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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 20-F**

(Mark One)

 

| **☐** | **REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|-------------|-----------------------------------------------------------------------------------------------------|
|        |                                                                                                |
| **OR**      |
|        |                                                                                                |
| **☒** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**            |
|        |                                                                                                |
|        | **For the fiscal year ended: September 30, 2021**                                                   |
|        |                                                                                                |
| **OR**      |
|        |                                                                                                |
| **☐** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934**    |
|        |                                                                                                |
| **OR**      |
|        |                                                                                                |
| **☐** | **SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934** |
|        |                                                                                                |
|        | Date of event requiring this shell company report                                                   |

 

**For the transition period from ___________ to ____________**

 

Commission File Number: **000-30813**

 

| **UMeWorld Limited**                                   |
|--------------------------------------------------------|
| (Exact name of Registrant as specified in its charter) |

 

**N/A**

(Translation of Registrant’s name into English)

 

**British Virgin Islands**

(Jurisdiction of incorporation or organization)

 

**Unit B, 12/F, Hang Seng Causeway Bay Building, 28 Yee Wo Street, Causeway Bay, Hong Kong, China**

(Address of principal executive offices)

 

**Michael Lee, (852) 8191 5550, info@umeworld.com**

(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** |   | **Trading Symbol (s)** |   | **Name of each exchange on which registered** |
|-------------------------|--------|------------------------|--------|-----------------------------------------------|
| None                    |   | None                   |   | None                                          |

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

 

___________________

Title of Class

 

| SEC 1852 (01-12) | **Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.** |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Securities registered or to be registered pursuant to Section 15(d) of the Act.

 

____________________

Title of Class

 

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|  |

|   |
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|        |
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|   |

 

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, 2021, there were****109,545,271 shares outstanding of the issuer’s ordinary shares.**

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐     NO ☒

 

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 ☐     NO ☒

 

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 ☐     No ☒

 

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 ☐     No ☒

 

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 | ☐ | Non-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. ☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

| U.S. GAAP | ☒ | 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 ☐     No ☒

 

(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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| 2      |
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|   |

 

**FORM 20-F**

 

For the Years Ended September 30, 2021, 2020 and 2019

 

**INDEX**

 

**PRELIMINARY NOTES**

 

| PART I    |                                                                           |   |   |   |
|-----------|--------------------------------------------------------------------------------|--------|--------|--------|
|      |                                                                           |   |   |   |
| Item 1.   | Identity of Directors, Senior Management and Advisers                          |   |   | 6      |   |
| Item 2.   | Offer Statistics and Expected Timetable                                        |   |   | 6      |   |
| Item 3.   | Key Information                                                                |   |   | 6      |   |
| Item 4.   | Information of the Company                                                     |   |   | 22     |   |
| Item 4A.  | Unresolved Staff Comments                                                      |   |   | 33     |   |
| Item 5.   | Operating and Financial Review and Prospects                                   |   |   | 33     |   |
| Item 6.   | Directors, Senior Management and Employees                                     |   |   | 40     |   |
| Item 7.   | Major Shareholders and Related Party Transactions                              |   |   | 45     |   |
| Item 8.   | Financial Information                                                          |   |   | 46     |   |
| Item 9.   | The Offer and Listings                                                         |   |   | 47     |   |
| Item 10.  | Additional Information                                                         |   |   | 48     |   |
| Item 11.  | Quantitative and Qualitative Disclosure About Market Risk                      |   |   | 51     |   |
| Item 12.  | Description of Securities Other Than Equity Securities                         |   |   | 51     |   |
|      |                                                                           |   |   |   |   |
| PART II   |                                                                           |   |   |   |
|           |                                                                           |   |   |   |
| Item 13.  | Default, Dividend Arrearages and Delinquencies                                 |   |   | 52     |   |
| Item 14.  | Material Modifications to the Rights of Securities Holders and Use of Proceeds |   |   | 52     |   |
| Item 15.  | Controls and Procedures                                                        |   |   | 52     |   |
| Item 16A. | Audit Committee Financial Experts                                              |   |   | 54     |   |
| Item 16B. | Code of Ethics                                                                 |   |   | 54     |   |
| Item 16C. | Principal Accountant Fees and Services                                         |   |   | 54     |   |
| Item 16D. | Exemptions from the Listing Standards for Audit Committee                      |   |   | 54     |   |
| Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers         |   |   | 55     |   |
| Item 16F. | Change in Registrant’s Certifying Accountant                             |   |   | 55     |   |
| Item 16G  | Corporate Governance                                                           |   |   | 55     |   |
| Item 16H. | Mine Safety Disclosure                                                         |   |   | 55     |   |
|      |                                                                           |   |   |   |   |
| PART III  |                                                                           |   |   |   |
|      |                                                                           |   |   |   |
| Item 17.  | Financial Statements                                                           |   |   | 56     |   |
| Item 18.  | Financial Statements                                                           |   |   | 56     |   |
| Item 19.  | Exhibits                                                                       |   |   | 56     |   |

 

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| 3                   |
|                     |
| *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”); |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                              |
|   | · | “China” or “PRC” refers to People’s Republic of China, and for the purpose of this annual report, excludes Taiwan, Hong Kong and Macau;                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
|   | · | “shares”, or “ordinary shares” refers to our ordinary shares, par value US$0.0001 per share;                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
|   | · | “RMB” or “Renminbi” refers to the legal currency of China, “HK$” refers to the legal currency of Hong Kong and “$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States;                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
|   | · | “U.S. GAAP” refers to generally accepted accounting principles in the United States;                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
|   | · | “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;                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
|   | · | “K-12” refers to the year before the first grade through the last year of high school; and                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
|   | · | “PRC GAAP” refers to generally accepted accounting principles in the People’s Republic of China.                                                                                                                                                                                                                                |

 

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. 

 

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| 4                   |
|                     |
| *Table Of Contents* |

  

**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 anticipated growth strategies;                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                              |
|   | · | competition in the K-12 after-school tutoring market;                                                             |
|   |   |                                                                                                              |
|   | · | our future business development, results of operations and financial condition;                                   |
|   |   |                                                                                                              |
|   | · | expected changes in our revenues and certain cost and expense items;                                              |
|   |   |                                                                                                              |
|   | · | our ability to increase student enrollments and course fees and expand course offerings;                          |
|   |   |                                                                                                              |
|   | · | risks associated with the expansion of our geographic reach;                                                      |
|   |   |                                                                                                              |
|   | · | the expected increase in spending on private education in China; and                                              |
|   |   |                                                                                                              |
|   | · | PRC laws, regulations and policies relating to private education and providers of after-school tutoring services. |

 

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. You should read this annual report and the documents that we refer to in this annual report completely and with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements with these cautionary statements.

 

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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| 5                   |
|                     |
| *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**

 

| **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, 2021, 2020 and 2019 and the consolidated balance sheets data as of September 30, 2021, 2020 and 2019 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:**

 

|                         |   | **For the Years Ended September 30,** |     |
|------------------------------|--------|---------------------------------------|----------|
|                         |   | **2021**                              |     |   | **2020** |   |   | **2019** |   |
| Revenues                     |   |                                  | 2,832    |   |   |   | 4 |   |   |   | 113 |   |
| Gross loss                   |   |                                  | (16,809  | ) |   |   | 4 |   |   |   | (477 | ) |
| Operating expenses           |   |                                  | (86,848  | ) |   |   | (134,953 | ) |   |   | (117,177 | ) |
| Loss from operations         |   |                                  | (103,657 | ) |   |   | (134,949 | ) |   |   | (117,654 | ) |
| Other (expenses) income, net |   |                                  | (3,779   | ) |   |   | (14,015 | ) |   |   | 14 |   |
| Net loss                     |   |                                  | (107,436 | ) |   |   | (148,964 | ) |   |   | (117,640 | ) |

 

**Selected Consolidated Balance Sheets Data:**

 

|                              |   | **As of September 30,** |     |
|-----------------------------------|--------|-------------------------|----------|
|                              |   | **2021**                |     |   | **2020** |   |   | **2019** |   |
| Current assets                    |   |                    | 36,963   |   |   |   | 16,890 |   |   |   | 14,579 |   |
| Total assets                      |   |                    | 56,203   |   |   |   | 16,890 |   |   |   | 14,579 |   |
| Current liabilities               |   |                    | 262,969  |   |   |   | 363,316 |   |   |   | 381,517 |   |
| Total liabilities                 |   |                    | 262,969  |   |   |   | 363,316 |   |   |   | 381,517 |   |
| Total shareholders’ deficit |   |                    | (206,766 | ) |   |   | (346,426 | ) |   |   | (366,938 | ) |

 

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| 6                   |
|                     |
| *Table Of Contents* |

 

**Selected Consolidated Statements of Cash Flows Data:**

 

|                                                         |   | **For the Years Ended September 30,** |     |
|--------------------------------------------------------------|--------|---------------------------------------|----------|
|                                                         |   | **2021**                              |     |   | **2020** |   |   | **2019** |   |
| Net cash used in operating activities                        |   |                                  | (120,144 | ) |   |   | (65,681 | ) |   |   | (5,861 | ) |
| Net cash used in investing activities                        |   |                                  | (20,687  | ) |   |   | - |   |   |   | - |   |
| Net cash provided by financing activities                    |   |                                  | 120,634  |   |   |   | 66,604 |   |   |   | - |   |
| Effect of exchange rate changes on cash and cash equivalents |   |                                  | 11,127   |   |   |   | 15,422 |   |   |   | (20 | ) |
| Net (decrease) increase in cash                              |   |                                  | (9,070   | ) |   |   | 16,345 |   |   |   | (5,881 | ) |
| Cash and cash equivalents, beginning of the year             |   |                                  | 16,890   |   |   |   | 545 |   |   |   | 6,426 |   |
| Cash and cash equivalents, end of the year                   |   |                                  | 7,820    |   |   |   | 16,890 |   |   |   | 545 |   |

 

| **B.** | **Capitalization and Indebtedness**           |
|--------|-----------------------------------------------|
|   |                                          |
|   | Not applicable.                               |
|   |                                          |
| **C.** | **Reasons for the Offer and Use of Proceeds** |
|   |                                          |
|   | 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 Business and Industry**

 

***We are exposed to the risks of an economic recession, credit and capital markets volatility and economic and financial crisis (including as a result of the COVID-19 virus pandemic), which could adversely affect the demand for our products and adversely affect the market price of our ordinary shares.***

 

The COVID-19 pandemic has created unique global and industry-wide challenges, including challenges to our business. In early 2020, the COVID-19 pandemic resulted in the temporary closure of many corporate offices and schools across China. Given the strict quarantine measures put in place during this period, normal economic activity throughout China was sharply curtailed and normal in-school education was temporarily suspended. All of our revenues and our workforce are concentrated in China. Consequently, to the extent that COVID-19 exerts long-term negative impact on the Chinese economy, our results of operations and financial performance may be adversely affected

 

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| 7                   |
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| *Table Of Contents* |

  

The COVID-19 virus pandemic has resulted in significant financial market volatility and uncertainty in recent months. The extent to which the COVID-19 impacts our results will depend on future developments, which are highly uncertain and will include emerging information concerning the severity of the COVID-19, the vaccine roll-out and actions taken by governments and private businesses to attempt to contain the coronavirus, A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on us.

 

Additionally, the pandemic may also affect our overall ability to react timely to mitigate the impact of this event and may hamper our efforts to provide our investors with timely information and comply with our filing obligations with the SEC, especially in the event of office closures, stay-in-place orders and a ban on travel or quarantines.

 

**Significant uncertainties exist in relation to the interpretation and implementation of, or proposed changes to, the PRC laws, regulations and policies regarding the private education industry. In particular, our compliance with the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education and the implementation measures issued thereunder by the relevant PRC government authorities has materially and adversely affected and will materially and adversely affect our business prospect.**

 

The PRC private education industry, especially the after-school tutoring sector, has experienced intense scrutiny and has been subject to significant regulatory changes recently. In particular, the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education jointly promulgated by the General Office of State Council and the General Office of Central Committee of the Communist Party of China on July 24, 2021, or the Alleviating Burden Opinion, sets out a series of operating requirements on after-school tutoring institutions, including, among other things, (i) local government authorities shall no longer approve any new after-school tutoring institutions providing tutoring services on academic subjects for students in compulsory education, or the Academic AST Institutions, and all the existing Academic AST Institutions shall be registered as non-profit, and local government authorities shall no longer approve any new after-school tutoring institutions providing tutoring services on academic subjects for pre-school-age children and students in grade ten to twelve; (ii) online Academic AST Institutions that have filed with the local education administration authorities will be subject to review and re-approval procedures by competent government authorities, and any failure to obtain such approval will result in the cancellation of its previous filing and ICP license; (iii) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities and listed companies are prohibited from investing in Academic AST Institutions through capital markets fund raising activities, or acquiring assets of Academic AST Institutions by paying cash or issuing securities; (iv) foreign capital is prohibited from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities; (v) after-school tutoring institutions shall not provide tutoring services on academic subjects during national holidays, weekends and school breaks; (vi) no advertisements for after-school tutoring shall be published or broadcasted in the network platforms and billboards displayed in the mainstream media, new media, public place and residential areas; (vii) fees charged for academic subjects tutoring in compulsory education will need to follow the guidelines from the government to prevent any excessive charging or excessive profit-seeking activity; (viii) government authorities will implement risk management and control for the pre-collection of fees by after-school tutoring institutions with requirements such as setting up third-party custodians and risk reserves, and strengthen supervision over loans regarding tutoring services; and (ix) online tutoring for preschool-age children is prohibited, and offline academic subjects (including foreign language) tutoring services for preschool-age children is also strictly prohibited. The Alleviating Burden Opinion further provides that administration and supervision over academic subjects tutoring institutions for students on grade ten to twelve shall be implemented by reference to the relevant provisions of the Alleviating Burden Opinion. It remains uncertain as to how and to what extent the administration over academic subjects tutoring institutions for students in grade ten to twelve will be implemented by reference of the Alleviating Burden Opinion. Furthermore, on August 18, 2021, the Beijing Municipality Government and the Beijing Municipal Committee of the Communist Party of China jointly published the full text of the Beijing Municipality’s Measures to Further Reduce the Burden of Homework and After-School Tutoring on Students in Compulsory Education in Beijing, or the Beijing Measures, to implement the Alleviating Burden Opinion.

 

To implement the Alleviating Burden Opinion, on September 7, 2021, the Chinese Ministry of Education, or the MOE, published on its official website that the MOE, together with two other government authorities, issued a circular requiring all Academic AST Institutions to complete registration as non-profit by the end of 2021, and all Academic AST Institutions shall, before completing such registration, suspend enrollment of students and charging fees.

 

Our business prospect have been and will be materially and adversely affected by the actions we have taken to date and consider taking to be in compliance with the Alleviating Burden Opinion and its implementation measures. We are closely monitoring the evolving regulatory environment and are making efforts to seek guidance from and cooperate with the government authorities to comply with the Alleviating Burden Opinion and its implementation measures.

 

**If we are unable to maintain a good relationship with China Mobile, our business will suffer.**

 

China Mobile is the primary distribution, marketing, promotion and payment platform for UMFun. We generate substantially all of our users through the China Mobile “AND” Education Platform and expect to continue to do so for the foreseeable future. Any deterioration in our relationship with China Mobile would harm our business and adversely affect the value of our ordinary shares.

 

We are subject to China Mobile’s terms and conditions for application developers, which govern the promotion, distribution and operation of educational applications on the “AND” Education Platform. We have entered into a Product Co-operation Agreement with China Mobile, which governs the promotion, distribution and operation of educational applications on the “AND” Education Platform. This Agreement expired on October 31, 2021. There can be no assurance that China Mobile will renew this Agreement.

 

Our business would be harmed if:

 

|   | · | China Mobile discontinues or limits access to its platform by us;                                                                                                                                                                                                                                                                    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                 |
|   | · | China Mobile terminates or does not renew our Product Co-operation Agreement;                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
|   | · | China Mobile modifies its terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers, or China Mobile changes how the personal information of its users is made available to application developers on the “AND” Education Platform or shared by users; |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
|   | · | China Mobile establishes more favorable relationships with one or more of our competitors; or                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
|   | · | China Mobile develops its own competitive offerings.                                                                                                                                                                                                                                                                                 |

 

We have benefited from China Mobile’s strong brand recognition and large user base. If China Mobile loses its market position or otherwise falls out of favor with Internet users, we would need to identify alternative channels for marketing, promoting and distributing our products, which would consume substantial resources and may not be effective. In addition, China Mobile has broad discretion to change its terms of service and other policies with respect to us and other developers, and those changes may be unfavorable to us. China Mobile may also change its fee structure, add fees associated with access to and use of the “AND” Education Platform. Any such changes may harm our business.

