Item
7.01. Regulation FD Disclosure
Need
for a Further Extension to File Form 10-K for the period ended December 31, 2019
On
March 25, 2020, the U.S. Securities and Exchange Commission (the “Commission”) issued Release No 34-88465 (the “Order”)
under Section 36 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) which superseded an order under
Section 36 (Release No. 34-88318) of the Exchange Act, granting public companies a 45-day extension to file certain disclosure
reports that would otherwise have been due from March 1, 2020 through July 1, 2020. Among other conditions, companies must continue
to convey through a current report a summary of why the relief is needed in their particular circumstances for each periodic report
that is delayed. Companies that receive an extension on filing Exchange Act annual reports or quarterly reports pursuant to the
Order will be considered to have a due date 45 days after the filing deadline for the report. As such, those companies will be
permitted to rely on Rule 12b-25 if they are unable to file the required reports on or before the extended due date. We believe
that the Order also requires us to keep the public informed of any additional circumstances that may further delay our timely
filing(s). The purpose of this Current Report on Form 8-K is to comply with these conditions under the Order
The
Company has already filed a Form 8-K on March 16, 2020 for a 45 day extension of the deadline to file Form 10-K for the period
ended on December 31, 2019 in reliance on the March 25, 2020 revised order from the United States Securities and Exchange Commission
(“SEC”). This would have provided for a timely filing on or before May 14, 2020. On May 14, 2020 we filed Form 12b-25
NT-10-K/A for the normal 15 day extension period to further extend our filing deadline to May 29, 2020.
These
actions were necessary due to circumstances caused by the outbreak of Covid-19, which has been determined to be a global pandemic
and has resulted in business shut-downs, restrictions on travel, quarantines and governmental stay at home orders throughout the
world. This has affected our ability to raise capital to pay required professional service providers, the timing and availability
of certain professional service providers whom are now working from home, and our ability to perform on site inventory inspections
on temporarily shut down businesses among other reasons.
In
addition to these challenges which many public companies are facing, our Company is facing additional extraordinary issues. Our
CEO was in China in the first part of January 2020 to inspect new equipment for our software and was thus caught in the early
lockdowns in China. When he returned to Hong Kong, he was placed on an enforced quarantine for an extended length of time. Similarly,
our CFO had been quarantined in Tokyo, Japan. Neither officer could travel to the United States due to U.S. governmental restrictions,
where they were needed to supervise the Company’s interactions with our U.S. professional service providers.
To
further complicate matters, the Company’s accounting firms in both Tokyo, Japan and Hong Kong were unable to or unwilling
to complete the Company’s financials for the period ended December 31, 2019, due mainly to personnel shortages created in
those jurisdictions due to Covid-19. Our CFO was able to complete the financials for our Japanese subsidiary, 12 Japan, LTD which
then needed to be verified by our U.S. accounting team before these financials could be incorporated into our consolidated financials.
Due to the delays in accomplishing these tasks, these financials were presented to the U.S. team far later than anticipated.
In
Hong Kong we did not have the necessary staff to perform what our CFO accomplished in Japan and our US team had to reconstruct
our Hong Kong financials using bank statements and other source materials. This time-consuming task further delayed the completion
of our consolidated financials.
Our
financials for the year are made more complicated by the fact that the Company made four significant acquisitions during 2019
of which the last two occurred in the 4th quarter. This meant that our audit firm had less time to complete some testing on these
acquisitions before year end. We were further delayed in the completion of the purchase accounting valuations as the firm that
we hired to perform this work in 2019 declined the work once Covid-19 infections became evident and they had to be replaced.
On
Monday May 26th, 2020 (Memorial Day) our accounting firm informed us that they had some doubt that they would be able
to complete their full audit procedure by Friday, May 29. 2020 but that they would try their best. We contacted the SEC office
of Chief Legal Counsel to inquire about obtaining an additional filing extension based on these extraordinary circumstances that
would not exist without the Covid-19 pandemic and due to circumstances well beyond our control as a smaller reporting company
which has operations in jurisdictions particularly hard hit by Covid-19. At the time of the filing of this Form 8-K we have not
yet heard back from the SEC office of Chief Legal Counsel as to whether or not they will grant our request for 20 extra days to
timely file our complete form 10-K for the period ended December 31, 2020. We believe that our circumstances warrant this relief
but have no guarantees that this will be granted. Whether or not our request is granted we believe that we will be able to file
within a 20 day window by June 18, 2020.