PART II

INFORMATION TO BE INCLUDED IN REPORT

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this annual report on Form 1-K (the “Annual Report”), that are forward-looking statements within the meaning of the federal securities laws. The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Annual Report or in the information incorporated by reference into this Annual Report.

The forward-looking statements included in this Annual Report are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Annual Report. All forward-looking statements are made as of the date of this Annual Report and the risk that actual results will differ materially from the expectations expressed in this Annual Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Annual Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Annual Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Annual Report will be achieved.

Item 1. Business

Overview

UC Asset LP is a limited partnership formed on February 01, 2016 under the laws of the State of Delaware. We invest in real estate for development and redevelopment in the Atlanta and Dallas areas. Our principal office address is 2299 Perimeter Park Drive, Suite 120, Atlanta, GA 30341.

Our partnership is managed by our general partner, UCF Asset LLC under the terms of our partnership’s Limited Partnership Agreement. Except for limited conditions defined in our limited partnership agreement, UCF Asset LLC acting as general partner has authority to exercise full management of our partnership. Limited partners are passive investors and have limited power over our partnership and our general partner.

General Partner

UCF Asset LLC is a limited liability company formed on January 26, 2016 under the law of the State of Georgia. The principal office of our general partner is the same to that of our partnership.

The individuals who, directly or indirectly, own and control our general partner are “Larry” Xianghong Wu with a 90% interest and Gregory Bankston with a 10% interest. Starting from the second quarter of the year 2020, Larry Wu’s interest share will decrease to 80% and Greg’s interest share will increase to 20%. Gregory Bankston is the managing member of our general partner.

UCF Asset LLC does not conduct any business activities other than management of our partnership.

The general partner may be removed, upon consent of the limited partners representing at least sixty-six and two-thirds percent (66 2/3%) of the outstanding common units voting as a single class, where (i) the general partner has been convicted of fraud, embezzlement, or a similar felony by a court of competent jurisdiction in a final judgment, or (ii) the general partner materially and willfully breaches our limited partnership agreement.

The general partner may, at any time, assign all or a portion of its partnership interest to any affiliate and, in the general partner’s sole discretion, admit the affiliate as an additional or substitute general partner.

By and of the date of December 31, 2019, our partnership’s investments primarily consist of ownership interests in residential properties for redevelopment in the Atlanta metropolitan area and land for development in the Dallas metropolitan area.

Residential Investment and Redevelopment in Metropolitan Atlanta

We acquire and redevelop residential real estate properties in metropolitan Atlanta, mostly in suburban regions north of downtown Atlanta, known as Brookhaven, Dunwoody and Marietta, and in downtown Atlanta. Atlanta is the ninth largest metropolitan area in the United States.

Our properties in metropolitan Atlanta are acquired and owned through our wholly-owned investee Atlanta Landsight LLC, which is a Georgia limited liability company.

Upon acquisition of a property, we usually make improvements intended to increase its value before putting it back on the market for sale. Depending on the condition of a property, the improvements may be renovation, remodeling, or a complete tear-down and rebuild of the residential home. After improvements, we may sell the completed project immediately if we believe the submarket has reached its short-term peak; or, we may rent it out for a period, usually12 months, if we believe that the submarket has potential of appreciation in the coming year.

We may resell a property without improvement if the value appreciation has generated a satisfying ROI. We sold such a property in October 2019 and realized an annualized ROI of 47.3% on this property.

Renovation

Renovating a property usually includes optimizing spaces, fixing or replacing water, power and HVAC equipment, installing new flooring, upgrading the kitchen and bathrooms, installing new appliances, and/or painting of interior and exterior walls. Renovation can be a relatively low-cost method to improve the value of a property.

For the annual year of 2019, our partnership had completed 7 renovated residential projects in the Atlanta metropolitan area. 3 of them were sold, and 3 were rented out, and 1 of them is still listed for sale as of December 31, 2019. The listed one went under contract in the first quarter of 2020.

Remodeling

A remodeled property may include most renovation described above but also changes to the structure, usually by adding more space and altering floor plans. Remodeling will usually cost more than renovation but less than rebuilding, and its ROI will usually be higher than renovation but lower than rebuilding.