 

**Changes in the policies, guidelines or practice of mobile network operators or the PRC government with respect to mobile applications and other content may negatively affect our business operations for mobile applications*.***

 

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| 8                   |
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| *Table Of Contents* |

  

We rely on PRC mobile network operators, directly and indirectly, to distribute our products to our users. The mobile telecommunication business in China is highly concentrated and major mobile network operators, such as China Mobile, may from time to time issue new policies or change their business practices, requesting or stating their preferences for certain actions to be taken by all mobile service providers using their networks. In addition, the PRC government may also implement new policies or change existing policies regulating the mobile telecommunication business. Such new policies or changes may negatively affect our business operations for mobile applications.

 

**A significant portion of our revenues will be dependent on market acceptance of our online learning and assessment platform and other cloud-based testing technologies, and if we are unable to anticipate and meet our clients’ technological needs and challenges from new technologies and industry standards, our products and services may lose market acceptance or become obsolete, and our margins and results of operations may be adversely affected.**

 

Our advanced technologies for the creation and delivery of online assessment, including our UMFun platform, are a key factor in growing and maintaining our relationships with educational institution clients and educational program content providers. Our future success depends on our ability to upgrade our systems, develop new technologies and anticipate and meet the technical needs of our clients on a regular basis. The emergence in the market of new test creation and delivery technologies or substitute products and services could reduce the competitiveness or result in the obsolescence of our current technologies and services. Moreover, if other companies develop similar technologies offering functionality comparable to that of our technologies, pricing pressure may increase, and our margins and results of operations may be adversely affected. Additionally, industry standards such as standard interfaces and data exchange protocols may be developed for testing technologies, and if these industry standards are incompatible with our technologies, demand for our technologies, products and services may decline significantly. To the extent we are unable to maintain our market position in key testing technologies or anticipate and respond to technological developments and changes in industry standards in a timely and cost-effective manner, our products and services may lose market acceptance or become obsolete.

 

**Technical errors or failures in relation to cloud-based tests delivered through our delivery platform could result in negative publicity, loss of clients, liability claims and costly and disruptive litigation.**

 

Due to the complexity of the technologies, we have developed and use to create and deliver cloud-based learning and assessment services for our clients, there is a risk that technical errors or failures may occur in relation to these services. These may include errors, failures or bugs in our self-developed software applications and test security technologies, breakdowns or failures of our servers and computer networks, and connectivity failures between our networks. While we have not experienced major problems to date due to errors, breakdowns, failures, bugs or defects, we cannot assure you that we will not experience such problems in the future. If such a problem were to occur, it could disrupt or compromise the integrity of the test-taking process or of test content and results, which could lead to negative publicity and loss of clients and may subject us to liability claims. Although we have established a formal crisis management system to respond to technical problems, it has never been tested in a real crisis situation. Any litigation or negative publicity resulting from an error or failure, with or without merit, could result in substantial costs and divert management’s attention and resources from our business and operations.

 

**If we fail to maintain a strong brand identity, our business may not grow, and our financial results may be adversely impacted.**

 

We believe that maintaining and enhancing the value of the “UMFun” brand is important to attracting clients. Our success in maintaining brand awareness will depend on our ability to consistently provide high quality, value-adding, user-friendly and secure products and services. To establish a significant recognition of our “UMFun” brand among schools, teachers, students and parents, we may need to spend significant resources on advertising. As we have limited experience with advertising and other activities required to establish a widely recognized brand, we cannot assure you that we will effectively allocate our resources for these activities or succeed in maintaining and broadening our brand recognition and appeal. If we fail to maintain a strong brand identity, our business may not grow and our financial results may be adversely impacted.

 

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**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, 2021, we had an accumulated deficit of $30,992,977. Our revenues for the years ended September 30, 2021, 2020, and 2019 were $2,832, $4, and $113, 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 online education market;                                                          |
|--------|---|-------------------------------------------------------------------------------------------------|
|   | - | the continued growth and maintenance of our user base;                                          |
|   | - | our efforts to sell and market our products through licensees, distributors and other partners; |
|   | - | our ability to establish partnerships and licensing arrangements;                               |
|   | - | the time and costs involved in obtaining regulatory approvals;                                  |
|   | - | our ability to control our costs and expenses; and                                              |
|   | - | the continued ability to source investments from our investors.                                 |

 

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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.

 

**We face significant competition, and if we fail to compete effectively, we may lose our market share or fail to gain additional market share, and our profitability may be adversely affected.**

 

We operate in a highly competitive market subject to rapid technological changes, and increasing competition could lead to pricing pressures, reduced operating margins, loss of market share and increased capital expenditures. The markets for our products and services are highly competitive, and we expect increased competition in the future that could adversely affect our revenue and market share. Our current competitors include but are not limited to:

 

|   | · | providers of online and offline supplemental instructional materials for the core subject areas of English language, mathematics and Chinese studies for K-12 institutions;                                                                                                                             |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                    |
|   | · | companies that provide K-12-oriented software and web-based educational assessment and remediation products and services to students, educators, parents and educational institutions;                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                    |
|   | · | providers of online and offline test preparation materials;                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                    |
|   | · | traditional print textbook and workbook companies that publish K-12 core subject educational materials, standardized test preparation materials or paper and pencil assessment tools;                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                    |
|   | · | summative assessment companies, which traditionally assess student learning at the end of a class period, that have expanded their line to include products that provide periodic assessment in the classroom to gauge student learning and inform instruction, also known as formative assessment; and |
|   |   |                                                                                                                                                                                                                                                                                                    |
|   | · | non-profit and membership educational organizations and government agencies that offer online and offline products and services, including in some cases at no cost, to assist individuals in standards mastery and test preparation.                                                                   |

 

Some of our competitors may have more resources than we do, and several of the largest K-12 educational publishers may have more experience, larger customer bases and greater brand recognition in the markets we serve. Further, larger established companies with high brand recognition and extensive experience providing various educational products to the K-12 market may develop online products and services that are competitive with our core products and services. These competitors may be able to devote greater resources than us to the development, promotion and sale of their products and services and respond more quickly than we can to new technologies or changes in customer requirements or preferences. We may not be able to compete effectively with current or future competitors, especially those with significantly greater resources or more established customer bases, which may materially adversely affect our sales and our business.

 

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**Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights or defend against third party allegations of infringement may be costly and ineffective.**

 

We believe that our copyrights, trademarks and other intellectual property are essential to our success. We depend to a large extent on our ability to develop and maintain the intellectual property rights relating to our technology and products. We have devoted considerable time and energy to the development and improvement of our websites, our online platform and educational materials.

 

We rely primarily on copyrights, trademarks, trade secrets and other contractual restrictions for the protection of the intellectual property used in our business. Nevertheless, these provide only limited protection and the actions we take to protect our intellectual property rights may not be adequate. Our trade secrets may become known or be independently discovered by our competitors. Third parties have, in the past, pirated our courses, books and other course materials and may in the future infringe upon or misappropriate our other intellectual property. Infringement upon, or misappropriation of, our proprietary technologies or other intellectual property could have a material adverse effect on our business, financial condition or operating results. Policing the unauthorized use of proprietary technology can be difficult and expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. The outcome of such potential litigation may not be in our favor and any success in litigation may not be able to adequately protect our rights. Such litigation may be costly and divert management’s attention away from our business. An adverse determination in any such litigation would impair our intellectual property rights and may harm our business, prospects and reputation. Enforcement of judgments in China is uncertain, and even if we are successful in litigation, it may not provide us with an effective remedy. In addition, we have no insurance coverage against litigation costs and would have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

 

**We have not registered copyrights for all of our products, which may limit our ability to enforce them.**

 

We have not registered our copyrights in all of our software, written materials, website information, designs or other copyrightable works. Preventing others from copying our products, written materials and other copyrightable works is important to our overall success in the marketplace. In the event we decide to enforce any of our copyrights against infringers, we will first be required to register the relevant copyrights, and we cannot be sure that all of the material for which we seek copyright registration would be registrable in whole or in part, or that once registered, we would be successful in bringing a copyright claim against any such infringers.

 

**We may be exposed to infringement claims by third parties or held liable for defamation or negligence to third parties for information displayed on, retrieved from or linked by our websites, for the content of the books and reference materials or marketing materials that we or our lecturers publish or distribute or for information delivered or shared through our services, which could disrupt our business and cause us to incur substantial legal costs, or damage our reputation.**

 

We cannot assure you that our services and products do not or will not infringe any intellectual property rights held by third parties. We cannot assure you that in the future we will not receive claims of infringement of third parties’ proprietary rights or claims for indemnification resulting from infringement arising from our services or products. We may also become subject to claims that content on our websites or in the books and reference materials or marketing materials that we or our lecturers publish or distribute is protected by third parties’ copyrights or trademark.

 

In addition, as a provider of Internet content and other value-added telecommunications services, we may face liability for defamation, negligence and other claims based on the nature and content of the materials displayed on our websites or delivered or shared through our services. We could also be subject to claims based on content accessible on our websites or through our networks, such as content and materials posted by visitors on message boards, online communities, or emails. By providing hypertext links to third-party websites, we may be held liable for copyright or trademark violations by those third-party websites. Third parties could assert claims against us for losses incurred in reliance on any erroneous information distributed by us.

 

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Royalty or licensing agreements, if required, may not be available on acceptable terms, if at all. A successful claim of infringement against us and our failure or inability to obtain a license to use the infringed or similar technology or content on commercially acceptable terms, or at all, could prevent us from producing and offering our services or products or cause us to incur great expense and delay in developing non-infringing services or products. Any of the above events could in turn have a material and adverse impact on our financial condition and results of operations. Any defamation or negligence claims against us, even if they do not result in liability to us, could cause us to incur significant costs in investigating and defending against these claims. We do not have general liability insurance to cover all potential claims to which we are exposed, and our insurance coverage may not be adequate to indemnify us from all liability that may be imposed.

 

**Concerns about the security of our transaction systems and confidentiality of information on the Internet may reduce use of our services and impede our growth.**

 

Public concerns over the security and privacy of electronic settlement, online transmittal and communications have to some extent constrained the rapid development and expansion of online transactions. If these concerns are not adequately addressed, they will restrict the growth of value-added telecommunications services generally and in particular the use of the Internet as a means of conducting commercial transactions. If a well-publicized breach of security were to occur, general usage of value-added telecommunications services could decline, which could reduce our visitor traffic and the number of course participants, and impede our growth. We are continuously vigilant about protecting and improving our cyber security and have not experienced any material cyberattacks on our information technology systems. We cannot assure you, however, that our current security measures will be adequate or sufficient to prevent any theft or misuse of personal data of our course participants. Further, security breaches could expose us to litigation and possible liability for failing to secure confidential customer information, and could harm our reputation and ability to attract or retain course participants. In addition, we do not have any cyber security insurance coverage for our operations, and any material cyberattack on our information technology systems and our online education websites could expose us to substantial costs and losses.

 

**We are subject to currency fluctuations, which may affect our results.**

 

The majority of our expenses and some of our debts are in Chinese Renminbi, Canadian dollars and U.S. dollars, while our revenues are primarily in Chinese Renminbi. We also incur expenses in Hong Kong dollars related to our Hong Kong subsidiary. The fluctuation of the Canadian dollar, Hong Kong dollar and U.S. dollar vis-a-vis the Chinese Renminbi could materially impact our operating results and financial position.

 

**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, 2021, we had working capital deficiency of $226,006 as compared to working capital deficiency of $346,426 as at September 30, 2020. The independent auditor’s report for the year ended September 30, 2021 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.

 

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**We may be unable to retain key employees or recruit additional qualified personnel.**

 

Because of the specialized educational nature of our business, we are highly dependent upon qualified educational, technical, and managerial and marketing personnel. There is competition for qualified personnel in our business. 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 educational, technical, and managerial personnel in a timely manner would harm our research and development programs and our business.

 

**Risks Relating to Our Corporate Structure and Restrictions on Our Industry**

 

**We do not have direct ownership of our VIEs in China and rely on VIE Agreements with our VIEs for our business operations, which may not be as effective in providing operational control or enabling us to derive economic benefits as through ownership of controlling equity interests.**

 

We do not have direct ownership of our VIEs in China and rely on and expect to continue to rely on the VIE Agreements with our VIEs in China and their respective shareholders to operate business. VIE Agreements may not be as effective as an ownership of controlling equity interests would be in providing us with control over the VIEs, or in enabling us to derive economic benefits from the operations of, the affiliated consolidated entities. Under the current VIE Agreements, as a legal matter, if any of the affiliated consolidated entities or any of their shareholders fails to perform its, his or her respective obligations under the VIE Agreements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if shareholders of a variable interest entity were to refuse to transfer their equity interests in such variable interest entity to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may have to take a legal action to compel them to fulfill their contractual obligations.

 

If (i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any variable interest entity or its shareholders terminate the contractual arrangements or (iii) any variable interest entity or its shareholders fail to perform their obligations under these contractual arrangements, our business operations in China would be materially and adversely affected, and the value of your stock would substantially decrease. Further, if we fail to renew these contractual arrangements upon their expiration, we would not be able to continue our business operations unless the then current PRC law allows us to directly operate businesses in China.

 

In addition, if any VIE or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of the VIE undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business and our ability to generate revenues.

 

All of VIE Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our operating entities and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations.

 

**If the PRC government determines that the agreements that establish the structure for operating our business in China are not in compliance with applicable PRC laws and regulations, we could be subject to severe penalties.**

 

PRC laws and regulations currently require any foreign entity that invests in the education business in China to be an educational institution with relevant experience in providing education services outside China. None of our offshore holding companies is an educational institution or provides education services. To comply with PRC laws and regulations, we have entered into (i) a series of contractual arrangements among UMeLook (Guangzhou) Information Technology Co. Ltd. (“UMeLook Guangzhou”), Guangzhou XinYiXun Network Technology Co. Ltd. (“Guangzhou XinYiXun”) and their respective shareholders. Accordingly, Guangzhou XinYiXun is our VIE, and we rely on the contractual arrangements with our VIE and their respective shareholders, or the VIE Contractual Arrangements, to conduct most of our services in China. 

 

We have been and are expected to continue to be dependent on our VIE in China to operate our education business until we qualify for direct ownership of educational businesses in China. Pursuant to the VIE Contractual Arrangements, we, through our wholly owned subsidiaries in China, exclusively provide comprehensive intellectual property licensing, technical and business support services to UMeLook Guangzhou and Guangzhou XinYiXun, our Consolidated Affiliated Entities in exchange for payments from them. In addition, the VIE Contractual Arrangements provide us with the ability to effectively control our VIE and its respective existing and future subsidiaries and schools, as applicable.

 

It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. In August 2018, the Ministry of Justice published a draft Implementation Rules for Private Education Law, or the draft Implementation Rules, for review. The draft Implementation Rules, among other things, provide that entities implementing group-based education shall not control non-profit schools by merger, acquisition, franchise or contractual arrangements. The draft Implementation Rules also provide that transactions among private schools and their affiliates shall be fair and open to public. For those agreements entered into by non-profit schools and their affiliates which is long-term or involving important interests or repeated performance, the educational authorities shall audit the necessity, legitimacy and legal compliance of such agreements. Such requirements, if remained in the final version and signed into law, may challenge the validity and enforceability of our VIE Contractual Arrangements.

 

If the corporate structure and contractual arrangements through which we conduct our business in China are found to be in violation of any existing or future PRC laws or regulations, or such arrangements are determined as illegal and invalid by PRC courts, arbitration tribunals or regulatory authorities, or if we fail to obtain or maintain any of the required permits or approvals, we would be subject to potential actions by the relevant PRC regulatory authorities with broad discretion, which actions could include:

 

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|   | · | revoke our business and operating licenses;                                                                                                                                             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                    |
|   | · | require us to discontinue or restrict our operations;                                                                                                                                   |
|   |   |                                                                                                                                                                                    |
|   | · | limit our business expansion in China by way of entering into contractual arrangements;                                                                                                 |
|   |   |                                                                                                                                                                                    |
|   | · | restrict our right to collect revenues or impose fines;                                                                                                                                 |
|   |   |                                                                                                                                                                                    |
|   | · | block our websites;                                                                                                                                                                     |
|   |   |                                                                                                                                                                                    |
|   | · | require us to restructure our operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets; |
|   |   |                                                                                                                                                                                    |
|   | · | impose additional conditions or requirements with which we may not be able to comply; or                                                                                                |
|   |   |                                                                                                                                                                                    |
|   | · | take other regulatory or enforcement actions against us that could be harmful to our business.                                                                                          |

 

Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If any of these actions results in our inability to direct the activities of our Consolidated Affiliated Entities that most significantly impact their economic performance, and/or our failure to receive the economic benefits from our Consolidated Affiliated Entities, we may not be able to consolidate these entities in our consolidated financial statements in accordance with U.S. GAAP. However, we do not believe that such actions would result in the liquidation or dissolution of our company, our wholly owned subsidiaries in China or our VIE.

