As filed with the Securities and Exchange Commission on August 30, 2022
Registration No. 333-257302
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 8
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter) |
| 2080 |
| ||
(State or Other Jurisdiction of |
| (Primary Standard Industrial |
| (IRS Employer |
Incorporation or Organization) |
| Classification Number) |
| Identification Number) |
New Momentum Corporation Singapore + |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
Leung Tin Lung David
President and Chief Executive Officer
New Momentum Corporation
150 Cecil Street, #08-01
Singapore 069543
+65 3105-4128
(Address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Thomas E. Puzzo, Esq.
Law Offices of Thomas E. Puzzo, PLLC
3823 44th Ave. NE
Seattle, Washington 98105
Telephone No.: (206) 522-2256
Approximate date of proposed sale to the public: As soon as practicable and from time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant Section 7(a)(2)(B) of the Exchange Act.
Calculation of Registration Fee
Title of Securities To Be Registered |
| Amount to be Registered |
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| Proposed Maximum Offering Price Per Share |
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| Proposed Maximum Aggregate Offering Price |
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| Registration Fee |
| ||||
Common Stock, par value $0.001 per share, issuable pursuant to Investment Agreement (1) |
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| 5,000,000 | (1) |
| $ | 1.000 | (3) |
| $ | 5,000,000 |
|
| $ | 545.50 |
|
Common Stock, par value $0.001 per share, issuable upon conversion of 10% Convertible Note (2) |
|
| 182,617 | (2) |
| $ | 1.00 | (3) |
| $ | 182,617 |
|
| $ | 19.92 |
|
Total |
|
| 5,182,617 | (3) |
| $ | 1.000 | (3) |
| $ | 5,182,617 |
|
| $ | 565.42 |
|
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(1) | Represents the number of shares of common stock of the Registrant that we will put (“Put Shares”) to Strattner Alternative Credit Fund LP, a Delaware limited partnership (“Strattner”), pursuant to that certain Investment Agreement (the “Investment Agreement”) by and between Strattner and the Registrant, effective on April 16, 2021. In the event that adjustment provisions of the Investment Agreement require the Company to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the Company will file a new registration statement to register those additional shares. |
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(2) | Represents the number of shares of common stock of the Registrant underlying that certain 10% Convertible Note (the “Note”), dated October 27, 2020, and made to EMA Financial, LLC. The Note is due July 27, 2021, and carries interest at a rate of 10% per annum. |
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(3) | This offering price has been estimated solely for the purpose of computing the registration fee in accordance with Rule 457(c) of the Securities Act on the basis of the average of the high and low prices of the common stock of the Company as reported on the Pink tier of the OTC Markets Group, Inc. on June 15, 2021. |
In the event of stock splits, stock dividends, or similar transactions involving the Registrant’s common stock, the number of Shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION ON AUGUST 30, 2022
NEW MOMENTUM CORPORATION
5,182,617 SHARES OF COMMON STOCK
This prospectus relates to the resale of shares of our common stock, par value $0.001 per share, by (i) Strattner Alternative Credit Fund LP (“Strattner”) of 5,000,000 Put Shares that we will put to Strattner pursuant to the Investment Agreement, and (ii) 182,617 shares of common stock underlying that certain 10% Convertible Note (the “Note”), dated October 27, 2020, and made to EMA Financial, LLC, a Delaware limited liability company (“EMA Financial”). Strattner and EMA Financial are collectively referred to herein as the “Selling Security Holders.” As used in this prospectus, references to the "Company", "we", "our", "us", and "New Momentum" refer to New Momentum Corporation and its subsidiaries, unless the context otherwise indicates.
The Investment Agreement with Strattner provides that Strattner is committed to purchase up to $5,000,000 of our common stock. We may draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement.
The terms and conditions of the Note provide registration rights for the shares (the “Note Shares”) underlying the Note to EMA Financial.
The Selling Security Holders are “underwriters” within the meaning of the Securities Act in connection with the resale of our common stock under the Investment Agreement and the Note. No other underwriter or person has been engaged to facilitate the sale of shares of our common stock in this offering. This offering will terminate on October 22, 2022. The per share purchase price for the Put Shares shall be equal to 85% of volume weighted average price (“VWAP”) for the five (5) consecutive trading days including and immediately after the date on which the Company submits a put notice to Strattner.
The conversion price of the Note Shares is equal to the lower of: (i) the lowest closing price of the Common Stock during the preceding twenty (20) trading day period ending on the latest complete trading day prior to the Issue Date of this Note or (ii) 55% of the lowest trading price for the Common Stock on the Principal Market during the twenty (20) consecutive trading days including and immediately preceding the Conversion Date.
We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holders. We may receive proceeds of up to $5,000,000 from the sale of our Put Shares under the Investment Agreement. The proceeds will be used for working capital or general corporate purposes. We will bear all costs associated with this registration.
Our common stock is quoted on the OTCQB tier of the OTC Markets Group, Inc. (the “OTC Markets”) under the symbol “NNAX.” The shares of our common stock registered hereunder are being offered for sale by Selling Security Holders at prices established on the OTC Markets during the term of this offering. On May 5, 2022, the closing price of our common stock was $0.016 per share. These prices will fluctuate based on the demand for our common stock.
While our principal administrative offices are located in Singapore, the majority of our operations are conducted in Hong Kong, three of our subsidiaries are Hong Kong entities, and as such, we are subject to emerging legal and operational risks associated with having the majority of our operations in Hong Kong corporations and thereby subject to political and economic influence from China. These risks could result in a material change in our operations and/or the value of our common stock. These risks could also significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
Recent statements and regulatory actions by the Chinese government, such as those related to data security, anti-monopoly concerns, entertainment, education, finance, real estate, video gaming, advertising, casino operations, social mores, healthcare and China’s extension of authority into Hong Kong, has or may impact our ability to conduct our business, accept foreign investments, or list on a U.S. or other foreign exchange. Under current regulatory conditions in China and Hong Kong, virtually no aspect of society is being left unaffected by these changes; therefore we expect that our business and operations will also be affected by China and/or Hong Kong regulatory actions in the future. For example, it travel or movement of peoples in China and/or Hong Kong is restricted, our business will be adversely effected. Furthermore, the policies of the Chinese government, including the implementation of the National Security Law in Hong Kong, recent legislative and government policy changes, including the redistribution of wealth, may impact our ability to operate with legal certainty.
We are not a Chinese or Hong Kong operating company but a Nevada holding company with operations conducted by our subsidiaries in Hong Kong and Singapore, and this structure, as it related to our Hong Kong subsidiaries, involves unique risks to investors. Chinese regulatory authorities could disallow this structure, which would likely result in a material change in our operations and/or a material change in the value of the securities the subject of this offering, including the risk that disallowing this structure could cause the value of our securities to significantly decline or become worthless. For further description of such regulatory and structural risks, see “Risk Factors—Risks Related to Doing Business in the People’s Republic of China” on page 16.
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Total Asia Associates PLT, our prior auditors, and the Company’s auditors, J&S Associate, are PCAOB-registered independent public accounting firms, based in Malaysia. Under the Holding Foreign Companies Accountable Act (the “HFCAA”), the PCAOB is permitted to inspect our independent public accounting firm. There is no guarantee that future audit reports will be prepared by auditors that are completely inspected by the PCAOB, and, as such, future investors may be deprived of such inspections, which could result in limitations or restrictions to our access of the U.S. capital markets. Furthermore, trading in our securities may be prohibited under the HFCAA, if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and, as a result, our securities may be removed from quotation and further trading on the over-the-counter markets, where our shares of common stock are currently quoted. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCAA to reduce the number of non-inspection years from three to two years and, thus, would reduce the time before our securities may be prohibited from trading or be delisted. On December 2, 2021, the SEC adopted amendments to finalize rules implementing the HFCAA requiring the SEC to prohibit an issuer’s securities from trading on any U.S. securities exchange and on the over-the-counter market, if the auditor is not subject to PCAOB inspections for three consecutive years and this ultimately could result in our ordinary shares being delisted. On December 16, 2021, the PCAOB issued its HFCAA Determination Report to notify the SEC that it was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and in Hong Kong because of the positions taken by authorities in mainland China and Hong Kong. As stated above, our current auditors are based in Malaysia and the PCAOB is permitted to inspect and investigate them.
Our auditors are based in Malaysia and are subject to PCAOB inspection. It is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event the Malaysian authorities subsequently take a position disallowing the PCAOB to inspect our auditors, then we would need to change our auditors to avoid having our securities delisted. Furthermore, due to the recent developments in connection with the implementation of the Holding Foreign Companies Accountable Act and the Accelerating the Holding Foreign Companies Accountable Act, we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditors’ audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
To the extent cash and/or assets of our business is in Hong Kong or our Hong Kong entities, such funds and/or assets may not be available to fund operations or for other use outside of Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of us or our subsidiaries by the PRC government to transfer cash and/or assets. For further discussion of our arrangement of how cash is transferred with our subsidiary, JJ Explorer, please see Note 8 (Related Party Transactions) to our unaudited financial statements for the fiscal quarter ended June 30, 2022 on page F-33. Our auditors are based in Malaysia and are subject to PCAOB inspection. It is not subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event the Malaysian authorities subsequently take a position disallowing the PCAOB to inspect our auditors, then we would need to change our auditors to avoid having our securities delisted. Furthermore, due to the recent developments in connection with the implementation of the Holding Foreign Companies Accountable Act and the Accelerating the Holding Foreign Companies Accountable Act, we cannot assure you whether the SEC or other regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditors’ audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
Our ability to pay dividends to our shareholders and to service any debt we may incur may depend upon dividends paid by our Hong Kong subsidiaries. Current Hong Kong regulations permit our Hong Kong Subsidiaries to pay dividends to us, only out of their accumulated profits, if any, determined in accordance with Hong Kong accounting standards and regulations. As of the date hereof, we have had no transactions that involved the transfer of cash or assets throughout our corporate structure and no transfers, dividends or distributions have been made to investors. Our Hong Kong subsidiaries have not transferred cash or other assets to New Momentum Corporation, including by way of dividends. New Momentum Corporation does not currently plan or anticipate transferring cash or other assets from our operations in Hong Kong to any non-Chinese entity.
We do not have any cash management policies that dictate how funds are transferred between New Momentum Corporation and its subsidiaries. To the extent cash and/or assets in our business in Hong Kong or in any of our Hong Kong subsidiaries, such funds and/or assets may not be available to fund operations or for other use outside of Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of you or your subsidiaries by the PRC government to transfer cash and/or assets.
Investing in our Common Stock involves a high degree of risk. See “Risk Factors” to read about factors you should consider before buying shares of our Common Stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such state.
The following table of contents has been designed to help you find information contained in this prospectus. We encourage you to read the entire prospectus.
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TABLE OF CONTENTS
PART I - INFORMATION REQUIRED IN PROSPECTUS
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Table of Contents |
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed information and the financial statements appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this Prospectus. Unless the context indicates or suggests otherwise, references to “we,” “our,” “us,” the “Company,” “New Momentum” or the “Registrant” refer to New Momentum Corporation, a Nevada corporation and its subsidiaries.
OUR COMPANY
Overview of New Momentum
We intend to develop travel services businesses, including “Gagfare,” an online ticketing platform that provides travelers a “Book Now, Pay Later” business model allowing travelers to secure the best fares and reserve flights well ahead of time. The Company intends to also become the driving force behind a bold new hospitality concept that takes nature lovers and intrepid travelers to exciting new and established destinations. The Company intends to curate a collection of boutique properties, each with a focus on diving, sustainability, conservation, and cultural authenticity, offering a thoroughly contemporary travel experience that is intrinsically linked to the destination, its heritage and its culture.
Our fiscal year-end date is December 31.
Our board of directors consists of one person: Leung Tin Lung David. Mr. Leung also serves as our sole officer, holding the offices of President, Secretary and Treasurer.
Our principal administrative offices are located at 150 Cecil Street, #08-01, Singapore 069543. Our website is www.gagfare.com. We do not incorporate the information on or accessible through our website into this Prospectus, and you should not consider any information on, or that can be accessed through, our websites a part of this Prospectus.
A summary diagram of our corporate structure is as follows:
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Recent Developments
Share Exchange Agreement
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Company Limited, a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, became the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common shareholders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
As a result of the share exchange, Nemo Holding became a wholly-owned subsidiary of the Company.
The share exchange transaction with Nemo Holding was treated as a reverse acquisition, with Nemo Holding as the acquiror and the Company as the acquired party. Unless the context suggests otherwise, when we refer in this Form 8-K to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of Nemo Holding.
Cooperation Agreement
Pursuant to Cooperation Agreement, dated February 1, 2016, by and between Gagfare Limited, a Hong Kong corporation and wholly owned subsidiary of the Company, and JJ Explorer Tours Limited, a Hong Kong corporation (“JJ Explorer”), controlled by our chief executive officer, JJ Explorer develops and maintains website and mobile application platforms the Company uses in the operation of its business in exchange for 50% of the net earnings the Company earns through its Gagfare website and mobile application platforms for a term of five years, to be expired on January 31, 2021. For the years ended December 31, 2021 and 2020, the Company did not pay or transfer any cash to JJ Explorer, because there were no net earnings during the reporting periods. Hence, no transfers, dividends, or distributions have been made to date, including the transfers to JJ Explorer during the reporting periods. For further discussion of our arrangement of how cash is transferred with JJ Explorer, please see Note 8 (Related Party Transactions) to our unaudited financial statements for the fiscal quarter ended June 30, 2022 on page F-33.
10% Convertible Note
On October 27, 2020, the Registrant offered and sold the Note, dated October 27, 2020, to EMA Financial for aggregate proceeds of $33,000. As of June 9, 2021, there was $35,000 in principal and $2,042 in interest due and owing under the Note. The Note is due July 27, 2021, and carries interest at a rate of 10% per annum. The conversion price of the Note Shares is equal to the lower of: (i) the lowest closing price of the Common Stock during the preceding twenty (20) trading day period ending on the latest complete trading day prior to the Issue Date of this Note or (ii) 55% of the lowest trading price for the Common Stock on the Principal Market during the twenty (20) consecutive trading days including and immediately preceding the Conversion Date. We will not receive any proceeds from the sale of the shares of common stock offered by EMA Financial. The terms and conditions of the Note provide registration rights for the Note Shares.
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Stock Purchase Agreement
On April 13, 2021, the Company entered into a Stock Purchase Agreement with Leung Tin Lung David, the Company’s sole director, President, and majority stockholder, pursuant to which the Company sold to Mr. Leung one share of Series A Preferred Stock in exchange for 169,000,000 shares of common stock of the Company. The Company subsequently canceled and returned to its authorized capital stock the 169,000,000 shares of common stock purchased from Mr. Leung. The holder of the one share of Series A Preferred Stock (i) has voting power equal to 110% of the total voting rights of the Company’s common stock, (ii) the right to appoint a designee to the board of directors, and (ii) requires the consent of the holder of the Series A Preferred Stock for any major corporate actions, including but not limited to changing the Articles of Incorporation or Bylaws of the Company, changing the business of the Company, issuing securities and or nominating a person as President or Chief Executive Office of the Company. As a result, Mr. Leung has controlling voting power in all matters submitted to our stockholders for approval including:
| · | The election of our board of directors; |
| · | The amendment of our Articles of Incorporation or bylaws; |
| · | The adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. |
As a result of his ownership and position, Mr. Leung is able to substantially influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Mr. Leung’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Investment Agreement with Strattner Alternative Credit Fund LP
On April 16, 2021, the Company entered into an Investment Agreement dated as of April 16, 2021 (the “Investment Agreement”) with Strattner. The Investment Agreement provides that, upon the terms and subject to the conditions set forth therein, Strattner is committed to purchase up to $5,000,000 (the “Total Commitment”) worth of the Company’s common stock, $0.001 par value, over the 36-month term of the Investment Agreement.
From time to time over the term of the Investment Agreement, commencing on the trading day immediately following the date on which the initial registration statement is declared effective by the Securities and Exchange Commission (the “Commission”), as further discussed below, the Company may, in its sole discretion, provide Strattner with draw down notices (each, a “Draw Down Notice”) to purchase a specified dollar amount of the Put Shares (the “Draw Down Amount”) over a 10 consecutive trading day period, commencing on the trading day specified in the applicable Draw Down Notice (the “Pricing Period”), with each draw down subject to the limitations discussed below. The maximum amount of Shares requested to be purchased pursuant to any single Draw Down Notice cannot exceed 200% of the average daily trading volume of the Company’s common stock for the ten trading days immediately preceding the date of the Draw Down Notice (the “Maximum Draw Down Amount”).
Once presented with a Draw Down Notice, Strattner is required to purchase the number of Put Shares underlying the Draw Down Notice. The per share purchase price for the Shares subject to a Draw Down Notice shall be equal to 85% of the arithmetic average of the lowest VWAPs during the applicable Pricing Period Each purchase pursuant to a draw down shall reduce, on a dollar-for-dollar basis, the Total Commitment under the Investment Agreement.
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The Company is prohibited from issuing a Draw Down Notice if (i) the amount requested in such Draw Down Notice exceeds the Maximum Draw Down Amount, (ii) the sale of Shares pursuant to such Draw Down Notice would cause the Company to issue or sell or Strattner to acquire or purchase an aggregate dollar value of Shares that would exceed the Total Commitment, or (iii) the sale of Shares pursuant to the Draw Down Notice would cause the Company to sell or Strattner to purchase an aggregate number of shares of the Company’s common stock which would result in beneficial ownership by Strattner of more than 9.99% of the Company’s common stock (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder). The Company cannot make more than one draw down in any Pricing Period and must allow 10 days to elapse between the completion of the settlement of any one draw down and the commencement of a Pricing Period for any other draw down.
Additionally, the Company paid to Strattner a commitment fee equal in the form of 250,000 restricted shares of the Company’s common stock (the “Initial Commitment Shares”).
Registration Rights Agreement with Strattner Alternative Credit Fund LP
In connection with the execution of the Investment Agreement, on April 16, 2021, the Company and Strattner also entered into a Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company has agreed to file an initial registration statement (“Registration Statement”) with the Commission to register an agreed upon number of Put Shares, on or prior to July 16, 2021 (the “Filing Deadline”) and have it declared effective on or before the 150th calendar day the Company has filed the Registration Rights Agreement (the “Effectiveness Deadline”).
If at any time all of the Registrable Securities (as defined in the Registration Rights Agreement) are not covered by the initial Registration Statement, the Company has agreed to file with the Commission one or more additional Registration Statements so as to cover all of the Registrable Securities not covered by such initial Registration Statement, in each case, as soon as practicable, but in no event later than the applicable filing deadline for such additional Registration Statements as provided in the Registration Rights Agreement.
Emerging risks for us being based in and having the majority of our operations in Hong Kong, China.
We are a Hong Kong, China-based company and we may face risks and uncertainties in doing business in China. In addition to the foregoing risks, we face various legal and operational risks and uncertainties arising from doing business in Hong Kong as summarized below and in “Risk Factors — Risks Relating to Doing Business in the People's Republic of China and Hong Kong” on page 19.
| · | The Peoples Republic of China (“PRC”) government has sovereignty of Hong Kong, and Hong Kong’s legislature adopts laws that are congruent with PRC government policies, laws and regulations. Because of the majority of our operations are in the Hong Kong, economic, political and legal developments in the PRC will significantly affect our business, financial condition, results of operations and prospects; For further discussion of this risk, see “Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies,” on page 19. |
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| · | Government policies, laws and regulations in the PRC can change very quickly with little advance notice; For further discussion of this risk, see “Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies,” on page 19. |
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| · | The PRC government may intervene or influence our operations in Hong Kong at any time and may exert more control over offerings conducted overseas and/or foreign investment in Hong Kong-based issuers, which could result in a material change in our operations and/or the value of our common stock, and could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our common stock and other securities to significantly decline or be worthless; For further discussion of this risk, see “Because we have subsidiaries in Hong Kong, the PRC government has significant oversight and discretion over the conduct our business operations, may exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may intervene or influence our operations at any time, and may limit or completely hinder our ability to offer or continue to offer securities to investors, which could result in a material change in our operations and/or cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals,” on page 19. |
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| · | Changes in China’s economic, political or social conditions or government policies, especially over the movement of people and travel, could materially and adversely affect our business and results of operations; For further discussion of this risk, see “Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies,” on page 19. |
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| · | The legal system in China embodies uncertainties which could limit the legal protections available to us or impose additional requirements and obligations on our business, which may materially and adversely affect our business, financial condition, and results of operations; For further discussion of this risk, see “Because we have subsidiaries in Hong Kong, the PRC government has significant oversight and discretion over the conduct our business operations, may exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may intervene or influence our operations at any time, and may limit or completely hinder our ability to offer or continue to offer securities to investors, which could result in a material change in our operations and/or cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals,” on page 19. |
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| · | The current tensions in international trade and rising political tensions, particularly between the United States and China, may adversely impact our business, financial condition, and results of operations; and For further discussion of this risk, see “Declines or disruptions in the travel industry could adversely affect our business and financial performance,” on page 15. |
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| · | It may be difficult for overseas regulators to conduct investigations or collect evidence within China. For further discussion of this risk, see “It may be difficult for U.S. regulators, such as the Department of Justice, the SEC, and other authorities, to conduct investigation or collect evidence within China.,” on page 22. |
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| · | To the extent cash and/or assets of our business is in Hong Kong or our Hong Kong entities, such funds and/or assets may not be available to fund operations or for other use outside of Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of us or our subsidiaries by the PRC government to transfer cash and/or assets. For further discussion of our arrangement of how cash is transferred with our subsidiary, JJ Explorer, please see Note 8 (Related Party Transactions) to our unaudited financial statements for the fiscal quarter ended June 30, 2022 on page F-33. |
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| · | Because our holding company structure, which includes Hong Kong subsidiaries, creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.For further discussion of this risk, see “Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited,” on page 21. |
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| · | It is possible that PRC authorities could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. We rely on dividends from our Hong Kong subsidiary for our cash and financing requirements, such as the funds necessary to service any debt we may incur. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. For further discussion of this risk, see “Our Hong Kong subsidiaries may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of New Momentum Corporation’s common stock,” on page 21. |
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| · | It is possible that PRC authorities could prevent our cash maintained in Hong Kong from leaving or the PRC could restrict the deployment of the cash into our business or for the payment of dividends. We rely on dividends from our Hong Kong subsidiary for our cash and financing requirements, such as the funds necessary to service any debt we may incur. Any such controls or restrictions may adversely affect our ability to finance our cash requirements, service debt or make dividend or other distributions to our shareholders. For further discussion of this risk, see “Governmental control of currency conversion may limit our ability to utilize revenues effectively and affect the value of your investment,” on page 21. |
Permissions under Hong Kong Law and PRC Law
We are currently not required to obtain permission from any of the PRC authorities to operate and issue our common stock to foreign investors. In addition, we and our subsidiaries are not required to obtain permission or approval from the Hong Kong and PRC authorities, including China Securities Regulatory Commission (“CSRC”), Cyberspace Administration of China (“CAC”) and/or any other entity that is required to approve our operations other than the standard annual check with local administration bureau. This is subject to the uncertainty of different interpretation and implementation of the rules and regulations in the PRC that could be potentially adverse to us, which may take place quickly with little advance notice.
Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on Illegal Securities Activities, which was available to the public on July 6, 2021. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. The PRC government also initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on a U.S. exchange. On July 10, 2021, the State Internet Information Office issued the Measures of Cybersecurity Review (Revised Draft for Comments, not yet effective), which requires operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office of Cybersecurity Review. As of the date of this prospectus, our Company and its subsidiaries have not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has any of them received any inquiry, notice or sanction. We do not believe that our existing business will require such regulatory review. As of the date of this prospectus, our Company its subsidiaries have not received any inquiry, notice, warning or sanctions regarding our planned overseas listing from the China Securities Regulatory Commission or any other PRC governmental authorities.
We have received all requisite permissions and approvals to operate our business. If PRC authorities reinterpret PRC laws to apply to Hong Kong companies, our Hong Kong subsidiaries may become subject permits, to the laws and regulations of the PRC governing businesses. We may also become subject to foreign exchange regulations that might limit our ability to convert foreign currency into Renminbi or Hong Kong Dollars, acquire any PRC companies, establish VIEs in the PRC, or make dividend payments from any subsidiary entities operating in the PRC and/or Hong Kong to us. If we do not receive or fail to maintain all requisite permits, permissions and approvals to operate our business, we would have to cease our operations in Hong Kong and you could lose your entire investment.
If either Hong Kong or PRC authorities reinterpret PRC laws to apply to Hong Kong companies, it is possible that Hong Kong or PRC authorities could determine that we are not allowed to operate our business in Hong Kong for failure to have requisite permits, permissions or approvals (which do not exist as of today), in which case we would have to cease our operations in Hong Kong and you could lose your entire investment.
If we inadvertently conclude that such permits, permissions or approvals are not required, Hong Kong or PRC authorities could assess us a monetary penalty, which as of today would be for an unknown amount, or determine that we are not allowed to operate our business in Hong Kong for failure to obtain requisite permits, permissions or approvals (which do not exist as of today), in which case we would have to cease our operations in Hong Kong and you could lose your entire investment.
If either Hong Kong or PRC authorities change applicable laws or regulations to apply to Hong Kong companies, and we are required to obtain new permits, permissions or approvals (which do not exist as of today), it is possible that Hong Kong or PRC authorities could determine that we are not granted such permits, permissions or approvals and, therefore, not allowed to operate our business in Hong Kong, in which case we would have to cease our operations in Hong Kong and you could lose your entire investment.
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The PRC National Security Law
On June 30, 2020, the PRC government’s National People’s Congress Standing Committee passed a national security law (the “National Security Law”) for the Hong Kong Special Administrative Region (“Hong Kong”). The National Security Law criminalizes, and otherwise gives the PRC government board broad powers to find unlawful, a broad variety of political crimes, including separatism, and collusion with a foreign country or with external elements to endanger national security in relation to the Hong Kong. The PRC government can, at its or the Hong Kong government’s discretion, exercise jurisdiction over alleged violations of the law and prosecute and adjudicate the cases in mainland China. The law can apply to alleged violations committed by anyone, anywhere in the world, including in the United States. We do not believe that we violate or have violated the National Security Law, but in light of the PRC government’s current and rapidly changing policies regarding PRC and Hong businesses operations, our business operations could in the future be subject to the National Security Law, if the PRC or Hong Kong government believes that it should. Additionally, regulations announced by the Cyberspace Administration of China the ("CAC") on January 4, 2022, The Cybersecurity Review Measures (2021) (the “Measures”), became effective on February 15, 2022. According to the Measures, to go public abroad, an online platform operator that possesses the personal information of more than 1,000,000 users must seek cybersecurity review from the Office of Cybersecurity Review. Currently, we have not been involved in any investigations on cybersecurity review initiated by the CAC or related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect. We have been advised by Hong Kong counsel, Tasman C.H. Tam, that the CAC does not apply to our operations in Hong Kong because we do not possess an amount of information in our business operations that would trigger the CAC; and the kind of data processed in our operations does not relate to national security. We have not obtained a legal opinion, and instead relied on legal advice from local counsel, because no legal opinion was required in order for us to rely on such advice.
Transfers of Cash to and from Our Hong Kong Subsidiaries, and to our U.S Investors.
New Momentum Corporation is a Nevada holding company with no operations of its own. We conduct our operations in Hong Kong primarily through our subsidiaries in Hong Kong. We may rely on dividends to be paid by our Hong Kong subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our Hong Kong 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. For further discussion of our arrangement of how cash is transferred with our subsidiary, JJ Explorer, please see Note 8 (Related Party Transactions) to our unaudited financial statements for the fiscal quarter ended June 30, 2022 on page F-33.
New Momentum Corporation is permitted under the Nevada laws to provide funding to our subsidiaries in Hong Kong through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. Our Hong Kong subsidiaries are also permitted under the laws of Hong Kong to provide funding to our other subsidiaries through dividend distribution without restrictions on the amount of the funds. As of the date of this prospectus, there has been no dividends or distributions among the holding company or the subsidiaries.
We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Subject to the Nevada Revised Statutes and our Bylaws, our board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they become due. There is no further Nevada statutory restriction on the amount of funds which may be distributed by us by dividend.
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The laws and regulations of the PRC do not currently have any material impact on transfer of cash from New Momentum Corporation to its subsidiaries. There are no restrictions or limitation under the laws of Hong Kong imposed on the conversion of HK dollar into foreign currencies and the remittance of currencies out of Hong Kong or across borders and to U.S investors.
Current PRC regulations permit PRC subsidiaries to pay dividends to Hong Kong subsidiaries only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. 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. As of the date of this prospectus, we do not have any PRC subsidiaries.
The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our common stock.
Cash dividends, if any, on our common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.
In order for us to pay dividends to our shareholders, we will rely on payments made from our Hong Kong subsidiary to New Momentum Corporation. If in the future we have PRC subsidiaries, certain payments from such PRC subsidiaries to Hong Kong subsidiaries will be subject to PRC taxes, including business taxes and VAT. As of the date of this prospectus, we do not have any PRC subsidiaries and our Hong Kong subsidiary has not made any transfers or distributions.
Pursuant to Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by a PRC subsidiary to its immediate holding company. As of the date of this prospectus, we do not have a PRC subsidiary. In the event that we acquire or form a PRC subsidiary in the future and such PRC subsidiary desires to declare and pay dividends to our Hong Kong subsidiary, our Hong Kong subsidiary will be required to apply for the tax resident certificate from the relevant Hong Kong tax authority. In such event, we plan to inform the investors through SEC filings, such as a current report on Form 8-K, prior to such actions. See “Risk Factors – Risk Factors Relating to Doing Business in the People's Republic of China and Hong Kong” on Page 19.
For further discussion of this risk, see “Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies,” on page 19.
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We are a “Smaller Reporting Company”
We are a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have (i) a public float of less than $250 million or (ii) annual revenues of less than $100 million during the most recently completed fiscal year and no public float, or a public float of less than $700 million. As a “smaller reporting company,” the disclosure we will be required to provide in our SEC filings are less than it would be if we were not considered a “smaller reporting company.” Specifically, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002 requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes until annual meetings; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being permitted to provide two years of audited financial statements in annual reports rather than three years. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze the Company’s results of operations and financial prospects.
Emerging Growth Company
We are an ‘‘emerging growth company’’ within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to comply with the 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 of the Sarbanes-Oxley Act, the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer an emerging growth company. For a description of the qualifications and other requirements applicable to emerging growth companies and certain elections that we have made due to our status as an emerging growth company, see “Risk Factors—Risks Related to this Offering and our Common Stock – We are an ‘emerging growth company’ and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors” on page 8 of this prospectus.
Our fiscal year end is December 31. Our audited financial statements for the year ended December 31, 2021, were prepared assuming that we will continue our operations as a going concern. Our accumulated loss for the period from March 15, 2016 (inception) to the fiscal quarter ended September 30, 2021 was $4,716,695. For the nine months ended September 30, 2021, we earned revenues of $968,271, from ticketing sales, with the cost of such revenue being $964,540.
Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors have included a going concern opinion in their report on our audited financial statements for the period ended December 31, 2021. The notes to our financial statements contain additional disclosure describing the circumstances leading to the issuance of a going concern opinion by our auditors.
THE OFFERING
This Prospectus relates to the resale of up to 5,182,617 shares of our Common Stock, issuable to Strattner, pursuant to that certain Investment Agreement (the “Investment Agreement”), dated April 16, 2021, by and between the Company and to Strattner, and 182,617 shares of common stock underlying that certain 10% Convertible Note (the “note”), dated October 27, 2020, and made to EMA Financial.
The Offering
Common Stock offered by Selling Security Holders: |
| This Prospectus relates to the resale of 5,000,000 shares of our Common Stock, issuable to the Selling Security Holders. |
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Common Stock outstanding before the Offering: |
| 176,168,548 shares of Common Stock as of the date of this Prospectus. |
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Common Stock outstanding after the Offering: |
| 181,168,548 shares of Common Stock (1) |
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Terms of the Offering: |
| The Selling Security Holders will determine when and how it will sell the Common Stock offered in this Prospectus. The prices at which the Selling Security Holders may sell the shares of Common Stock in this Offering will be determined by the prevailing market price for the shares of Common Stock or in negotiated transactions. |
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Termination of the Offering |
| The Offering will conclude upon such time as all of the Common Stock has been sold pursuant to the Registration Statement. |
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Trading Market |
| Our Common Stock is subject to quotation on the OTC Markets under the symbol “NNAX.” |
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Use of proceeds |
| The Company is not selling any shares of the Common Stock covered by this Prospectus. As such, we will not receive any of the Offering proceeds from the registration of the shares of Common Stock covered by this Prospectus. See “Use of Proceeds.” |
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Risk Factors |
| The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of his/her/its entire investment. See “Risk Factors”. |
(1) This total reflects the number of shares of Common Stock that will be outstanding assuming that the Selling Security Holders purchase all of the 5,000,000 shares of our common stock under the Investment Agreement.
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SUMMARY FINANCIAL INFORMATION
The tables and information below are derived from our audited financial statements for the fiscal year ended December 31, 2021, and our unaudited financial statements for the fiscal quarter ended June 30, 2022. Our working capital deficit as at June 30, 2022 was $(355,718).
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| For the Fiscal Year December 31, 2021 |
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Financial Summary (Audited) |
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Cash and Deposits |
| $ | 15,609 |
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Total Assets |
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| 76,150 |
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Total Liabilities |
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| 384,249 |
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Total Stockholder’s Equity (Deficit) |
| $ | (308,099 | ) |
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| For the Fiscal Year ended December 31, 2021 |
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Consolidated Statements of Expenses and Net Loss |
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Total Operating Expenses |
| $ | 295,409 |
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Net Loss for the Period |
| $ | (287,763 | ) |
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| For the Fiscal Quarter June 30, 2022 |
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Financial Summary (Unaudited) |
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Cash and Deposits |
| $ | 70,507 |
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Total Assets |
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| 117,597 |
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Total Liabilities |
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| 473,315 |
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Total Stockholder’s Equity (Deficit) |
| $ | 355,718 |
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| For the Fiscal Quarter ended June 30, 2022 |
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Consolidated Statements of Expenses and Net Loss |
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Total Operating Expenses |
| $ | 30,431 |
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Net Loss for the Period |
| $ | (29,124 | ) |
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RISK FACTORS
An investment in our common stock involves a number of very significant risks. You should carefully consider the following known material risks and uncertainties in addition to other information in this prospectus in evaluating our company and its business before purchasing shares of our company’s common stock. You could lose all or part of your investment due to any of these risks.
RISKS RELATING TO OUR COMPANY
Our auditors have expressed substantial doubt about our ability to continue as a going concern.
Our audited financial statements for the period from March 15, 2016 (inception) through December 31, 2021 were prepared assuming that we will continue our operations as a going concern. Our wholly-owned subsidiary, Nemo Holding Company Limited, was incorporated on April 16, 2016, and does not have a history of earnings. As a result, our independent accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.
If our estimates related to future expenditures are erroneous or inaccurate, our business will fail and you could lose your entire investment.
Our success is dependent in part upon the accuracy of our management’s estimates of our future cost expenditures for legal and accounting services (including those we expect to incur as a publicly reporting company), for website marketing and development expenses, and for administrative expenses, which management estimates to be approximately $10,000,000 over the next twelve months. If such estimates are erroneous or inaccurate, or if we encounter unforeseen costs, we may not be able to carry out our business plan, which could result in the failure of our business and the loss of your entire investment.
If we are not able to develop our business as anticipated, we may not be able to generate revenues or achieve profitability and you may lose your investment.
Our wholly-owned subsidiary, Nemo Holding Company Limited, was incorporated on April 16, 2020, and our net loss for the period from inception (March 15, 2016) to June 30, 2022 was $(4,690,647). We have few customers, and we have not earned substantive revenues to date. Our business prospects are difficult to predict because of our limited operating history, and unproven business strategy. Our primary business activities will be focused on the commercialization of licensing our New Momentum brand. Although we believe that our business plan has significant profit potential, we may not attain profitable operations and our management may not succeed in realizing our business objectives. If we are not able to develop out business as anticipated, we may not be able to generate revenues or achieve profitability and you may lose your entire investment.
Potential disputes related to the existing agreement pursuant to which we purchased the intellectual property rights underlying our business could result in the loss of rights that are material to our business.
The acquisition of the intellectual property of New Momentum, by way of the Share Exchange Agreement, by and among the Company, New Momentum Corporation, and the holders of common stock of New Momentum, is of critical importance to our business and involves complex legal, business, and scientific issues. Although we have clear title to and no restrictions to use our intellectual property, disputes may arise regarding the Share Exchange Agreement, including but not limited to, the breaches of representations or other interpretation-related issues. If disputes over intellectual property that we have acquired under the Share Exchange Agreement prevent or impair our ability to maintain our current intellectual property, we may be unable to successfully develop and commercialize our business.
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We expect to suffer losses in the immediate future that may cause us to curtail or discontinue our operations.
We expect to incur operating losses in future periods. These losses will occur because we do not yet have substantive revenues to offset the expenses associated with the development of brand and our business operations, generally. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will almost certainly fail.
We may not be able to execute our business plan or stay in business without additional funding.
Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through the issuance of debt and/or equity in order to establish profitable operations, and such financing may not be forthcoming. As widely reported, the global and domestic financial markets have been extremely volatile in recent months. If such conditions and constraints continue or if there is no investor appetite to finance our specific business, we may not be able to acquire additional financing through credit markets or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. At this time, we have not identified or secured sources of additional financing. Our failure to secure additional financing when it becomes required will have an adverse effect on our ability to remain in business.
Any significant disruption in our website and mobile application presence or services could result in a loss of customers.
Our plans call for our customers to access our service through our website, www.gagfare.com and our mobile applications. Our reputation and ability to attract, retain and serve our customers will be dependent upon the reliable performance of our website, network infrastructure and fulfillment processes (how we deliver services purchased by our customers). Prolonged or frequent interruptions in any of these systems could make our website unavailable or unusable, which could diminish the overall attractiveness of our subscription service to existing and potential customers.
Our servers will likely be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions and delays in our service and operations and loss, misuse or theft of data. It is likely that our website will periodically experience directed attacks intended to cause a disruption in service, which is not uncommon for web-based businesses. Any attempts by hackers to disrupt our website service or our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services. Any significant disruption to our website or internal computer systems could result in a loss of subscribers and adversely affect our business and results of operations.
Our connections to the airline booking systems may be interrupted and causing delays or unavailability to search and book the flight tickets, which may affect the user experiences and trust significantly.
Technology changes rapidly in our business and if we fail to anticipate or successfully implement new technologies or the manner in which use our products and services, the quality, timeliness and competitiveness of our products and services will suffer.
Rapid technology changes in our industry require us to anticipate, sometimes years in advance, which technologies we must implement and take advantage of in order to make our products and services competitive in the market. Therefore, we must start our product development with a range of technical development goals that we hope to be able to achieve. We may not be able to achieve these goals, or our competition may be able to achieve them more quickly and effectively than we can. In either case, our products and services may be technologically inferior to our competitors’, less appealing to consumers, or both. If we cannot achieve our technology goals within the original development schedule of our products and services, then we may delay their release until these technology goals can be achieved, which may delay or reduce revenue and increase our development expenses. Alternatively, we may increase the resources employed in research and development in an attempt to accelerate our development of new technologies, either to preserve our product or service launch schedule or to keep up with our competition, which would increase our development expenses. Any such failure to adapt to, and appropriately allocate resources among, emerging technologies would harm our competitive position, reduce our market share and significantly increase the time we take to bring our product to market.
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Our potential customers will require a high degree of reliability in the delivery of our services, and if we cannot meet their expectations for any reason, demand for our products and services will suffer.
Our success depends in large part on our ability to assure generally error-free services, uninterrupted operation of our network and software infrastructure, and a satisfactory experience for our customers’ end users when they use Internet-based communications services. To achieve these objectives, we depend on the quality, performance and scalability of our products and services, the responsiveness of our technical support and the capacity, reliability and security of our network operations. We also depend on third parties over which we have no control. For example, our ability to serve our customers is based solely on our network access agreement with one service provider and on that service provider’s ability to provide reliable Internet access. Due to the high level of performance required for critical communications traffic, any failure to deliver a satisfactory experience to end users, whether or not caused by our own failures could reduce demand for our products and services.
If we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.
We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing customers. Successful promotion of our brand and our ability to attract customers depends largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our services. It is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.
Declines or disruptions in the travel industry could adversely affect our business and financial performance.
Our financial results and prospects are almost entirely dependent upon the sale of travel services. Travel, including accommodation (including hotels, motels, resorts, homes, apartments and other unique places to stay), rental car and airline ticket reservations, is significantly dependent on discretionary spending levels. As a result, sales of travel services tend to decline during general economic downturns and recessions and times of political or economic uncertainty as consumers engage in less discretionary spending, are concerned about unemployment or inflation, have reduced access to credit or experience other concerns or effects that reduce their ability or willingness to travel.
Perceived or actual adverse economic conditions, including slow, slowing or negative economic growth, high or rising unemployment rates, inflation and weakening currencies, and concerns over government responses such as higher taxes or tariffs, increased interest rates and reduced government spending, could impair consumer spending and adversely affect travel demand.
These and other macro-economic uncertainties, such as oil prices, geopolitical tensions and differing central bank monetary policies, have led to significant volatility in the exchange rates between the U.S. Dollar and the Euro, the British Pound Sterling and other currencies. Significant fluctuations in foreign currency exchange rates, stock markets and oil prices can also impact consumer travel behavior. For example, although lower oil prices may lead to increased travel activity as consumers have more discretionary funds and airline fares decrease, declines in oil prices may be indicative of broader macro-economic weakness, which in turn could negatively affect the travel industry, our business and results of operations. Conversely, higher oil prices may result in higher airfares and decreased travel activity, which can negatively affect our business and results of operations.
The uncertainty of macro-economic factors and their impact on consumer behavior, which may differ across regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to effectively manage our business and adversely affect our results of operations.
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In addition, events beyond our control, such as oil prices, stock market volatility, terrorist attacks, unusual or extreme weather or natural disasters such as earthquakes, hurricanes, tsunamis, floods, fires, droughts and volcanic eruptions, travel-related health concerns including pandemics and epidemics such as coronaviruses, Ebola and Zika, political instability, changes in economic conditions, wars and regional hostilities, imposition of taxes, tariffs or surcharges by regulatory authorities, changes in trade policies or trade disputes, changes in immigration policies, travel-related accidents or increased focus on the environmental impact of travel, have previously and may in the future disrupt travel, limit the ability or willingness of travelers to visit certain locations or otherwise result in declines in travel demand and adversely affect our business and results of operations. Because these events or concerns, and the full impact of their effects, are largely unpredictable, they can dramatically and suddenly affect travel behavior by consumers, and therefore demand for our services and our relationships with travel service providers and other partners, any of which can adversely affect our business and results of operations. Certain jurisdictions, particularly in Europe, are considering regulations intended to address the issue of “overtourism,” including by restricting access to city centers or popular tourist destinations or limiting accommodation offerings in surrounding areas, such as by restricting construction of new hotels or the renting of homes or apartments. Such regulations could adversely affect travel to, or our ability to offer accommodations in, such markets, which could negatively impact our business, growth and results of operations. The United States has implemented or proposed, or is considering, various travel restrictions and actions that could affect U.S. trade policy or practices, which could also adversely affect travel to or from the United States.