For the annual year of 2019, our partnership had completed 0 remodeled residential projects in the Atlanta metropolitan area.

Rebuilding

If the condition of a property is too deteriorated to be cost-effectively fixed or repaired, it may be a candidate to tear down and rebuild. When choosing properties to rebuild, we prefer those in a neighborhood where other active rebuilding projects have taken place and completed rebuilt properties have been sold.

For the annual year of 2019, our partnership had completed 2 rebuilding projects in the Atlanta metropolitan area. One of them was sold, and the other one is still listed for sale as of December 31, 2019.

* * *

As of December 31, 2019, our partnership owned ten residential properties in metro Atlanta. See the “Description of Properties” section in this Annual Report.

Of these ten properties, five have completed redevelopment and are listed for sale or are rented out. The net market value of those properties is assessed at approximately $3.30 million in total, as of December 31, 2019.

Five properties are currently under redevelopment with a projected cost of redevelopment of approximately $530,000 in total. This does not include the costs of redevelopment that have already been expended. Upon completion, those properties may have an aggregated listed price of $3.86 million in total.

Two properties were acquired for an aggregate purchase price of approximately $127 thousand, plus other cost of $2.5 thousand.

The total net market value of the properties we owned in metro Atlanta was approximately $6.31 million as of December 31, 2019.

As of December 31, 2019, our property value in Atlanta area is decided by our management utilizing a related party. However, the methods used by the management, as well as the results, have been reviewed and approved by an independent and licensed third party. The third party that reviewed this valuation is Brandon Atkins from Keller Williams (Atlanta Perimeter office).

Farmland Investment and Development in Metropolitan Dallas

In September 2016, we invested and owned 76% of a 72.53-acre farmland located within the township of Farmersville, Texas, in Collin County in the northeast quadrant of the Dallas metropolitan area. In February 2018, our partnership purchased the remaining 24% and now owns 100% of this land.

The land is owned by our Texas wholly owned subsidiary, UCF Development LLC.

The purchase price in September 2016 for the Farmersville property was $805,216. The total historical cost for us on this property (including commissions, taxes, consulting fees etc.) was approximately $860,000, by December 31, 2019.

As of December 31, 2019, the value of our Farmersville, TX property is solely based on the valuation by independent and licensed third parties. The most up-to-date appraisal report valued the property at $1,088,000.00 as of December 19, 2019. This up-to-date report was provided by Michelle Godwin from Valuright Appraisal, Inc.

Our goal is to develop the Farmersville property into a high-end residential community of approximately 40 to 45 high-end residential homes. We have hired a local engineering company to work on concept plans of development. By December 31, 2019, two variants of conceptual plans have been created, reviewed and revised for multiple rounds. Based on those conceptual plans, the property will be developed into 43-44 lots of the size of one acre minimum.

The Farmersville property is not currently zoned for residential use. Rezoning the property to residential use requires the submission of a formal application to the City of Farmersville. We have not yet started the application process. On November 15, 2018, our representatives had a meeting with the City Manager, the Assistant to the City Manager, and the City’s consulting engineer of Farmersville. The meeting addressed issues regarding the property including, to acquire off-site easements for the water line extension to the property. It is possible that our company will get pro rata reimbursement for the water line extension as other developments tie into it.  The meeting also addressed the prospect of annexing our property into the City and zoning it for estate lots. However, no follow-up meetings have occurred for the whole year of 2019.

As of the date of December 31, 2019, we projected the total development cost for the Farmersville property may range between $12 million to $22 million. Since we have frozen our capital-raising efforts for the whole year of 2019 to clear our review by FINRA, we don’t have the needed capital, even partially, to develop this land.

As of the date of December 31, 2019, our strategy on this piece of property is to hold and see if we may be able to raise enough capital to develop it. We don’t exclude the possibility of liquidating it.

To save administrative cost, we have started a process to transfer the ownership of this property to Atlanta Landsight LLC. Upon completion of the transfer, we may consider dissolving UCF Development LLC.