 

**Our contractual arrangements may be subject to national security review under PRC laws and regulations and, thus, be challenged by relevant regulatory authorities.**

 

On February 3, 2011, the General Office of the State Council issued the Circular of the General Office of the State Council on the Establishment of Security Review System for Foreign Investors’ Merger and Acquisition of Domestic Enterprises (the “Circular on the Establishment of Security Review”), which became effective on March 4, 2011. Among other things, the Circular on the Establishment of Security Review stipulates that the scope of the security review lies in foreign investors’ acquisition of domestic military enterprises, military-related enterprises, enterprises involving sensitive military facilities and other enterprises that impact national defense security; foreign investors’ acquisition of domestic enterprises which may provide foreign investors with de facto control over industries relating to national security, such as important agricultural products, energy and natural resources, infrastructures, transportation services, technologies and major equipment manufacturing. On August 25, 2011, the Ministry of Commerce issued the Circular of the Ministry of Commerce on the Implementation of Security Review System for Foreign Investors’ Merger and Acquisition of Domestic Enterprises (the “Circular on the Implementation of Security Review”), which became effective on September 1, 2011. Among other things, the Circular on the Implementation of Security Review further specifies that whether a foreign investors’ acquisition of domestic enterprises falls within the scope of the security review depends on the said transaction’s substantive content and practical influence. Foreign investors shall not circumvent the security review through any arrangements or schemes, including but not limited to trust, lease and/or contractual arrangements.

 

According to our PRC counsel, as our contractual arrangements were established in 2013, the new security review system may apply to our contractual arrangements. We cannot guarantee, however, that the Ministry of Commerce will not promulgate additional implementing rules or new rules that will bring our contractual arrangements under the scope of the security review system. Moreover, according to a press conference held by the Ministry of Commerce on September 20, 2011, there are no specific laws or regulations governing contractual arrangements like the ones that we employ, but the Ministry of Commerce together with other authorities would study how to regulate them in the future. Hence, we cannot assure you that our contractual arrangements will not be subject to new regulations that will be issued by relevant****regulatory authorities and that such new regulations will not have a material adverse effect on our existing structure.

 

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**We rely on the VIE Contractual Arrangements for our PRC operations, which may not be as effective in providing operational control as direct ownership.**

 

We have relied and expect to continue to rely on the VIE Contractual Arrangements to operate our education business in China. See “Item 4.C. - Information on the Company - Organizational Structure - VIE Contractual Arrangements.” The VIE Contractual Arrangements may not be as effective in providing us with control over our Consolidated Affiliated Entities as direct ownership. If we had direct ownership of the Consolidated Affiliated Entities, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of these entities, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the VIE Contractual Arrangements, we rely on the performance by our Consolidated Affiliated Entities and their respective shareholders of their obligations under the contracts to exercise control over and receive economic benefits from our Consolidated Affiliated Entities.

 

**Any changes in the PRC foreign investment legal regime may materially and adversely affect our operations and the contractual arrangements.**

 

In January 2015, the Ministry of Commerce, or MOC, published a discussion draft of the proposed Foreign Investment Law for public review and comments, and on March 15, 2019, the Foreign Investment Law was promulgated and implemented on January 1, 2020. The draft Foreign Investment Law expanded the definition of foreign investment and introduced the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the draft Foreign Investment Law, variable interest entities would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft law did not take a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled by Chinese parties. The final Foreign Investment Law does not include the contractual control concept from the 2015 draft and so the government’s view on variable interest entities continues to be unclear. The Foreign Investment Law also retains a comprehensive oversight over all “foreign investors who invest in China through laws, administrative regulations or other methods prescribed by the State Council”. Foreign investment refers to any investment activity directly or indirectly carried out by foreign natural persons, enterprises, or other organizations, including investment in new construction project, establishment of foreign funded enterprise or increase of investment, merger and acquisition, and investment in any other way stipulated under laws, administrative regulations, or provisions of the State Council. Accordingly, it cannot be ruled out that the National People’s Congress or relevant departments may introduce a series of related supporting policies in the future to resolve any ambiguity on the application of the Foreign Investment Law.

 

If the ownership structure, contractual arrangements and business of our company or any of our Consolidated Affiliated Entities are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our income or the income of our Chinese subsidiaries and VIE, revoking the business licenses or operating licenses of our Chinese subsidiaries or VIE, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from our offerings to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of our VIE, and/or our failure to receive economic benefits from our VIE, we may not be able to consolidate their results into our consolidated financial statements in accordance with U.S. GAAP.

 

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**We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.**

 

We are a holding company, and we may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require UMeLook Guangzhou to adjust its taxable income under the contractual arrangements it currently has in place with our PRC consolidated VIE in a manner that would materially and adversely affect its ability to pay dividends and other distributions to us. 

 

Under PRC laws and regulations, our PRC subsidiaries, which are wholly foreign-owned enterprises may pay dividends only out of their respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund, or a staff welfare and bonus fund. The statutory reserve funds, enterprise expansion funds and staff welfare and bonus funds are not distributable as cash dividends.

 

Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

 

**Our contractual arrangements may be subject to scrutiny by the PRC tax authorities, and a finding that we owe additional taxes could substantially reduce our consolidated net income and the value of your investment.**

 

Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among our PRC subsidiary and our PRC consolidated VIE do not represent an arm's-length price and adjust our PRC consolidated VIE's income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by our PRC consolidated VIE, which could in turn increase their tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties to our PRC consolidated VIE for under-paid taxes. Our consolidated net income may be materially and adversely affected if our tax liabilities increase or if we are found to be subject to late payment fees or other penalties.

 

**The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges nor the execution of VIE Agreements, however, if our VIE or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, continue to offer securities to investors, or materially affect the interest of the investors and cause significantly depreciation of our price of Ordinary Shares*.***

 

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

 

For example, the Chinese cybersecurity regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the company’s app be removed from smartphone app stores. As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.

 

Furthermore, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on U.S. exchanges or enter into VIE Agreements in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchange and or enter into VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry.

 

**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.

 

We are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with this report. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. 

 

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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.

 

**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 16.31% 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 51.18% 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 substantially all of our assets are located outside of the United States. Nearly all of our current operations are conducted in China. In addition, 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 or China 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 or PRC courts would be competent to hear original actions brought in the British Virgin Islands or China against us or such persons predicated upon the securities laws of the United States or any state.

 

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**Risks Related to Doing Business in China**

 

**Uncertainties*in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.***

 

The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China. Our PRC subsidiaries are subject to various PRC laws and regulations generally applicable to companies in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.

 

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations. 

 

***The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results of operations.***

 

The PRC Labor Contract Law became effective and was implemented on January 1, 2008, which was amended on December 28, 2012. It has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to have written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. According to the PRC Social Insurance Law, which became effective on July 1, 2011, and the Administrative Regulations on the Housing Funds, companies operating in China are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance and housing funds plans, and the employers must pay all or a portion of the social insurance premiums and housing funds for their employees.

 

As a result of these laws and regulations designed to enhance labor protection, we expect our labor costs will continue to increase. In addition, as the interpretation and implementation of these laws and regulations are still evolving, our employment practice may not at all times be deemed in compliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and results of operations may be adversely affected.

 

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***Regulation and censorship of information disseminated over the internet in China may adversely affect our business and reputation and subject us to liability for information displayed on our website.***

 

The PRC government has adopted regulations governing internet access and the distribution of news and other information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, and the closure of the concerned websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If our website is found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could be adversely affected.

 

***Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.***

 

A significant portion of our business operations is conducted in China and all of our sales are made in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

 

China’s economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

 

While China’s economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing. Some of the governmental measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our results of operations and financial condition. For example, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation.

 

***A severe or prolonged downturn in the global or PRC economy could materially and adversely affect our business and our financial condition.***

 

The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and it is facing new challenges, including the escalation of the European sovereign debt crisis since 2011 and the slowdown of the PRC economy since 2012. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies. There have also been concerns over unrest in Ukraine, the Middle East and Africa, which have resulted in volatility in oil and other markets. In addition, there have been concerns about the territorial disputes involving China in Asia and the economic effects of such disputes. Economic conditions in China are sensitive to global economic conditions. Although the PRC economy has grown significantly in the past decade, that growth may not continue, as evidenced by the slowing of the growth of the PRC economy since 2012. Any severe or prolonged slowdown in the PRC economy may materially and adversely affect our business, results of operations and financial condition. In addition, continued turbulence in the international markets may adversely affect our ability to access capital markets to meet liquidity needs.

 

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**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.

 

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 operate our online platform through Guangzhou XinYiXun Technology Co. Ltd (“Guangzhou XinYiXun”), our consolidated variable interest entity, or VIE, in the PRC. Guangzhou XinYiXun holds 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 rely 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 own any share in Guangzhou XinYiXun. However, as a result of these contractual arrangements, we are the primary beneficiary of Guangzhou XinYiXun and treat 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 has setup both corporate-owned and franchised centers surrounding the Greater Bay area in Guangdong province.

 

From 2013 to present, we have been focusing primarily on the development of our principal product, UMFun.

 

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| **B.** | **Business Overview** |
|--------|-----------------------|

 

We are an offshore holding company conducting our operations in China through our variable interest entity, Guangzhou XinYiXun. Neither we nor our subsidiaries own any share in Guangzhou XinYiXun. Instead, we control and receive the economic benefits of Guangzhou XinYiXun’s business operation through VIE Agreements. 

 

We are an educational technology company and a visionary player in the online educational landscape in China. UMFun, our K-12 flagship product, combines “gamification” and “adaptive learning”. It is a cloud-based assessment and learning analytics platform that can intelligently analyze and adapt to a student's performance and personalizes the delivery of proprietary educational items in accordance with their individual learning needs. UMFun received the prestigious “2016 Top 100 Online Education Product” designation in China.

 

UMFun provides standards-based instruction, practice, assessments and productivity tools that improve the performance of educators and students via a proprietary online & mobile platform. UMFun helps students in kindergarten through 12th grade, or K-12, master grade level academic standards in a fun and engaging manner. 

 

UMFun combines rigorous content that is highly customized to specific standards in math, English & Chinese with interactive features and games that engage students and reinforce and reward learning achievement. Our programs also enable educators to track student performance in real-time to address individual student learning gaps, while allowing administrators to monitor student progress and measure teacher effectiveness. 

 

We capitalize on two significant trends in China’s education market: (1) an increased focus on higher academic standards and educator accountability for student achievement, which has led to periodic assessment in the classroom to gauge student learning and inform instruction, and (2) the increased availability and utilization of web and mobile-based technologies to enhance and supplement teacher instruction, engage today’s technology-savvy learners and improve student outcomes. 

 

***China Mobile Partnership***

 

In July 2014, we entered into a business relationship with China Mobile Limited, to be a partner on its “AND” Education Platform. This collaboration with China Mobile is a major cornerstone in our business plan. China Mobile created its “AND” Education Platform in 2003, the largest of its kind in the world, and is a closed pay-for-use communication portal system and operated independently by China Mobile’s wholly-owned provincial subsidiaries. System-wide, it is used by over ninety million teachers, students and parent subscribers. 

 

In 2016, China Mobile began consolidating the individual provincial “AND” education offerings into one “AND” Education National Platform. In June 2017, UMFun was chosen to be listed on the “AND” Education National Platform. This national platform listing is also a major milestone for us, as UMFun will become incrementally available to China Mobile's "AND" Education Platform subscribers in 31 provinces across China. 

 

To date, we have acquired substantially all of our users through China Mobile. We expect to continue to acquire a substantial portion of our users from the China Mobile “AND” Education Platform for the foreseeable future. We have signed a Product Co-operation Agreement with China Mobile for the sale and distribution of UMFun on the “AND” Education National Platform which expires on October 31, 2021. We have not generated any revenue through our partnership with China Mobile, and significant financial resources are required to accelerate the UMFun commercialization process on the “AND” Education National Platform. There can be no assurance that we will be able to obtain enough capital to fund UMFun’s commercialization, and without such capital, we may be required to cease all UMFun development. 

 

***Our Principal Product***

 

We are an educational technology company with a focus on the K-12 education market in China. UMFun, our principal product, provides standards-based instruction, practice, assessments and productivity tools that improve the performance of educators and students via a proprietary online and mobile platform.

 

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***Core Educational Principles***

 

We believe that one of the key factors to our success lies in our core educational principles that guide product design and development:

 

|   | · | Clear expectations. Each UMFun session focuses on an academic standard or underlying topic and sets forth a clear goal for the student to master the targeted skill or concept.                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | · | High quality, rigorous content. Collaborating with our academic partners, we have access to subject area writer and editor expertise with deep knowledge of K-12 curriculum development. We build content from the ground-up, customized to each set of standards for a particular subject. We utilize a scaffolding approach to content development that begins with skill building and then builds to higher level thinking skills. This “building block” learning approach ensures that students master grade level content and are prepared for state assessments. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | · | Fun and engaging assignments. UMFun sessions are embedded with short games segments and reward student mastery of standards with achievement certificates. These features provide continual positive reinforcement and reward learning to engage students and build student confidence.                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | · | Immediate feedback. Students receive immediate feedback and explanations for each question, allowing them to learn and quickly apply new knowledge to subsequent questions and to build skills and conceptual understanding in order to handle more complex content that follows.                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | · | Student responsibility for learning. UMFun automatically offers explanations and prescribes remedial or “building block” topics when a student does not master a standard or sub-topic, allowing the student to quickly address any learning weakness. The student can continue with these remediation topics until he or she gradually accelerates back to grade level proficiency, receiving built-in rewards for learning along the way.                                                                                                                            |

 

***UMFun***

 

UMFun is a subscription-based online product that provides standards-based instruction, practice, assessment and productivity tools for teachers and students. UMFun is specifically built from the requirements for a subject area in a grade level in a particular province. Our curriculum includes math, Chinese and the English languages. Subscriptions are typically for one year but is also available on a monthly basis.

 

Students can log in to UMFun from any computer or mobile device with internet access. Students can take control and move through the UMFun program, earning awards as each standard is mastered. Once logged in, students move through the content in a traditional, multiple choice test mode which includes short game segments to reward student achievement. Teachers can customize sessions for the number of questions asked as well as the number of correct answers needed to reach proficiency in a standard or sub-topic. The questions are dynamically generated and therefore constantly changing, compelling students to learn concepts rather than memorize answers. Upon answering a question incorrectly, students are shown the correct answer along with a detailed explanation of this response. UMFun offers add-on features and programs, such as a benchmark assessment that enables educators to predict student performance on the end-of-year assessment and provides diagnostic information to guide instruction. 

 

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**Our Competitive Strengths**

 

We believe the following are our key competitive strengths:

 

*Personalized learning experience*. Our proprietary algorithms intelligently analyze a student’s performance and personalizes the delivery of proprietary educational items to address their individual learning needs and to improve students’ performance in core skill areas. Our data-driven approach to each step of a student's learning process, as well as our highly interactive lessons enable us to provide students with highly personalized learning experience. By analyzing a student's profile, learning objectives and proficiency, and considering the key learning points of our curriculum, our system recommends a study plan that suits individual students.

 

*Real-time Student Tracking*. Built-in Remediation and Enrichment. We provide real-time reporting on student achievement, allowing educators to quickly identify learning gaps and provide targeted instruction and practice. UMFun provides students with immediate feedback and explanations and, when required, remediation content designed to build foundational skills in order to accelerate students to grade-level proficiency.

 

*Engaging, Fun and Easy to Use for Students.* Our product utilizes a simple, graphical user interface that is intuitive and easy to use. In addition, UMFun incorporates games and rewards in order to make learning fun and engaging for students. By engaging students and providing them with the tools they need to succeed, we enable them to take control of their own learning, boost their confidence and keep them interested in using our products, while creating a culture of academic success.