As a result of the recent coronavirus outbreak, the travel industry to experience, and continue to experience, a significant decline in travel demand and increase in customer cancellations predominantly related to travel to, from or in China and certain other Asian markets, though concerns about the coronavirus are also negatively impacting travel demand (and therefore our business) generally. Some countries have implemented travel bans or restrictions and some airlines have suspended or limited flights to or from China. In addition, like many other companies, we have instructed or allowed employees in high-risk areas to work from home or not report to work, which, especially if this persists for a prolonged period of time, may have an adverse impact on our employees, ability to service travelers, operations and systems. The ultimate extent of the coronavirus outbreak and its impact on travel in currently affected countries or more broadly is unknown and impossible to predict with certainty. As a result, the full extent to which the coronavirus will impact our business and results of operations is unknown. However, decreased travel demand resulting from the outbreak has had a negative impact, and is likely to have a negative and material impact, on our business, growth and results of operations. In addition, we may incur additional customer service costs in connection with servicing travelers affected by the outbreak, which would also have a negative impact on our results of operations.
The loss of the services of Leung Tin Lung David, our sole director and officer, and majority shareholder, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our website and sell our services.
We are highly dependent on Leung Tin Lung David, who is our sole director and officer, and controlling stockholder. The development of our business will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers who are developing our business, and on our ability to identify and retain competent consultants and employees with the skills required to execute our business objectives. The loss of the services of Jing Li or our failure to timely identify and retain competent personnel would negatively impact our ability to develop our business and license our brand, which could adversely affect our financial results and impair our growth.
Leung Tin Lung David, our President and sole director, beneficially owns approximately or has the right to vote 41.3% of our outstanding common stock and 100% of our Series A Preferred Stock, which has voting power equal to 110% of our issued and outstanding common stock. As a result, Mr. Leung has a substantial voting power in all matters submitted to our stockholders for approval including:
| · | Election of our board of directors; |
| · | Removal of any of our directors or officers; |
| · | Amendment of our Articles of Incorporation or Bylaws; |
| · | Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. |
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As a result of his ownership and position, Mr. Leung is able to substantially influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, the future prospect of sales of significant amounts of shares held by him could affect the market price of our common stock if the marketplace does not orderly adjust to the increase in shares in the market and the value of your investment in our company may decrease. Mr. Leung’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
We are an independent travel services, with little experience in the market, and failure to successfully compensate for this inexperience may adversely impact our operations and financial position.
We operate as an independent business, whose existence is predicated on the brand name Gagfare, and we have no substantial tangible assets in a highly competitive industry. We have little operating history, no customer base and little revenue to date. This makes it difficult to evaluate our future performance and prospects. Our business must be considered in light of the risks, expenses, delays and difficulties frequently encountered in establishing a new business in an emerging and evolving industry characterized by intense competition, including:
· | our business model and strategy are still evolving and are continually being reviewed and revised; | |
· | we may not be able to raise the capital required to develop our initial customer base and reputation; | |
· | we may not be able to successfully implement our business model and strategy; and | |
· | our management consists is conducted by one persons, Leung Tin Lung David, our President and a director. |
We cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will not be successful and the value of your investment in our company will decline.
Our failure to protect our intellectual property and proprietary technology may significantly impair our competitive advantage.
Our success and ability to compete depends in large part upon protecting our proprietary technology. We rely on a combination of patent, trademark and trade secret protection, nondisclosure and nonuse agreements to protect our proprietary rights. The steps we have taken may not be sufficient to prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. The patent and trademark law and trade secret protection may not be adequate to deter third party infringement or misappropriation of our patents, trademarks and similar proprietary rights.
We may in the future initiate claims or litigation against third parties for infringement of our proprietary rights in order to determine the scope and validity of our proprietary rights or the proprietary rights of our competitors. These claims could result in costly litigation and the diversion of our technical and management personnel.
We may face costly intellectual property infringement claims, the result of which would decrease the amount of cash we would anticipate to operate and complete our business plan.
We anticipate that from time to time we will receive communications from third parties asserting that we are infringing certain copyright, trademark and other intellectual property rights of others or seeking indemnification against alleged infringement. If anticipated claims arise, we will evaluate their merits. Any claims of infringement brought of third parties could result in protracted and costly litigation, damages for infringement, and the necessity of obtaining a license relating to one or more of our products or current or future technologies, which may not be available on commercially reasonable terms or at all. Litigation, which could result in substantial cost to us and diversion of our resources, may be necessary to enforce our patents or other intellectual property rights or to defend us against claimed infringement of the rights of others. Any intellectual property litigation and the failure to obtain necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations.
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We incur costs associated with SEC reporting compliance, which may significantly affect our financial condition.
The Company made the decision to become an SEC “reporting company” in order to comply with applicable laws and regulations. We incur certain costs of compliance with applicable SEC reporting rules and regulations including, but not limited to attorneys’ fees, accounting and auditing fees, other professional fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount estimated at approximately $50,000 per year. On balance, the Company determined that the incurrence of such costs and expenses was preferable to the Company being in a position where it had very limited access to additional capital funding.
We may be required to incur significant costs and require significant management resources to evaluate our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act, and any failure to comply or any adverse result from such evaluation may have an adverse effect on our stock price.
As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with our Annual Report on Form 10-K. This report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities. Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources. No assurance can be given that we will be able to fully comply with Section 404 or that we and our independent registered public accounting firm would be able to conclude that our internal control over financial reporting is effective at fiscal year-end. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities, as well as subject us to civil or criminal investigations and penalties. In addition, our independent registered public accounting firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating effectively.
We may not be able to meet the internal control reporting requirements imposed by the SEC resulting in a possible decline in the price of our common stock and our inability to obtain future financing.
As directed by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports. Although the Dodd-Frank Wall Street Reform and Consumer Protection Act exempts companies with a public float of less than $250 million from the requirement that our independent registered public accounting firm attest to our financial controls, this exemption does not affect the requirement that we include a report of management on our internal control over financial reporting and does not affect the requirement to include the independent registered public accounting firm’s attestation if our public float exceeds $250 million.
While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. Regardless of whether we are required to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, if we are unable to do so, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.
In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the SEC, which could also adversely affect the market for and the market price of our common stock and our ability to secure additional financing as needed.
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We face risks related to the Novel Coronavirus (COVID-19) which could significantly disrupt our development, operations, sales, and financial results.
Our business will be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments will cause disruption to our operations and sales activities. Our third-party vendors, third-party distributors, and our customers have been and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions. Depending on the magnitude of such effects on our activities or the operations of our third-party vendors and third-party distributors, the supply of our products will be delayed, which could adversely affect our business, operations and customer relationships. In addition, the Novel Coronavirus (COVID-19) or other disease outbreak will in the short-run and may over the longer term adversely affect the economies and financial markets of many countries, resulting in an economic downturn that will affect demand for our products and services and impact our operating results. There can be no assurance that any decrease in sales resulting from the Novel Coronavirus (COVID-19) will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the Novel Coronavirus (COVID-19) outbreak on our business and operations remains uncertain, the continued spread of the Novel Coronavirus (COVID-19) or the occurrence of other epidemics and the imposition of related public health measures and travel and business restrictions will adversely impact our business, financial condition, operating results and cash flows. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and services in a timely manner or meet required milestones or customer commitments.
It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets outside the United States.
Substantially all of our assets are currently located outside of the United States. Additionally, our sole director and officer resides outside of the United States, in Hong Kong. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws. Moreover, we have been advised by Law Offices of Thomas E. Puzzo, PLLC, our US counsel, that Hong Kong does not have a treaty providing for the reciprocal recognition and enforcement of judgments of courts with the United States.
RISKS RELATED TO DOING BUSINESS IN THE PEOPLE’S REPUBLIC OF CHINA AND HONG KONG
Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.
New Momentum Corporation, is a holding company that, through Gagfare Limited, a Hong Kong entity, and Beyond Blue Limited, Hong Kong entity, both wholly-owned subsidiaries, operates our online ticketing platform that provides travelers a “Book Now, Pay Later” business model. The PRC government has sovereignty of Hong Kong, and Hong Kong’s legislature adopts laws that are congruent with PRC government policies and laws. Because of the majority of our operations are in the Hong Kong, economic, political and legal developments in the PRC will significantly affect our business, financial condition, results of operations and prospects.
The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures 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 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 China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.
While the PRC economy has experienced significant growth in the past three decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition, the PRC government has implemented in the past certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for our services and consequently have a material adverse effect on our businesses, financial condition and results of operations.
Because we have subsidiaries in Hong Kong, the PRC government has significant oversight and discretion over the conduct our business operations, may exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may intervene or influence our operations at any time, and may limit or completely hinder our ability to offer or continue to offer securities to investors, which could result in a material change in our operations and/or cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals.
The PRC government may intervene or influence our operations at any time with little to no advanced notice, which could result in a material change in our operations and/or the value of New Momentum Corporation’s common stock. Furthermore, the PRC government has also recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. We have been advised by Tasman C.H. Tam, our Hong Kong counsel, that the CAC does not apply to our operations in Hong Kong because we do not possess an amount of information in our business operations that would trigger the CAC; and the kind of data processed in our operations does not relate to national security.
We believe that we are not subject to merger control review by China’s anti-monopoly enforcement agency due to the level of our revenues and the fact that we currently do not expect to propose or implement any acquisition of control of, or decisive influence over, any company with revenues within China of more than RMB400 million. Currently, these statements and regulatory actions have had no impact on our daily business operation, our ability to accept foreign investments and list the securities of New Momentum Corporation on an U.S. or other foreign exchange. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign investments and list the securities New Momentum Corporation on an U.S. or other foreign exchange.
There are uncertainties regarding the interpretation and enforcement of PRC and Hong Kong laws, rules and regulations.
A substantial majority of our operations are conducted in the Hong Kong, and are governed by PRC and Hong Kong laws, rules and regulations. Our Hong Kong subsidiaries may become subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
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In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies. In particular, because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation.
Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. 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.
Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance requirements for companies like us with China-based operations, all of which could increase our compliance costs, subject us to additional disclosure requirements.
The recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore, may lead to additional regulatory review in China over our financing and capital raising activities in the United States. In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect of restricting the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations. We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.
On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective. On August 1, 2021, the China Securities Regulatory Commission stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related issuers. We cannot guarantee that we will not be subject to tightened regulatory review and we could be exposed to government interference in China.
Compliance with China’s new Data Security Law, Measures on Cybersecurity Review (revised draft for public consultation), Personal Information Protection Law (second draft for consultation), regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.
Recently, the Cyberspace Administration of China has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber Security Law and the Measures on Cybersecurity Review, which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.” Additionally, regulations announced by the Cyberspace Administration of China on January 4, 2022, The Cybersecurity Review Measures (2021) (the “Measures”), became effective on February 15, 2022. According to the Measures, to go public abroad, an online platform operator that possesses the personal information of more than 1,000,000 users must seek cybersecurity review from the Office of Cybersecurity Review. Currently, we have not been involved in any investigations on cybersecurity review initiated by the CAC or related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect. Since these cybersecurity rules were recently enacted and uncertainties exist as to the interpretation or implementation of the Measures, if the Measures require us to obtain clearance or permissions from the CAC, we would file an application with CAC and seek to obtain the clearance or permissions from the CAC as required. However, there can be no assurance we will obtain clearance or permission which could adversely affect our business. Compliance with the Measures, as well as additional laws, regulations and guidelines that the PRC government promulgates in the future, may entail significant expenses and could materially affect our business.
It is unclear at the present time how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on our online ticketing platform. China’s regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and this could lead to us delisting or removal from the over-the-counter markets.
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Also, on August 20, 2021, the National People’s Congress passed the Personal Information Protection Law, which will be implemented on November 1, 2021. The law creates a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The law also proposes that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to-be-set by Chinese cyberspace regulators are also required to store in China personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. Lastly, the draft contains proposals for significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year.
Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement. Compliance with the Cyber Security Law and the Data Security Law could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market.
Because our holding company structure creates restrictions on the payment of dividends or other cash payments, our ability to pay dividends or make other payments is limited.
New Momentum Corporation is a holding company whose primary assets are its ownership of the equity interests in its subsidiaries. New Momentum Corporation conducts no other business and, as a result, it depends entirely upon its subsidiaries’ earnings and cash flow to meet cash and financing requirements. If New Momentum Corporation decides in the future to pay dividends or make other payments, as a holding company, its ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from its operating subsidiaries. Its subsidiaries and projects may be restricted in their ability to pay dividends, make distributions or otherwise transfer funds to New Momentum Corporation prior to the satisfaction of other obligations, including the payment of operating expenses or debt service, appropriation to reserves prescribed by laws and regulations, covering losses in previous years, restrictions on the conversion of local currency into U.S. dollars or other hard currency, completion of relevant procedures with governmental authorities or banks and other regulatory restrictions, as applicable. Under the applicable PRC laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside a portion of its after-tax profit to fund specific reserve funds prior to payment of dividends. In particular, at least 10% of its after-tax profits based on PRC accounting standards each year is required to be set aside towards its general reserves until the accumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends. If future dividends are paid in RMB, fluctuations in the exchange rate for the conversion of any of these currencies into U.S. dollars may adversely affect the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars. For a detailed description of the potential government regulations facing the Company associated with our operations in Hong Kong and on restrictions on payments from our subsidiaries, please refer to “Government and Industry Regulations –China and “Transfers of Cash to and From our Subsidiaries” on page 10. We do not presently have any intention to declare or pay dividends in the future. You should not purchase shares of our common stock in anticipation of receiving dividends in future periods.
Our Hong Kong subsidiaries may be subject to restrictions on paying dividends or making other payments to us, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of New Momentum Corporation’s common stock.
New Momentum Corporation is a holding company incorporated in Nevada. It relies on dividends from its Hong Kong subsidiaries for its cash and financing requirements, such as the funds necessary to service any debt it may incur. Current PRC regulations permit PRC subsidiaries to pay dividends to foreign parent companies only out of their accumulated after-tax profits upon satisfaction of relevant statutory condition and procedures, if any, determined in accordance with Chinese accounting standards and regulations. In addition, PRC subsidiaries are required to set aside at least 10% of their accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. Furthermore, if PRC subsidiaries and their 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 payments to the foreign parent company, which may restrict the ability of the foreign parent company to satisfy its liquidity requirements. If such restrictions on dividend and other payments are interpreted to apply to Hong Kong entities, our ability to rely on payments from our Hong Kong subsidiary will be adversely affected.
In addition, the Enterprise Income Tax Law of the PRC, or the PRC EIT Law, and its implementation rules provide that withholding tax rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.
Governmental control of currency conversion may limit our ability to utilize revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. In light of the flood of capital outflows of China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. If any of our shareholders regulated by such policies fail to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be subject to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions.
We receive substantially all of our revenues in Hong Kong Dollars. Under our current corporate structure, our Nevada holding company may rely on dividend payments from our Hong Kong subsidiary to fund any cash and financing requirements that we may have. If the PRC government expands its currency controls to include the Hong Kong Dollar, we will be required to obtain SAFE approval to use cash generated from the operations of our Hong Kong subsidiary and consolidated affiliated entities to pay off their respective debt in a currency other than Hong Kong Dollar or Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi or the Hong Kong Dollar. We may be prevented from obtaining sufficient foreign currencies to satisfy our foreign currency demands. As a result, we may not be able to pay dividends in foreign currencies to its shareholders.
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It may be difficult for U.S. regulators, such as the Department of Justice, the SEC, and other authorities, to conduct investigation or collect evidence within China.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with regulatory authorities in the Unities States—including the SEC and the Department of Justice—may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the PRC territory. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase the difficulties you face in protecting your interests.
The audit report included in this prospectus is prepared by an independent registered public accounting firm who is based in Malaysia and is presently is inspected by the Public Company Accounting Oversight Board (the “PCAOB”). If, however, the PCAOB is unable to inspect our independent registered public accounting firm, our investors would be deprived of the benefits of such inspection. The Holding Foreign Companies Accountable Act, or the HFCA Act, and other legislative and regulatory developments related to political tensions between the United States and China, may have a material adverse impact on any future possible listing and trading, or quotation, in the U.S. and the trading prices of our shares of common stock, if our shares of common stock are so listed or quoted.
As an auditor of U.S. publicly traded companies and a PCAOB-registered accounting firm, the independent registered public accounting firm that issued the audit report included in this prospectus is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. If, however, it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in Malaysia or another other foreign jurisdiction, then our independent registered public accounting firm would not be inspected by the PCAOB, which would be detrimental to your investment.
PCAOB inspections are able to identify deficiencies in the inspected firms’ audit procedures and quality control procedures, which may then be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections prevents the PCAOB from regularly evaluating an independent registered public accounting firm’s audits and quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections of an auditor in such circumstances. The inability of the PCAOB to conduct an inspection of an independent registered public accounting firm makes it more difficult to evaluate the effectiveness of an independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Accordingly, if in the future the PCAOB is unable to inspect our independent registered public accounting firm, investors will likely have a lower level of confidence in our reported financial information and procedures and the quality of our financial statements compared to an independent registered public accounting firm is subject to PCAOB inspections.
Furthermore, U.S. legislators and regulators have in recent years raised concerns about risks associated with investing in companies that are based in or have substantial operations in emerging markets, including China. In particular, lawmakers have highlighted the increased risks associated with companies whose independent auditors are unable to be inspected by the PCAOB. As part of this continued focus in the United States on access to audit and other information currently protected by national law, in particular China’s, on December 18, 2020, the U.S. president signed the HFCA Act into law. On December 2, 2021, the SEC adopted final rules implementing the HFCA Act.
The HFCA Act requires the SEC to identify and maintain a list of U.S. listed companies whose audit reports are prepared by auditors that the PCAOB is unable to inspect or investigate completely because of restrictions imposed by the authorities in the foreign jurisdiction. The HFCA Act also requires SEC-identified public companies to (i) submit documentation establishing that the company is not owned or controlled by a governmental entity in the jurisdiction that restricts PCAOB inspections and (ii) make certain additional disclosures in their SEC filings regarding, among other things, the fact that the PCAOB is unable to inspect its audit firm, the percentage of the company’s shares owned by governmental entities in such foreign jurisdiction, whether governmental entities in such foreign jurisdiction have a controlling financial interest with respect to the company, the name of any Chinese Communist Party members on the company’s board of directors, and whether there are any charters of the Chinese Communist Party included in the company’s organizational documents (including the text of any such charter). For issuers remaining on the SEC-identified companies list for three consecutive years, the securities of such company would be prohibited from trading on a U.S. national securities exchange or the U.S. over-the-counter markets. On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. It is uncertain whether this proposed legislation will advance. Such decrease from three non-inspection years to two non-inspection years would reduce the time period before your securities may be prohibited from trading or delisted. Pursuant to the HFCA Act, the PCAOB has issued its report notifying the Commission of its determination that it is unable to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong.
On February 4, 2022, the U.S. House of Representatives passed the America Competes Act of 2022 which includes the exact same amendments as the bill passed by the Senate. The America Competes Act however includes a broader range of legislation not related to the HFCA Act in response to the U.S. Innovation and Competition Act passed by the Senate in 2021. The U.S. House of Representatives and U.S. Senate will need to agree on amendments to these respective bills to align the legislation and pass their amended bills before the president of the United States can sign into law. It is unclear when the U.S. Senate and U.S. House of Representatives will resolve the differences in the U.S. Innovation and Competition Act and the America Competes Act of 2022 bills currently passed, or when the U.S. President will sign on the bill to make the amendment into law, or at all.
The SEC has recently begun identifying issuers based on annual reports filed in 2022 for the fiscal year ended December 31, 2021, and already identified approximately 80 companies with ties to Hong Kong and/or the PRC for delisting. Because our annual report for fiscal year 2021 will likely include an audit report issued by an independent registered public accounting firm that is currently subject to PCAOB inspection, we do not expect that we will be an SEC-identified company in fiscal year 2022, and would not be required to comply with the SEC’s submission and disclosure requirements for our Annual Report for the fiscal year ending December 31, 2022.
If, however, it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in Malaysia or another foreign jurisdiction, then our independent registered public accounting firm would not be inspected by the PCAOB, and we are determined to be subject to the HFCA Act, our shares of common stock would be prohibited from trading on a U.S. national securities exchange or the U.S. over-the-counter markets, if we are unable to meet PCAOB inspection requirements in a timely manner, and you could lose your entire investment.
Additionally, if we become a SEC-identified company in fiscal year 2022, any actions that we would take in response to the HFCA Act and compliance with the requirements of the HFCA Act, for so long as we would remain an SEC-identified company, would require is to incur additional legal, accounting and other expenses, which would be significant.
RISKS ASSOCIATED WITH OUR SECURITIES
The price of our shares of common stock may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock either now or in the future.