Other Residential Property Investments

Through Atlanta Landsight LLC, we also acquired a property in Greensboro, NC. This property is acquired with a lease-sell contract which will yield approximately 10% per annum return on equity. This is a one-time contingent opportunity and does not represent any change of our investment strategy which focuses on metro Atlanta and Dallas.

Debt Investments

We have made a limited number of debt investments from time to time in high-yield promissory notes or private loans to related parties. As of December 31, 2019, we have made $400,000 of debt investments, which accounts for less than 5% of our net equity.

Employees

Operational services for our partnership are provided by our general partner. In addition to the managing member, our general partner employs two persons on a part-time basis. The member of majority interest of our general partner also contributes his time and services to our general partner. We also utilize the services of contractors and subcontractors in connection with real estate developments.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a limited partnership engaged in the redevelopment and development of real estate properties in metropolitan Atlanta and Dallas. Our general partner is UCF Asset LLC.

Since its incorporation, the Company has grown its net equity from $2.25 million as of the date of March 01, 2016, to $8.76 million as of December 31, 2019.

Net equity per common unit has grown from $1.156/per unit as of March 01, 2016, to $1.557/per unit as of December 31, 2019, after a $0.050 dividend distribution in the year of 2018. The following table shows the change of net equity per share during this period:

Table I: Net equity per share of UC Asset LP, between March 01, 2016 to December 31, 2019.

After factored in the distribution of $.0.050/unit, our net equity per unit has grown 39%, which equals to 8.58% year over year compound growth, since our inception.

On January 02, 2020, our shares (common units) started to quote on OTCQX, the Best Market of OTC markets.

Legal Structure of our Company

The business is structured as a publicly traded limited partnership (Master Limited Partnership or MLP) rather than a real estate investment trust (REIT) in order to appeal to investors looking for long-term growth. It combines the tax benefits of a private partnership—profits are taxed only when investors receive distributions—with the liquidity of a publicly-traded company. The majority of MLPs are organized in natural resources sectors, and only a very limited number are in real estate. The Master Limited Partnership Association counted a total number of 82 MLPs trading on US national exchanges, and only four of them are in the real estate sector. As a matter of fact, we are the only real estate MLP quoted on OTCQX.

Based on our knowledge and understanding, we highlight the distinctions between REITs and MLPs in the following Table II.

Table II: REITs vs MLPs, based on the Management’s knowledge and understanding

Operating Results

Year Ended December 31, 2018

During the year ended December 31, 2018, we invested an additional $1,866,982 into our portfolio investments:

We received an additional return of investment of $1,193,492 during this period from Atlanta Landsight LLC.

Our unrealized losses during this period from our portfolio investments totaled $25,292:

Atlanta Landsight LLC purchased four properties and sold three properties during this period. Atlanta Landsight LLC had $108,869 of realized gain and $57,286 of unrealized gains. We recorded this gain as a combined unrealized loss of $79,239 for the period. UCF Development LLC had $188,108 unrealized loss during this period. In addition, our unrealized gains during this period included accrued but unpaid interest.

Our operational expenses were $241,089 during this period, consisting principally management fees paid to our general partner, and professional fees.

During the year ended December 31, 2018, we recorded a net decrease in net equity of $261,487.

Year Ended December 31, 2019

During the year ended December 31, 2019, we invested an additional $2,331,009 into our portfolio investments:

We received an additional return of investment of $2,635,000from our subsidiaries during this period:

Our unrealized gain during this period from our portfolio investments totaled $744,001:

Atlanta Landsight LLC purchased three properties and sold five properties during this period. Atlanta Landsight LLC had $41,138 of realized loss and $677,139 of unrealized gains. We recorded this gain as a combined unrealized gain of $636,001 for the period. UCF Development LLC had $108,000 unrealized gain during this period. In addition, our unrealized gains during this period included accrued but unpaid interest.

Our operational expenses were $382,808 during this period, consisting principally management fees paid to our general partner, and professional fees.

During the year ended December 31, 2019, we recorded a net increase in net equity of $373,884.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through the issuance of limited partner interests to raise capital. Prior to our initial public offering (IPO) in 2018, we have conducted three private placements of limited partner interests in March 2016, October 2016, and April 2017. We have raised a total of $6,900,000 from these placements. Prior to our public offering, there were 42 limited partners in our partnership.