 

*Accessible, Dynamic online and mobile Platform*. UMFun is delivered entirely online and cross-platform so it can be used by teachers, parents and students on any computer or mobile device wherever internet access is available.

 

*High Impact, Low Cost Solution*. By providing a single, comprehensive solution for core subjects across a wide range of grade levels, UMFun eliminates the need for parents to have multiple learning products, saving them both time and money. In addition, at an average monthly price per student of US $1.60, we offer parents a compelling value proposition compared to off-line private tutoring.

 

*Visionary and passionate management team with strong academic partners*. Our visionary management team is passionate about education and has been instrumental in driving the success of our business. Our academic partners, Sun Yat Sen University and South China Normal University, are ranked as top universities in China by all the most influential and widely observed international university rankings. We believe our management team's collective experience and strong execution capabilities present a significant advantage and enable us to realize attractive growth opportunities.

 

**Our Growth Strategies**

 

Our goal is to strengthen our market position in the online education market in China, creating a foundation for us to develop a global online education platform. We intend to achieve our goal by pursuing the following strategies:

 

*Further enhance our brand image to grow our student base*. We believe that building our brand and strengthening our reputation for providing quality online English education is critical to the success of our platform. We seek to deploy marketing initiatives strategically to maximize returns across both online and offline channels. 

 

*Expand our curriculum*. We believe the quality of our subject offerings is important to our continued growth and success. We intend to devote significant resources and to leverage our knowledge and expertise in the online education industry in China to develop new subject offerings that will better address the needs of our current students and attract new prospective students from various demographic groups.

 

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*Strengthen our technologies and data analytics capabilities*. We intend to continue to devote resources to our product development efforts. Our proprietary technologies allow us to track a wide range of metrics across our student and teacher base. This has created a substantial database of student and teacher data. We aim to actively enhance the learning experience for our students by analyzing this data, utilizing algorithms to identify trends and traits that will help better address the learning objectives and needs of our students. We seek to improve these processes and algorithms in the future by making them more robust and accurate to continue to offer our students a personalized learning experience. 

 

*Pursue selective strategic acquisitions and partnerships.* We seek acquisitions and strategic alliances that expand our product and service offerings and provide additional revenue opportunities. We intend to continue to pursue acquisitions that have products, services and businesses that are compatible with our brand identity, culture and corporate mission. We expect that our acquisition activity will be focused primarily on online products and services for our target markets. In addition, we believe our large student audience of over 14 million K-12 students provides a significant and valuable opportunity to enter into strategic relationships in order to cross-sell other appropriate, teacher- and parent approved products to our students.

 

**Competition**

 

The online education services market in China in general, and especially for K-12 students, is fragmented, rapidly evolving and highly competitive. We compete primarily with other providers of supplemental educational materials and online learning tools. We face competition from other companies that provide online education as well as from those that provide traditional offline education in China. We also face competition from other online and mobile platforms or internet companies that plan to expand their business into education.

 

We believe our principal competitors include:

 

|   | · | providers of online and offline supplemental instructional materials for the core subject areas of reading, mathematics and science for K-12 institutions;                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                      |
|   | · | companies that provide K-12-oriented software and online-based educational assessment and remediation products and services to students, educators, parents and educational institutions;                                                 |
|   |   |                                                                                                                                                                                                                                      |
|   | · | the assessment divisions of established education publishers;                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                      |
|   | · | providers of online and offline test preparation materials;                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                      |
|   | · | traditional print textbook and workbook companies that publish K-12 core subject educational materials, standardized test preparation materials or paper and pencil assessment tools;                                                     |
|   |   |                                                                                                                                                                                                                                      |
|   | · | summative assessment companies that have expanded their product lines to include formative assessment and instruction products;                                                                                                           |
|   |   |                                                                                                                                                                                                                                      |
|   | · | non-profit and membership educational organizations and government agencies that offer online and offline products and services, including in some cases at no cost, to assist individuals in standards mastery and test preparation; and |
|   |   |                                                                                                                                                                                                                                      |
|   | · | providers of website hosting for teachers and schools.                                                                                                                                                                                    |

 

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We believe that we are well-positioned to effectively compete in the markets in which we operate on the basis of our innovative approach to online education, immersive and interactive learning environment, scalable and efficient business model, strong curriculum development capabilities and experienced management team. However, some of our current or future competitors may have longer operating histories, greater brand recognition, or greater financial, technical or marketing resources than we do. For a discussion of risks related to competition, see "Risk Factors—Risk Related to Our Business and Industry - We face significant competition, and if we fail to compete effectively, we may lose our market share or fail to gain additional market share, which would adversely impact our business and financial conditions and operating results."

 

**Emerging Growth Company Status**

 

We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act enacted on April 5, 2012 (the “JOBS Act”). For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory “say-on-pay” and “say-when-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation. Under the JOBS Act, we will remain an emerging growth company until the earliest of:

 

|           | ·         | the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;                                                                                                                                                                                                                                                                                                                                                                                                                |
|----------------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|           | ·         | the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock;                                                                                                                                                                                                                                                                                                                                                                                                     |
|           |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|           | ·         | the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or                                                                                                                                                                                                                                                                                                                                                                                              |
|           |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|  

  | ·

  | the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934 (the “Exchange Act”) (we will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months; the value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter). |

 

The JOBS Act also provides that an emerging growth company may utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

 

**Regulation**

 

**PRC Regulations**

 

This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.

 

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**Regulation Relating to Educational Apps**

 

On December 25, 2018, the General Office of the MOE issued the Notice on Strictly Forbidding Harmful Apps in Primary and Secondary Schools, which stipulates, among other things, that (i) local primary schools, secondary schools and education departments, should conduct comprehensive investigations on Apps in their campus, and should call off using any Apps containing harmful contents (such as commercial advertisements and internet games) or increasing the burden to the students, and (ii) a filing and reviewing system of learning Apps should be established.

 

On August 10, 2019, the MOE, jointly with certain other PRC government authorities, issued the Opinions on Guiding and Regulating the Orderly and Healthy Development of Educational Mobile Apps, or the Opinions on Educational Apps, which requires, among others, mobile Apps that provide services for school teaching and management, student learning and student life, or home-school interactions, with school faculties, students or parents as the main users and with education or learning as the main application scenarios, are educational Apps, which should be filed with competent provincial regulatory authorities for education. The Opinions on Educational Apps also requires, among others, that (i) each provider of educational Apps should obtain the ICP License or complete the ICP filing and obtain the certificate and the grade evaluation report for graded protection of cybersecurity before the completion of filing; (ii) the educational Apps with main users under the age of 18 should limit the use time of its App, specify the range of suitable ages, and strictly monitor the content in its App; (iii) if any educational App will be introduced as a mandatory App to students in any school, such educational App should be approved by the applicable school through its collective decision-making process and be filed with the competent regulatory authorities for education; and (iv) the educational Apps selected by regulatory authorities for education and schools as the teaching or management tools are not allowed to charge any fees to students or parents or offer any commercial advertisements or games. On November 11, 2019, the MOE issued the Administrative Measures on Filing of Educational Mobile Apps. In 2020, the MOE established a public channel that can be used to submit complaints with respect to educational apps and set a penalty points system based on the severity of the complaints. For serious complaints substantiated by relevant government authorities, an appropriate number of penalty points is recorded for the relevant educational app provider, and remedial measures also may be required. In the event that an educational app provider receives 12 or more penalty points within 12 months or certain types of serious complaints, the MOE may revoke such provider’s filing, blacklist such provider, remove its educational app from the app store, publicize the complaint or prohibit such provider from submitting any filings for six months. Complaints can be made against both educational app providers and users regarding a variety of matters including failure to file or obtain relevant permits; illegal or inappropriate information; inappropriate collection and use of personal information; and violation of relevant requirements for primary and secondary schools and online after-school training programs.

 

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**Regulation Related to Foreign Investment Restrictions**

 

Investments in China by foreign investors and foreign-invested enterprises were previously regulated by the Catalogue of Industries for Guiding Foreign Investment, repealed by the Special Management Measures (Negative List) for the Access of Foreign Investment (2020 Version), or the Negative List, and the Catalogue of Industries for Encouraging Foreign Investment (2020 Version), or the Encouraging Catalogue, which were promulgated by the National Development and Reform Commission, or the NDRC, and the Ministry of Commerce on December 27, 2020, and became effective on January 27, 2021. Pursuant to the Encouraging Catalogue and the Negative List, foreign investments are categorized as encouraged, restricted and prohibited. Foreign investments that are not listed in the Negative List or Encouraging Catalogue are permitted categories. According to the Negative List, foreign investors are prohibited from holding more than 50% of equity interests in an enterprise which provides value-added telecommunications services (except for e-commerce business, domestic multi-party communications services, store and forward services and call center services).

 

The Regulations on Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which took effect on January 1, 2002 and last amended on February 6, 2016, are the key regulations for foreign direct investment in telecommunications companies in China. The FITE Regulations stipulate that the foreign investor of a telecommunications enterprise is prohibited from holding more than 50% of the equity interests in a foreign-invested enterprise that provides value-added telecommunications services. In addition, for a foreign investor to acquire any equity interest in a business providing value-added telecommunications services in China, it must demonstrate a positive track record and experience in providing such services.

 

On July 13, 2006, the MIIT issued the Circular on Strengthening the Administration of Foreign Investment in Value-added Telecommunications Services, or the MIIT Circular 2006, which requires that (i) foreign investors can only operate a telecommunications business in China through establishing a telecommunications enterprise with a valid telecommunications business operation license; (ii) domestic license holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any form, or providing any resource, sites or facilities to foreign investors to facilitate the unlicensed operation of telecommunications business in China; (iii) value-added telecommunications services providers or their shareholders must directly own the domain names and registered trademarks they use in their daily operations; (iv) each value-added telecommunications services provider must have the necessary facilities for its approved business operations and maintain such facilities in the geographic regions covered by its license; and (v) all value-added telecommunications services providers should improve network and information security, enact relevant information safety administration regulations and set up emergency plans to ensure network and information safety. The provincial communications administration bureaus, as local authorities in charge of regulating telecommunications services, may revoke the value-added telecommunications business operation licenses of those who fail to comply with the above requirements or fail to rectify such noncompliance within specified time limits. Due to the lack of any additional interpretation from the regulatory authorities, it remains unclear what impact MIIT Circular 2006 will have on us or the other PRC internet companies with similar corporate structures and contractual arrangements.

 

In light of the above restrictions and requirements, we conduct our value-added telecommunications businesses through our VIE, Guangzhou XinYiXun.

 

**Regulation Relating to Online Publishing**

 

On February 4, 2016, the SAPPRFT and the MIIT jointly issued the Administrative Provisions on Online Publishing Services, or the Online Publishing Provisions. The Online Publishing Provisions, taking effect as of March 10, 2016, superseded the Internet Publishing Measures. Compared with the Internet Publishing Measures, the Online Publishing Provisions set out more detailed provisions for online publishing activities, which mainly cover issues such as defining online publishing services, licensing and approvals, the administrative and supervisory regime and legal liabilities. According to the Online Publishing Provisions, all online publishing services provided within the territory of China are subject to the Online Publishing Provisions, and an online publishing services permit shall be obtained to provide online publishing services. Pursuant to the Online Publishing Provisions, "online publishing services" refer to providing online publications to the public through information networks; and "online publications" refer to digital works with publishing features such as having been edited, produced or processed and are made available to the public through information networks, including: (i) written works, pictures, maps, games, cartoons, audio/video reading materials and other original digital works containing useful knowledge or ideas in the field of literature, art, science or other fields; (ii) digital works of which the content is identical to that of any published book, newspaper, periodical, audio/video product, electronic publication or the like; (iii) network literature databases or other digital works, derived from any of the aforesaid works by selection, arrangement, collection or other means; and (iv) other types of digital works as may be determined by the SAPPRFT. As the scope of online publication is broad, certain contents we post on our website, such as video-audio clips and course materials, may be deemed as online publications. We currently do not hold the license required to provide online publishing services.

 

**Regulation Relating to Internet Culture Activities**

 

On February 17, 2011, the Ministry of Culture, or MOC, promulgated the Interim Administrative Provisions on Internet Culture, or the Internet Culture Provisions, which became effective on April 1, 2011. The Internet Culture Provisions require ICP services providers engaging in commercial "internet culture activities" to obtain a permit from the MOC. "Internet cultural activities" is defined in the Internet Culture Provisions as an act of provision of Internet cultural products and related services, which includes (i) the production, duplication, importation, and broadcasting of the Internet cultural products; (ii) the online dissemination whereby cultural products are posted on the Internet or transmitted via the Internet to end-users, such as computers, fixed-line telephones, mobile phones, television sets and games machines, for online users' browsing, use or downloading; and (iii) the exhibition and comparison of the Internet cultural products. In addition, "Internet cultural products" is defined in the Internet Culture Provisions as cultural products produced, broadcast and disseminated via the Internet, which mainly include internet cultural products specially produced for the Internet, such as online music entertainment, online games, online shows and plays (programs), online performances, online works of art and online cartoons, and internet cultural products produced from cultural products such as music entertainment, games, shows and plays (programs), performances, works of art, and cartoons through certain techniques and duplicate those to the internet for dissemination. 

 

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| **C.** | **Organizational Structure** |
|--------|------------------------------|

 

UMeWorld is a holding company without substantive operations and we conduct our businesses through our subsidiaries and our consolidated VIE, or VIE. The chart below summarizes our corporate legal structure and identifies our significant subsidiaries and other entities that are material to our business as of the date of this annual report:

 

On April 16, 2021, the Company dissolved AlphaRx Canada Limited, a wholly owned subsidiary which was incorporated in the Province of Ontario, Canada. The dissolution did not have a material impact on the Company’s consolidated financial statements.

 

 

 

**VIE Contractual Arrangements**

 

Due to PRC legal restrictions on foreign investment in and ownership of entities engaged in the education industry, we operate our business through our consolidated VIE, or VIE. PRC laws and regulations currently require any foreign entity that invests in the education industry in China to be an educational institution with relevant experience in providing educational services outside of China. Our offshore holding companies are not educational institutions and do not provide educational services outside China. Accordingly, our offshore holding companies are not allowed to directly engage in the education industry in China. To comply with PRC laws and regulations, we have entered into a series of contractual arrangements with our VIE and its shareholders, through which we are able to consolidate the financial results of our VIE. Neither we nor our subsidiaries own any equity interest in our VIE.

 

These contractual arrangements allow us to:

 

|   | · | exercise effective control over our VIE;                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                       |
|   | · | receive substantially all of the economic benefits of our VIE; and                                                         |
|   |   |                                                                                                                       |
|   | · | have a call option to purchase all or part of the equity interests in our VIE when and to the extent permitted by PRC law. |

 

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As a result of these contractual arrangements, we are the primary beneficiary of our VIE and have consolidated its financial results in our consolidated financial statements in accordance with U.S. GAAP. However, these contractual arrangements may not be as effective in providing operational control as direct ownership and the use of the contractual arrangements exposes us to certain risks. For example, Guangzhou XinYiXun may breach the contractual arrangements with us. In such cases, we would have to rely on legal remedies under PRC law, which may not always be effective, particularly in light of uncertainties in the PRC legal system. See “Risk Factors—Risks Related to Our Corporate Structure.”

 

If our VIE, Mr. Yilun Liang or Mr. Dong Liang fail to perform its/his obligations under the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us effective control over our Consolidated Affiliated Entities. See “Risk Factors - Risks Related to Our Corporate Structure - We rely on the VIE Contractual Arrangements for our PRC operations, which may not be as effective in providing operational control as direct ownership.” If we are unable to maintain effective control over our affiliated entities, we will not be able to continue consolidating the financial results of our affiliated entities into our financial results. We do not have unfettered access to the revenues from our PRC subsidiaries or Consolidated Affiliated Entities due to the significant legal restrictions on the payment of dividends by PRC companies, foreign exchange control restrictions, and restrictions on foreign investment, among others. See “Risk Factors - We rely on dividends, fees and other distributions paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could hinder our ability to conduct our business.”

 

The following is a summary of the currently effective contractual arrangements by and among us, Guangzhou XinYiXun Network Technology Co. Ltd., and its shareholders, namely Mr. Yilun Liang and Guangzhou Zhongda No.3 Venture Investment Co., Ltd.