Although our common stock is quoted on the OTC Markets, our shares of common stock trade sporadically, and the price of our common stock, if traded, may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result holders of our securities may not find purchasers our securities should they to sell securities held by them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time.
If a more active market should develop, the price of our shares of common stock may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in our securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for any loans.
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We expect to experience volatility in our stock price, which could negatively affect stockholders’ investments.
Although our common stock is quoted on the OTC Markets under the symbol “NNAX”, there is a limited public market for our common stock. No assurance can be given that an active market will develop or that a stockholder will ever be able to liquidate its shares of common stock without considerable delay, if at all. Many brokerage firms may not be willing to effect transactions in the securities. Even if a purchaser finds a broker willing to effect a transaction in these securities, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price and liquidity of our common stock.
In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. Due to the volatility of our common stock price, we may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources.
Stockholders should also be aware that, according to SEC Release No. 34-29093, the market for “penny stock”, such as our common stock, has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the future volatility of our share price.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
Under U.S. federal securities legislation, our common stock will constitute “penny stock”. Penny stock is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a potential investor’s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve an investor’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination. Brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
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FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Certain restrictions on the extent of puts may have little, if any, effect on the adverse impact of our issuance of shares in connection with the Investment Agreement, and as such, Strattner may sell a large number of shares, resulting in substantial dilution to the value of shares held by existing stockholders.
Strattner has agreed to refrain from holding an amount of shares which would result in Strattner owning more than 9.99% of the then-outstanding shares of our common stock at any one time. These restrictions, however, do not prevent Strattner from selling shares of common stock received in connection with a put, and then receiving additional shares of common stock in connection with a subsequent put. In this way, Strattner could sell more than 9.99% of the outstanding common stock in a relatively short time frame while never holding more than 9.99% at one time.
Because Strattner will be paying less than the then-prevailing market price for our common stock, your ownership interest may be diluted and the value of our common stock may decline by exercising the put right pursuant to the Investment Agreement.
The common stock to be issued to Strattner pursuant to the Investment Agreement will be purchased at a price equal to the lowest of 85% of the lowest closing bid price of our common stock reported by Bloomberg Finance L.P. in a five consecutive trading day period commencing with the date a put notice is delivered. Because the put price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised, your ownership interest may be diluted. Strattner has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Strattner sells the shares, the price of our common stock could decrease. If our stock price decreases, Strattner may have a further incentive to sell the shares of our common stock that it holds. These sales may have a further adverse impact on our stock price.
The Investment Agreement’s pricing structure may result in dilution to our stockholders.
Pursuant to the Investment Agreement, Strattner committed to purchase, subject to certain conditions, up to $5,000,000 of our common stock over a sixteen-month period. If we sell shares to Strattner under the Investment Agreement, it will have a dilutive effect on the holdings of our current stockholders, and may result in downward pressure on the price of our common stock. If we draw down amounts under the Investment Agreement, we will issue shares to Strattner at a discount. If we draw down amounts under the Investment Agreement when our share price is decreasing, we will need to issue more shares to raise the same amount than if our stock price was higher. Issuances in the face of a declining share price will have an even greater dilutive effect than if our share price were stable or increasing, and may further decrease our share price.
We may not be able to access sufficient funds pursuant to the terms of the Investment Agreement.
Our ability to put shares to Strattner and obtain funds pursuant to the terms of the Investment Agreement is limited, including restrictions on when we may exercise our put rights, restrictions on the amount we may put to Strattner at any one time, which is determined in part by the trading price of our common stock, and a limitation on Strattner’s obligation to purchase if such purchase would result in Strattner beneficially owning more than 9.99% of our common stock. Accordingly, we may not be able to access sufficient funds when needed.
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If we issue additional shares in the future, whether in connection with a financing or in exchange for services or rights, it will result in the dilution of our existing stockholders.
Our articles of incorporation authorize the issuance of up to 500,000,000 shares of common stock with a par value of $0.001 per share, and 175,000,000 shares have been designated as “blank check” preferred stock. As of the date of this Prospectus, the Company had 176,168,548 shares of common stock issued and outstanding. Accordingly, we may issue up to an additional 323,831,452 shares of common stock. Our Board of Directors may choose to issue some or all of such shares to acquire one or more companies or properties, to fund our overhead and general operating requirements and in exchange for services rendered to the Company. Such issuances may not require the approval of our stockholders. We have previously issued shares of our common stock in exchange for services provided to the Company and for certain rights, including as consideration for intellectual property rights. Any future issuances may reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares in the future, such issuance will reduce the proportionate ownership and voting power of all current stockholders.
State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.
Secondary trading in common stock sold in this offering will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment.
The Company does not intend to seek registration or qualification of its shares of common stock the subject of this offering in any State or territory of the United States. Aside from a “secondary trading” exemption, other exemptions under state law and the laws of US territories may be available to purchasers of the shares of common stock sold in this offering,
Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of us.
Though not now, we may be or in the future we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors:
(i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.
The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.
If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder’s shares.
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Nevada’s control share law may have the effect of discouraging takeovers of the corporation.
In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquiror to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.
Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. Stockholders may never be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.
USE OF PROCEEDS
Selling Security Holders may sell all of the common stock offered by this Prospectus from time-to-time. We will not receive any proceeds from the sale of those shares of common stock.
We will pay for expenses of this offering, except that the Selling Security Holders will pay any broker discounts or commissions or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.
DETERMINATION OF THE OFFERING PRICE
There currently is a limited public market for our common stock. The Selling Security Holders may sell their shares in the over-the-counter market or otherwise, at market prices prevailing at the time of sale, at prices related to the prevailing market price, or at negotiated prices.
SELLING SECURITY HOLDERS
This Prospectus relates to the resale of up to (i) 5,000,000 shares of our Common Stock, issuable to Strattner, pursuant to that certain Investment Agreement (the “Investment Agreement”), dated April 16, 2021, by and between the Company and Strattner, and (ii) 182,617 shares of common stock underlying the Note, issuable to EMA Financial.
The Investment Agreement
Pursuant to that certain Investment Agreement (the “Investment Agreement”), dated April 16, 2021, by and between the Company and Strattner, pursuant to which Strattner is committed to purchase up to $5,000,000 to purchase the Company’s common stock. We may draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement.
This offering relates to the resale of up to an aggregate of $5,000,000 in put shares (“Put Shares”) that we may put to Strattner pursuant to the Investment Agreement. Assuming the resale of all 5,000,000 shares offered in this prospectus as Put Shares, this would constitute approximately 2.9% of our outstanding common stock, such 2.9% figure being calculated using the number of our outstanding common stock on a fully diluted basis. It is likely that the number of shares offered in this registration statement is insufficient to allow us to receive the full amount of proceeds under the Investment Agreement.
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The maximum amount of common stock that the Company shall be entitled to put to Strattner under any applicable put notice shall be an amount of shares up to or equal to 200% of the average of the daily trading volume of our common stock for the ten (10) consecutive trading days immediately prior to the applicable date on which we make our put to Strattner, so long as such amount is at least $5,000 and does not exceed $250,000, as calculated by multiplying the number of shares under our put by the average daily volume weighted average price for the 10 consecutive trading days immediately prior the to the applicable date we submit our put to Strattner.
The Company shall not be entitled to submit a notice of put to Strattner until after the previous put closing has been completed. The Company may not deliver a notice of a put to Strattner on or earlier of the tenth (10th) trading day immediately following the preceding date on which the Company last submitted a put to Strattner.
The volume weighted average prices of the common stock of the Company on the OTC Markets of $1.00 per share for the 10 trading days prior to June 21, 2021, is $0.39. At such a price, we will be able to receive up to $1,950,000 in gross proceeds, assuming the sale of the entire 5,000,000 Put Shares being registered hereunder pursuant to the Investment Agreement.
The amount of $5,000,000 was selected based on our potential use of funds over the effective time period to acquire targeted businesses, including their intellectual property, and scale our business at a rapid rate. Our ability to receive the full amount is largely dependent on the daily dollar volume of stock traded during the effective period. Based strictly on the current daily trading dollar volume up to June 21, 2021, we believe it is unlikely that we will be able to receive the entire $5,000,000. We are not dependent on receiving the full amount to execute our business.
In order to sell shares to Strattner under the Investment Agreement, during the Commitment Period, the Company must deliver to Strattner a written put notice on any trading day (the “Put Date”), setting forth the dollar amount to be invested by Strattner (the “Put Notice”). For each share of our common stock purchased under the Investment Agreement, Strattner will pay of the arithmetic average of the lowest VWAPs reported by Bloomberg Finance L.P. in a five consecutive trading day period commencing with the date a put notice is delivered (the “Valuation Period”). The Company may, at its sole discretion, issue a Put Notice to Strattner and Strattner will then be irrevocably bound to acquire such shares.
The Investment Agreement provides that the number of Put Shares to be sold to Strattner shall not exceed the number of shares that when aggregated together with all other shares of the Company’s common stock which Strattner is deemed to beneficially own, would result in Strattner owning more than 9.99% of the Company’s outstanding common stock. The Investment Agreement provides that any provision of the Investment Agreement may be amended or waived only by an instrument in writing signed by the party to be charged with enforcement. The Company and Strattner have entered into an enforceable oral agreement that neither will amend or waive any provision in the Investment Agreement that alters the pricing mechanism or the 9.99% ownership cap which will result in the transaction becoming ineligible to be made on a shelf basis under Rule 415(a)(1)(i).
If, during the term of the Agreement, the Company (i) subdivides or combines the common stock; (ii) pays a dividend in shares of common stock or makes any other distribution of shares of common stock; (iii) issues any options or other rights to subscribe for or shares of common stock and the price per share is less than closing price in effect immediately prior to such issuance; (iv) issues any securities convertible into shares of common stock and the consideration per share for which shares of common stock may at any time thereafter be issuable pursuant to the terms of such convertible securities shall be less that the closing price in effect immediately prior to such issuance; (v) issue shares of common stock otherwise than as provided in the foregoing subsections (i) through (iv) at a price per share less than the closing price in effect immediately prior to such issuance, or without consideration; or (vi) makes a distribution of its assets or evidences of its indebtedness to the holders of common stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law (collectively, a “Valuation Event”), then a new Valuation Period shall begin on the trading day immediately after the occurrence of such Valuation Event and end on the fifth trading day thereafter.
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We are relying on an exemption from the registration requirements of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder. The transaction involves a private offering, Strattner is an “accredited investor” and/or qualified institutional buyer and Strattner has access to information about us and its investment.
Assuming the sale of the entire $5,000,000 in Put Shares being registered hereunder pursuant to the Investment Agreement, we will be able to receive $5,000,000 in gross proceeds. Neither the Investment Agreement nor any rights or obligations of the parties under the Investment Agreement may be assigned by either party to any other person.
There are substantial risks to investors as a result of the issuance of shares of our common stock under the Investment Agreement. These risks include dilution of stockholders, significant decline in our stock price and our inability to draw sufficient funds when needed.
Strattner will periodically purchase our common stock under the Investment Agreement and will, in turn, sell such shares to investors in the market at the prevailing market price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Strattner to raise the same amount of funds, as our stock price declines.
10% Convertible Note
On October 27, 2020, the Registrant offered and sold the Note, dated October 27, 2020, to EMA Financial for aggregate proceeds of $33,000. As of June 9, 2021, there was $35,000 in principal and $2,042 in interest due and owing under the Note. The Note is due July 27, 2021, and carries interest at a rate of 10% per annum. The conversion price of the Note Shares is equal to the lower of: (i) the lowest closing price of the Common Stock during the preceding twenty (20) trading day period ending on the latest complete trading day prior to the Issue Date of this Note or (ii) 55% of the lowest trading price for the Common Stock on the Principal Market during the twenty (20) consecutive trading days including and immediately preceding the Conversion Date. We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holders. The terms and conditions of the Note provide registration rights for the Note Shares.
The Selling Security Holders Table
The following table sets forth the names of the Selling Security Holders, the number of shares of common stock beneficially owned by each Selling Security Holders as of the date hereof and the number of shares of common stock being offered by each Selling Security Holders. The shares being offered hereby are being registered to permit public secondary trading, and the Selling Security Holders may offer all or part of the shares for resale from time to time. However, the Selling Security Holders are under no obligation to sell all or any portion of such shares nor are the Selling Security Holders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the Selling Security Holders. The “Amount Beneficially Owned After Offering” column assumes the sale of all shares offered.
To our knowledge, the none of the Selling Security Holders is a broker-dealer or an affiliate of a broker-dealer. We may require the Selling Security Holders to suspend the sales of the shares of our common stock being offered pursuant to this Prospectus upon the occurrence of any event that makes any statement in this Prospectus or the related registration statement untrue in any material respect or that requires the changing of statements in those documents in order to make statements in those documents not misleading.
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Name of Selling Security Holders |
| Shares Beneficially Owned Prior to Offering(1) |
|
| Amount Beneficially Owned After Offering |
|
| Number of Shares to Be Owned by Selling Security Holders After the Offering and Percent of Total Issued and Outstanding Shares(1) |
| |||
|
|
|
|
| # of Shares(2) |
|
| % of Class(2) |
| |||
Strattner Alternative Credit Fund LP (3) |
|
| 0 |
|
|
| 5,000,000 |
|
|
| 0 | * |
EMA Financial, LLC (4) |
|
| 0 |
|
|
| 182,617 |
|
|
| 0 | * |
_________
* Less than 1%
(1) | Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of Common Stock. Shares of Common Stock subject to options and warrants currently exercisable, or exercisable within 60 days, are counted as outstanding for computing the percentage of the person holding such options or warrants but are not counted as outstanding for computing the percentage of any other person. |
(2) | We have assumed that the Selling Security Holder will sell all of the shares being offered in this offering. |
(3) | Strattner Capital Management Limited, a Hong Kong entity, is the general partner of Strattner Alternative Credit Fund LP and has voting and investment power over the shares beneficially owned by Strattner Alternative Credit Fund LP. Timo Strattner has voting and investment power over the shares beneficially owned by Strattner Capital Management Limited. |
(4) | EMA Group, LLC (“EMA Group”) is the investment manager of EMA Financial, LLC. Felicia Preston is the managing member of EMA Group, and she has voting and investment power over the shares beneficially owned by EMA Group. |
PLAN OF DISTRIBUTION
This prospectus relates to the resale of shares of our common stock, par value $0.001 per share, by the Selling Security Holders, including (i) 5,000,000 Put Shares that we will put to Strattner, and (ii) 182,617 Note Shares issuable to EMA Financial.
We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holders. We may receive proceeds of up to $5,000,000 from the sale of our Put Shares under the Investment Agreement.
The Selling Security Holders may, from time to time sell any or all of their shares of common stock on any market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Security Holders may use any one or more of the following methods when selling shares:
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser; |
| · | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal; |
| · | facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | broker-dealers may agree with the Selling Security Holders to sell a specified number of such shares at a stipulated price per share; |
| · | a combination of any such methods of sale; and |
| · | any other method permitted pursuant to applicable law. |
The Selling Security Holders may also sell securities under Rule 144 under the Securities Act of 1933, if available, rather than under this Prospectus.
The Selling Security Holders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Security Holders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that the Selling Security Holders will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The Selling Security Holders cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the Selling Security Holders. In addition, the Selling Security Holders and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus are “underwriters” as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
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Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a Selling Security Holders. The Selling Security Holders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.
The Selling Security Holders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them, and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable provision of the Securities Act amending the list of Selling Security Holders to include the pledgee, transferee or other successors in interest as Selling Security Holders under this prospectus.
The Selling Security Holders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of Selling Security Holders to include the pledgee, transferee or other successors in interest as a Selling Security Holders under this prospectus.
We are required to pay all fees and expenses incident to the registration of the shares of common stock. Otherwise, all discounts, commissions or fees incurred in connection with the sale of our common stock offered hereby will be paid by the Selling Security Holders.
The Selling Security Holders acquired or will acquire the securities offered hereby in the ordinary course of business and have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any Selling Security Holders. We will file a supplement to this prospectus if a Selling Security Holders enters into a material arrangement with a broker-dealer for sale of common stock being registered. If the Selling Security Holders use this prospectus for any sale of the shares of common stock, it will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Exchange Act, may apply to sales of our common stock and activities of the Selling Security Holders. The Selling Security Holders will act independently of us in making decisions with respect to the timing, manner and size of each sale.
We will pay all expenses incident to the registration, offering and sale of the shares of our common stock to the public hereunder other than commissions, fees and discounts of underwriters, brokers, dealers and agents. If any of these other expenses exists, we expect the Selling Security Holders to pay those expenses. We estimate that the expenses of the offering to be borne by us will be approximately $30,000. We will not receive any proceeds from the resale of any of the shares of our common stock by the Selling Security Holders.
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DESCRIPTION OF SECURITIES
General
The following summary includes a description of material provisions of our capital stock.
Authorized and Outstanding Securities
The Company is authorized to issue 500,000,000 shares of common stock, par value $0.001 per share, and 175,000,000 shares of Preferred Stock, par value $0.001 per share, and one (1) of which is designated as Series A Preferred Stock, par value $0.001 per share. As of May 3, 2022, there were issued and outstanding 176,168,548 shares of our common stock, and one (1) share of our Series A Preferred Stock.
Common Stock
The holders of our common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available therefore. In the event of a liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.
Series A Preferred Stock
On March 11, 2021, the Company designated a class of preferred stock titled, Series A Preferred Stock, with a par value of $0.001 per share, and consisting of one share. The Series A preferred carries voting rights equal to 110% of the total voting rights of the outstanding common stock and voting power of the Company, and has the right to appoint one director of the Company.
Additionally, the one share of Series A Preferred Stock contains protective provisions, which precludes the Company from taking the certain actions without the approval of the holder of the share of Series A Preferred Stock. More specifically, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class:
| (a) | amend the Articles of Incorporation or, unless approved by the Board of Directors, including by the Series A Director, amend the Company’s Bylaws; |
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| (b) | change or modify the rights, preferences or other terms of the Series A Preferred Stock, or increase or decrease the number of authorized shares of Series A Preferred Stock; |
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| (c) | reclassify or recapitalize any outstanding equity securities, or, unless approved by the Board of Directors, including by the Series A Director, authorize or issue, or undertake an obligation to authorize or issue, any equity securities or any debt securities convertible into or exercisable for any equity securities (other than the issuance of stock-options or securities under any employee option or benefit plan); |
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| (d) | authorize or effect any transaction constituting a “Deemed Liquidation” under the Articles, or any other merger or consolidation of the Company; |
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| (e) | increase or decrease the size of the Board of Directors as provided in the Bylaws of the Company or remove the Series A Director (unless approved by the Board of Directors, including the Series A Director); |
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| (f) | declare or pay any dividends or make any other distribution with respect to any class or series of capital stock (unless approved by the Board of Directors, including the Series A Director); |
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| (g) | redeem, repurchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any outstanding shares of capital stock (other than the repurchase of shares of Common Stock from employees, consultants or other service providers pursuant to agreements approved by the Board of Directors under which the Company has the option to repurchase such shares at no greater than original cost upon the occurrence of certain events, such as the termination of employment) (unless approved by the Board of Directors, including the Series A Director); |
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| (h) | create or amend any stock option plan of the Company, if any (other than amendments that do not require approval of the stockholders under the terms of the plan or applicable law) or approve any new equity incentive plan; |
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| (i) | replace the President and/or Chief Executive Officer of the Company (unless approved by the Board of Directors, including the Series A Director); |
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| (j) | transfer assets to any subsidiary or other affiliated entity (unless approved by the Board of Directors, including the Series A Director); |
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| (k) | issue, or cause any subsidiary of the Company to issue, any indebtedness or debt security, other than trade accounts payable and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase or otherwise alter in any material respect the terms of any indebtedness previously approved or required to be approved by the holders of the Series A Preferred Stock (unless approved by the Board of Directors, including the Series A Director); |
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| (l) | modify or change the nature of the Company’s business; |
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| (m) | acquire, or cause a Subsidiary of the Company to acquire, in any transaction or series of related transactions, the stock or any material assets of another person, or enter into any joint venture with any other person (unless approved by the Board of Directors, including the Series A Director); or |
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| (n) | sell, transfer, license, lease or otherwise dispose of, in any transaction or series of related transactions, any material assets of the Company or any Subsidiary outside the ordinary course of business (unless approved by the Board of Directors, including the Series A Director). |
Additionally, as long as any shares of Series A Preferred Stock remain outstanding, the holders of a majority of the shares of Series A Preferred Stock represented at a duly called special or annual meeting of such stockholders or by an action by written consent for that purpose shall be entitled to elect a special director to the board of directors.
Dividends
Dividends, if any, will be contingent upon our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends, if any, will be within the discretion of our board of directors. We intend to retain earnings, if any, for use in its business operations and accordingly, the board of directors does not anticipate declaring any dividends in the foreseeable future.
Warrants
We have no warrants issued or outstanding.
Convertible Note
On October 27, 2020, the Registrant offered and sold the Note, dated October 27, 2020, to EMA Financial for aggregate proceeds of $33,000. As of June 9, 2021, there was $35,000 in principal and $2,042 in interest due and owing under the Note. The Note is due July 27, 2021, and carries interest at a rate of 10% per annum. The conversion price of the Note Shares is equal to the lower of: (i) the lowest closing price of the Common Stock during the preceding twenty (20) trading day period ending on the latest complete trading day prior to the Issue Date of this Note or (ii) 55% of the lowest trading price for the Common Stock on the Principal Market during the twenty (20) consecutive trading days including and immediately preceding the Conversion Date. We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holders.