In January 2018, we made our first public filing of Offering Circular of our IPO to SEC for qualification. This original Offering Circular intended to raise capital of a minimum of $6 million and a maximum of $12 million. However, it was beyond Management’s reasonable expectation that economic ties between the U.S. and China would experience a fast downturn in the first quarter of 2018, as the so-called “trade war” between the U.S. and China erupted. The demand for our IPO substantially decreased. And we changed our Offering Circular in April 2018, to decrease the size of our IPO to a minimum of $3 million and maximum of $6 million.

On June 13, 2018, our Offering Circular for IPO was qualified by the SEC. However, in the following months, the tension of trade disputes between the U.S. and China kept rising. During this period, a series of negative comments spread by a third party (against whom we have filed a charge of defamation in a Chinese court and won the court decision in September 2019), might also have decreased the demand to our offering. By August 2018, it was clear that we would not be able to raise a minimum of $3 million. We made another change to our Offering Circular and reduced the fundraising target to a minimum of $1.43 million and a maximum of $2.85 million.

Our IPO was closed on October 12, 2018. The gross amount of raised capital was $1.45 million, which is less than 25% of the original minimum amount we had set for our IPO. We have a total number of 80 limited partners after the IPO.

Due to this major change of business environment that is out of our control and beyond our reasonable expectation, the capital we were able to raise through our IPO fell dramatically short than our original plan, and the closing of our IPO was several months later than our expectation. Therefore, the Company was forced to adjust its operating plans. A direct impact was on the 73-acre land in Farmersville (northern Dallas), Texas, of which a full development will require $12 million to $22 million. That property has not been developed as of the end of December 2019.

In the year of 2019, we had to freeze all efforts in capital raising through equity deals, as we are subject to FINRA review to be cleared for quotation of our shares on OTC markets. The review process by FINRA took longer than we originally expected, and it was not completed until October 31, 2020, when our Form 211 sponsor received FINRA clearance letter. As a result, our company had not raised any additional capital for the whole year of 2019.

All the above-mentioned factors had limited the availability of capital to us. As the response, we had to downsize our investment plan and business operation in the year of 2018, and then to remain downsized for the year of 2019. This has had a negative impact on our financial performance.

Debt financing

Atlanta Landsight has a construction loan allowance of $510,500 from a local bank. As of December 31, 2019, we have drawn $194,000 from this loan allowance, which represents all our outstanding debt. The Partnership’s debt to net equity ratio is 2.21%, as of December 31, 2019.

After adjustment of our investment and operating plan, we believe our available capital, including net proceeds from our IPO, construction loan allowance from the local bank, together with our existing cash and cash equivalents, will be sufficient to fund our operating plan through at least the next twelve months. However, our operating plan may change due to many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations. Further, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Additional financing may result in dilution to limited partners, imposition of debt covenants and repayment obligations or other restrictions that may affect our business.

Anti-dilution Clause: However, Section 4.01(a) of our Limited Partnership Agreement contains an anti-dilution clause which offers protection to the interest of current investors when additional units or derivative units of our Company will be offered for the purpose of additional financing. Concerned content of this clause reads as follows:

“…. provided that i) any Common Units shall not be offered at a price lower than the book value per Common Unit based on the last audited financial statement immediately preceding the offering of such Common Unit; and ii) any Units or Derivative Units, if convertible into Common Units, the conversion price shall not be set or calculated at a price lower than the book value per Common Unit based on the last audited financial statement immediately preceding the date when such Units or Derivative Units were issued. The foregoing conditions i) and ii) may be waived for any offering if the General Partner has received the approval of a Unit Majority prior to such offering.”

Net Cash Used in Operating Activities

For the year ended December 31, 2018, net cash used in operating activities was primarily the result of $23,053 in prepaid assets and $100,902 in accrued expenses, increased by $25,592 in net unrealized loss on our investments in Atlanta Landsight LLC and UCF Development LLC.