 

***Agreements that provide us with effective control over the VIE***

 

*Exclusive Management Service Agreement*

 

Pursuant to the Exclusive Management Services Agreement, we have the exclusive right to provide comprehensive technical and business support services to our consolidated VIE. 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 of the Company, our consolidated VIE may not accept such services from any third party. In addition, the consolidated VIE is entitled to pay a service fee to the Company, the amount of which is equal to its total revenue less any necessary costs, taxes and expenses. We have discretion to adjust and decide the amount to be paid by the consolidated VIE to us from time to time.

 

*Proxy agreement*

 

In order to ensure that we are able to make all of the decisions concerning the VIE, we have entered into a proxy agreement with the shareholders of the VIE. Pursuant to the proxy agreement, each of its shareholders has irrevocably appointed us as such shareholder’s attorney-in-fact to act for all matters pertaining to such shareholder’s equity interests in the VIE and to exercise all of their rights as shareholders, including but not limited to attending and voting at shareholders’ meetings. As such, we have the sole rights to designate and appoint directors and senior management members of the VIE. The proxy agreement will remain in effect until the respective shareholder ceases to hold any equity interest in the VIE.

 

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*Equity pledge agreement*

 

In order to secure the performance of the VIE and its shareholders under the contractual arrangements, each shareholder of the VIE has undertaken to pledge all of their shares in the VIE to us. As of the date of this annual report, the share pledge has been registered with local PRC authorities. If the VIE or any of its shareholders breaches or defaults under any of the contractual arrangements, we have the right to require the transfer of the pledged equity interests in the VIE to us or our 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. Moreover, we have the right to collect any and all dividends in respect of the pledged equity interests during the term of the pledge. Unless the VIE and its shareholders have fully performed all of their obligations in accordance with the contractual arrangements and all debts have been fully paid by them to us, the equity pledge agreement will continue to remain in effect.

 

***Agreement that enables us to receive substantially all of the economic benefits from the VIE***

 

In order to ensure that we receive the economic benefits of our consolidated VIE, we have entered into a series of agreements with the consolidated VIE. Under these agreements, we are entitled to substantially all of the economic benefits of our VIE.

 

*Exclusive Management Service Agreement*

 

*See “Agreements that provide us with effective control over the VIE” for key terms and conditions.*

 

*Exclusive Technology Consultation and Services Agreement”*

 

Pursuant to the Exclusive Technology and Services Agreement, we have the exclusive right to provide technical services to the consolidated VIE. In exchange, the consolidated VIE pays a service fee to us that is based on a predetermined formula based on the financial performance of the consolidated VIE. During the term of this agreement, we are entitled to adjust the service fee at our sole discretion without the consent of the consolidated VIE. We will exclusively own any intellectual property arising from the performance of this agreement. 

 

***Agreement that provides us with the option to purchase the equity interests in*****Guangzhou XinYiXun**

 

*Call option agreement*

 

In order to ensure that we are able to acquire all of the equity interests in the VIE at our discretion, we have entered into a call option agreement with the shareholders of the VIE. The option is exercisable by us at any time, provided that doing so is not prohibited by law. The exercise price under the option is the minimum amount required by law and any proceeds obtained by the respective shareholders through the transfer of their equity interests in the VIE shall be used for the repayment of the loans provided by us in accordance with the loan agreements. During the terms of the call option agreement, the shareholders will not grant a similar right or transfer any of the equity interests in the VIE 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. According to the call option agreement, the VIE cannot declare any profit distributions in any form without our prior consent. The call option agreement will remain in effect until the respective shareholder has transferred all of such shareholder’s equity interests in the VIE to us or our designee.

 

In the opinion of our PRC counsel, Dentons China (formerly Beijing Dacheng (Guangzhou) Law Offices), the contractual arrangements among UMeLook Guangzhou, Guangzhou XinYiXun and its shareholders are valid, binding and enforceable under current PRC law. However, these contractual arrangements may not be as effective in providing control as direct ownership. There are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. For a description of the risks related to our corporate structure, please see "Risk Factors - Risks Related to Our Corporate Structure."

 

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| **D.** | **Properties, Plants & Equipment** |
|--------|----------------------------------------|

 

We do not own any real property. We do not lease any office space at this time. We did lease office space in Guangzhou, China. This concluded in September 30, 2017 with no further obligation due. We currently use office space provided by a related 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.

 

**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 an offshore holding company conducting our operations in China through our variable interest entity, Guangzhou XinYiXun. Neither we nor our subsidiaries own any share in Guangzhou XinYiXun. Instead, we control and receive the economic benefits of Guangzhou XinYiXun’s business operation through VIE Agreements. 

 

We are an educational technology company and a visionary player in the online educational landscape in China. UMFun, our K-12 flagship product combines “gamification” and “adaptive learning”. It is a cloud-based assessment and learning analytics platform that can intelligently analyze and adapt to a student's performance and personalizes the delivery of proprietary educational items in accordance with their individual learning needs. UMFun received the prestigious “2016 Top 100 Online Education Product” designation in China. The Company has incurred recurring operating losses since inception as it has worked to bring its UMFun to market. Management expects such operating losses will continue until such time that substantial revenues are received from UMFun. Management is currently seeking additional capital through private placements and public offerings of its ordinary shares to fund our operations. There can be no assurance that we will be successful in accomplishing our objectives. Without such additional capital, we may be required to cease operations.

 

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 $30.99 million as of September 30, 2021, net loss of $0.11 million, and net cash used in operating activities of $0.12 million for the year ended September 30, 2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

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**Results of Operations**

 

The following tables summarize the results of operations for the years ended September 30, 2021, 2020 and 2019 and the annual results of operations for the past three years:

 

| Years Ended September 30                         |       | **2021**    | ** ** | ** ** | **2020**    | ** ** | ** ** | **2019**    | ** ** |
|--------------------------------------------------|------------|-------------|------------|------------|-------------|------------|------------|-------------|------------|
| ** **                                       | ** ** | ** $** | ** ** | ** ** | ** $** | ** ** | ** ** | **$ ** |       |
| **Revenue**                                      |       |        | 2,832      |       |        |       | 4          |        |       |   | 113 |   |
| **Cost of revenue**                              |       |        | (19,641    | )          |        |       | -          |        |       |   | (590 | ) |
| **Selling, general and administrative expenses** |       |        | (86,848    | )          |        |       | (134,953   | )           |       |   | (117,177 | ) |
| **Other income**                                 |       |        | -          |       |        |       | 10,765     |        |       |   | - |   |
| **Interest income**                              |       |        | 31         |       |        |       | 5          |        |       |   | 14 |   |
| **Other expense**                                |       |        | (3,810     | )          |        |       | (24,785    | )           |       |   | - |   |
| **Income tax expense**                           |       |        | -          |       |        |       | -          |        |       |   | - |   |
| **Net loss**                                     |       |        | (107,436   | )          |        |       | (148,964   | )           |       |   | (117,640 | ) |

 

**RESULTS OF OPERATIONS**

 

**The Year Ended September 30, 2021 Compared to the Year Ended September 30, 2020**

 

**Revenues**

 

Our revenues increased from $4 in 2020 to $2,832 in 2021. This increase was related to the Company’s Easy Learn English product.

 

**Cost of Revenues**

 

Our cost of revenues increased from $0 in 2020 to $19,641 in 2021. The increase was due to headcount-related expenses to serve Easy Learn English product. 

 

**Selling, General and Administrative Expenses**

 

Our selling, general and administrative expenses decreased from $134,953 in 2020 to $86,848 in 2021 due to decreased sales and marketing activities. 

 

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**Other Income**

 

We had $0 other income in 2021, as compared to other income of $10,765 in 2020.

 

**Other Expense**

 

We had $3,810 other expense in 2021, as compared to other expense of $24,785 in 2020, a decrease of $20,975 or about 84.63%.

 

**Income Tax Expense**

 

**There was no income tax expense incurred for the years ended September 30, 2021 and 2020.**

 

**Net loss**

 

As a result of the cumulative effect of the foregoing factors, we incurred a net loss of $107,436 for the year ended September 30, 2021 as compared to net loss of $148,964 for the year ended September 30, 2020, a decrease of $41,528 or about 27.88%. The decrease was mainly attributed from the decrease in selling, general and administrative expenses.

 

**The Year Ended September 30, 2020 Compared to the Year Ended September 30, 2019**

 

**Revenues**

 

Our revenues decreased from $113 in 2019 to $4 in 2020. This decrease was related to the Company’s lack of funding for any sales and marketing effort.

 

**Cost of Revenues**

 

Our cost of revenues decreased from $590 in 2019 to $0 in 2020. The decrease was due to less headcount-related expenses to serve UMFun users. 

 

**Selling, General and Administrative Expenses**

 

Our selling, general and administrative expenses increased by 15% from $117,177 in 2019 to $134,953 in 2020. The increase was mainly due to increased audit expenses. 

 

**Other Income**

 

We had other income of $10,765 in 2020, as compared to other income of $0 in 2019.

 

**Other Expense**

 

We had $24,785 other expense in 2020, as compared to other expense of $0 in 2020, a increase of $24,785.

 

**Income Tax Expense**

 

There was no income tax expense incurred for the years ended September 30, 2020 and 2019.

 

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**Net loss**

 

As a result of the cumulative effect of the foregoing factors, we incurred a net loss of $148,964 for the year ended September 30, 2020 as compared to net loss of $117,640 for the year ended September 30, 2019, an increase of $31,324 or about 26.63%. The increase was mainly attributable from the increase in selling, general and administrative expenses. 

 

**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, 2021 and 2020, we had cash balances of $7,820 and $16,890 respectively. These funds are primarily located in various financial institutions located in Hong Kong and the PRC.

 

As of September 30, 2021, we had working capital deficiency of approximately $226,006 as compared to a working capital deficiency of $346,426 as of September 30, 2020. 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 Easy Learn English. The inability to raise capital would have a material adverse effect on the Company.

 

**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.

 

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**Holding Company Structure**

 

***Overview***

 

We are a holding company with no material operations of our own, all of our education business in China is conducted through the VIE Contractual Arrangements. See “Item 4. Information on the Company - Organizational Structure - VIE Contractual Arrangements.” For each of the three years ended September 30, 2021, 2020 and 2019, revenues from our Consolidated Affiliated Entities constituted substantially all of our total consolidated net revenues.

 

Conducting most of our operations through the VIE Contractual Arrangements entails a risk that we may lose effective control over our Consolidated Affiliated Entities, which may result in our being unable to consolidate their financial results with our results and may impair our access to their cash flow from operations and thereby reduce our liquidity. See “Item 3. Key Information - D. Risk Factors - Risks Relating to Our Corporate Structure and Restrictions on Our Industry” for more information, including the risk factors titled “If the PRC government determines that the agreements that establish the structure for operating our business in China are not in compliance with applicable PRC laws and regulations, we could be subject to severe penalties” and “We rely on the VIE Contractual Arrangements for our PRC operations, which may not be as effective in providing operational control as direct ownership.”

 

***Dividend Distributions***

 

As a holding company, our ability to pay dividends and other cash distributions to our shareholders depends primarily upon dividends and other distributions paid to us by our PRC subsidiaries. The amount of dividends paid by each of our PRC subsidiaries to us depends solely on the service and license fees paid to each of our PRC subsidiaries by the relevant Consolidated Affiliated Entity with which it has contractual arrangements.

 

Under PRC law, all of our PRC subsidiaries and Consolidated Affiliated Entities in China are required to set aside at least 10% of their respective after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of their respective registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. Our PRC subsidiaries are permitted to pay dividends to us only out of their respective retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. 

 

Pursuant to the VIE Contractual Arrangements, the earnings and cash of our VIE are used to pay service fees in RMB to UMeLook Guangzhou as applicable, in the manner and amount set forth in the VIE Contractual Arrangements. After paying the applicable withholding taxes, making appropriations for its statutory reserve requirement and retaining any profits from accumulated profits, the remaining net profit of UMeLook Guangzhou would be available for distribution to UMeLook Limited (HK). 

 

The Company has been in a net loss position since inception.

 

**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, 2021, 2020 and 2019.

 

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**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.

 

**Critical Accounting Policies and Estimates**

 

***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.                                              |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                        |
| 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. |
|    |                                                                                                                                                        |
| 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. 

 

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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.

 

***Use of estimates***

 

The preparation of the consolidated 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 disclosures of contingent assets and liabilities at the date of the accompanying consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include but not limited to, useful lives of property and equipment, stock based compensation, and deferred tax assets. Actual results could differ from those estimates.

 

***Revenue recognition***

 

We previously recognized revenue when the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the service has been rendered, (iii) the fees are fixed or determinable, and (iv) collectability is reasonably assured.

 

On October 1, 2017, we adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (FASB ASC Topic 606) (“ASC 606”) using the modified retrospective method under which cumulative effects are recognized at the date of the initial application of ASC 606. With the adoption of ASC 606, revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. We believe that its current revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Based on our assessment, potential adjustments to input measures are not expected to be pervasive to the majority of its contracts. As such, we have concluded that the adoption of this new guidance will not result in a material cumulative catch-up adjustment to the opening balance sheet or retained earnings at the effective date or any other material impact on its consolidated financial statements.

 

**Recent Accounting Pronouncements**

 

For a summary of recently issued accounting pronouncements, see Note 2 to our consolidated financial statements

 

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**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          |   | 58      |   | Founder, Chairman, Chief Executive Officer |   | Since 8/8/1997  |
| Winfield, Yongbiao Ding |   | 57      |   | Chief Financial Officer (Part time)        |   | Since 6/5/2017  |
| Dr. David Milroy        |   | 69      |   | Independent Director                       |   | Since 4/15/2003 |
| Dr. Ford Moore          |   | 69      |   | 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.

 

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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, 2021, 2020 and 2019. 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, 2021, 2020 and 2019 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)              |   | 2021     |   |                | 30,000 |   |                                      | Nil    |                                       | Nil    |                                                     | Nil    |                                         | Nil    |                            | Nil    |                                     | Nil    |   |   | 30,000 |   |
| Chairman and CEO                |   | 2020     |   |                | 30,000 |   |                                      | Nil    |                                       | Nil    |                                                     | Nil    |                                         | Nil    |                            | Nil    |                                     | Nil    |   |   | 30,000 |   |
|                            |   | 2019     |   |                | 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 2021, 2020 and 2019 fiscal years and payable at such times as determined by the Company.* |

 

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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****UnderlyingOptions**

**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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| **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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**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 2 full-time employees 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 109,545,271 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 |   |   |   | 9.70 | % |
| Winfield Ding (2)                                   |   |                          | 1,719,326  |   |   |   | 1.57 | % |
| Ford Moore (3)                                      |   |                          | 3,446,214  |   |   |   | 3.15 | % |
| David Milroy (4)                                    |   |                          | 2,080,130  |   |   |   | 1.90 | % |
| All Directors and Executive Officers as a group (5) |   |                          | 17,869,373 |   |   |   | 16.31 | % |
|                                                |   |                          |       |   |   |   |   |   |
| **5% or More Beneficial Owner**                     |   |                          |       |   |   |   |   |   |
| Vago International Limited (6)                      |   |                          | 56,066,020 |   |   |   | 51.18 | % |
| Yan Zeng (7)                                        |   |                          | 5,500,000  |   |   |   | 5.02 | % |
| Ruby Hui (8)                                        |   |                          | 6,982,358  |   |   |   | 6.37 | % |
| First Scion Investments Limited (9)                 |   |                          | 10,656,642 |   |   |   | 9.73 | % |

 

|   | (1) | Includes 6,623,703 ordinary shares and vested options to purchase 4,000,000 ordinary shares.                                                                                                                                              |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (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) | The business address for Yan Zeng is Suite 601, Haizhu Science and Technology Building, 2429 Xingang East Road, Haizhu District, Guangzhou, China                                                                                         |
|   | (8) | 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.                                           |
|   | (9) | 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. |

 

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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** |
|--------|--------------------------------|

 

**Contractual Arrangements with Our VIE**

 

We conduct our operations in China principally through contractual arrangements with our PRC subsidiary, our consolidated affiliated entity in China, and their respective shareholders. See Item 4.C. “Organizational Structure.” 

 

**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, 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 year ended September 30, 2019, Michael Lee provided management services to the Company with the amount of $30,000, paid $22,236.51 expenses on behalf of the Company, advanced $16,523.02 to the Company, and received $10,056.40 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, 2019 is $136,703.13.

 

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.

 

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.

 

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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**

 

See Item 18 “Financial Statements.”