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Registration Rights
In connection with the execution of the Investment Agreement, on April 16, 2021, the Company and Strattner also entered into the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company has agreed to file the Registration Statement with the Commission to register an agreed upon number of Put Shares, on or prior to the Filing Deadline and have it declared effective on or before the Effectiveness Deadline.
We must use commercially reasonable best efforts to keep such registration statement continuously effective until all registrable securities covered by such registration statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect.
The terms and conditions of the Note provide registration rights for the Note Shares.
All fees and expenses incident to the performance of or compliance with, the Financing Rights Agreement by the Company shall be borne by the Company
Transfer Agent and Registrar
Our transfer agent is Action Stock Transfer Corporation, whose address is 2469 E. Fort Union Blvd., Suite 214, Salt Lake City, Utah, and whose telephone number is (801) 274-1088.
Indemnification of Officers and Directors
Subsection 7 of Section 78.138 of the Nevada Revised Statutes (the “Nevada Law”) provides that, subject to certain very limited statutory exceptions, a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer, unless it is proven that the act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and such breach of those duties involved intentional misconduct, fraud or a knowing violation of law. The statutory standard of liability established by Section 78.138 controls even if there is a provision in the corporation’s articles of incorporation unless a provision in the Company’s Articles of Incorporation provides for greater individual liability.
Subsection 1 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (any such person, a “Covered Person”), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Covered Person in connection with such action, suit or proceeding if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceedings, had no reasonable cause to believe the Covered Person’s conduct was unlawful.
Subsection 2 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any Covered Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in the capacity of a Covered Person against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by the Covered Person in connection with the defense or settlement of such action or suit, if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the Company. However, no indemnification may be made in respect of any claim, issue or matter as to which the Covered Person shall have been adjudged by a court of competent jurisdiction (after exhaustion of all appeals) to be liable to the corporation or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances the Covered Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
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Section 78.7502 of the Nevada Law further provides that to the extent a Covered Person has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in Subsection 1 or 2, as described above, or in the defense of any claim, issue or matter therein, the corporation shall indemnify the Covered Person against expenses (including attorneys’ fees) actually and reasonably incurred by the Covered Person in connection with the defense.
Subsection 1 of Section 78.751 of the Nevada Law provides that any discretionary indemnification pursuant to Section 78.7502 of the Nevada Law, unless ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may be made by a corporation only as authorized in the specific case upon a determination that indemnification of the Covered Person is proper in the circumstances. Such determination must be made (a) by the stockholders, (b) by the board of directors of the corporation by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding, (c) if a majority vote of a quorum of such non-party directors so orders, by independent legal counsel in a written opinion, or (d) by independent legal counsel in a written opinion if a quorum of such non-party directors cannot be obtained.
Subsection 2 of Section 78.751 of the Nevada Law provides that a corporation’s articles of incorporation or bylaws or an agreement made by the corporation may require the corporation to pay as incurred and in advance of the final disposition of a criminal or civil action, suit or proceeding, the expenses of officers and directors in defending such action, suit or proceeding upon receipt by the corporation of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Subsection 2 of Section 78.751 further provides that its provisions do not affect any rights to advancement of expenses to which corporate personnel other than officers and directors may be entitled under contract or otherwise by law.
Subsection 3 of Section 78.751 of the Nevada Law provides that indemnification pursuant to Section 78.7502 of the Nevada Law and advancement of expenses authorized in or ordered by a court pursuant to Section 78.751 does not exclude any other rights to which the Covered Person may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his or her official capacity or in another capacity while holding his or her office. However, indemnification, unless ordered by a court pursuant to Section 78.7502 or for the advancement of expenses under Subsection 2 of Section 78.751 of the Nevada Law, may not be made to or on behalf of any director or officer of the corporation if a final adjudication establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action. Additionally, the scope of such indemnification and advancement of expenses shall continue for a Covered Person who has ceased to be a director, officer, employee or agent of the corporation, and shall inure to the benefit of his or her heirs, exe
Section 78.752 of the Nevada Law empowers a corporation to purchase and maintain insurance or make other financial arrangements on behalf of a Covered Person for any liability asserted against such person and liabilities and expenses incurred by such person in his or her capacity as a Covered Person or arising out of such person’s status as a Covered Person whether or not the corporation has the authority to indemnify such person against such liability and expenses.
The Bylaws of the Company provide for indemnification of Covered Persons substantially identical in scope to that permitted under the Nevada Law. Such Bylaws provide that the expenses of directors and officers of the Company incurred in defending any action, suit or proceeding, whether civil, criminal, administrative or investigative, must be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it is ultimately determined by a court of competent jurisdiction that the director or officer is not entitled to be indemnified by the Company.
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DESCRIPTION OF BUSINESS
Our Corporate History and Background
The Company was incorporated on July 1, 1999, under the laws of the State of Nevada, under the name “Han Logistics, Inc.” On August 6, 2015, the Company changed its name to “Eason Education Kingdom Holdings, Inc.” On June 18, 2020, the Company changed its name to New Momentum Corporation.
Amee Han Lombardi served as President, Secretary, Treasurer and a director from July 1, 1999 until her resignation on February 13, 2015. Michael Vardakis served as a director from April 19, 2012 until his resignation on February 13, 2015. On February 13, 2015, Kin Hon Chu was appointed a director, Law Wai Fan was appointed Chief Executive Officer, Cheng Kin Ning was appointed Chief Financial Officer, and Marie Huen Lai Chun was appointed Chief Operating Officer. On April 27, 2020, Leung Tin Lung David acquired approximately 233,813,213, or approximately 75.2%, of the issued and outstanding shares of common stock of the Company on such date.
On May 27, 2020, Chu Kin Hon resigned a director; Law Wai Fan resigned as Chief Executive Officer and President; Cheng Kin Ning resigned as Chief Financial Officer, Secretary and Treasurer; and Marie Huen Lai Chun resigned as Chief Operating Officer, of the Company. Effective May 27, 2020, Leung Tin Lung David was appointed as President, Secretary, and Treasurer and a Director of the Company. Mr. Leung is currently the sole director and officer of the Company.
Reverse Acquisition of Nemo Holding
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Company Limited, a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, is the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common shareholders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
As a result of the share exchange, Nemo Holding became a wholly-owned subsidiary of the Company.
The share exchange transaction with Nemo Holding was treated as a reverse acquisition, with Nemo Holding as the acquiror and the Company as the acquired party. Unless the context suggests otherwise, when we refer in this prospectus to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of Nemo Holding.
Organization & Subsidiaries
We have one operating subsidiary, Nemo Holding Company Limited, a British Virgin Islands corporation.
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Overview of Nemo Holding
Our wholly owned subsidiary, Nemo Holding was incorporated on April 16, 2020, in the British Virgin Islands.
The business of Nemo Holding is now the principal business of the Company. Nemo Holding has developed and operates an online ticketing platform named Gagfare.com, which provides a ticketing system for individuals and agencies to search, book and issue flight tickets and other services. The Company also offers its services through its app, Gagfare.
Nemo Holding principal administrative offices are located at 150 Cecil Street, #08-01, Singapore 069543, and our telephone number is +65 3105-4128. Our website is www.gagfare.com.
Summary Financial Information
The tables and information below are derived from our unaudited financial statements as of December 31, 2021.
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| December 31, 2021 |
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Financial Summary |
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Cash and Cash Equivalents |
| $ | 15,609 |
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Total Assets |
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| 76,150 |
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Total Liabilities |
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| 384,249 |
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Total Stockholders’ Equity (Deficit) |
| $ | (308,099 | ) |
Nemo Holding Company Limited has developed and operates an online ticketing platform, named Gagfare.com, which provides a ticketing system for individuals and agencies to search, book and issue flight tickets and other services.
Being the pioneer to provide “book-now-pay-later” option for securing flight ticket reservations, Gagfare enables travelers to search flights directly with over 500 airlines globally, and securing a confirmed, impartial airfare on their desired flight, instantly. With a unique and first time ever ‘book-now-pay-later’ solution provides by Gagfare, travelers can now pay only $2.00 to secure up to nine flight seats, well in advance in schedule, on their desired flight. Travelers don’t have to pay the rest of the fare until closer to their travel date.
The business mission of Gagfare is to let customers to “get a good fare.” Gagfare taps into multiple global distribution systems specifically for flight reservations, enables customers to be able to search and book their flights directly in the airlines’ own reservation systems. This gives travelers access to the best available promotional deals they may never encounter anywhere else online. Gagfare ensures to offer the best available airfare, on any given travel day, on any given flight, on any of the world’s leading airlines.
Travelers are using many of the existing online travel booking sites are spending lots of time searching and comparing for flight ticket options, and being rushed to pay the full ticket price as early as the platforms want. Often travelers may find out the selected flight fare options may no longer be available when they want to make the purchase. Advance booking is not available in most online travel booking sites today.
With user-friendly web and mobile application interfaces, Gagfare enables instant access to hundreds of thousands of flights around the world. Customers can also choose from their favorite airlines or search for alternate route options. Travelers can book itineraries with multiple stops, and check for their bookings through the airline official booking web sites by using the Gagfare booking reference information. Gagfare user just needs to pay $2.00 through multiple popular online payment methods to secure the best seats on their best flight choice instantly. A reminder will be sent through email to the customer when it is time to pay the flight ticket fare and issue the flight ticket.
In the future, Gagfare will also tap into the booking of travel packages, cruises, trains and buses tickets, hotels, theme parks, sports and event tickets as well, giving a one-stop travel and entertainment booking center for the consumers worldwide.
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Revenue and User Model
Gagfare plans that its revenue will be derived from online flight ticket booking and ticket issuance.
For each advance booking that user makes through the Gagfare’s state of the art book-now-pay-later solution, a non-refundable $2.00 booking fee is paid to Gagfare. The booking fee will not apply to the flight ticket payment at ticket issuance.
When user has decided to issue the booked flight plan, full payment for the tickets will be made for ticket issuance. Gagfare may still get a market ticket price margin from the ticket issuance transactions, depending on the type of ticket offering from the ticket source which the user has chosen.
Gagfare will also provide advertising spots on the web and mobile application platforms, for travel related businesses to advertise on the platforms, which will bring a stream of advertising income to the platform.
While the technology already developed and operational, Gagfare will later expand into the other ticketing markets, include travel packages, cruises, trains and buses, hotel rooms, theme parks, sports and even tickets, apply similar search, book and buy ticket business model and mechanisms which is already applied to flight tickets.
Intellectual Property
We rely on a combination of trademark laws, trade secrets, confidentiality provisions and other contractual provisions to protect our proprietary rights, which are primarily our brand names, product designs and marks. We do not own any patents.
Pursuant to a Cooperation Agreement, dated February 1, 2016, by and between Gagfare Limited, a Hong Kong corporation and wholly owned subsidiary of the Company, and JJ Explorer Tours Limited, a Hong Kong corporation (“JJ Explorer”), controlled by Leung Tin Lung David, JJ Explorer develops and maintains website and mobile application platforms the Company uses in the operation of its business in exchange for 50% of the net earnings the Company earns through its Gagfare website and mobile application platforms for a term of five years.
Government Regulation and Approvals
We are not aware of any governmental regulations or approvals required for any of our services or products. We do not believe that we are subject to any government regulations relating to the ownership and licensing of our intellectual property.
Employees
As of the date hereof, we have 1 non-employee officer, Leung Tin Lung David, who operates our company. The Company also uses 19 independent contractor consultants and advisors in connection with its operations.
Competition
We operate in the travel industry and face strong competition in terms of distribution, brand recognition, taste, quality, price, availability, and product positioning. The market is highly fragmented, and the resources of our competitors may increase due to mergers, consolidations or alliances, and we may face new competitors in the future. Our main competitors include a plethora of internet-based travel websites. Furthermore, we face competition from producers of other beverages. In addition, as we seek to expand our market share and to penetrate into new markets, we may have difficulty competing. From time to time in response to competitive and customer pressures or to maintain market share, we may be forced to reduce our selling prices or increase or reallocate spending on marketing, advertising, or promotions in order to compete. These types of actions could decrease our profit margins. Such pressures may also restrict our ability to increase our selling prices in response to raw material and other cost increases. In light of the strong competition that we currently face, and which may intensify in the future, there can be no assurance that we will be able to increase the sales of our products or even maintain our past levels of sales, or that our profit margins will not be reduced. If we are unable to increase our product sales or to maintain our past levels of sales and profit margins, our business, financial condition, results of operations and prospects may be materially and adversely affected.
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Description of Properties
Our executive offices are located at 150 Cecil Street, #08-01, Singapore 069543, and our telephone number is +65 3105-4128. We do not own any real estate or other physical properties.
Bankruptcy or Similar Proceedings
We have never been subject to bankruptcy, receivership or any similar proceeding.
Reports to Security Holders
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and accordingly, file current and periodic reports, proxy statements and other information with the SEC. We have also filed with the Commission a Registration Statement on Form S-1, under the Securities Act of 1933, as amended, with respect to the securities offered by this prospectus. This prospectus, which forms a part of the registration statement, does not contain all the information set forth in the registration statement, as permitted by the rules and regulations of the Commission. You may obtain copies of our reports from the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10 A.M. to 3 P.M. or on the SEC’s website, at www.sec.gov. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
ENFORCEABILITY OF CIVIL LIABILITIES
We are a corporation under the laws of the State of Nevada. We have appointed State Agent & Transfer Syndicate, Inc., of Carson City, Nevada, as our agent to receive service of process with respect to any action brought against us in the United States.
Substantially all of our assets are located outside the United States, in our Hong Kong subsidiaries. In addition, our sole officer and director is a citizen of Australia and a resident of Hong Kong, China, and all or a substantial portion of such person’s assets are located outside the United States. As a result, it may not be possible for investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws. Moreover, we have been advised Hong Kong does not have a treaty providing for the reciprocal recognition and enforcement of judgments of courts with the United States.
PROPERTIES
Our executive offices are located at 150 Cecil Street, #08-01, Singapore 069543.
LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Since July 27, 2020, our common stock has been quoted on the OTCQB and/or OTC Pink tiers of the OTC Markets Group Inc., under the symbol “NNAX.” Between August 26, 2015 and July 26, 2020, our common stock was quoted on the OTCQB and/or OTCPink, tiers under the stock symbol “EKKH.” On May 3, 2022, the last day that our shares of common stock traded, the closing bid price for our common stock was $0.015.
Stockholders
As of the date of this Prospectus, there were 176,168,548 shares of common stock issued and outstanding held by approximately 121 stockholders of record, and one (1) share of our Series A Preferred Stock held by one stockholder of record.
Transfer Agent
Our transfer agent is Action Stock Transfer Corporation, whose address is 2469 E. Fort Union Blvd., Suite 214, Salt Lake City, Utah, and whose telephone number is (801) 274-1088.
Dividends
We have not paid dividends to date and do not anticipate paying any dividends in the foreseeable future. Our Board of Directors intends to follow a policy of retaining earnings, if any, to finance our growth. The declaration and payment of dividends in the future will be determined by our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements and other factors.
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Recent Sales of Unregistered Securities
None.
Securities Authorized for Issuance Under Equity Compensation Plans
We have not established any compensation plans under which equity securities are authorized for issuance.
SECURITIES AUTHORIZED UNDER EQUITY COMPENSATION PLANS
On October 19, 2020, the Company approved its 2020 Stock Incentive Plan (the “Plan”) and authorized Leung Tin Lung David, the Company’s President, to issue up to 20,000,000 shares of common stock under the Plan. During the year ended December 31, 2020, the Company granted 19,400,000 shares of common stock to directors, officers, and consultants. During the year ended December 31, 2021, the Company granted 250,000 shares of common stock to consultants. As of the date of this Prospectus, 19,650,000 shares of common stock are issued under the Plan, and 230,000 shares of common stock are remaining authorized shares for issuance under the Plan.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Cautionary Statement Regarding Forward-Looking Information
The statements in this registration statement that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements appear in a number of different places in this report and can be identified by words such as “estimates”, “projects”, “expects”, “intends”, “believes”, “plans”, or their negatives or other comparable words. Also look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include, among others, statements regarding our business plans and availability of financing for our business.
OVERVIEW
The Company was incorporated in the State of Nevada on July 1, 1999, and established a fiscal year end of December 31.
Going Concern
To date the Company has little operations or revenues and consequently has incurred recurring losses from operations. No revenues are anticipated until we complete the financing we endeavor to obtain, as described in the Form 10-K, and implement our initial business plan. The ability of the Company to continue as a going concern is dependent on raising capital to fund our business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.
Our activities have been financed from related-party loans and the proceeds of share subscriptions. During October 2015, the Company raised a total of $300,500 in cash from offerings of our common stock. We have no outstanding loans.
The Company plans to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be able to raise any capital through this or any other offerings.
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PLAN OF OPERATION
We are an early stage corporation and have generated revenues of $299,070 and $667,774 from our business for the six months ended June 30, 2022 and 2021, respectively. We have developed and operate an online ticketing platform named Gagfare.com, which provides a ticketing system for individuals and agencies to search, book and issue flight tickets and other services. During the 12 months following the date of filing of this Prospectus, will be focused on attempting to raise $10,000,000 of funds to expand our business. We have no assurance that future financing will materialize. If that financing is not available, we may be unable to continue. However, if such public financing is not available, we could fail to satisfy our future cash requirements. We have no assurance that future financing will materialize. If that financing is not available we may be unable to continue. Management believes that if subsequent private placements are successful, we will be able to generate sales revenue within the following twelve months thereof. However, additional equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.
If we are unsuccessful in raising the additional proceeds through a private placement offering we will then have to seek additional funds through debt financing, which would be highly difficult for an early-stage company to secure. Therefore, the Company is highly dependent upon the success of the anticipated private placement offering and failure thereof would result in the Company having to seek capital from other sources such as debt financing, which may not even be available to the Company. However, if such financing were available, because we are an early stage company, it would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via a private placement of its common stock or secure debt financing it would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.
With new investors joining, the Company is operating a travel services businesses, which includes an online ticketing platform Gagfare, which provides to travelers a “Book Now, Pay Later” business model, for travelers to secure the best fares and reserve flights well ahead of time. The Company will also become the driving force behind a bold new hospitality concept that takes nature lovers and intrepid travelers to exciting new and established destinations. The curated collection of boutique properties, each with a focus on diving, sustainability, conservation, and cultural authenticity, offers a thoroughly contemporary travel experience that is intrinsically linked to the destination, its heritage and its culture.
RESULTS OF OPERATIONS
Comparison of the Three Months ended June 30, 2022 and 2021
The following table sets forth certain operational data for the three months ended June 30, 2022 and 2021:
|
| Three Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Revenues |
| $ | 299,068 |
|
| $ | 328,825 |
|
Cost of revenue |
|
| (297,891 | ) |
|
| (327,607 | ) |
Gross profit |
|
| 1,177 |
|
|
| 1,218 |
|
General and administrative expenses |
|
| (30,431 | ) |
|
| (95,442 | ) |
Other income (expense) |
|
| 130 |
|
|
| (2,170 | ) |
Loss before income taxes |
|
| (29,124 | ) |
|
| (96,394 | ) |
Income tax expense |
|
| - |
|
|
| - |
|
Net loss |
|
| (29,124 | ) |
|
| (96,394 | ) |
Revenue. We generated revenues of $299,068 and $328,825 for the three months ended June 30, 2022 and 2021, with the reduction being due to the significant reduction of air ticket demand from the unexpected Omicron outbreak, starting from December 2021 up to March 2022, globally and in Hong Kong. The global demand for air tickets have largely decreased and we experienced many flight cancellations or rescheduling. This situation has since recovered when the outbreak was brought under control in April 2022. We will continue to operate the business and expect the market turnaround in the upcoming holiday season.
Cost of Revenue. Cost of revenue for the three months ended June 30, 2022 and 2021, was $297,891 and $327,607, respectively. Cost of revenue decreased primarily as a result of the decrease in our business volume.
Gross Profit. We achieved a gross profit of $1,177 and $1,218 for the three months ended June 30, 2022 and 2021, respectively. The decrease in gross profit is primarily attributable to the decrease in our business volume. Gross margins have remained fairly consistent for the periods mentioned.
General and Administrative Expenses (“G&A”). We incurred G&A expenses of $30,431 and $95,442 for the three months ended June 30, 2022 and 2021, respectively. The decrease in G&A is primarily attributable to no stock base compensation was issued and decrease in professional fee during the three months ended June 30, 2022.
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Income Tax Expense. Our income tax expenses for the three months ended June 30, 2022 and 2021 were $0.
Net Loss. During the three months ended June 30, 2022, we incurred a net loss of $29,124, as compared to $96,394 for the three months ended June 30, 2021.
Comparison of the Six Months ended June 30, 2022 and 2021
The following table sets forth certain operational data for the six months ended June 30, 2022 and 2021:
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Revenues |
| $ | 299,070 |
|
| $ | 667,774 |
|
Cost of revenue |
|
| (297,891 | ) |
|
| (665,433 | ) |
Gross profit |
|
| 1,179 |
|
|
| 2,341 |
|
General and administrative expenses |
|
| (62,845 | ) |
|
| (133,801 | ) |
Other income (expense) |
|
| 12,943 |
|
|
| (4,342 | ) |
Loss before income taxes |
|
| (48,723 | ) |
|
| (135,802 | ) |
Income tax expense |
|
| - |
|
|
| - |
|
Net loss |
|
| (48,723 | ) |
|
| (135,802 | ) |
Revenue. We generated revenues of $299,070 and $667,774 for the six months ended June 30, 2022 and 2021, with the reduction being due to the significant reduction of air ticket demand from the unexpected Omicron outbreak, starting from December 2021 up to March 2022, globally and in Hong Kong. No revenue was generated from January to March in 2022. The global demand for air tickets have largely decreased and we experienced many flight cancellations or rescheduling. This situation has since recovered when the outbreak was brought under control in April 2022. We will continue to operate the business and expect the market turnaround in the upcoming holiday season.