For the year ended December 31, 2019, net cash used in operating activities was primarily the result of management fees and professional fees.

Net Cash Used in Investing Activities

For the year ended December 31, 2018, net cash used in investing activities was primarily the result of $1.9 million in investments in Atlanta Landsight LLC and UCF Development LLC, reduced by $1.2 million in repayments due to those portfolio properties.

For the year ended December 31, 2019, , net cash provided by investing activities was primarily the result of $1.9 million in investments in Atlanta Landsight LLC and UCF Development LLC and $0.4 million in new loans to related parties, reduced by $2.6 million in repayments due to those portfolio properties.

Net Cash Provided by Financing Activities

For the year ended December 31, 2018, net cash provided by financing activities was primarily due to net proceeds of $1.1 million in contributions by limited partners in an IPO in closed in October 2018.

For the year ended December 31, 2019, , net cash provided by financing activities was solely due to a refund of back-up withholding to the U.S. Internal Revenue Service on behalf of our limited partners.

Commitments and Contingencies

We pay quarterly management fees to our general partner, UCF Asset LLC. Management fees are calculated at 2.0% of assets under management as of the last day of our preceding fiscal year. Management fees for the periods ended December 31, 2018 and 2019 was $155,221 and $164,488, respectively.

In addition, we lease space from an unaffiliated third party at 2299 Perimeter Park Drive, Suite 120 in Atlanta. Rent was paid monthly at $2,035 through November 1, 2019, and increased to $2,096 for the next twelve months. Pursuant to the terms of the lease, we have provided a deposit of $2,189 to the lessor.

Trend information

The following discussion covers some significant trends happened to our business, in our industry, or to the macro economy, since the last fiscal year, which had impacts on our operation. It also covers known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our operation for the current fiscal year of 2020.

Public trading of our common units and its impact on our business operation

On October 31, 2019, our Form 211 sponsor received FINRA clearance letter, which cleared the way for us to be quoted on OTC markets. On January 02, 2020, our common units have started to be quoted and traded on OTCQX, the Best Market of OTC Markets.

Clearance by FINRA and trading of our common units on OTCQX will have significant impact on our business operation in the year of 2020 and the years to follow. First of all, we now have the option of raising capital via PIPE deals (private placement of public equity) to meet our operational needs. This will help to ease the limit to our capital availability, which had restrained our options in business operation in the past two years (2018 and 2019).

Secondly, it will enable us to acquire properties by issuing new units, possibly preferred units and/or restricted units, in replacement of cash for all or part of the acquisition cost. This will reduce our cash outflow in acquiring properties, and those saved cash capital can be used on renovation/remodeling/rebuilding of the acquired properties. Overall, it will increase our cash-on-cash ROI, and probably improve the growth rate of our net equity per unit.

Plans to convert our Company into a Qualified Opportunity Fund (QoF)

On May 15, 2019, the Company filed a form 1-U, announced that the Company will convert itself into a Qualified Opportunity Fund (QoF). QoF and Opportunity Zones (OZ) are new policy tools created by the 2017 Tax Cuts and Jobs Act, designed to spur investment in distressed communities throughout the country through tax benefits. Those tax benefits will be granted to investors who invest into a QoF.

The Company expected the transition to be completed by March 2020. In order to complete the transition, the Company would swap its assets outside of OZs for assets inside of OZs, within and surrounding metro Atlanta.

As of the end of December 2019, the transition went much slower than the Company expected for two reasons: 1) it had been slower than expected to liquidate our assets outside of OZs; and 2) we had not been able to raise adequate capital to purchase more assets inside of OZs. As of the date of December 31, 2019, management believed that it was unlikely that the Company’s portfolio would meet the criteria of a QoF, which requires 90% of its assets to be inside of OZs, by the end of March 2020.

Management will decide whether the Company will continue its effort to convert into a QoF after March 2020.