 

Dividend Policy

 

Since the incorporation of our company, we have not declared or paid any dividends on our common shares. We have no present plan to declare or pay any dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

 

We are a holding company incorporated in the British Virgin Islands. Although we have not received any to date, we may in the future rely on dividends from our subsidiaries in the PRC. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our subsidiaries in the PRC are required to set aside a certain amount of their accumulated after-tax profits each year, if any, to fund certain statutory reserves. These reserves may not be distributed as cash dividends. Further, if our subsidiaries in the PRC incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

 

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Under the previous PRC tax law, dividend payments to foreign investors made by FIEs, such as our PRC subsidiaries, were exempt from PRC withholding tax. Pursuant to the EIT Law that became effective on January 1, 2008, as well as the related implementation rules and other recently issued regulations, dividends payable by an FIE to its foreign investors are subject to a 10% withholding tax (unless the foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement). Distributions made from pre-January 1, 2008 retained earnings will not be subject to the withholding tax.

 

Our Board of Directors has complete discretion as to whether to distribute dividends, subject to the approval of our shareholders. 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, our general financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

 

**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.

 

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| **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, 2021) |   | 0.40       |   | 0.11      |   |
| Third Quarter  | (Ended June 30, 2021)      |   | 0.28       |   | 0.28      |   |
| Second Quarter | (Ended March 31, 2021)     |   | 0.20       |   | 0.20      |   |
| First Quarter  | (Ended December 31, 2020)  |   | 0.17       |   | 0.17      |   |
| Fourth Quarter | (Ended September 30, 2020) |   | 0.09       |   | 0.09      |   |
| Third Quarter  | (Ended June 30, 2020)      |   | 0.09       |   | 0.09      |   |
| Second Quarter | (Ended March 31, 2020)     |   | 0.15       |   | 0.065     |   |
| First Quarter  | (Ended December 31, 2019)  |   | 0.10       |   | 0.055     |   |

 

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, 2021 there were approximately 58 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.

 

| **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. 

 

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| **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** |
|--------|-----------------------|

 

Regulation of Foreign Exchange

 

China’s government imposes restrictions on the convertibility of the Renminbi and on the collection and use of foreign currency by Chinese entities. Under current regulations, the Renminbi is convertible for current account transactions, which include dividend distributions, interest payments, and the import and export of goods and services. Conversion of Renminbi into foreign currency and foreign currency into Renminbi for capital account transactions, such as direct investment, portfolio investment and loans, however, is still generally subject to the prior approval of the PRC State Administration of Foreign Exchange, or SAFE.

 

Under current Chinese regulations, Foreign-Invested Enterprises such as our Chinese subsidiaries are required to apply to SAFE for a Foreign Exchange Registration Certificate for Foreign-Invested Enterprise. With such a foreign exchange registration certificate (which is subject to review and renewal by SAFE on an annual basis), a foreign-invested enterprise may open foreign exchange bank accounts at banks authorized to conduct foreign exchange business by SAFE and may buy, sell and remit foreign exchange through such banks, subject to documentation and approval requirements. Foreign-invested enterprises are required to open and maintain separate foreign exchange accounts for capital account transactions and current account transactions. In addition, there are restrictions on the amount of foreign currency that foreign-invested enterprises may retain in such accounts.

 

The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. The People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy goals.

 

***Dividend Distributions***

 

We have adopted a holding company structure, and our holding companies may rely on dividends and other distributions on equity paid by our current and future Chinese subsidiaries for their cash requirements, including the funds necessary to service any debt we may incur or financing we may need for operations other than through our Chinese subsidiaries. Chinese legal restrictions permit payments of dividends by our Chinese subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with Chinese accounting standards and regulations. Our Chinese subsidiaries are also required under Chinese laws and regulations to allocate at least 10% of their after-tax profits determined in accordance with PRC GAAP to statutory reserves until such reserves reach 50% of the company’s registered capital. Allocations to these statutory reserves and funds can only be used for specific purposes and are not transferable to us in the form of loans, advances or cash dividends.

 

| **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.

 

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People’s Republic of China Taxation

 

On March 16, 2007, the National People’s Congress, the PRC legislature, enacted the Enterprise Income Tax Law, or the New EIT Law, which became effective on January 1, 2008, and on December 6, 2007, the State Council promulgated the Implementation Rules to the Enterprise Income Tax Law, or the Implementation Rules, which also became effective on January 1, 2008. Under the New EIT Law and its Implementation Rules, foreign-invested enterprises and domestic companies are subject to a uniform enterprise income tax rate of 25%, unless otherwise specified.

 

In addition, dividends payable to foreign investors by PRC resident enterprises are subject to a PRC withholding tax at the rate of 10% unless the foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a preferential withholding arrangement. Pursuant to the Double Taxation Arrangement (Hong Kong), which became effective on December 8, 2006, the withholding tax may be lowered to 5% if the PRC enterprise is at least 25% directly held by a Hong Kong enterprise. According to Circular 601, non-resident enterprises that cannot provide valid supporting documents as to “beneficial ownership” may not be approved to enjoy tax treaty benefits, and the term “beneficial owners” refers to individuals, companies or other organizations normally engaged in substantive operations. These rules also expressly exclude a “conduit company,” or a company established for the purposes of avoiding or reducing tax obligations or transferring or accumulating profits and not engaged in substantive operations, such as manufacturing, sales or management, from being deemed a beneficial owner. As a result, dividends from our PRC subsidiaries paid to us through our Hong Kong subsidiaries may be subject to a reduced withholding tax rate of 5% if our Hong Kong subsidiaries are determined to be Hong Kong tax residents and beneficial owners under the Double Taxation Arrangement (Hong Kong).

 

Under the New EIT Law, enterprises organized under the laws of jurisdictions outside China with their “de facto management bodies” located within China may be considered PRC resident enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The Implementation Rules define the term “de facto management body” as the management body that exercises substantial and overall control and management over the business, personnel, accounts and properties of an enterprise. Circular 82 sets out certain specific criteria for determining the location of the “de facto management bodies” of an enterprise registered outside of the PRC and funded by Chinese enterprises as controlling investors, or a Chinese Controlled Enterprise. Under Circular 82, a Chinese Controlled Enterprise shall be considered a resident enterprise if all of the following applies:

 

|   | 1) | the Chinese Controlled Enterprise’s major management department and personnel who are responsible for carrying out daily operations are located in the PRC;              |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 2) | the department or the personnel who have the right to decide or approve the Chinese Controlled Enterprise’s financial and human resource matters are located in the PRC; |
|   | 3) | the major assets, account book, company seal and meeting minutes of the Chinese Controlled Enterprise are located or stored in the PRC; and                                    |
|   | 4) | the directors or management personnel holding no less than 50% voting rights of the Chinese Controlled Enterprise habitually reside in the PRC.                                |

 

Since the Company is not controlled by a PRC enterprise or a PRC enterprise group, it remains unclear whether the standards set out in the SAT Circular 82 will apply or be cited for reference when considering whether the “de facto management bodies” of the Company and its overseas subsidiaries are in the PRC or not. Furthermore, we do not believe that any of our offshore entities meet all of the conditions detailed above, as the key assets and records for these entities, including the resolutions of their respective board of directors and the resolutions of their respective shareholders, are located and maintained outside of the PRC. While we do not currently consider our company or any of our overseas subsidiaries to be a PRC resident enterprise, there is a risk that the PRC tax authorities may deem our company or any of our overseas subsidiaries as a PRC resident enterprise since a substantial majority of the members of our management team as well as the management team of some of our offshore holding companies are located in China. If the PRC tax authorities determine that our British Virgin Islands holding company is a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example, a 10% withholding tax may be imposed on dividends we pay to our non-PRC enterprise shareholders and, with respect to gains derived by our non-PRC enterprise shareholders, from transferring our shares. It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. 

 

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Pursuant to the New EIT Law, if a non-resident enterprise derives China-sourced income, such as dividends or capital gains, that income is subject to EIT, in the form of a withholding tax. The SAT issued the Interim Measures for Administration of Withholding EIT for Non-Resident Enterprise, effective from January 1, 2009. According to the measures, the entity or individual with the legal or contractual obligation to remit income to the non-resident enterprise is deemed as a withholding agent. The withholding agent must withhold the EIT at the time the relevant payment is made or due to be made and pay the tax within seven days from the date of withholding. Noncompliance with the prescribed procedures by a PRC withholding agent and failure of the non-resident enterprise to pay the applicable EIT must be rectified within a designated period and could result in a fine.

 

| **F.** | **Dividends and Paying Agents** |
|--------|---------------------------------|

 

Not Applicable.

 

| **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.”

 

**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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**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 chief executive officer and chief financial officer have performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report. 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, 2021 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, 2021 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.

 

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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, 2021 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;                                                     |
|   |   |                                                                                                                                                                                                                          |
|   | 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;                                                                                 |
|   |   |                                                                                                                                                                                                                          |
|   | 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, 2021.

 

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. 

 

**Changes in Internal Control over Financial Reporting**

 

In connection with the audit of our consolidated financial statements as of and for the year ended September 30, 2021 we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting as of September 30, 2021. As defined in standards established by the 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.

 

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The material weakness is related to the lack of U.S. GAAP expertise to address complex U.S. GAAP technical accounting issues, related disclosures in accordance with U.S. GAAP and financial reporting requirements set forth by the SEC. To remedy our control deficiencies, we will implement measures to improve our internal control over financial reporting upon the availability of funds.

 

Other than as described above, there were no 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 China and Hong Kong ensures that our employees are treated with a minimum standard of care and consideration.

 

**ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

**Audit Fees:**For the year ended September 30, 2021, we incurred $14,000 in external audit fees, and quarterly reviews in connection with statutory and regulatory filings to our principal accountants as compared to approximately $14,000 for the year ended September 30, 2020.

 

**Audit-Related Fees:**For the years ended September 30, 2021 and 2020, we incurred no fees for assurance and related services by the principal accountant.

 

**Tax Fees:** For the years ended September 30, 2021 and 2020, we incurred NIL tax fees with our principal accountants.

 

**All Other Fees:**For the years ended September 30, 2021 and 2020, 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.

 

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**ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATD PURCHASERS**

 

None.

 

**ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT**

 

On April 1, 2021, the Company dismissed its independent registered public accounting firm, ZH CPA LLC (“ZH”). As a result of ZH's dismissal as the Company's independent registered public accounting firm, ZH had not completed its audit nor had it issued its report with respect to the Company's consolidated financial statements for the fiscal years ended September 30, 2018, 2019 and 2020.

 

The Company has requested that ZH furnish it with a letter addressed to the Securities and Exchange Commission stating whether ZH agrees with the above statements made by the Company in the Form 6-K. The Company will amend the Form 6-K and attach a copy of such letter as an exhibit promptly after ZH furnishes the letter to the Company.

 

Effective April 2, 2021, we engaged J&S Associate (“JS”) as our new independent registered public accounting firm. During the two most recent fiscal years and through the date of our engagement, we did not consult with JS regarding either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on its financial statements, or (2) any matter that was either the subject of a disagreement or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K). On September 27, 2021, July 16, 2021 and June 4, 2021, the Company filed its Annual Reports on Form 20-F for the fiscal years ended September 30, 2020, September 30, 2019 and September 30, 2018 respectively.

 

**ITEM 16G. CORPORATE GOVERNANCE**

 

Not Applicable.

 

**ITEM 16H. MINE SAFETY DISCLOSURE**

 

Not Applicable.

 

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**PART III**

 

**ITEM 17. FINANCIAL STATEMENTS**

 

Financial Statements are set forth under Item 18.

 

**ITEM 18. FINANCIAL STATEMENTS**

 

The consolidated financial statements of UMeWorld Limited, its subsidiaries and its variable interest entity are included at the end of this annual report.

 

**ITEM 19. EXHIBITS******

 

The following exhibits are incorporated by reference.

 

| **Exhibit No.** |   | **Description of Document**                                                                                                                                            |
|-----------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(i)(a)         |   | Memorandum of Association and Articles of Association of AlphaRx, Inc., a BVI Corporation (incorporated by reference to the Form 8-K filed on April 15, 2013).         |
| 3(i)(b)         |   | Certificate of Name Change to UMeWorld Limited (incorporated by reference to the Form 8-K filed on April 15, 2013).                                                    |
| 3(i)(c)         |   | Amended Memorandum and Articles of Association of UMeWorld Limited (incorporated by reference to the Form 6-K filed on May 24, 2013).                                  |
| 3(i)(d)         |        | Certificate of Name Change to UMeWorld Limited (incorporated by reference to the Form 6-K filed on May 25, 2013).                                                      |
| 10.1            |   | 2013 Share Incentive Plan adopted July 1, 2013 (incorporated by reference to the Form 6-K filed on August 19, 2013)                                                    |
| 10.2            |   | 2013 Incentive Bonus Plan adopted July 1, 2013 (incorporated by reference to the Form 6-K filed on August 19, 2013)                                                    |
| 12.1            |   | Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                 |
| 12.2            |   | Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                     |
| 13.1            |   | Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                 |
| 13.2            |   | 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.

 

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**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** |                          |
|--------------------------|----------------------|-------------------------------|
|                     |                 |                          |   |
| DATED: February 14, 2022 | By:                  | */s/ Michael M. Lee*          |   |
|                     |                 | Michael M. Lee, President and |   |
|                     |                 | Chief Executive Officer       |   |

 

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| **UMEWORLD LIMITED****CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019**

  |
|------------------------------------------------------------------------------------------------------------------------|

 

**TABLE OF CONTENTS**

 

|                                                                                                                    |   | **PAGE**

**(S)** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                                                               |   |              |   |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                            |   | F-2               |   |
|                                                                                                               |   |              |   |
| CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2021 AND 2020                                                      |   | F-3               |   |
|                                                                                                               |   |              |   |
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019 |   | F-4               |   |
|                                                                                                               |   |              |   |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019       |   | F-5               |   |
|                                                                                                               |   |              |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019                        |   | F-6               |   |
|                                                                                                               |   |              |   |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                         |   | F-7               |   |

 

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|  | **J&S ASSOCIATE (AF002380)**

*(Registered with PCAOB and MIA)*

UNIT B-2-2-2, SOLARIS DUTAMAS 1, 

JALAN DUTAMAS 1,

50480, Kuala Lumpur, Malaysia.

 

Tel : 03-62053622

Fax : 03-62053623

Email : admin@jns-associate.com |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Shareholders and Board of Directors of

UMeWorld Limited and Subsidiaries

 

| **Opinion on the Financial Statements**

 

We have audited the accompanying consolidated balance sheet of UMeWorld Limited and its subsidiaries (collectively, the “Company”) as of September 30, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for each of the years in the three-year period ended September 30, 2021, 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, 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2021 in conformity with accounting principles generally accepted in the United States of America.

 

**Basis for Opinion**

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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.