Cost of Revenue. Cost of revenue for the six months ended June 30, 2022 and 2021, was $297,891 and $665,433, respectively. Cost of revenue decreased primarily as a result of the decrease in our business volume.
Gross Profit. We achieved a gross profit of $1,179 and $2,341 for the six months ended June 30, 2022 and 2021, respectively. The decrease in gross profit is primarily attributable to the decrease in our business volume. Gross margins have remained fairly consistent for the periods mentioned.
General and Administrative Expenses (“G&A”). We incurred G&A expenses of $62,845 and $133,801 for the six months ended June 30, 2022 and 2021, respectively. The decrease in G&A is primarily attributable to decrease in salaries, professional fee and no stock base compensation was issued during the six months ended June 30,2022.
Income Tax Expense. Our income tax expenses for the six months ended June 30, 2022 and 2021 were $0.
Net Loss. During the six months ended June 30, 2022, we incurred a net loss of $48,723, as compared to $135,802 for the six months ended June 30, 2021.
Liquidity and Capital Resources
As of June 30, 2022, we had cash and cash equivalents of $70,507, accounts receivable of $835, deposits, prepayments and other receivables of $33,804.
The continuation of the Company as a going concern through the next twelve months is dependent upon the continued financial support from its shareholders. The Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net cash used in operating activities |
| $ | (19,936 | ) |
| $ | (77,427 | ) |
Net cash provided by financing activities |
| $ | 73,733 |
|
| $ | 29,707 |
|
Net Cash Used In Operating Activities.
For the six months ended June 30, 2022, net cash used in operating activities was $19,936, which consisted primarily of a net loss of $48,723, offset by amortization of convertible note discount of $452, non-cash income related to lease liabilities of $304, non-cash financing cost of $663, a decrease in accounts receivables of $14,938, an increase in accounts payable of $18,455, an increase in accrued liabilities and other payables of $8,679 and an increase in deposits, prepayments and other receivables of $14,096.
For the six months ended June 30, 2021, net cash used in operating activities was $77,427, which consisted primarily of a net loss of $135,802, offset by a depreciation of right-of-use asset of $10,071, amortization of convertible note discount of $1,333, non-cash expenses related to lease liabilities of $1,259, stock-based compensation of $41,715, an increase in accounts receivables of $234, an increase in lease liabilities of $2,000 and an increase in accrued liabilities and other payables of $2,231.
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities, however, to finance our operations and future acquisitions.
Net Cash Provided By Investing Activities.
For the six months ended June 30, 2022 and 2021, there are no net cash provided by investing activities.
Net Cash Provided By Financing Activities.
For the six months ended June 30, 2022, net cash provided by financing activities was $73,733 consisting primarily of $8,733 advances from a director and $65,000 proceeds from issuance of convertible note.
For the six months ended June 30, 2021, net cash provided by financing activities was $29,707 consisting primarily of $15,540 payment of lease liabilities, offset by $45,247 advances from a director.
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COVID-19
We continue to evaluate the impact of the COVID-19 pandemic on the industry and our Company and have concluded that while it is reasonably possible that the virus could have a negative effect on our financial position and results of our operations, the specific impact is not readily determinable as of the date of this filing. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements for the fiscal year ended December 31, 2021 and as of June 30, 2022.
Subsequent Events
None through date of this filing.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On March 14, 2022, the Company received notice dated March 11, 2022, from Total Asia Associates Plt. (“Total Asia Associates”), that Total Asia Associates had resigned as the independent registered public accounting firm of the Company.
The reports of Total Asia Associates regarding the Company’s financial statements as of December 31, 2020 and 2019 and the statement of operations, stockholders’ equity (deficit) and cash flows for the years then ended, contained no adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principle. The reports of Total Asia Associates, however, stated that there is substantial doubt about the Company’s ability to continue as a going concern.
For the years ended December 31, 2020 and 2019, and during the subsequent interim period through the date of dismissal, the Company had no disagreement with Total Asia Associates on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Total Asia Associates, would have caused them to make reference thereto in their report on the Company’s financial statements for such year ended December 31, 2020 and 2019. There were no reportable events, as listed in Item 304(a)(1)(v) of Regulation S-K.
The Company provided Total Asia Associates a copy of the above disclosures and requested Total Asia Associates to furnish a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. Total Asia Associates’s response is attached as Exhibit 16.1 to this Current Report on Form S-1.
(b) On March 14, 2022, the Board of Directors of the Company resolved to engage the independent registered public accounting firm of J&S Associate (“J&S Associate”), the Company’s new independent registered public accountants, which appointment J&S Associates has accepted with the dismissal of Total Asia Associates.
During the two most recent fiscal years and the interim period preceding the engagement of J&S Associate, the Company has not consulted with J&S Associate regarding either: (i) the application of accounting principles, (ii) the type of audit opinion that might be rendered by J&S Associate or (iii) any other matter that was the subject of disagreement between the Company and its former auditor as described in Item 304(a)(1)(iv), or a reportable event as described in paragraph 304(a)(1)(v), of Regulation S-K. The Company did not have any disagreements Total Asia Associates and therefore did not discuss any past disagreements with J&S Associate.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person:
Name | Age | Positions | ||
Leung Tin Lung David | 58 | President, Chief Executive Officer, Secretary, Treasurer and Director |
Leung Tin Lung David
President, Secretary, Treasurer and Director
Mr. Leung, age 58, has served as our President, Secretary, Treasurer and sole Director since May 27, 2020. Mr. Leung is a resident of Hong Kong and was appointed Chief Executive Officer on April 16, 2021. Mr. Leung is a long-term veteran in the travel industry, with many years of experience working with government and travel trade partners. He is the founder and has been the Managing Director of JJ Explorer Tour Limited, a position he has held since 2007. From 2011 until 2017, Mr. Leung was the Marketing Representative of Philippine Department of Tourism, Hong Kong and Macau. Mr. Leung graduated from the University of Minnesota in 1984. Mr. Leung’s background in the travel industry led to our conclusion that he should serve as a director in light of our business and structure.
Director Qualifications
We believe that our directors should have the highest professional and personal ethics and values, consistent with our values and standards. They should have broad experience at the policy-making level in business or banking. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties for us. Each director must represent the interests of all stockholders. When considering potential director candidates, the Board also considers the candidate’s character, judgment, diversity, age and skills, including financial literacy and experience in the context of our needs and the needs of the Board.
Term of Office
All directors hold office until the next annual meeting of the stockholders of the Company and until their successors have been duly elected and qualified. The Company’s Bylaws provide that the Board of Directors will consist of no less than three members. Officers are elected by and serve at the discretion of the Board of Directors.
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Director Independence
Our board of directors is currently composed of one member, and such member does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market (the Company has no plans to list on the NASDAQ Global Market). The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to our director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by our director and us with regard to our director’s business and personal activities and relationships as they may relate to us and our management.
Certain Legal Proceedings
To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:
| · | Any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| · | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| · | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; |
| · | Being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| · | Being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| · | Being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Significant Employees and Consultants
As of the date of this Prospectus, the Company has no significant employees, other than its officers and directors acting in such capacity. The Company is managed by Leung Tin Lung David, our sole director and officer.
Audit Committee and Conflicts Of Interest
Since we do not have an audit, compensation or governance and nominating committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board of Directors established a nominating committee. The Board is of the opinion that such committees are not necessary since the Company is an early stage company and has only one director, and to date, such director has been performing the functions of such committees. Thus, there is a potential conflict of interest in that our sole director and officer has the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.
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Family Relationships
There are no family relationships among our directors or officers. Other than as described above, we are not aware of any other conflicts of interest with any of our executive officers or directors.
Stockholder Communications with the Board Of Directors
We have not implemented a formal policy or procedure by which our stockholders can communicate directly with our Board of Directors. Nevertheless, every effort has been made to ensure that the views of stockholders are heard by the Board of Directors or individual directors, as applicable, and that appropriate responses are provided to stockholders in a timely manner. We believe that we are responsive to stockholder communications, and therefore have not considered it necessary to adopt a formal process for stockholder communications with our Board. During the upcoming year, our Board will continue to monitor whether it would be appropriate to adopt such a process.
Code of Ethics
The Company has not adopted a code of ethics that applies to its principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company has not adopted a code of ethics because it has only commenced operations.
Employment Agreements
On April 16, 2021, the Company entered into an Employment Agreement (the “Employment Agreement”) with Leung Tin Lung David, our President and Chief Executive Officer and sole director.
The Employment Agreement provides that Mr. Leung shall act as the Company’s Chief Executive Officer at an initial annual base salary of $240,000. Mr. Leung’s monthly base salary shall increase by $30,000 per month, which is equivalent to $360,000 on an annualized basis, at the time that the Company closes on a Qualified Financing. For the purposes of the Employment Agreement, a “Qualified Financing” shall mean an equity or debt financing in which the Company offers and sells equity or debt securities for an aggregate purchase price of, and obtains gross cash proceeds in an amount of, not less than $1,000,000. Mr. Leung may, in his sole discretion, elect to receive any monthly base salary due to him, in whole or in part, in the form of a restricted stock grant, or a warrant or an option with no or a an exercise price of $0.00001 per share, with a future vesting date to be determined by Mr. Leung, and a term of 10 years. Mr. Leung’s base salary shall increase by 7% on April 1 of each year, based on the salary due to Mr. Leung in the year prior to each such increase.
In addition to new hire option grants and any other outstanding options that Mr. Leung may currently hold, Mr. Leung is eligible to participate in the Company’s 2020 Stock Incentive Program, and any employee benefit plan of the Company (the “Program”) whereby each year Mr. Leung may receive an option for up to 5,000,000 shares of Company Common Stock (the “Option”) per year. The Option, if granted, will vest and become exercisable over a four (4) year vesting period such that 1/48 of the total number of Option shares will vest and become exercisable on each monthly anniversary. Vesting is contingent upon Mr. Leung’s continued employment with the Company.
Mr. Leung is eligible for a cash bonus(es) equal to 10% of first $1,000,000 of earnings before interest, tax, depreciation and amortization (“EBITDA”) of the Company, 8% of the second $1,000,000 of EBITDA of the Company, 6% of the third $1,000,000 of EBITDA of the Company, 4% of the fourth $1,000,000 of EBITDA of the Company, and 2% of all EBITDA of the Company in excess of $4,000,000. All such bonus payments are due to Mr. Leung when the Company earns its EBITDA. In lieu of any cash payment due to Mr. Leung as a bonus, Mr. Leung, may in his sole discretion, elect to receive shares of common stock of the Company at a rate of $0.27805 per share (the closing price per share of common stock of the Company on the OTC Markets on April 15, 2021). In lieu of any issuance of shares common stock by the Company to Mr. Leung as a bonus, Mr. Leung may, in his sole discretion, elect to receive any monthly base salary due to him, in whole or in part, in the form of a restricted stock grant, or a warrant or an option with no or a an exercise price of $0.27805 per share, with a future vesting date to be determined by Mr. Leung, and a term of 10 years.
Mr. Leung is also eligible for a cash bonus in the event of any sale (whether in one or a series of transactions) of all or a substantial amount of the assets or the capital stock of the Company, any sale, merger, consolidation or other event which results in the transfer of control of or a material interest in the Company or of all or a substantial amount of the assets thereof, as well as any recapitalization, restructuring or liquidation of the Company by the current owners, a third party or any combination thereof, or any other form of transaction or disposition which results in the effective sale of the principal business and operations of the Company by the current owners (a “Transaction”).
In the event a Transaction is consummated or if the Company enters into an agreement providing for a Transaction, the Company will pay Mr. Leung a “Transaction Fee,” payable in cash or other immediately available funds at the closing of the Transaction. The Transaction Fee shall be equal to 3% of the aggregate value (as defined below) of the Transaction; however, in no event shall the Transaction Fee be less than $750,000.
In the event a licensing transaction is consummated by the Company for a licensing aggregate value of greater than $5,000,000, the Company will pay Mr. Leung a cash fee (the “Licensing Transaction Fee”), payable in cash or other immediately available funds at the closing of the Licensing Transaction, equal to 6.0% of the Licensing Aggregate Value; provided, however, that in no event shall the License Transaction Fee be less than $750,000.
1,000,000 shares of common stock shall be issued to Mr. Leung when the Company’s securities are listed on an exchange or the OTCQX tier of the OTC Markets Group, Inc. In lieu of such an issuance of 1,000,000 shares common stock, Mr. Leung may, in his sole discretion, elect to receive such shares, in the form of a restricted stock grant, or a warrant or an option with no or a an exercise price of $0.00001 per share, with a future vesting date to be determined by Mr. Leung, and a term of 10 years.
The Company will pay for Mr. Leung’s costs related to his (i) reasonable monthly cell phone and other mobile Internet costs, home office Internet costs, (iii) car and commuting costs, not to exceed $1,000 per month, and (iii) club membership costs, payable not later than 10 days after the end of each month.
Mr. Leung is also entitled a severance payment for his then current annual base salary rate upon the termination of his employment by the Company without cause or by him for good reason or in the event of a change in control.
Indemnification Agreements
We have no indemnification agreements with our officers, directors or any other person.
Family Relationships
No family relationships exist between our officers and directors or any person who is an affiliate of the Company.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The summary compensation table below shows certain compensation information for services rendered in all capacities to us by our principal executive officer and principal financial officer and by each other executive officer whose total annual salary and bonus exceeded $100,000 during the fiscal periods ended December 31, 2021 and 2020. Other than as set forth below, no executive officer’s total annual compensation exceeded $100,000 during our last fiscal period.
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|
|
|
|
|
|
|
|
| Incentive |
|
| Nonqualified |
|
|
|
|
|
|
| ||||||||
Name and |
|
|
|
|
|
|
|
|
| Stock |
|
| Option |
|
| Plan |
|
| Deferred |
|
| All Other |
|
|
|
| ||||||||
Principal Position |
| Year |
| Salary |
|
| Bonus |
|
| Awards |
|
| Awards |
|
| Compensation($) |
|
| Compensation($) |
|
| Compensation($) |
|
| Total |
| ||||||||
Law Wai |
| 2021 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Fan (1) |
| 2020 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cheng Kin |
| 2021 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Ning (2) |
| 2020 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marie Huen |
| 2021 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Lai Chun (3) |
| 2020 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leung Tin |
| 2021 |
|
| 10,785 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10,785 |
|
Lung David (4) |
| 2020 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
___________
(1) | Appointed President and Chief Executive Officer an on February 13, 2015; resigned from all such positions on May 27, 2020. |
(2) | Appointed Chief Financial Officer, Secretary and Treasurer on February 13, 2015; resigned from all such positions on May 27, 2020. |
(3) | Appointed Chief Operating Officer on February 13, 2015; resigned from such position on May 27, 2020. |
(4) | Appointed President, Secretary, Treasurer and director on May 27, 2020. Appointed Chief Executive Officer on April 16, 2021. |
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
On April 16, 2021, the Company entered into an Employment Agreement (the “Employment Agreement”) with Leung Tin Lung David, our President and Chief Executive Officer and sole director.
The Employment Agreement provides that Mr. Leung shall act as the Company’s Chief Executive Officer at an initial annual base salary of $240,000. Mr. Leung’s monthly base salary shall increase by $30,000 per month, which is equivalent to $360,000 on an annualized basis, at the time that the Company closes on a Qualified Financing. For the purposes of the Employment Agreement, a “Qualified Financing” shall mean an equity or debt financing in which the Company offers and sells equity or debt securities for an aggregate purchase price of, and obtains gross cash proceeds in an amount of, not less than $1,000,000. Mr. Leung may, in his sole discretion, elect to receive any monthly base salary due to him, in whole or in part, in the form of a restricted stock grant, or a warrant or an option with no or a an exercise price of $0.00001 per share, with a future vesting date to be determined by Mr. Leung, and a term of 10 years. Mr. Leung’s base salary shall increase by 7% on April 1 of each year, based on the salary due to Mr. Leung in the year prior to each such increase.
In addition to new hire option grants and any other outstanding options that Mr. Leung may currently hold, Mr. Leung is eligible to participate in the Company’s 2020 Stock Incentive Program, and any employee benefit plan of the Company (the “Program”) whereby each year Mr. Leung may receive an option for up to 5,000,000 shares of Company Common Stock (the “Option”) per year. The Option, if granted, will vest and become exercisable over a four (4) year vesting period such that 1/48 of the total number of Option shares will vest and become exercisable on each monthly anniversary. Vesting is contingent upon Mr. Leung’s continued employment with the Company.
Mr. Leung is eligible for a cash bonus(es) equal to 10% of first $1,000,000 of earnings before interest, tax, depreciation and amortization (“EBITDA”) of the Company, 8% of the second $1,000,000 of EBITDA of the Company, 6% of the third $1,000,000 of EBITDA of the Company, 4% of the fourth $1,000,000 of EBITDA of the Company, and 2% of all EBITDA of the Company in excess of $4,000,000. All such bonus payments are due to Mr. Leung when the Company earns its EBITDA. In lieu of any cash payment due to Mr. Leung as a bonus, Mr. Leung, may in his sole discretion, elect to receive shares of common stock of the Company at a rate of $0.27805 per share (the closing price per share of common stock of the Company on the OTC Markets on April 15, 2021). In lieu of any issuance of shares common stock by the Company to Mr. Leung as a bonus, Mr. Leung may, in his sole discretion, elect to receive any monthly base salary due to him, in whole or in part, in the form of a restricted stock grant, or a warrant or an option with no or a an exercise price of $0.27805 per share, with a future vesting date to be determined by Mr. Leung, and a term of 10 years.
Mr. Leung is also eligible for a cash bonus in the event of any sale (whether in one or a series of transactions) of all or a substantial amount of the assets or the capital stock of the Company, any sale, merger, consolidation or other event which results in the transfer of control of or a material interest in the Company or of all or a substantial amount of the assets thereof, as well as any recapitalization, restructuring or liquidation of the Company by the current owners, a third party or any combination thereof, or any other form of transaction or disposition which results in the effective sale of the principal business and operations of the Company by the current owners (a “Transaction”).
In the event a Transaction is consummated or if the Company enters into an agreement providing for a Transaction, the Company will pay Mr. Leung a “Transaction Fee,” payable in cash or other immediately available funds at the closing of the Transaction. The Transaction Fee shall be equal to 3% of the aggregate value (as defined below) of the Transaction; however, in no event shall the Transaction Fee be less than $750,000.
In the event a licensing transaction is consummated by the Company for a licensing aggregate value of greater than $5,000,000, the Company will pay Mr. Leung a cash fee (the “Licensing Transaction Fee”), payable in cash or other immediately available funds at the closing of the Licensing Transaction, equal to 6.0% of the Licensing Aggregate Value; provided, however, that in no event shall the License Transaction Fee be less than $750,000.
1,000,000 shares of common stock shall be issued to Mr. Leung when the Company’s securities are listed on an exchange or the OTCQX tier of the OTC Markets Group, Inc. In lieu of such an issuance of 1,000,000 shares common stock, Mr. Leung may, in his sole discretion, elect to receive such shares, in the form of a restricted stock grant, or a warrant or an option with no or a an exercise price of $0.00001 per share, with a future vesting date to be determined by Mr. Leung, and a term of 10 years.
The Company will pay for Mr. Leung’s costs related to his (i) reasonable monthly cell phone and other mobile Internet costs, home office Internet costs, (iii) car and commuting costs, not to exceed $1,000 per month, and (iii) club membership costs, payable not later than 10 days after the end of each month.
Mr. Leung is also entitled a severance payment for his then current annual base salary rate upon the termination of his employment by the Company without cause or by him for good reason or in the event of a change in control.
46 |
Table of Contents |
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between our Board of Directors and the Board of Directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.
Option Exercises and Fiscal Year-End Option Value Table
There were no stock options exercised by the named executive officers as of the end of the fiscal period ended December 31, 2021.
Long-Term Incentive Plans and Awards
There were no awards made to a named executive officer, under any long-term incentive plan, as of the end of the fiscal period ended December 31, 2021.
We currently do not pay any compensation to our directors serving on our board of directors.
Stock Option Grants
The following table sets forth stock option grants and compensation for the fiscal year ended December 31, 2021:
|
| Option Awards |
|
| Stock Awards | ||||||||||||||||||
Name |
| Number of Securities Underlying Unexercised Options (#) Exercisable |
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
| Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
| Option Exercise Price ($) |
|
| Option Expiration Date |
|
| Number of Shares or Units of Stock That Have Not Vested (#) |
| Market Value of Shares or Units of Stock That Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||
Law Wai Fan (1) |
| -0- |
| -0- |
| -0- |
| $ | -0- |
|
|
| N/A |
|
| -0- |
| -0- |
| -0- |
| -0- | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cheng Kin Ning (2) |
| -0- |
| -0- |
| -0- |
| $ | -0- |
|
|
| N/A |
|
| -0- |
| -0- |
| -0- |
| -0- | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Marie Huen Lai Chun (3) |
| -0- |
| -0- |
| -0- |
| $ | -0- |
|
|
| N/A |
|
| -0- |
| -0- |
| -0- |
| -0- | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Chu Kin Hon (4) |
| -0- |
| -0- |
| -0- |
| $ | -0- |
|
|
| N/A |
|
| -0- |
| -0- |
| -0- |
| -0- | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Leung Tin Lung David (5) |
| -0- |
| -0- |
| -0- |
| $ | -0- |
|
|
| N/A |
|
| -0- |
| -0- |
| -0- |
| -0- |
_____________
(1) | Appointed Chief Executive Officer on February 13, 2015; resigned from such position on May 27, 2020. |
(2) | Appointed Chief Financial Officer on February 13, 2015; resigned from such position on May 27, 2020. |
(3) | Appointed Chief Operating Officer on February 13, 2015; resigned from such position on May 27, 2020. |
(4) | Appointed a director on February 13, 2015; resigned from such position on May 27, 2020. |
(5) | Appointed President, Secretary, Treasurer and director on May 27, 2020. Appointed Chief Executive Officer on April 16, 2021. |
Option Exercises and Fiscal Year-End Option Value Table.