Trends of “trade war” between the U.S. and China

Economic ties between the U.S. and China experienced a fast downturn in the first quarter of 2018. Several rounds of tariffs and retaliating tariffs were imposed by both governments which impacted billions of dollars of trade between the two countries. The trade dispute, or, “trade war” as it was commonly called, raised concerns among Chinese investors over their investments in the U.S., which were worsened as Chinese government tightened its policy regarding outflow of Chinese investments into the U.S. This had substantial negative impacts on our financing efforts, because the majority of our current investors are Chinese, and Chinese investors have been the major pool for our capital-raising efforts. Our IPO in 2018 raised approximately $1.45 million, which was 75% less than the minimum amount we expected in the end of the year 2017.

The trade war also increased building costs, and therefore had negative impacts on our business by increasing our subsidiary’s operational cost. According to an analysis by the National Association of Home Builders (Source: CNBC, May 2019):

On Wednesday, 15, 2020, U.S. President Donald Trump and Chinese Vice Premier Liu He signed a deal that was called the “Phase I Agreement” to end the trade disputes. That agreement cut some U.S. tariffs on Chinese goods in exchange for Chinese pledged to purchase more of American farm, energy and manufactured goods and addressed some U.S. complaints about intellectual property practices. The two governments are currently engaging into further negotiations. We expect that the trade relation between the two economies will keep improving in the year 2020, and that will possibly improve Chinese investor’s enthusiasm for investment into our company.

The outbreak of COVID-19 and its possible impact on US and Atlanta and Dallas markets

The coronavirus COVID-19 pandemic, starting as an outbreak in China in the last months of the year 2019, and transmitted to many countries including United States in the first few months of the year 2020, has had profound impact, mostly negative, on US and global economies and stock markets. Discussions on COVID-19’s global and national impacts are very available in the public domain, so we will not add more herein.

It will definitely have negative impact on the real estate markets in both Atlanta and Dallas. In March 2020, one of our buyers cancelled his offer on one of our listed properties, citing the reason that his portfolio had suffered a big loss during the stock market crash caused by COVID-19 impact. Although we had a back-up offer on this property, we were nevertheless alerted that we might see weaker demands on our properties in the following period. The management will follow and monitor the situation closely, and will take necessary actions to mitigate risks.

On the other hands, we believe that the impact of COVID-19 will be of a limited period of time, and the market will bounce back after the pandemic is gone. This may create an opportunity for us to purchase properties at an undervalued price. We project that the lowest point of real estate market may take place in the seasons of fall and winter of 2020. Based on this projection, the Company may start a round of private placement to raise funds this summer, in order to make purchases in fall and winter.

On the operation side, the outbreak of COVID-19 might have a near term negative effect on building supplies necessary for our renovations, remodels and rebuilds. We do not expect it to have a long-term negative effect.

The Company is monitoring the impact of COVID-19 very closely.

Item 3. Directors and Officers

The operation of our partnership is managed by our general partner. We do not have any directors, officers, or significant employees. The following are key members of our general partner and their respective ages and positions as of December 31, 2019. As the member of majority interest of our general partner, Dr. Wu contributes his time and services to our general partner as an owner rather than an employee.

Mr. Gregory Bankston has served as managing member of UCF Asset LLC since its formation in January 2016. Between 2013 and 2016, he founded and operated Real Estate Butlers. Prior to then, he was a co-owner of Bankston Brokers, formerly known as Bankston Realty, since 2010. Mr. Bankston is a member of Atlanta Board of Realtors, the Georgia Association of Realtors, and the National Association of Realtors.

Dr. “Larry” Xianghong Wu has been the member of majority interest of UCF Asset LLC since its formation in January 2016. Between 2012 and 2016, he was the founder and chief executive officer of Shanghai Heqing Asset Management LP, a limited partnership based in Shanghai, China, focused on Chinese investments in the U.S., particularly real estate. Between 2011 and 2012, he was chief executive officer of EHE Capital, a Chinese PE fund managing a portfolio of approximately $1 billion from 2011. Prior to then, he worked at Cisco Systems, Inc. between 2009 and 2011 as a vice president in charge of Cisco’s strategic business transformation in China. Dr. Wu has served as policy advisor and counselor to the Chinese government and officials. He also served as a Board Member of Finance and Investment of the Capital Club in China from 2009 to 2013. 