 

**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. The Company has suffered recurring losses from operations and has incurred a net capital deficit as at September 30, 2021. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

*/s/ J&S Associate                               *

Certified Public Accountants

 

February 14, 2022

Malaysia

 

We have served as the Company’s auditor since 2021. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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|---------------------|
| F-2                 |
|                     |
| *Table Of Contents* |

 

**UMEWORLD LIMITED****CONSOLIDATED BALANCE SHEETS****AS OF SEPTEMBER 30, 2021 AND 2020****(All amounts in US Dollars, except share and share related data or otherwise noted)**

 

|                                                                                                                                       |   | **2021** |        |   | **2020** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|
| **ASSETS**                                                                                                                                 |   |     |        |   |     |   |
| CURRENT ASSETS                                                                                                                             |   |     |        |   |     |   |
| Cash                                                                                                                                       |   | $        | 7,820       |   |     | $      | 16,890 |   |
| Deposit                                                                                                                                    |   |     | 2,494       |   |     |   | - |   |
| Prepayment                                                                                                                                 |   |     | 26,649      |   |     |   | - |   |
| TOTAL CURRENT ASSETS                                                                                                                       |   |     | 36,963      |   |     |   | 16,890 |   |
| NON-CURRENT ASSETS                                                                                                                         |   |     |        |   |     |   |   |   |
| Property and equipment, net                                                                                                                |   |     | 19,240      |   |     |   | - |   |
| TOTAL NON-CURRENT ASSETS                                                                                                                   |   |     | 19,240      |   |     |   | - |   |
| **TOTAL ASSETS**                                                                                                                           |   | $        | 56,203      |   |     | $      | 16,890 |   |
|                                                                                                                                       |   |     |        |   |     |   |   |   |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT**                                                                                                  |   |     |        |   |     |   |   |   |
| CURRENT LIABILITIES                                                                                                                        |   |     |        |   |     |   |   |   |
| Accounts payable                                                                                                                           |   |     | 23,365      |   |     |   | 22,200 |   |
| Due to related parties                                                                                                                     |   |     | 27,955      |   |     |   | 112,151 |   |
| Accrued liabilities and other payables                                                                                                     |   |     | 211,649     |   |     |   | 228,965 |   |
| TOTAL CURRENT LIABILITIES                                                                                                                  |   |     | 262,969     |   |     |   | 363,316 |   |
| **TOTAL LIABILITIES**                                                                                                                      |   | **$**    | **262,969** |   |     | **$**  | **363,316** |   |
|                                                                                                                                       |   |     |        |   |     |   |   |   |
| Commitments and Contingencies                                                                                                              |   |     |        |   |     |   |   |   |
|                                                                                                                                       |   |     |        |   |     |   |   |   |
| STOCKHOLDERS’ DEFICIT                                                                                                                |   |     |        |   |     |   |   |   |
| Ordinary shares: $ 0.0001 par value;                                                                                                       |   |     |        |   |     |   |   |   |
| Authorized: 250,000,000 shares; Issued and outstanding: 109,545,271 and 107,005,276 shares as of September 30, 2021 and 2020, respectively |   |     | 10,955      |   |     |   | 10,701 |   |
| Additional paid-in capital                                                                                                                 |   |     | 30,657,209  |   |     |   | 30,408,663 |   |
| Accumulated other comprehensive income                                                                                                     |   |     | 118,047     |   |     |   | 119,751 |   |
| Accumulated deficit                                                                                                                        |   |     | (30,992,977 | )      |     |   | (30,885,541 | ) |
| Total stockholders' deficit                                                                                                                |   |     | (206,766    | )      |     |   | (346,426 | ) |
|                                                                                                                                       |   |     |        |   |     |   |   |   |
| **TOTAL LIABILITES AND STOCKHOLDERS’ DEFICIT**                                                                                       |   | $        | 56,203      |   |     | $      | 16,890 |   |

 

 The accompanying notes are an integral part of these consolidated financial statements

 

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|---------------------|
| F-3                 |
|                     |
| *Table Of Contents* |

 

**UMEWORLD LIMITED****CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS****FOR THE YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019****(All amounts in US Dollars, except share and share related data or otherwise noted)**

 

|                                                  |   | **2021** |        |   | **2020** |   |        | **2019** |   |
|-------------------------------------------------------|--------|----------|-------------|--------|----------|--------|-------------|----------|--------|
|                                                  |   |     |        |   |     |   |        |     |   |
| Revenues                                              |   | $        | 2,832       |   |     | $      | 4           |     |   | $ | 113 |   |
| TOTAL REVENUES                                        |   |     | 2,832       |   |     |   | 4           |     |   |   | 113 |   |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Cost of revenues                                      |   |     | (19,641     | )      |     |   | -           |     |   |   | (590 | ) |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| GROSS LOSS                                            |   |     | (16,809     | )      |     |   | 4           |     |   |   | (477 | ) |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| OPERATING EXPENSES                                    |   |     |        |   |     |   |        |     |   |   |   |   |
| Selling, general and administrative expenses          |   |     | 86,848      |   |     |   | 134,953     |     |   |   | 117,177 |   |
| TOTAL OPERATING EXPENSES                              |   |     | 86,848      |   |     |   | 134,953     |     |   |   | 117,177 |   |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| LOSS FROM OPERATIONS                                  |   |     | (103,657    | )      |     |   | (134,949    | )        |   |   | (117,654 | ) |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| OTHER INCOME (EXPENSES)                               |   |     |        |   |     |   |        |     |   |   |   |   |
| Other income                                          |   |     | -           |   |     |   | 10,765      |     |   |   | - |   |
| Interest income                                       |   |     | 31          |   |     |   | 5           |     |   |   | 14 |   |
| Other expense                                         |   |     | (3,810      | )      |     |   | (24,785     | )        |   |   | - |   |
| TOTAL OTHER (EXPENSES) INCOME                         |   |     | (3,779      | )      |     |   | (14,015     | )        |   |   | 14 |   |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| LOSS BEFORE INCOME TAXES                              |   |     | (107,436    | )      |     |   | (148,964    | )        |   |   | (117,640 | ) |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| INCOME TAX EXPENSE                                    |   |     | -           |   |     |   | -           |     |   |   | - |   |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| NET LOSS                                              |   | $        | (107,436    | )      |     | $      | (148,964    | )        |   | $ | (117,640 | ) |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Comprehensive loss:                                   |   |     |        |   |     |   |        |     |   |   |   |   |
| Net loss                                              |   | $        | (107,436    | )      |     | $      | (148,964    | )        |   | $ | (117,640 | ) |
| Foreign currency translation (loss) income            |   |     | (1,704      | )      |     |   | 25,115      |     |   |   | 49 |   |
| Total comprehensive loss                              |   | $        | (109,140    | )      |     | $      | (123,849    | )        |   | $ | (117,591 | ) |
|                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Net loss per share:                                   |   |     |        |   |     |   |        |     |   |   |   |   |
| Basic and diluted                                     |   | $        | (0.00       | )      |     | $      | (0.00       | )        |   | $ | (0.00 | ) |
| Weighted average number of common shares outstanding: |   |     |        |   |     |   |        |     |   |   |   |   |
| Basic and diluted                                     |   |     | 108,591,506 |   |     |   | 107,005,276 |     |   |   | 104,524,189 |   |

 

The accompanying notes are an integral part of these consolidated financial statements

 

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|---------------------|
| F-4                 |
|                     |
| *Table Of Contents* |

 

**UMEWORLD LIMITED****CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT****FOR THE YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019****(All amounts in US Dollars, except share and share related data or otherwise noted)**

 

 

|                                 |   | **Ordinary shares**  |        |   |            |   |   |                               |   |   |                                  |   |   |                            |    |
|--------------------------------------|--------|----------------------|-------------|--------|------------|--------|--------|-------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------|---------|
|                                 |   |                      |        |   |            |   |   | **Additional**                |   |   | **Accumulated**

**Other ** |   |   |                            |    |   | **Total** |   |
|                                 |   | **Number of Shares** |        |   | **Amount** |   |   | ** ****Paid in Capital** |   |   | **Comprehensive Income**         |   |   | **Accumulated****Deficit** |    |   | **Stockholders’ Deficit** |   |
|                                 |   |                 |        |   |       |   |   |                          |   |   |                             |   |   |                       |    |   |   |   |
| **Balance as of September 30, 2018** |   |                 | 104,524,189 |   |       | $      | 10,453 |                          |   | $      | 30,264,550                       |   |   | $                          | 94,587  |   |   | $ | (30,618,937 | ) |   | $ | (249,347 | ) |
| Foreign currency translation         |   |                 | -           |   |       |   | -      |                          |   |   | -                                |   |   |                       | 49      |   |   |   | - |   |   |   | 49 |   |
| Net loss for the year                |   |                 | -           |   |       |   | -      |                          |   |   | -                                |   |   |                       | -       |   |   |   | (117,640 | ) |   |   | (117,640 | ) |
| **Balance as of September 30, 2019** |   |                 | 104,524,189 |   |       | $      | 10,453 |                          |   | $      | 30,264,550                       |   |   | $                          | 94,636  |   |   | $ | (30,736,577 | ) |   | $ | (366,938 | ) |
| Stock issued for cash                |   |                 | 2,481,087   |   |       |   | 248    |                          |   |   | 144,113                          |   |   |                       | -       |   |   |   | - |   |   |   | 144,361 |   |
| Foreign currency translation         |   |                 | -           |   |       |   | -      |                          |   |   | -                                |   |   |                       | 25,115  |   |   |   | - |   |   |   | 25,115 |   |
| Net loss for the year                |   |                 | -           |   |       |   | -      |                          |   |   | -                                |   |   |                       | -       |   |   |   | (148,964 | ) |   |   | (148,964 | ) |
| **Balance as of September 30, 2020** |   |                 | 107,005,276 |   |       | $      | 10,701 |                          |   | $      | 30,408,663                       |   |   | $                          | 119,751 |   |   | $ | (30,885,541 | ) |   | $ | (346,426 | ) |
| Stock issued for cash                |   |                 | 2,539,995   |   |       |   | 254    |                          |   |   | 248,546                          |   |   |                       | -       |   |   |   | - |   |   |   | 248,800 |   |
| Foreign currency translation         |   |                 | -           |   |       |   | -      |                          |   |   | -                                |   |   |                       | (1,704  | ) |   |   | - |   |   |   | (1,704 | ) |
| Net loss for the year                |   |                 | -           |   |       |   | -      |                          |   |   | -                                |   |   |                       | -       |   |   |   | (107,436 | ) |   |   | (107,436 | ) |
| **Balance as of September 30, 2021** |   |                 | 109,545,271 |   |       |   | 10,955 |                          |   | $      | 30,657,209                       |   |   |                       | 118,047 |   |   | $ | (30,992,977 | ) |   | $ | (206,766 | ) |

 

The accompanying notes are an integral part of these consolidated financial statements

 

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|---------------------|
| F-5                 |
|                     |
| *Table Of Contents* |

 

**UMEWORLD LIMITED****CONSOLIDATED STATEMENTS OF CASH FLOWS****FOR THE YEARS ENDED SEPTEMBER 30, 2021, 2020 AND 2019****(All amounts in US Dollars)**

 

|                                                                        |   | **2021** |     |   | **2020** |   |     | **2019** |   |
|-----------------------------------------------------------------------------|--------|----------|----------|--------|----------|--------|----------|----------|--------|
|                                                                        |   |     |     |   |     |   |     |     |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                        |   |     |     |   |     |   |     |     |   |
| Net loss                                                                    |   | $        | (107,436 | )      |     | $      | (148,964 | )        |   | $ | (117,640 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |   |     |     |   |     |   |     |     |   |   |   |   |
| Depreciation expense                                                        |   |     | 1,436    |   |     |   | -        |     |   |   | 113 |   |
| Changes in assets and liabilities:                                          |   |     |     |   |     |   |     |     |   |   |   |   |
| Deposit                                                                     |   |     | (2,494   | )      |     |   | 14,034   |     |   |   | 551 |   |
| Prepayment                                                                  |   |     | (26,649  | )      |     |   | -        |     |   |   | 1,324 |   |
| Accounts payable                                                            |   |     | 1,165    |   |     |   | (2,525   | )        |   |   | 2,625 |   |
| Accrued liabilities and other payables                                      |   |     | 13,834   |   |     |   | 71,774   |     |   |   | 30,463 |   |
| Due to related parties                                                      |   |     | -        |   |     |   | -        |     |   |   | 76,703 |   |
| **NET CASH USED IN OPERATING ACTIVITIES**                                   |   | $        | (120,144 | )      |     | $      | (65,681  | )        |   | $ | (5,861 | ) |
|                                                                        |   |     |     |   |     |   |     |     |   |   |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                    |   |     |     |   |     |   |     |     |   |   |   |   |
| Purchase of property and equipment                                          |   |     | (20,687  | )      |     |   | -        |     |   |   | - |   |
| **NET CASH USED IN INVESTING ACTIVITIES**                                   |   | $        | (20,687  | )      |     |   | -        |     |   |   | - |   |
|                                                                        |   |     |     |   |     |   |     |     |   |   |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES**                                    |   |     |     |   |     |   |     |     |   |   |   |   |
| Proceeds from issuance of common stock                                      |   |     | 248,800  |   |     |   | 144,361  |     |   |   | - |   |
| Repayments to related parties                                               |   |     | (128,166 | )      |     |   | (78,992  | )        |   |   | - |   |
| Proceeds from related parties                                               |   |     | -        |   |     |   | 1,235    |     |   |   | - |   |
| **NET CASH PROVIDED BY FINANCING ACTIVITIES**                               |   | $        | 120,634  |   |     | $      | 66,604   |     |   | $ | - |   |
|                                                                        |   |     |     |   |     |   |     |     |   |   |   |   |
| Effect of exchange rate changes on cash and cash equivalents                |   |     | 11,127   |   |     |   | 15,422   |     |   |   | (20 | ) |
| NET (DECREASE) INCREASE IN CASH                                             |   |     | (9,070   | )      |     |   | 16,345   |     |   |   | (5,881 | ) |
| Cash and cash equivalents at beginning of year                              |   |     | 16,890   |   |     |   | 545      |     |   |   | 6,426 |   |
| Cash and cash equivalents at end of year                                    |   | $        | 7,820    |   |     | $      | 16,890   |     |   | $ | 545 |   |
|                                                                        |   |     |     |   |     |   |     |     |   |   |   |   |
| **SUPPLEMENTARY DISCLOSURE:**                                               |   |     |     |   |     |   |     |     |   |   |   |   |
| Income tax paid                                                             |   | $        | -        |   |     | $      | -        |     |   | $ | - |   |
| Interest paid                                                               |   | $        | -        |   |     | $      | -        |     |   | $ | - |   |

 

The accompanying notes are an integral part of these consolidated financial statements

 

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|---------------------|
| F-6                 |
|                     |
| *Table Of Contents* |

 

**UMEWORLD LIMITED****NOTES TO CONSOLIDATED FINANCIAL STATEMENTS****SEPTEMBER 30, 2021, 2020 AND 2019**

 

**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 August 8, 1997. The Company was re-domiciled to British Virgin Islands (BVI) and continued as a BVI registered company on January 7, 2013. On March 8, 2013, AlphaRx changed its name to UMeWorld Limited. AlphaRx Inc. was a pharmaceutical company specializing in the formulation of therapeutic products using proprietary drug delivery technologies. On November 4, 2011, the Company ceased all operations of its drug development business and adopted a new corporate development strategy that changed the business operation of the Company to digital media and digital education. The Company does not own any material assets and conducts its operations in China through its variable interest entity, Guangzhou XinYiXun.

 

On April 16, 2021, the Company dissolved AlphaRx Canada Limited, a wholly owned subsidiary which was incorporated in the Province of Ontario, Canada.

 

The Company, its subsidiaries, its consolidated subsidiaries and variable interest entities (“VIEs”) are collectively referred to as the (“Group”).

 

As of September 30, 2021, details of the Company’s subsidiaries and VIEs are as follows:

 

| **Name**                                                                                                                          |   | **Date of Incorporation** |   | **Place of Incorporation** |   | **Percentage of Interest** |   | **Principal Activities** |   | **Nature of company** |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|----------------------------|--------|----------------------------|--------|--------------------------|--------|-----------------------|
| Guangzhou YouManFen Information Technology Co., Limited (formerly known as Guangzhou YouManFen Education Technology Co., Limited) |   | May 8, 2021               |   | China                      |   | Contractual arrangements   |   | Private tutoring         |   | Subsidiary of VIE     |
| UMeLook Limited                                                                                                                   |   | February 23, 2012         |   | Hong Kong                  |   | 100%                       |   | Holding company of WFOE  |   | Subsidiary            |
| UMeZone Adaptive Learning Technology Limited                                                                                      |   | September 7, 2012         |   | Hong Kong                  |   | 100%                       |   | Dormant                  |   | Subsidiary            |
| UMeLook (Guangzhou) Information Technology Co. Ltd. (WFOE)                                                                        |   | October 29, 2012          |   | China                      |   | 100%                       |   | Holding company          |   | Subsidiary            |
| YouYiXue (Guangzhou) Information Technology Co. Ltd.                                                                              |   | April 23, 2013            |   | China                      |   | 100%                       |   | Dormant                  |   | Subsidiary            |
| Guangzhou XinYiXun Network Technology Co. Ltd.                                                                                    |   | July 9, 2012              |   | China                      |   | Contractual arrangements   |   | Online education         |   | VIE                   |

 

UMeLook Limited (“UMeLook HK”), the Company’s 100% owned subsidiaries, was incorporated in Hong Kong on February 23, 2012. 

 

UMeLook HK holds 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 does 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 operates UMFun.com, an online learning and assessment platform used by teachers, students and parents in China’s K-12 education system. 

 

The Company does not conduct any substantive operations of its own, rather, it conducts its primary business operations through WFOE, which in turn, conducts 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.

 

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| F-8                 |
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| *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 is the provision of private tutoring. Subsequently on December 31, 2021, YMF changed its name to Guangzhou YouManFen Information Technology Co., Ltd.

