10-K: UbuyHoldings, Inc. Reports Significant Losses and Going Concern Doubt Amidst Leadership Transition and Search for Operating Business

UbuyHoldings, Inc., a public shell company, reported a substantial increase in net loss and accumulated deficit for the fiscal year ended May 31, 2024, with auditors expressing significant doubt about its ability to continue as a going concern, as new management takes the helm to pursue a merger or acquisition.

Summary

• UbuyHoldings, Inc. (UBYH) is a public shell company with no current operations or revenue, actively seeking to merge with or acquire an operating business.
• For the fiscal year ended May 31, 2024, the company reported a net loss of $284,102, a significant increase from the $15,000 net loss in the prior fiscal year.
• The company's accumulated deficit grew to $14,213,560 as of May 31, 2024, up from $13,929,458 in the previous year.
• Total liabilities increased to $45,102 as of May 31, 2024, primarily due to an increase in notes payable to related parties.
• The independent auditors expressed substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows from operations.
• Effective June 24, 2024, Mr. John Tan Honjian was appointed CEO, President, CFO, and Secretary, and became the sole director, following the resignation of Mr. David Lazar.
• On April 16, 2025, Mr. Azham Azudin replaced Mr. John Tan Honjian as CFO.
• The company's business plan involves identifying and acquiring a business opportunity, likely through a reverse merger, with a focus on entities that may need additional capital or access to U.S. capital markets.
• As of May 31, 2024, the company had no cash and cash equivalents.
• The company's disclosure controls and procedures and internal control over financial reporting were deemed ineffective as of May 31, 2024, due to lack of segregation of duties, absence of an independent board/audit committee, and lack of written policies.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative due to the company's status as a dormant shell with no operations or revenue, significant and increasing net losses, a substantial accumulated deficit, and auditors' expression of 'substantial doubt' about its ability to continue as a going concern. While new management with relevant experience has been appointed and debt was forgiven, the fundamental financial and operational challenges, coupled with high risks associated with finding and integrating a suitable business, outweigh any minor positives.

Positives

• The company has appointed new management, Mr. John Tan Honjian and Mr. Azham Azudin, who bring extensive experience in private equity, M&A, investment banking, and corporate advisory, particularly in Asia-Pacific markets.
• A significant related party debt of $45,102 due to former CEO David Lazar was forgiven as a subsequent event, improving the company's balance sheet post-fiscal year end.
• The company has a clear stated strategy to acquire an operating business, which could potentially create shareholder value if successful.

Negatives

• The company reported a net loss of $284,102 for the fiscal year ended May 31, 2024, a substantial increase from $15,000 in the prior year.
• UbuyHoldings has an accumulated deficit of $14,213,560 as of May 31, 2024, indicating a history of significant losses.
• The company has negative working capital of $45,102 and no cash on hand as of May 31, 2024.
• Auditors have expressed substantial doubt about the company's ability to continue as a going concern.
• The company currently has no operations or revenue, providing no basis for investors to evaluate future prospects.
• Disclosure controls and procedures and internal control over financial reporting were assessed as ineffective due to a lack of segregation of duties, absence of an independent board/audit committee, and unwritten policies.

Risks

• The company has no current operations, and investors have no basis for evaluating its future prospects or ability to achieve its business objective of completing a business combination.
• There is no assurance that the company will be able to identify and acquire a suitable business opportunity in a reasonable timeframe, on reasonable terms, or at all.
• Limited capital resources may hinder the company's ability to take advantage of available business opportunities or successfully develop and implement its plan of operation.
• If the company is unsuccessful in acquiring a new business and generating material revenues, investors could lose their entire investment.
• The company may not become profitable if it cannot manage growth effectively after acquiring an operating business, potentially requiring expansion of management and personnel.
• Future capital raises through debt or equity securities may dilute current investors' ownership percentage or subordinate their rights.
• The company faces intense competition in its search for a revenue-producing business to combine with or acquire, often from firms with greater financial and personnel resources.
• Significant time and capital may be expended on prospective business combinations that are ultimately not consummated, leading to lost resources.
• Conflicts of interest may arise due to the CEO not committing full-time to the company's affairs and potential related-party transactions.
• A business combination may result in significant tax consequences for the company and its shareholders if not structured as a tax-free reorganization.
• Shareholders are unlikely to be afforded an opportunity to evaluate or approve a proposed business combination, relying solely on management's judgment.
• The company's search for a business combination is not limited to a particular industry or sector, making it difficult for prospective investors to evaluate specific merits or risks.
• Past performance by management and their affiliates may not be indicative of the future performance of an investment in the company.
• The company may attempt to complete a business combination with a private target company about which little public information is available, leading to decisions based on limited or faulty information.
• Any acquired business will likely lack diversity of operations or geographical reach, subjecting the company to risks associated with dependence on a single industry or region.
• Changes in laws or regulations, or failure to comply with applicable laws, may adversely affect the business and its ability to complete a business combination.
• As a 'shell company' under SEC rules, investors may be unable to rely on the resale exemption provided by Rule 144 of the Securities Act for at least one year after the company ceases to be a shell, potentially limiting liquidity.
• The company's stock price may be volatile due to factors beyond its control, and there is currently a very limited market for its Common Stock on the Expert Market.
• Future issuance of common stock, particularly in connection with an acquisition, could substantially dilute the interests of existing shareholders.
• Recent changes to Rule 15c2-11 under the Exchange Act could limit or reduce the stock price, liquidity, or volume of the company's Common Stock, and increase compliance costs.