The general partner may be removed, upon consent of the limited partners representing at least sixty-six and two-thirds percent (66 2/3%) of the outstanding common units voting as a single class, where (i) the general partner has been convicted of fraud, embezzlement, or a similar felony by a court of competent jurisdiction in a final judgment, or (ii) the general partner materially and willfully breaches our limited partnership agreement.

The general partner may, at any time, assign all or a portion of its partnership interest to any affiliate and, in the general partner’s sole discretion, admit the affiliate as an additional or substitute general partner.

Audit Committee

Our Company is a limited partnership and is not required to set up a board of director. However, we are still required by the rule of OTCQX to set up an Audit Committee.

In February 2019, the Company resolved to establish an Audit Committee. Starting from July 01, 2019, we have hired two Audit Committee members who both are independent. Herein the meaning of “independent” follows the guidelines published by OTC Market Group Inc.

The two members are:

Harris Miller is a prominent American politician, businessman, and lobbyist. Miller served as president of the Information Technology Association of America and the World Information Technology and Services Alliance (WITSA) for 12 years. He ran for US Senate in the year 2006 and lost to Jim Webb in the Commonwealth of Virginia. Harris received a political science master’s degree from Yale University in 1975.

For a detailed biography of Harris Miller, please see: https://en.wikipedia.org/wiki/Harris_Miller

Li Zheng is currently president of Techtop Industries Inc., an electric motor manufacturer based in Atlanta, GA, which Li co-founded in 2008 with extended family members. Before founding and operating Techtop, Li worked as an environmental engineer, and spent 10 years on academic research and consulting for various water resources and sustainable development projects in the western United States, Northern China, Tibet Plateau, and the mountainous regions of Nepal and India. Li has also been serving as a board member of non-profit Atlanta Young Singers since 2015. Li obtained his Ph.D. degree in Water Resources Engineering from the University of Notre Dame in 1997.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of UC Asset LP is currently comprised of Harris Miller and Li Zheng, each of whom is an independent member of Audit Committee. The Audit Committee operates under service agreements between the Company and the Audit Committee members.

The Company’s management, which consists of its General Partner, is responsible for the preparation of the Company’s financial statements and for maintaining an adequate system of internal controls and processes for that purpose. Daszkal Bolton LLP acts as the Company’s independent auditor and is responsible for conducting an independent audit of the Company’s annual financial statements and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 in accordance with the standards of the Public Company Accounting Oversight Board (United States), and issuing a report on the results of their audit. The Audit Committee is responsible for providing independent, objective oversight of both of these processes.

The Audit Committee has reviewed and discussed the audited financial statements for the year ended December 31, 2019 with management of the Company and with representatives of Daszkal Bolton LLP. As a result of these discussions, the Audit Committee believes that UC Asset maintains an effective system of accounting controls that allow it to prepare financial statements that fairly present the Company’s financial position and results of its operations. Discussions with Daszkal Bolton LLP also included the matters required by AS 1301: Communications with Audit Committees.

In addition, the Audit Committee reviewed the independence of Daszkal Bolton LLP. We received written disclosures and a letter from Daszkal Bolton LLP regarding its independence as required by Independent Standards Board Standards No. 1 and discussed this information with Daszkal Bolton LLP.

Based on the foregoing, the Audit Committee has recommended that the audited financial statements of the Company for the year ended December 31, 2019 be included in the Company’s annual report on form 1-K to be filed with the Securities and Exchange Commission.

Harris Miller
Li Zheng

MANAGEMENT COMPENSATION

The operation of our partnership is managed by our general partner, UCF Asset LLC. Our partnership does not have any directors or officers who receive compensation.

We pay management fees quarterly to our general partner. Management fees are calculated at 2.0% of assets under management as of the last day of our preceding fiscal year. The fee is paid quarterly. Management fees for the periods ended December 31, 2018 and 2019 was $155,221 and $164,488, respectively.

We pay our Audit Committee members $7,000 each annually.

In addition to the management fee, we reimburse the general partner for standard expenses of managing our partnership in accordance with our limited partnership agreement. These reimbursable expenses include: organizational expenses; fees for accountants, attorneys, auditors, and other professionals; expenses associated with partnership taxation reporting; operational expenses including insurance, valuation reports, and real estate brokerage commissions; and government filing fees and costs.