 

As of September 30, 2021 and 2020, the carrying amount and classification of the assets and liabilities in the Company’s balance sheets that relate to the Company’s VIEs is as follows: 

 

|                                  |   | **September 30,**

**2021** |      |   | **September 30,**

**2020** |   |
|---------------------------------------|--------|-----------------------------|-----------|--------|-----------------------------|--------|
| Assets                                |   |                        |      |   |                        |   |
| Cash                                  |   | $                           | 2,961     |   |                        | $      | 5,767 |   |
| Prepayment and other assets           |   |                        | 29,143    |   |                        |   | - |   |
| Property and equipment, net           |   |                        | 19,240    |   |                        |   | - |   |
| **Total assets of VIEs**              |   | $                           | 51,344    |   |                        | $      | 5,767 |   |
| Liabilities                           |   |                        |      |   |                        |   |   |   |
| Accrued liabilities and other payable |   | $                           | 447,869   |   |                        | $      | 362,836 |   |
| Due to VIE holding companies          |   |                        | 19,316    |   |                        |   | 18,646 |   |
| Due to related parties                |   |                        | 2,232,617 |   |                        |   | 2,237,667 |   |
| **Total liabilities of VIEs**         |   | $                           | 2,699,802 |   |                        | $      | 2,619,149 |   |

 

**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 net loss of $107,436 during the year ended September 30, 2021. Also, at September 30, 2021, the Company has incurred the accumulated deficits of $30,992,977. Accordingly, the financial statements do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary in the event that the Company is unable to continue as a going concern. The Company demonstrates adverse conditions that raise substantial doubt about the Company's ability to continue as a going concern for one year following the issuance of these consolidated financial statements. These adverse conditions are working capital deficiency, recurring operating losses, accumulated stockholders’ deficit, and continued reliance on external funding sources. In order to mitigate the going concern issues, the Company is constantly pursuing new business arrangements and striving to achieve profitability and seeking capital funding on an ongoing basis via the issuance of promissory notes and private placements. There is no assurance that management's plan will be successful. 

 

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| 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.

 

**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.

 

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| F-10                |
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| *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*”. The Company maintains the books and records of AlphaRx Canada Ltd. in Canadian dollars, and the books and records of Alpha Life Sciences Ltd. and AlphaRx International Holdings Ltd. in Hong Kong dollars, their respective functional currencies. The records of these companies are converted to US dollars, the reporting currency. The translation method used is the current rate method. 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.

 

|                                  |   | **September 30,**

**2021** |   |   | **September 30,**

**2020** |   |   | **September 30,**

**2019** |   |
|---------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|--------|-----------------------------|--------|
| Year-end CAD: USD exchange rate       |   |                        | 0.7884 |   |                        |   | 0.7483 |                        |   |   | 0.7753 |   |
| Annual average CAD: USD exchange rate |   |                        | 0.7786 |   |                        |   | 0.7435 |                        |   |   | 0.7536 |   |
| Year-end RMB: USD exchange rate       |   |                        | 0.1551 |   |                        |   | 0.1470 |                        |   |   | 0.1401 |   |
| Annual average RMB: USD exchange rate |   |                        | 0.1557 |   |                        |   | 0.1427 |                        |   |   | 0.1455 |   |
| Year-end HKD: USD exchange rate       |   |                        | 0.1284 |   |                        |   | 0.1290 |                        |   |   | 0.1276 |   |
| Annual average HKD: USD exchange rate |   |                        | 0.1288 |   |                        |   | 0.1286 |                        |   |   | 0.1276 |   |

 

**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:

 

|                  |   | **2021** |       |   | **2020** |   |       | **2019** |   |
|-----------------------|--------|----------|------------|--------|----------|--------|------------|----------|--------|
| Stock options         |   |     | 10,300,000 |   |     |   | 10,300,000 |     |   |   | 10,300,000 |   |
| Common stock warrants |   |     | -          |   |     |   | -          |     |   |   | - |   |
| Total                 |   |     | 10,300,000 |   |     |   | 10,300,000 |     |   |   | 10,300,000 |   |

 

**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, 2021 and 2020, the Company had cash in the amount of $7,820 and $16,890, respectively.

 

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| 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, 2021, 2020, and 2019.

 

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  | 5 – 7 years |
|-------------------------|-------------------|
| Machinery and Equipment | 3 – 7 years |
| Leasehold Improvement   | 6 years           |

 

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.

 

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| F-12                |
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| *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 Group 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. 

 

The Company generates substantially all of its revenues through UMFun app. The Company’s revenue is reported net of discounts, value added tax and surcharges. During the years ended September 30, 2021, 2020, and 2019 the Company recognized revenue in the amount of $2,832, $4 and $113 respectively.

 

**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.

 

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| F-13                |
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| *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.                                              |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                        |
| 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. |
|    |                                                                                                                                                        |
| 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.

 

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| F-14                |
|                     |
| *Table Of Contents* |

 

**Recent Issued Accounting Pronouncement**

 

On October 1, 2017, the Company adopted *Revenue from Contracts with Customers*(“Topic 606”), applying the modified retrospective method to all contracts that were not completed as of October 1, 2017. Results for reporting periods beginning on October 1, 2017 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior periods.

 

Revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which the Company expects to be entitled to in exchange for those goods or services. The Company follows the five steps approach for revenue recognition under Topic 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

 

The Company generates substantially all of its revenues through UMFun app, in which revenue is recognized over time. The Company’s revenue is reported net of discounts, value added tax and surcharges. During the years ended September 30, 2021, and 2020 the Company recognized revenue in the amount of $0 and $0 respectively.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. Under the new guidance, lessees will be required to recognize all leases (with the exception of short-term leases) at the commencement date including a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (ROU) asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessees may not apply a full retrospective transition approach. The Company adopted the new standard on October 1, 2017. The new standard did not have a material effect on the Company’s consolidated financial statements as the Company does not have any leases that meet the requirements for recognition. 

 

**NOTE 3. PROPERTY AND EQUIPMENT**

 

For the years ended September 30, 2021, 2020 and 2019 the Company recorded depreciation expense of $1,436, $0 and $113 respectively. 

 

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| F-15                |
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| *Table Of Contents* |

 

**NOTE 4. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER PAYABLES**

 

Accounts payable, accrued liabilities and other payables are comprised of the following: 

 

|                                   |   | **September 30,**

**2021** |    |   | **September 30,**

**2020** |   |
|----------------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
| Accounts Payable                       |   | $                           | 23,365  |   |                        | $      | 22,200 |   |
| Accrued Liabilities and Other Payables |   |                        | 211,649 |   |                        |   | 228,965 |   |
| TOTAL                                  |   | $                           | 235,014 |   |                        | $      | 251,165 |   |

 

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 employees, and accrued expenses for services received. As of September 30, 2021, the balance mainly consisted of advances from individual of $171,532 and accrued payroll of $2,481. As of September 30, 2020, the balance mainly consisted of advances from individuals of $218,733 and accrued payroll of $1,347 

 

**NOTE 5. DUE TO RELATED PARTIES**

 

The amounts represented temporary advances to the Company by the related parties of the Company, which were unsecured, interest-free and had no fixed terms of repayments. 

 

**NOTE 6. COMMITMENTS AND CONTINGENCIES**

 

As of September 30, 2021 and 2020, the Company has no material commitments and contingencies. 

 

**NOTE 7. ORDINARY SHARES**

 

The Company is authorized to issue up to 250,000,000 ordinary shares with a stated par value of $0.0001 per share. 

 

On November 22, 2019, the Company issued 300,000 restricted shares to Winfield, Yongbiao Ding, the CFO of the Company, at $0.10 per share pursuant to a private placement agreement.

 

On December 19, 2019, the Company issued 102,642 restricted shares to an arm’s length investor at $0.10 per share pursuant to a private placement agreement.

 

On April 13, 2020, the Company issued 1,000,000 restricted shares to Ford Moore, a director of the Company at $0.05 per share pursuant to a private placement agreement.

 

On August 27, 2020 and September 16, 2020, the Company issued a total of 1,078,445 restricted shares to Ruby Hui, over 5% shareholder of the Company at $0.05 per share pursuant to three private placement agreements.

 

On October 28, 2020, the Company issued a total of 800,000 restricted shares to Ruby Hui, over 5% shareholder of the Company at $0.05 per share pursuant to a private placement agreement.

 

On February 23, 2021, the Company issued 100,000 shares at a price of $0.12 per share to Winfield, Yongbiao Ding, the CFO of the Company for net proceeds of $12,000

 

On March 29, 2021, the Company issued 400,000 restricted shares to an arm’s length investor at $0.12 per share pursuant to a private placement agreement.

 

On March 30, 2021, the Company issued 100,000 restricted shares to an arm’s length investor at $0.12 per share pursuant to a private placement agreement.

 

On April 9, 2021, the Company issued 644,995 restricted shares to an arm’s length investor at $0.12 per share pursuant to a private placement agreement.

 

On April 12, 2021, the Company issued a total of 395,000 restricted shares to two arm’s length investors at $0.12 per share pursuant to a private placement agreement.

 

On April 30, 2021, the Company issued 100,000 restricted shares to an arm’s length investor at $0.12 per share pursuant to a private placement agreement.

 

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| *Table Of Contents* |

 

As of September 30, 2021 and 2020, there were 109,545,271 and 107,005,276 shares issued and outstanding respectively.

 

**NOTE 8. INCOME TAXES**

 

BVI

 

UMeWorld Limited, and AlphaRx International Holdings were incorporated in the BVI and, under the current laws of the BVI, are not subject to income taxes. 

 

Canada

 

AlphaRx Canada Limited was incorporated in Canada and is subject to income tax rate of 38%.

 

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 8.25% to 16.5% on the assessable income arising in Hong Kong during its tax year. No provision for Hong Kong Profits tax has been made as these companies had no taxable income during the years ended September 30, 2021, 2020 and 2019.

 

PRC

 

The Company’s subsidiaries, UMeLook (Guangzhou) Information Technology Co. Ltd. and YouYiXue (Guangzhou) Information Technology Co. Ltd., and VIE, XinYiXun, registered in the PRC are subject to PRC Enterprise Income Tax (“EIT”) of 25% on the taxable income in accordance with the relevant PRC income tax laws. No provision for PRC income tax has been made as these companies had no taxable income during the years ended September 30, 2021, 2020 and 2019.

 

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| F-17                |
|                     |
| *Table Of Contents* |

 

The tax effect of material temporary differences representing deferred tax assets is estimated as follows: 

 

|                      |   | **2021** |   |   | **2020** |   |   | **2019** |   |
|---------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| Deferred tax assets:      |   |     |   |   |     |   |   |     |   |
| Canada                    |   | $        | -      |   |     | $      | 288    |     |   | $ | 763 |   |
| Hong Kong                 |   |     | 518    |   |     |   | 428    |     |   |   | 546 |   |
| PRC                       |   |     | 7,374  |   |     |   | 157    |     |   |   | 1,756 |   |
| Sub-total                 |   |     | 7,892  |   |     |   | 873    |     |   |   | 3,065 |   |
| Less: Valuation allowance |   |     | (7,892 | ) )    |     |   | (873   | ) )      |   |   | (3,065 | ) |
| Net deferred tax assets   |   | $        | -      |   |     | $      | -      |     |   | $ | - |   |

 

The valuation allowance as of September 30, 2021 and 2020 totaled $7,892 and $873, respectively which consisted primarily of established reserves for deferred tax assets arising from non-capital operating loss carry forwards for our entities in United States and our foreign entities. The tax rates being used to determine deferred tax assets are estimated at 38% for Canada, 25% for mainland China, and 16.5% for Hong Kong. The consolidated effective tax (benefit) rate as a percentage of income (loss) before income taxes is as follows.

 

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, 2021 and 2020. 

 

**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 17,000,000 ordinary shares. Under the terms of the 2013 Plan, the Board of Directors shall specify the exercise price and vesting period of each share option on the grant date. 

 

On February 1, 2018, the Company granted 300,000 options to purchase its ordinary shares to Winfield, Yongbiao Ding, the CFO of the Company. The exercise prices of these options shall be $0.20 with an expiry date of May 29, 2024.

 

The following table summarizes the Company’s share option activity during the years ended September 30, 2021, 2020 and 2019:

 

|                                 |   | **Number Outstanding** |       |   | **Exercise**

**Price Per**

**Share** |   |                    | **Weighted-**

**Average**

**Exercise**

**Price** |   |
|--------------------------------------|--------|------------------------|------------|--------|----------------------------------------|--------|-------------------------|-----------------------------------------------------|--------|
| Outstanding as of September 30, 2019 |   |                   | 11,300,000 |   |                                   | $      |  0.15 – 0.20 |                                                |   | $ | 0.16 |   |
| Granted                              |   |                   | -          |   |                                   |   | 0.20                    |                                                |   |   | - |   |
| Exercised                            |   |                   | -          |   |                                   |   | -                       |                                                |   |   | - |   |
| Options forfeited/cancelled          |   |                   | (1,000,000 | )      |                                   |   | 0.20                    |                                                |   |   | - |   |
| Outstanding as of September 30, 2020 |   |                   | 10,300,000 |   |                                   | $      |  0.15 – 0.20 |                                                |   | $ | 0.15 |   |
| Granted                              |   |                   | -          |   |                                   |   | -                       |                                                |   |   | - |   |
| Exercised                            |   |                   | -          |   |                                   |   | -                       |                                                |   |   | - |   |
| Options forfeited/cancelled          |   |                   | -          |        |                                   |   | -                       |                                                |   |   | - |   |
| Outstanding as of September 30, 2021 |   |                   | 10,300,000 |   |                                   | $      |  0.15 – 0.20 |                                                |   | $ | 0.15 |   |

  

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| *Table Of Contents* |

 

The following table summarizes the ordinary shares of the Company issuable upon exercise of options outstanding as of September 30, 2021, 2020 and 2019.

 

|                   |    | **Share Options Outstanding/ Exercisable** |   |
|------------------------|---------|--------------------------------------------|--------|
|                   |    | **Range of**

**Exercise Price**           |   | **Number Outstanding** |   |   | **Weighted-Average Remaining Contractual Life (Years)** |   |
| **September 30, 2021** | $  |   0.15-$0.20                     |   |   | 10,300,000 |   |   |   | 2.66 |   |
| **September 30, 2020** | $       |   0.15-$0.20                     |   |   | 10,300,000 |   |   |   | 3.66 |   |
| **September 30, 2019** | $       |   0.15-$0.20                     |   |   | 11,300,000 |   |   |   | 4.67 |   |

 

As of September 30, 2021 and 2020, the intrinsic values of both outstanding options and exercisable options were $1,134,029 and $926,999 respectively. There were no options exercised during the years ended September 30, 2021, 2020, and 2019; and no stock based compensation is recognized from stock options during the years ended September 30, 2021, 2020, and 2019.

 

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| F-19                |
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| *Table Of Contents* |

 

**NOTE 10. RELATED PARTY TRANSACTIONS**

 

During the year ended September 30, 2019, Michael Lee provided management services to the Company with the amount of $30,000, paid $22,236.51 expenses on behalf of the Company, advanced $16,523.02 to the Company, and received $10,056.40 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, 2019 is $136,703.13.

 

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 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.

 

On November 22, 2019, the Company issued 300,000 restricted shares to Winfield, Yongbiao Ding, the CFO of the Company, at $0.10 per share pursuant to a private placement agreement.

 

On April 13, 2020, the Company issued 1,000,000 restricted shares to Ford Moore, a director of the Company at $0.05 per share pursuant to a private placement agreement.

 

On August 27, 2020 and September 16, 2020 , the Company issued a total of 1,078,445 restricted shares to Ruby Hui, over 5% shareholder of the Company at $0.05 per share pursuant to two private placement agreements.

 

On October 28, 2020, the Company issued a total of 800,000 restricted shares to Ruby Hui, over 5% shareholder of the Company at $0.05 per share pursuant to a private placement agreement.

 

On February 23, 2021, the Company issued 100,000 shares at a price of $0.12 per share to Winfield, Yongbiao Ding, the CFO of the Company for net proceeds of $12,000.

 

**NOTE 11. SUBSEQUENT EVENTS**

 

In accordance with ASC Topic 855, “*Subsequent Events*”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated subsequent events through the date of issuance of the financial data included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Annual Report on Form 20-F or would be required to be recognized in the Consolidated Financial Statements as of September 30, 2021.

 

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| F-20   |