Future Outlook

UbuyHoldings, Inc. intends to explore and identify viable business opportunities within the U.S. and globally, with the primary goal of acquiring an operating entity through a reverse merger, asset purchase, or similar transaction. The company anticipates incurring operating losses in the next 12 months, principally from SEC reporting obligations, and expects to need additional capital to fund operations and close any potential acquisition. The selection of a business opportunity is expected to be complex and risk-prone, with no specific target identified yet. Management plans to rectify internal control weaknesses by implementing an independent board, establishing written policies, and hiring additional accounting personnel once a reverse merger or similar business acquisition is completed.

Management Comments

• "We are a public shell company seeking to create value for its shareholders by merging with another entity with experienced management and growth opportunities in return for shares of our common stock."
• "We do not propose restricting our search for a business opportunity to any particular industry or geographical area and may, therefore, engage in any business in any industry."
• "Our activities are subject to several significant risks, which arise primarily because we have no specific business and may acquire or participate in a business opportunity based on the decision of management, which potentially could act without the consent, vote, or approval of our shareholders."
• "Although there is no assurance that this series of events will be successfully completed, we believe we can complete an acquisition or merger that will enable us to continue as a going concern."
• "Our ability to effectively identify, develop, and implement a feasible plan for our company may be hindered by risks and uncertainties beyond our control, including, without limitation, the continued adverse effects of the coronavirus pandemic on the U.S. and global economies."
• "We plan to rectify these weaknesses [in internal controls] by implementing an independent board of directors, establishing written policies and procedures for our internal control of financial reporting, and hiring additional accounting personnel at such time as we complete a reverse merger or similar business acquisition."

Industry Context

UbuyHoldings, Inc. operates as a 'blank check' or 'shell' company, a common structure used to facilitate public market access for private companies through reverse mergers. This strategy is prevalent in periods where traditional IPOs are less feasible or desirable. The company's stated intention to acquire an operating business places it in competition with other shell companies, SPACs, and private equity firms, many of which possess significantly greater financial and human resources. The current economic climate, including the lingering effects of the COVID-19 pandemic, has created both challenges and potential opportunities for such acquisitions, with some operating entities seeking public market access or capital at discounted rates. The company's lack of specific industry focus is typical for a shell company, aiming for broad flexibility in its search.

Comparison to Industry Standards

• Unlike many Special Purpose Acquisition Companies (SPACs) which typically raise significant capital through an IPO before seeking a target, UbuyHoldings has minimal capital and relies on its public shell status to attract a merger candidate, offering access to the public market without the cost and time of an IPO.
• Compared to more established blank check companies, UbuyHoldings' lack of an independent board, audit committee, and formal internal control policies represents a significant governance weakness, which is not standard for well-capitalized public entities.
• The company's financial position, with zero assets and recurring losses, is typical of a dormant shell company, but the substantial doubt about its going concern status highlights a critical financial vulnerability that would be a red flag for any operating business.
• The appointment of Mr. John Tan Honjian, with his extensive background in private equity and M&A, particularly in Asia-Pacific, suggests a strategic shift towards leveraging international capital markets and deal-making expertise, potentially differentiating it from domestic-focused shell companies.

Management Changes

Corporate Governance

Related Party Transactions

• As of May 31, 2024, Custodian Ventures, the company's Custodian, had advanced $45,102 in the form of an interest-free demand loan.
• On December 6, 2023, the company awarded Custodian Ventures 55,000,000 Class A Preferred Stock (valued at $16,500) and 10,000,000 shares of newly designated Series A-1 Preferred Stock (valued at $237,500) for services performed and to cancel all advances made by the Custodian.
• On January 5, 2024, Custodian Ventures converted its 55,000,000 Class A shares to common shares.
• Subsequent to May 31, 2024, $45,102 in related party debt due to Mr. David Lazar (former CEO and associated with Custodian Ventures) was forgiven.

Stakeholder Impact

• Shareholders face significant risk of dilution from future equity issuances required for a business combination or to fund operations.
• Existing shareholders may experience a substantial reduction in their percentage ownership interest in the company following any merger or acquisition, especially if the target company's owners receive a controlling interest.
• Investors face the potential loss of their entire investment if the company is unsuccessful in acquiring a new business and generating material revenues.
• The limited market for common stock and potential impact of Rule 144 and Rule 15c2-11 changes may make it difficult for shareholders to resell their shares at desired prices or at all.
• The lack of an independent board and audit committee, combined with ineffective internal controls, poses governance risks to all stakeholders, particularly shareholders.

Next Steps

• Identify and investigate viable business opportunities for a merger or acquisition.
• Negotiate and execute appropriate written business agreements for a potential transaction.
• Obtain debt and/or equity financing to meet ongoing operating expenses and fund any acquisition.
• Implement an independent board of directors and establish written policies and procedures for internal control over financial reporting.
• Hire additional accounting personnel to address internal control weaknesses, likely after a reverse merger or similar business acquisition.

Key Dates

Recommendation

Keywords

Shell Company, Merger and Acquisition, Corporate Governance, Financial Reporting, Microcap, OTC Markets, Private Equity, Reverse Merger, Going Concern, SEC Filing, Public Company, Investment Banking