Item 4. Security Ownership of Management and Certain Security holders

No person to our knowledge beneficially owns more than 10% of our common units. Neither the managing member nor the member of majority interest of our general partner beneficially owns any of our common units.

Item 5. Interest of Management and Others in Certain Transactions

We utilize the real estate brokerage services of Liz Bankston of Bankston Brokers to acquire and sell properties in the Atlanta area. Mrs. Bankston is the wife of Gregory Bankston, the managing member of our general partner. Our work relation with Liz Bankston is not exclusive, and we have worked with other brokers from time to time. In 2019, we paid Mrs. Bankston approximately $31,152 as commissions for acting as broker in connection with five real estate transactions. We believe the commissions are paid at or less than a standard market rate.

In June 2019, we advanced $100,000 to our General Partner. This advance carries a 4.5% annual interest rate and maturity date of June 10, 2021 or upon the LP having raised an additional $20,000,000 in capital. This advancement was made to empower the General Partner to carry on the business plan of converting the Company into a Qualified Opportunity Zone. However, the plausibility of such conversion has considerably dropped since the advance, and the Company has requested that the General Partner should pay back the advancement or set up a definite pay-back schedule by the end of June 2020, one year earlier than its maturity date.

In April 2019, we loaned $300,000. This third party then acquired a 10% economic interest in our General Partner. This note carried a 5.6% annual interest rate in 2019, 8% annual interest rate for 2020 and 10% annual interest rate for 2021 and a maturity date of March 31, 2021, in a single lump sum. In January 2020, we reached an agreement with this third party to keep the introductory rate of 5.6% for the year of 2020.

Except as noted immediately above and other than fees and expenses we have paid and will pay to our general partner as described in the “Management Compensation” section of this Annual Report, there are no transactions or currently proposed transactions since our inception to which we were or will be a participant and the amount involved exceeded or will exceed the lesser of $120,000 or 1% of our total assets, and in which any member of our general partner or 10% beneficial owner, promoter (or immediate family member of the foregoing persons) of our partnership had or will have a direct or indirect material interest.

Exhibit 3.2

AUDIT COMMITTEE MEMBER

SERVICE AGREEMENT

This Audit Committee Member Service Agreement (hereinafter this “Agreement”) is made, entered into, and effective as of July 01, 2019 (hereinafter the “Effective Date”)

BY AND BETWEEN:

UC Asset LP, a Delaware limited partnership of which the primary office locates at 2299 Perimeter Park Drive, Suite 120, Atlanta, GA 30341 (hereinafter the “Company”)

AND:

_____________________, an individual whose mailing address is ____________________

_________________________(hereinafter the “Committee Member”).

The Company and the Committee Member may be referred to individually as a “party” or collectively as the “parties” in this Agreement.

NOW THEREFORE, IN CONSIDERATION of the mutual covenants and agreements hereinafter contained and for other good and valuable consideration, the parties agree as follows:

ARTICLE 1: SERVICES, FEES, AND PAYMENT

The parties agree to make reasonable adjustments to the amount of Compensation, from time to time and upon mutual agreement of the parties, to adapt to the development of the Company as well as to the change of cost of living in general.

ARTICLE 2: TERM AND TERMINATION

ARTICLE 3: INDEPENDENT CONTRACTOR

ARTICLE 4: PERSONAL SERVICE AND NON-ASSIGNMENT

ARTICLE 5: INSIDER TRADING POLICY

ARTICLE 6: CONFIDENTIALITY

ARTICLE 7: CONFLICT AND NON-COMPETITION

ARTICLE 8: GENERAL

*******THE REMAINDER OF THIS PAGA IS INTENTIONALLY LEFT BLANK********

IN WITNESS WHEREOF the parties have duly executed this Agreement by signing below as of the Effective Date. 

UC Asset Limited Partnership. Address: 2299 Perimeter Park Drive, Suite 120, Atlanta, GA 30341, USA; Website: www.ucasset.com

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