There were no stock options exercised by the named executive officers as of the end of the fiscal period ended December 31, 2021.
Long-Term Incentive Plans and Awards
There were no awards made to a named executive officer, under any long-term incentive plan, as of the end of the fiscal period ended December 31, 2021.
Other Compensation
There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of our company in the event of retirement at normal retirement date as there was no existing plan as of the end of the fiscal year ended December 31, 2020, provided for or contributed to by our company.
47 |
Table of Contents |
DIRECTOR COMPENSATION
The following table sets forth director compensation or the fiscal year ended December 31, 2021:
Name |
| Fees Earned or Paid in Cash ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation($) |
|
| Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation($) |
|
| Total ($) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leung Tin Lung David (1) |
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
_____________
(1) | Appointed President, Secretary, Treasurer and director on May 27, 2020. Appointed Chief Executive Officer on April 16, 2021. |
We currently do not pay any compensation to our directors for serving on our board of directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table lists, as of the date of this Prospectus, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
The percentages below are calculated based on 176,168,548 shares of our common stock issued and outstanding as of the date of this Prospectus.
Title of Class |
| Name and Address of Beneficial Owner (2) |
| Amount and Nature of Beneficial Ownership |
|
| Percent of |
| ||
|
|
|
|
|
|
|
|
| ||
Common Stock |
| Leung Tin Lung David (3) |
|
| 70,813,213 |
|
|
| 40.1 | % |
Common Stock |
| Chak Wan Ling Margaret |
|
| 27,763,000 |
|
|
| 15.7 | % |
Common Stock |
| Leung Yin Yu Janice |
|
| 25,000,000 |
|
|
| 14.1 | % |
Common Stock |
| Leung Suk Mun |
|
| 25,000,000 |
|
|
| 14.1 | % |
All directors and executive officers as a group (1 person) |
|
|
|
| 70,813,213 |
|
|
| 40.1 | % |
______________
(1) | Calculated based on 176,168,548 shares of common stock issued and outstanding as of the date of this Prospectus. |
(2) | Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, at the address of: 150 Cecil Street, #08-01, Singapore 069543. |
(3) | Appointed President, Secretary, Treasurer and a director on May 27, 2020. Appointed Chief Executive Officer on April 16, 2021. |
The following table lists, as of the date of this Prospectus, the number of shares of Series A Preferred Stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
48 |
Table of Contents |
The percentages below are calculated based on 1 share of our Series A Preferred Stock issued and outstanding as of the date of this Prospectus.
Title of Class |
| Name and Address of Beneficial Owner (2) |
| Amount and Nature of Beneficial Ownership |
|
| Percent of Series A Stock (1) |
| ||
|
|
|
|
|
|
|
|
| ||
Series A Preferred Stock |
| Leung Tin Lung David (3) |
|
| 1 |
|
|
| 100.0 | % |
All directors and executive officers as a group (1 person) |
|
|
|
| 1 |
|
|
| 100.0 | % |
__________
(1) | The percentages below are based on 1 share of our Series A Preferred Stock issued and outstanding as of the date of this Prospectus. |
(2) | c/o New Momentum, 150 Cecil Street, #08-01, Singapore 069543. |
(3) | Appointed President, Secretary, Treasurer and a director on May 27, 2020. Appointed Chief Executive Officer on April 16, 2021. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Company Limited, a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, became the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common shareholders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
As a result of the share exchange, Nemo Holding became a wholly-owned subsidiary of the Company.
On April 13, 2021, the Company entered into a Stock Purchase Agreement with Leung Tin Lung David, the Company’s sole director, President, and majority stockholder, pursuant to which the Company sold to Mr. Leung one share of Series A Preferred Stock in exchange for 169,000,000 shares of common stock of the Company. The Company subsequently canceled and returned to its authorized capital stock the 169,000,000 shares of common stock purchased from Mr. Leung.
On April 16, 2021, the Company entered into an Employment Agreement (the “Employment Agreement”) with Leung Tin Lung David, our President and Chief Executive Officer and sole director.
On April 16, 2021, we entered into an Indemnification Agreement, with Mr. Leung, pursuant to which the Company agreed to indemnify Mr. Leung for claims against him that may arise in connection with the performance of his duties as a director and officer for the Company.
Director Independence
Our board of directors is currently composed of one member, who does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
Our board of directors has not separately designated and standing committees. Accordingly, the duties customarily performed by an audit committee, compensation committee, and governance and nominating committee are performed by our board of directors.
49 |
Table of Contents |
INTEREST OF NAMED EXPERTS AND COUNSEL
Law Offices of Thomas E. Puzzo, PLLC, is counsel named in this Prospectus as having prepared part of this Prospectus. Except with respect to Mr. Puzzo, no expert named in this Prospectus as having prepared or certified any part of this Prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the Common Stock was employed on a contingency basis, or had, or is to receive, in connection with the Offering, a substantial interest, direct or indirect, in the Company or any of its subsidiaries.
EXPERTS
The financial statements included in this Prospectus for the year ended December 31, 2021 have been audited by J&S Associate, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
The financial statements included in this Prospectus for the year ended December 31, 2020 have been audited by Total Asia Associates PLT, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
Unless otherwise indicated in the applicable prospectus supplement, Law Offices of Thomas Puzzo, PLLC, will provide opinions regarding the validity of the shares of our Common Stock. Law Offices of Thomas Puzzo, PLLC may also provide opinions regarding certain other matters. Any underwriters will also be advised about legal matters by their own counsel, which will be named in the prospectus supplement.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide to the fullest extent permitted by law that our directors or officers, former directors and officers, and persons who act at our request as a director or officer of a body corporate of which we are a shareholder or creditor shall be indemnified by us. We believe that the indemnification provisions in our By-laws are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to provisions of the State of Nevada, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1, together with all amendments and exhibits, with the SEC. This Prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits. With respect to references made in this Prospectus to any of our contracts or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contracts or documents. You may read and copy any document that we file at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings and the registration statement can also be reviewed by accessing the SEC’s website at http://www.sec.gov.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
J&S Associate, is our independent registered public accounting firm. There have not been any changes in or disagreements with accountants on accounting and financial disclosure or any other matter.
50 |
Table of Contents |
NEW MOMENTUM CORPORATION
INDEX TO FINANCIAL STATEMENTS
Fiscal Years ended December 31, 2021 and 2020 (Audited)
Fiscal Quarter ended June 30, 2022 (Unaudited)
Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 |
| F-21 |
|
| F-22 |
| |
Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 |
| F-23 |
|
| F-24 |
| |
F-25 |
|
F-1 |
Table of Contents |
| J&S ASSOCIATE (AF002380) (Registered with PCAOB and MIA) UNIT B222,SOLARIS DUTAMAS 1, JALAN DUTAMAS 1, 50480, Kuala Lumpur, Malaysia.
Tel : 03-62053622 Fax : 03-62053623 Email : jspartner348@gmail.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Director and Stockholder of
NEW MOMENTUM CORPORATION
Opinion on the Financial Statement
We have audited the accompanying consolidated balance sheet of New Momentum Corporation and its subsidiaries (the ‘Company’) as of December 31, 2021, and the related consolidated statement of operations and comprehensive income, stockholders’ equity (deficit), and cash flows for the year ended December 31, 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 December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company suffered an accumulated shareholders’ deficit of $308,099 and net current liabilities of $333,159. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regards to these matters are also described in Note 2 to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 audits. 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 audits 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.
Critical Audit Matters
Critical audit matters are matters arising from the current year audit of the financial statements that were communicated or are required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved especially challenging, subjective, or complex judgements. We determined that there are no critical audit matters.
/s/ J&S Associate
Certified Public Accountants
PCAOB Number: 6743
We have served as the Company’s auditor since 2022.
Kuala Lumpur, Malaysia
April 15, 2022
F-2 |
Table of Contents |
TOTAL ASIA ASSOCIATES PLT (AF002128 & LLP0016837-LCA) A Firm registered with US PCAOB and Malaysian MIA
Block C-3-1, Megan Avenue 1, 189, Off Jalan Tun Razak, 50400, Kuala Lumpur, Malaysia Tel: (603) 2733 9989 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Director and Shareholders of
NEW MOMENTUM CORPORATION
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of New Momentum Corporation and its subsidiaries (the ‘Company’) as of December 31, 2020, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficit and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the years ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. These factors create an uncertainty as to the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 audits 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.
/s/ TOTAL ASIA ASSOCIATES PLT
TOTAL ASIA ASSOCIATES PLT
March 26, 2021
We have served as the Company’s auditor since 2020.
Kuala Lumpur, Malaysia
F-3 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
|
| As of December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current asset: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 15,609 |
|
| $ |
| |
Accounts receivable |
|
| 15,773 |
|
|
|
| |
Deposits, prepayments and other receivables |
|
| 19,708 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Total current assets |
|
| 51,090 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Non-current asset: |
|
|
|
|
|
|
|
|
Right-of-use assets |
|
| 25,060 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 76,150 |
|
| $ |
| |
|
|
|
|
|
|
|
|
|
LIABILTIES AND SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 15,696 |
|
| $ |
| |
Accrued liabilities and other payables |
|
| 56,555 |
|
|
|
| |
Amount due to director |
|
| 286,327 |
|
|
|
| |
Lease liabilities |
|
| 25,671 |
|
|
|
| |
Convertible promissory note |
|
| - |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
| 384,249 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 384,249 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
| - |
|
|
|
| |
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’DEFICIT |
|
|
|
|
|
|
|
|
Preferred stock, Class A, $ |
|
| - |
|
|
|
| |
Common stock, $ |
|
| 176,169 |
|
|
|
| |
Additional paid in capital |
|
| 4,358,612 |
|
|
|
| |
Accumulated other comprehensive losses |
|
| (272 | ) |
|
| ( | ) |
Accumulated deficit |
|
| (4,842,608 | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Shareholders’ deficit |
|
| (308,099 | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT |
| $ | 76,150 |
|
| $ |
|
See accompanying notes to consolidated financial statements.
F-4 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”))
|
| Years ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Revenue, net |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative expenses |
|
| ( | ) |
|
| ( | ) |
Legal and professional fee |
|
| ( | ) |
|
| ( | ) |
Total operating expenses |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Government subsidy |
|
|
|
|
|
| ||
Interest income |
|
|
|
|
|
| ||
Interest expense |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Total other income |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NET LOSS |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
|
|
|
|
Basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”))
|
| Years ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization of convertible note discount |
|
|
|
|
|
| ||
Depreciation of right-of-use assets |
|
|
|
|
|
| ||
Stock-based compensation for services |
|
|
|
|
|
| ||
Non-cash lease expense |
|
|
|
|
|
| ||
Non-cash convertible note expense |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
|
| |
Deposits, prepayments and other receivables |
|
|
|
|
| ( | ) | |
Accounts payable |
|
|
|
|
|
| ||
Accrued liabilities and other payables |
|
|
|
|
|
| ||
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Advance from a director |
|
|
|
|
|
| ||
Proceed from issuance of convertible bonds |
|
|
|
|
|
| ||
Repayment to lease liabilities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Effect on exchange rate change on cash and cash equivalents |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
BEGINNING OF YEAR |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
END OF YEAR |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
Cash paid for tax |
| $ |
|
| $ |
| ||
Cash paid for interest |
| $ |
|
| $ |
|
See accompanying notes to consolidated financial statements.
F-6 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
|
|
Preferred Stock Class A |
|
|
Common Stock |
|
| Additional paid |
|
| Accumulated other comprehensive |
|
| Accumulated |
|
| Total shareholders’ |
| ||||||||||||||
|
| No. of shares |
|
| Amount |
|
| No. of shares |
|
| Amount |
|
| in capital |
|
| losses |
|
| deficit |
|
| deficit |
| ||||||||
Balance as at January 1, 2020 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for acquisition of legal acquirer |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||||
Issuance of shares for service rendered |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Net loss for the year |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2020 |
|
| - |
|
| $ | - |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2021 |
|
| - |
|
| $ | - |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for service rendered |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Conversion of common stock to preferred stock |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Shares issued to convert the bond |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss for the year |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2021 |
|
|
|
| $ | - |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
See accompanying notes to consolidated financial statements.
F-7 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(Currency expressed in United States Dollars (“US$”), except for number of shares)
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
New Momentum Corporation (the “Company”) was incorporated under the law of the State of Nevada on July 1, 1999. The Company through its subsidiaries, mainly operates a smartphone application to provide an online platform with “Book Now, Pay Later” flight booking service for travelers with over 500 airlines worldwide to search and secure their tickets. With a simple, user-friendly interface, the Company enables customers to arrange and book the multiple-stop itineraries, and to check their bookings through official airline websites using the Gagfare booking reference number.
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Company Limited, a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company issued
Because the Company is a shell company, Nemo Holding comprises the ongoing operations of the combined entity and its senior management serves as the senior management of the combined entity, Nemo Holding is deemed to be the accounting acquirer for accounting purposes. The transaction was treated as a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company became the historical financial statements of Nemo Holding, and the Company’s assets, liabilities and results of operations were consolidated with Nemo Holding beginning on the acquisition date. Nemo Holding was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition were those of the accounting acquirer (Nemo Holding). After completion of the Share Exchange Transaction in the prior year, the Company’s consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
Description of subsidiaries
Name |
| Place of incorporation and kind of legal entity |
| Principal activities |
| Particulars of registered/ paid up share capital |
| Effective interest held |
|
|
|
|
|
|
|
|
|
NEMO Holding Company Limited |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
Gagfare Limited |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
Beyond Blue Limited |
|
| Event organizer |
|
| |||
|
|
|
|
|
|
|
|
|
New Momentum Asia Pte. Ltd. |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
JPOPCOIN Limited |
|
|
|
|
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
F-8 |
Table of Contents |
2. GOING CONCERN UNCERTAINTIES
The accompanying consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has suffered from continuous loss from its inception and shareholders’ deficit of $
The continuation of the Company as a going concern through the next twelve months is dependent upon the continued financial support from its shareholders. The Company is also currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes.
· | Basis presentation |
These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
· | Use of estimates and assumptions |
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates.
· | Basis of consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
F-9 |
Table of Contents |
· | Cash and cash equivalents |
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
· | Accounts receivable |
Accounts receivable are recorded at the invoiced amount and do not bear interest on amounts which are due within contractual payment terms, of 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2021 and 2020, there was no allowance for doubtful accounts.
· | Revenue recognition |
The Company recognizes revenue from its contracts with customers in accordance with Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
| • | identify the contract with a customer; |
| • | identify the performance obligations in the contract; |
| • | determine the transaction price; |
| • | allocate the transaction price to performance obligations in the contract; and |
| • | recognize revenue as the performance obligation is satisfied. |
The Company records its revenue from booking income upon the ticket booking service is rendered to travelers. The Company also records its revenue from the sale of air tickets upon the confirmation and issuance of tickets to the travelers.
F-10 |
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. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
· | Uncertain tax positions |
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the years ended December 31, 2021 and 2020.
· | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
The reporting currency of the Company is United States Dollar (“US$”) and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company operates in Hong Kong and Singapore and maintain their books and records in their local currency, Hong Kong Dollars (“HKD”) and Singapore Dollars (“SGD”), which are their respective functional currencies, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholders’ equity.
Translation of amounts from HKD and SGD into US$ have been made at the following exchange rates for the years ended December 31, 2021 and 2020:
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Year-end HKD:US$ exchange rate |
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Average HKD:US$ exchange rate |
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Year-end SGD:US$ exchange rate |
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Average SGD:US$ exchange rate |
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F-11 |
Table of Contents |
· | 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 shareholders’ 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.
· | Leases |
The Company adopts the FASB Accounting Standards Update (“ASU”) 2016-02 “Leases (Topic 842).” for all periods presented. This standard requires lessees to recognize lease assets (“right of use”) and related lease obligations (“lease liabilities”) on the balance sheet for leases with terms in excess of 12 months.
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease and finance lease ROU assets and liabilities are recognized at January 1, 2019 based on the present value of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
· | Retirement plan costs |
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service are provided.
F-12 |
Table of Contents |
· | Share-based compensation |
The Company follows ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards, including restricted stock units, based on estimated grant date fair values. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company records compensation expense, net of estimated forfeitures, over the requisite service period.
· | Related parties |
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
· | 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.
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 consolidated 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.
F-13 |
Table of Contents |
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. |
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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. |
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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, accounts receivable, deposits, prepayment and other receivables, amount due from a director and operating lease right-of-use assets, approximate their fair values because of the short maturity of these instruments.
· | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
F-14 |
Table of Contents |
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), (“ASU 2021-04”). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU will be effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2021-04 on January 1, 2022 will not have a material impact on the Company’s financial statements or disclosures.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
4. AMOUNT DUE TO DIRECTOR
As of December 31, 2021 and 2020, the Company owed to its director in the amount of $286,327 and $
5. CONVERTIBLE PROMISSORY NOTE
On October 27, 2020, the Company and EMA Financial, LLC, (“EMA”) entered into a Securities Purchase Agreement, whereby the Company issued a note to EMA (the “EMA Note”) in the original principal amount of $
For the year ended December 31, 2021, all convertible promissory notes were converted to Company’s common stock.
For the year ended December 31, 2021 and 2020, the amortization of discount was $
As of December 31, 2021 and 2020, accrued interest amounted to $
F-15 |
Table of Contents |
6. SHAREHOLDERS’ DEFICIT
Preferred Stock
Authorized shares
The Company was authorized to issue
Issued and outstanding shares
On March 11, 2021, the Company designated a class of preferred stock titled, Series A Preferred Stock, with a par value of $
Additionally, the one share of Series A Preferred Stock contains protective provisions, which precludes the Company from taking the certain actions without the approval of the holder of the share of Series A Preferred Stock. More specifically, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the outstanding shares of Series A Preferred Stock. As long as any shares of Series A Preferred Stock remain outstanding, the holders of a majority of the shares of Series A Preferred Stock represented at a duly called special or annual meeting of such stockholders or by an action by written consent for that purpose shall be entitled to elect a special director to the board of directors.
As of December 31, 2021 and 2020,
Common Stock
Authorized shares
The Company was authorized to issue
Issued and outstanding shares
On October 19, 2020, the Company approved the 2020 Stock Incentive Plan (the “Plan”) and authorized the director to issue the maximum shares of common stock of
On October 23, 2020, the Company issued
On April 13, 2021, the Company entered into a Stock Purchase Agreement with the Company’s sole director and a major shareholder, pursuant to which the Company issued one share of Series A Preferred Stock in exchange for his
On April 19, 2021, the Company issued
On July 27, 2021 and October 27, 2021, the Company issued the aggregate of
On November 28, 2021, the Company issued
As of December 31, 2021 and 2020,
Stock Option Plan
On October 19, 2020, the Company approved the 2020 Stock Incentive Plan (the “Plan”) and authorized the director to issue the maximum shares of common stock of 20,000,000 shares under the Plan.
F-16 |
Table of Contents |
On October 23, 2020, the Company issued 19,400,000 shares of its common stock at $0.21 per share under the Plan to compensate certain consultants and service providers in rendering the services to the Company.
On April 19, 2021, the Company issued
On November 28, 2021, the Company issued
As of December 31, 2021 and 2020,
7. INCOME TAX
Income (loss) before income taxes within or outside the United States are shown below:
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| Years ended December 31, |
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| 2021 |
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| 2020 |
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Domestic |
| $ | ( | ) |
| $ | ( | ) |
Foreign |
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| ( | ) |
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| ( | ) |
Total |
| $ | ( | ) |
| $ | ( | ) |
The provision (benefit) for income taxes as shown in the accompanying consolidated statements of income consists of the following:
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| Years ended December 31, |
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Current: |
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Domestic |
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Foreign |
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Deferred: |
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Domestic |
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Foreign |
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Provision for income taxes |
| $ |
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| $ |
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The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in various countries: United States of America and Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:
F-17 |
Table of Contents |
United States of America
NNAX is registered in the State of Nevada and is subject to US federal corporate income tax. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the periods presented. Deferred tax asset is not provided for as the tax losses may not be able to carry forward after a change in substantial ownership of the Company in July 2020.
As of December 31, 2021, the operations in the United States of America incurred $
ASC 740, Accounting for Income Taxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. The Company’s history of cumulative losses, along with expected future U.S. losses required that a full valuation allowance be recorded against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.
BVI
Under the current BVI law, the Company is not subject to tax on income.
Singapore
The Company’s operating subsidiary is registered in Republic of Singapore and is subject to the Singapore corporate income tax at a standard income tax rate of 17% on the assessable income arising in Singapore during its tax year. No assessable income was generated in Singapore during the year ended December 31, 2021 and 2020, and there was no provision for income tax.
Hong Kong
The Company’s subsidiaries operating in Hong Kong are subject to
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| Years ended December 31, |
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| 2020 |
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Loss before income taxes |
| $ | ( | ) |
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Statutory income tax rate |
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Income tax expense at statutory rate |
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Tax effect of non-taxable items |
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Net operating loss |
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Income tax expense |
| $ |
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| $ |
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F-18 |
Table of Contents |
The following table sets forth the significant components of the deferred tax assets of the Company as of December 31, 2021 and 2020:
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| As of December 31, |
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| 2020 |
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Deferred tax assets: |
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Net operating loss carryforwards |
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- United States |
| $ | 978,905 |
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| $ |
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- Hong Kong |
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| 34,270 |
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- Singapore |
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| 231 |
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| 1,013,406 |
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Less: valuation allowance |
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| (1,013,406 | ) |
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Deferred tax assets, net |
| $ | - |
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| $ |
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8. NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of common shares outstanding during the year. The dilutive effect of potential common shares outstanding is included in diluted net loss per share. The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31, 2021 and 2020:
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Net loss attributable to common shareholders |
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Weighted average common shares outstanding – Basic and diluted |
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Net loss per share – Basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
9. PENSION COSTS
The Company is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible full-times employees in Hong Kong. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. During the years ended December 31, 2021 and 2020, $
10. RELATED PARTY TRANSACTIONS
From time to time, the director of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and had no fixed terms of repayment.
Since February 1, 2016, the Company was granted with the right of use to the website and mobile application platforms by JJ Explorer Tours Limited (“JJ Explorer”), which was also controlled by the directors of the Company. Also, the Company formed a cooperation partnership with JJ Explorer whereas JJ Explorer invested to develop and maintain the operations of the Gagfare web and mobile application platforms in a term of
For the years ended December 31, 2021 and 2020, as the Company has generated no earnings, the Company does not have any service charges and payables to JJ Explorer.
For the years ended December 31, 2021 and 2020, the Company paid the service fee of $
For the years ended December 31, 2021 and 2020, the Company paid the salary of $
F-19 |
Table of Contents |
Apart from the transactions and balances detailed elsewhere in these accompanying consolidated financial statements, the Company has no other significant or material related party transactions during the years presented.
11. CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the year ended December 31, 2021, there is one single customer who accounts for
For the year ended December 31, 2020, there is one single customer who accounts for
(b) Major vendors
For the year ended December 31, 2021, there is one single vendor who accounts for
For the year ended December 31, 2020, there is one single vendor who accounts for
(c) Economic and political risk
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
(d) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD and SGD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
12. COMMITMENTS AND CONTINGENCIES
As of December 31, 2021 and 2020, the Company has no material commitments or contingencies.
13. 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 all events or transactions that occurred after December 31, 2021, up through the date the Company issued the audited consolidated financial statements.
F-20 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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Deposits, prepayments and other receivables |
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Total current assets |
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Non-current asset: |
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Right-of-use asset |
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TOTAL ASSETS |
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LIABILTIES AND SHAREHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable |
| $ |
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Accrued liabilities and other payables |
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Amount due to a director |
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Convertible promissory note |
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Lease liabilities |
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Total current liabilities |
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TOTAL LIABILITIES |
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Commitments and contingencies |
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SHAREHOLDERS’ DEFICIT |
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Preferred stock, Class A, $ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated other comprehensive income (losses) |
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| ( | ) | |
Accumulated losses |
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Shareholders’ deficit |
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| ( | ) |
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TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT |
| $ |
|
| $ |
|
See accompanying notes to condensed consolidated financial statements.
F-21 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
|
| Three Months ended June 30, |
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| Six Months ended June 30, |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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Revenue, net |
| $ |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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General and administrative expenses |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) |
Legal and professional fee |
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| ( | ) |
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| ( | ) |
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Total operating expenses |
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Other income (expense): |
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Interest expense |
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Interest income |
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Sundry income |
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Total other income (expense) |
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LOSS BEFORE INCOME TAXES |
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Income tax expense |
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NET LOSS |
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Other comprehensive income: |
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Foreign currency translation (loss) gain |
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| ( | ) |
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COMPREHENSIVE LOSS |
|
| ( | ) |
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| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average shares outstanding – Basic and diluted |
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Net loss per share - Basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
See accompanying notes to condensed consolidated financial statements.
F-22 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
|
| Six months ended June 30, |
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| 2022 |
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| 2021 |
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Cash flows from operating activities: |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustment to reconcile net loss to net cash used in operating activities: |
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Amortization of debt discount |
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Depreciation of right-of-use asset |
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Stock-based compensation expense |
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Non-cash financing cost |
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Non-cash lease expense |
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| ( | ) |
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Change in operating assets and liabilities: |
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Accounts receivable |
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| ( | ) | |
Deposits, prepayments and other receivables |
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Accounts payable |
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Accrued liabilities and other payables |
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Lease liabilities |
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Net cash used in operating activities |
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| ( | ) |
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Cash flows from financing activities: |
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Advances from a director |
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Proceed from issuance of convertible note |
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Payment of lease liabilities |
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| ( | ) | |
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Net cash provided by financing activities |
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Effect on exchange rate change on cash and cash equivalents |
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Net change in cash and cash equivalents |
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| ( | ) | |
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS, END OF PERIOD |
| $ |
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| $ |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
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Cash paid for tax |
| $ |
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| $ |
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Cash paid for interest |
| $ |
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| $ |
|
See accompanying notes to condensed consolidated financial statements.
F-23 |
Table of Contents |
NEW MOMENTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
|
| For the Three and Six months ended June 30, 2022 and 2021 |
| |||||||||||||||||||||||||||||
|
| Series A Preferred Stock |
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated other comprehensive |
|
| Accumulated |
|
| Total shareholders’ |
| ||||||||||||||
|
| No. of shares |
|
| Amount |
|
| No. of shares |
|
| Amount |
|
| capital |
|
| (loss) income |
|
| losses |
|
| deficit |
| ||||||||
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Balance as at January 1, 2021 (audited) |
|
| - |
|
| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
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Foreign currency translation adjustment |
|
| - |
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| - |
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Net loss for the period |
|
| - |
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| - |
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| ( | ) |
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Balance as at March 31, 2021 |
|
| - |
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| ( | ) |
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| ( | ) |
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Issue of preferred stock and cancellation of common stock held by a director |
|
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| ( | ) |
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| ( | ) |
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Shares issued for services |
|
| - |
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| ||||||
Foreign currency translation adjustment |
|
| - |
|
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| - |
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Net loss for the period |
|
| - |
|
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| - |
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| ( | ) |
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| ( | ) | ||||
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Balance as at June 30, 2021 |
|
|
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| $ |
|
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||||
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Balance as at January 1, 2022 (audited) |
|
| - |
|
| $ |
|
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| $ |
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| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
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Foreign currency translation adjustment |
|
| - |
|
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| - |
|
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| ||||||
Net loss for the period |
|
| - |
|
|
|
|
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| - |
|
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| ( | ) |
|
| ( | ) | ||||
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Balance as at March 31, 2022 |
|
| - |
|
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| ( | ) |
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| ( | ) | |||||
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Foreign currency translation adjustment |
|
| - |
|
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| - |
|
|
|
|
|
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|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Net loss for the period |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
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|
| ( | ) |
|
| ( | ) | ||||
|
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|
|
Balance as at June 30, 2022 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
See accompanying notes to condensed consolidated financial statements.
F-24 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
New Momentum Corporation (the “Company”) was incorporated under the laws of the State of Nevada on July 1, 1999. The Company through its subsidiaries, mainly operates a smartphone application to provide an online platform with “Book Now, Pay Later” flight booking service for travelers among over 500 airlines worldwide to search and secure their tickets. With a simple, user-friendly interface, the Company enables customers to arrange and book multiple-stop itineraries, and to check their bookings through official airline websites using the Gagfare booking reference number on http://presscentre.asia/gagfare.html. The Company will also become the driving force behind a bold new hospitality concept that takes nature lovers and intrepid travelers to exciting new and established destinations. The curated collection of boutique properties, each with a focus on diving, sustainability, conservation, and cultural authenticity, offers a thoroughly contemporary travel experience that is intrinsically linked to the destination, its heritage and its culture.
Description of subsidiaries
Name |
| Place of incorporation and kind of legal entity |
| Principal activities |
| Particulars of registered/ paid up share capital |
| Effective interest held |
|
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|
NEMO Holding Company Limited(“NHCL”) |
|
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| ||||
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|
Gagfare Limited (“GL”) |
|
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| ||||
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Beyond Blue Limited (“BBL”) |
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| ||||
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|
New Momentum Asia Pte. Ltd. (“NMAPL”) |
|
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| ||||
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|
JPOPCOIN Limited (“JL”) |
|
|
|
|
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
2. GOING CONCERN UNCERTAINTIES
The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has suffered shareholders’ deficit and working capital deficit of $
The continuation of the Company as a going concern through the next twelve months is dependent upon the continued financial support from its shareholders. The Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
F-25 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
• | Basis of presentation |
These accompanying condensed consolidated financial statements have been prepared in U.S. Dollars in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K, as filed with the SEC on April 18, 2022.
• | Use of estimates and assumptions |
In preparing these unaudited condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.
• | Basis of consolidation |
The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
• | Cash and cash equivalents |
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
• | Accounts receivable |
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of June 30, 2022 and December 31, 2021, there were no allowance for doubtful accounts.
F-26 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
• | Revenue recognition |
The Company recognizes revenue from its contracts with customers in accordance with Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
| • | identify the contract with a customer; |
| • | identify the performance obligations in the contract; |
| • | determine the transaction price; |
| • | allocate the transaction price to performance obligations in the contract; and |
| • | recognize revenue as the performance obligation is satisfied. |
The Company records its revenue from booking income upon the ticket booking service is rendered to travelers. The Company also records its revenue from the sale of air tickets upon the confirmation and issuance of tickets to the travelers.
• | 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 condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
F-27 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
• | Uncertain tax positions |
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the six months ended June 30, 2022 and 2021.
• | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the condensed consolidated statement of operations.
The reporting currency of the Company is United States Dollar ("US$") and the accompanying condensed consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.
Translation of amounts from HKD into US$ has been made at the following exchange rates for the six months ended June 30, 2022 and 2021:
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Period-end HKD:US$ exchange rate |
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Period average HKD:US$ exchange rate |
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Period-end SGD:US$ exchange rate |
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Period average SGD:US$ exchange rate |
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• | 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 condensed 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.
• | Leases |
The Company adopted Topic 842, Leases (“ASC 842 whereby at the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
F-28 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.
The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or
• | Related parties |
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of condensed consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
• | 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.
F-29 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
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 condensed consolidated 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. |
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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. |
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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, accounts receivable, deposits, prepayment and other receivables, amount due from a director and operating lease right-of-use assets, approximate their fair values because of the short maturity of these instruments.
F-30 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
• | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company has assessed and concluded that the impact of recently issued standards that became effective for the current financial period did not have a material impact on its financial position or results of operations upon adoption.
The Company believes that recently issued but not yet effective accounting standards, when adopted, will not have a material impact on its financial position or results of operations of the Company.
4. AMOUNT DUE TO DIRECTOR
As of June 30, 2022 and December 31, 2021, the Company owed to its director an amount of $
5. CONVERTIBLE PROMISSORY NOTE
On
For the six months ended June 30, 2022, none of convertible promissory notes were converted to the Company’s common stock, consistent with the terms of the notes whereby conversion is only permissible after 180 days from the issue date and number of the shares held by the holder and its affiliates when converted, shall not to exceed
For the three and six months ended June 30, 2022 and 2021, the amortization of debt discount was $
As of June 30, 2022 and December 31, 2021, accrued interest amounted to $
6. SHAREHOLDERS’ DEFICIT
Preferred Stock |
Authorized shares
The Company was authorized to issue
As of June 30, 2022 and December 31, 2021,
Common Stock |
Authorized shares
The Company was authorized to issue
F-31 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
Issued and outstanding shares
As of June 30, 2022 and December 31, 2021,
Stock Option Plan |
As of June 30, 2022 and December 31, 2021,
7. INCOME TAX
The Company mainly operates in Hong Kong and is subject to taxes in the governing jurisdictions in which it operates. The effective tax rate in the period presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:
United States of America
NNAX is registered in the State of Nevada and is subject to US federal corporate income tax. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from
As of June 30, 2022, the operations in the United States of America incurred $4,685,958 of cumulative net operating losses which can be carried forward to offset future taxable income. The Tax Reform Act also changed the rules on net operating loss carry forwards. The
BVI
NHCL is considered to be an exempted British Virgin Islands Company and is presently not subject to income taxes or income tax filing requirements in the British Virgin Islands or the United States.
Singapore
NMAPL is registered in Republic of Singapore and is subject to the Singapore corporate income tax at a standard income tax rate of
As of June 30, 2022, the operation in Singapore incurred $
Hong Kong
GL, BBL and JL are operating in Hong Kong and are subject to
F-32 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
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Loss before income taxes |
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Net operating loss |
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Income tax expense |
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As of June 30, 2022, the operation in Hong Kong incurred $
The following table sets forth the significant components of the deferred tax assets of the Company as of June 30, 2022 and December 31, 2021:
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Deferred tax assets: |
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Net operating loss carryforwards |
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- United States |
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Less: valuation allowance |
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Deferred tax assets, net |
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8. RELATED PARTY TRANSACTIONS
From time to time, the directors of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and repayment on demand.
During the six months ended June 30, 2021, the Company has been provided free office space by its shareholder. The management determined that such cost is nominal and did not recognize the rent expense in its condensed consolidated financial statements.
Since February 1, 2016, the Company was granted with the right of use to the website and mobile application platforms by JJ Explorer Tours Limited (“JJ Explorer”), which was also controlled by the director, Leung Tin Lung David of the Company. Also, the Company formed a cooperation partnership with JJ Explorer whereby JJ Explorer invested to develop and maintain the operations of the Gagfare web and mobile application platforms for a term of 5 years.
F-33 |
Table of Contents |
NEW MOMENTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
For the three and six months ended June 30, 2022 and 2021, as the Company had not generated any earnings from the use of the web and mobile application platforms, and accordingly, there are no service charges and payables due to JJ Explorer.
For the three months ended June 30, 2022 and 2021, the Company paid the allowance of $
For the six months ended June 30, 2022 and 2021, the Company paid the allowance of $
For the three months ended June 30, 2022 and 2021, the Company paid the allowance of $
For the six months ended June 30, 2022 and 2021, the Company paid the allowance of $
Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
9. CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the three months ended June 30, 2022 and 2021, there was a single customer who accounted for
For the six months ended June 30, 2022 and 2021, there was a single customer who accounted for
(a) Major vendors
For the three months ended June 30, 2022 and 2021, there was a single vendor who accounted for
For the six months ended June 30, 2022 and 2021, there was a single vendor who accounted for
(b) Economic and political risk
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
Further, with the current global economic outlook and increasing commodity prices, the consumers purchasing power will be impacted. This in turn may influence the Company’s business, financial condition, and results of operations.
(c) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
10. COMMITMENTS AND CONTINGENCIES
As of June 30, 2022, the Company has no material commitments or contingencies.
As of June 30, 2022, the operating lease payment of $
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 condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after June 30, 2022, up through the date the Company presented the unaudited condensed consolidated financial statements. The Company determined that there are no further events to be disclosed.
F-34 |
[OUTSIDE BACK COVER PAGE]
PROSPECTUS
NEW MOMENTUM CORPORATION
5,182,617 SHARES OF
COMMON STOCK
We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or a solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein nor the affairs of the Issuer have not changed since the date hereof.
Until ___________, 2022 (90 days after the date of this prospectus), all dealers that effect transactions in these shares of common stock may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.
THE DATE OF THIS PROSPECTUS IS ____________, 2022
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Table of Contents |
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the issuance and distribution of the securities being registered hereby. All such expenses will be borne by the Company; none shall be borne by any Selling Security Holders.
Item |
| Amount ($) |
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SEC Registration Fee |
| $ | 565.42 |
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Accounting Fees |
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| 3,500.00 |
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Printing Costs |
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| 1,500.00 |
|
Legal fees and expenses |
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| 20,000.00 |
|
TOTAL |
| $ | 25,565.42 |
|
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company’s Bylaws and Articles of Incorporation provide that we shall, to the full extent permitted by the Nevada Revised Statutes, as amended from time to time (the “Nevada Corporate Law”), indemnify all of our directors and officers. Section 78.7502 of the Nevada Corporate Law provides in part that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
Similar indemnity is authorized for such persons against expenses (including attorneys’ fees) actually and reasonably incurred in defense or settlement of any threatened, pending or completed action or suit by or in the right of the corporation, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and provided further that (unless a court of competent jurisdiction otherwise provides) such person shall not have been adjudged liable to the corporation. Any such indemnification may be made only as authorized in each specific case upon a determination by the stockholders or disinterested directors that indemnification is proper because the indemnitee has met the applicable standard of conduct. Under our Bylaws and Articles of Incorporation, the indemnitee is presumed to be entitled to indemnification and we have the burden of proof to overcome that presumption. Where an officer or a director is successful on the merits or otherwise in the defense of any action referred to above, we must indemnify him against the expenses which such offer or director actually or reasonably incurred. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
52 |
Table of Contents |
RECENT SALES OF UNREGISTERED SECURITIES
Share Exchange Agreement
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Company Limited, a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, became the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common shareholders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
As a result of the share exchange, Nemo Holding became a wholly-owned subsidiary of the Company.
10% Convertible Note
On October 27, 2020, the Registrant offered and sold the Note, dated October 27, 2020, to EMA Financial for aggregate proceeds of $33,000. As of June 9, 2021, there was $35,000 in principal and $2,042 in interest due and owing under the Note. The Note is due July 27, 2021, and carries interest at a rate of 10% per annum. The conversion price of the Note Shares is equal to the lower of: (i) the lowest closing price of the Common Stock during the preceding twenty (20) trading day period ending on the latest complete trading day prior to the Issue Date of this Note or (ii) 55% of the lowest trading price for the Common Stock on the Principal Market during the twenty (20) consecutive trading days including and immediately preceding the Conversion Date. We will not receive any proceeds from the sale of the shares of common stock offered by the Selling Security Holders. The terms and conditions of the Note provide registration rights for the Note Shares.
Stock Purchase Agreement
On April 13, 2021, the Company entered into a Stock Purchase Agreement with Leung Tin Lung David, the Company’s sole director, President, and majority stockholder, pursuant to which the Company sold to Mr. Leung one share of Series A Preferred Stock in exchange for 169,000,000 shares of common stock of the Company. The Company subsequently canceled and returned to its authorized capital stock the 169,000,000 shares of common stock purchased from Mr. Leung.
Investment Agreement with Strattner Alternative Credit Fund LP
On April 16, 2021, the Company entered into an Investment Agreement dated as of April 16, 2021 (the “Investment Agreement”) with Strattner. The Investment Agreement provides that, upon the terms and subject to the conditions set forth therein, Strattner is committed to purchase up to $5,000,000 (the “Total Commitment”) worth of the Company’s common stock, $0.001 par value, over the 36-month term of the Investment Agreement. Additionally, under the Investment Agreement, the Company paid to Strattner a commitment fee equal in the form of 250,000 restricted shares of the Company’s common stock.
53 |
Table of Contents |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this registration statement:
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). |
_______________
(1) | Incorporated by reference to the Registrant’s Registration Statement on Form SB-2 (File No. 333-54002), filed with the Securities and Exchange Commission on January 19, 2001. |
(2) | Incorporated by reference to the Registrant’s Definitive Information Statement on Schedule 14C (File No. 000-52273), filed with the Securities and Exchange Commission on November 17, 2010. |
(3) | Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 000-52273), filed with the Securities and Exchange Commission on April 17, 2015. |
(4) | Incorporated by reference to the Registrant’s Annual Report on Form 10-KSB (File No. 000-52273), filed with the Securities and Exchange Commission on April 14, 2006. |
(5) | Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-52273) dated filed with the Securities and Exchange Commission on July 8, 2020. |
(6) | Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-52273) dated filed with the Securities and Exchange Commission on November 20, 2020. |
(7) | Incorporated by reference to the Registrant’s Annual Report on Form 10-K (File No. 000-52273), filed with the Securities and Exchange Commission on April 26, 2021. |
(8) | Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-52273) dated filed with the Securities and Exchange Commission on August 14, 2015. |
(9) | Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-257302), filed with the Securities and Exchange Commission on June 23, 2021. |
(10) | Incorporated by reference to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333257302), filed with the Securities and Exchange Commission on July 22, 2021. |
# | Indicates management contract or compensatory plan. |
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Table of Contents |
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) | To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this registration statement to: |
| (i) | Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (§230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
(2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
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(4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
| (i) | If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or our securities provided by or on behalf of the undersigned registrant; and |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in Hong Kong, Special Administrative Region of the People’s Republic of China, on August 30, 2022.
NEW MOMENTUM CORPORATION (Registrant) | |||
Dated: August 30, 2022 | By: | /s/ Leung Tin Lung David | |
| Name: | Leung Tin Lung David | |
| Title: | President and Chief Executive Officer (principal executive officer, principal financial officer, and principal accounting officer) |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Leung Tin Lung David, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement on Form S-1 of New Momentum Corporation, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, grant unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
Dated: August 30, 2022 | By: | /s/ Leung Tin Lung David | |
| Name: | Leung Tin Lung David | |
| Title: | President, Chief Executive Officer, Secretary, Treasurer and director (principal executive officer, principal financial officer, and principal accounting officer) |
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