UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the fiscal year ended
or
For the transition period from _____________________ to ___________________________
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, 0.001 per share
(Title of Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
Indicate
by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files). Yes ☐
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| 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 to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter approximately $1,185,963 as of June 30, 2019.
As
of August 31, 2021, the registrant had
TABLE OF CONTENTS
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EXPLANATORY NOTE
This is an Annual Report on Form 10-K of Wave Sync Corp. (the “Company”, “we”, “us”, and “our”, unless the context indicates otherwise) covering the year ended December 31, 2019. Readers should be aware that this 10-K is being filed well after the reporting period contained herein and therefore there is more recent information available. This more recent information is also being filed separately around the timing of this filing. This 10-K and other Annual Reports on Form 10-Ks as well as Quarterly Reports on Form 10-Qs are a part of the Company’s effort to become current in its filing obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward looking statement can be guaranteed and actual future results may vary materially.
These risks and uncertainties, many of which are beyond our control, include, and are not limited to:
| ● | our growth strategies; |
| ● | our anticipated future operation and profitability; |
| ● | our future financing capabilities and anticipated need for working capital; |
| ● | the anticipated trends in our industry; |
| ● | acquisitions of other companies or assets that we might undertake in the future; |
| ● | our operations in China and the regulatory, economic and political conditions in China; and |
| ● | current and future competition. |
In addition, factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
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PART I
Item 1. Business
History of the Company
Wave Sync Corp., formerly known as China Bio-Energy Corp., formerly known as China INSOnline Corp., was initially incorporated on December 23, 1988 under the name Lifequest Medical, Inc. (“DEXT”), a Delaware corporation. On December 6, 2010, the Company entered into an Amendment (the “Amendment”) to a certain share exchange agreement dated November 12, 2010 with Ding Neng Holdings, a British Virgin Islands company (“Ding Neng Holdings”). This share exchange agreement and the Amendment provided for an acquisition transaction in which the Company, through the issuance of shares of its common stock, representing 90% of the issued and outstanding common stock immediately following the closing of this acquisition, acquired 100% of Ding Neng Holdings.
The closing of this acquisition took place on February 10, 2011, on which date, pursuant to the terms of the share exchange agreement as amended, the Company acquired all of the outstanding equity securities of Ding Neng Holdings from the shareholders of Ding Neng Holdings. Accordingly, on the closing of the acquisition, the Company, via Ding Neng Holdings, held 100% of Ding Neng Bio-technology Co., Limited, a Hong Kong Company, which held 100% of Zhangzhou Fuhua Biomass Energy Technology Co., Ltd., a wholly-foreign owned enterprise in China (“Fuhua Biomass”), which, via a series of variable interest entity (or VIE) arrangements, controlled the operating company Fujian Zhangzhou Ding Neng Bio-technology Co., Ltd. (“Ding Neng Bio-tech”). In connection of this share exchange, the Company changed its fiscal year end from June 30 to December 31.
The Company and the previous management believed that from late 2011 to 2014, due to change in law, unfavorable market conditions, and lack of effective management, the business of Ding Neng Bio-tech deteriorated significantly and eventually the Company defaulted on various loan obligations. Eventually, Ding Neng Bio-tech completely ceased its operations.
On June 4, 2015, Fuhua Biomass filed a civil action in Haicang District People’s Court of Xiamen, Fujian, PRC against Ding Neng Bio-tech, alleging that the purposes of those certain Consulting Service Agreement, Operating Agreement, Pledge and Security Agreement, Option Agreement, and Voting Rights Proxy Agreement (the “VIE Agreements”) entered into by Fuhua Biomass and Ding Neng Bio-tech on October 28, 2010 had been frustrated, and that these VIE Agreements should be terminated. On July 14, 2015, this case was settled via in-court mediation directed by the Court. As a result, Fuhua Biomass and Ding Neng Bio-tech entered into binding settlement to, among other things, terminate the VIE Agreements.
Given that the Company was unable to exercise effective control over Ding Neng Bio-tech or gain access to Ding Neng Bio-tech’s financial information since 2011, and that the VIE Agreements were terminated, the Company deconsolidated Ding Neng Bio-tech’s financial results. The Company has written off all investments made in Ding Neng Holdings as loss on investment in subsidiary.
Share Purchase Agreement with EGOOS Mobile Technology Co. Ltd. and Subsequent Developments
On October 19, 2015, the Company entered into a share purchase agreement with EGOOS Mobile Technology Company Limited, a British Virgin Islands holding company (“EGOOS BVI”), which owned 100% of EGOOS Mobile Technology Company Limited, a Hong Kong company (“EGOOS HK”), which owned 100% of Move the Purchase Consulting Management (Shenzhen) Co., Ltd. (“WOFE” or “Yigou”), a foreign investment enterprise organized under the laws of the PRC, and which, through various contractual agreements, had management control and the rights to the profits of Guangzhou Yuzhi Information Technology Co., Ltd., a corporation organized under the laws of the PRC as a variable interest entity (“Guangzhou Yuzhi”), which owned 100% of Shenzhen Qianhai Exce-card Technology Co., Ltd., a Chinese corporation (“Shenzhen Exce-card”), which owned 100% of Guangzhou Rongsheng Information Technology Co., Ltd., a Chinese corporation (“Guangzhou Rongsheng”, together with Guangzhou Yuzhi and Shenzhen Exce-card, is collectively referred to herein as “Guangzhou Yuzhi and its Subsidiaries”), and the sole shareholder of EGOOS BVI. Guangzhou Yuzhi and its Subsidiaries engaged in research, development, marketing and distribution of inlays/audio chips for audio bank card products.
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The share purchase agreement provided for an acquisition transaction in which the Company, through the issuance of a convertible note to EGOOS BVI’s sole shareholder, acquired 100% of EGOOS BVI.
The closing of the acquisition took place on October 19, 2015. Upon closing, the Company acquired all of the outstanding equity securities of EGOOS BVI from the sole shareholder of EGOOS BVI.
EGOOS BVI’s organizational structure was crafted to abide by the laws of the PRC and maintain tax benefits as well as internal organizational efficiencies
EGOOS BVI, a British Virgin Islands business company, acted as a holding company and indirectly controled Guangzhou Yuzhi (a variable interest entity in China) and its Subsidiaries. EGOOS BVI’s sole source of income and operations was through its indirect, contractual control of Guangzhou Yuzhi and its Subsidiaries.
Based in the city of Guangzhou, Guangdong Province, China, Guangzhou Yuzhi and Guangzhou Rongsheng were principally engaged in software and information technology services and shared full-time employees with Shenzhen Exce-card.
We encountered challenges to expand the sales of our audio bank cards. Mobile phone payments through smart phone apps, such as Wechat and Venmo, have become one of the most popular methods to make payments. We ceased our efforts to market and sell our audio bank cards.
We sought to develop relationships with major card issuers in China since 2014 until 2018. We promoted two pilot programs with China Construction Bank (“CCB”), one of China’s four major banks; however, we could not continue the pilot programs due to lack of positive market reaction.
During the year ended December 31, 2019, we ceased all active business operations.
Employees
As of September 20, 2021, we had four (4) full-time employees. There are no collective bargaining contracts covering any of our employees. We believe our relationship with our employees is satisfactory.
ITEM 1A. RISK FACTORS
Not required for smaller reporting companies.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not required for smaller reporting companies.
ITEM 2. PROPERTIES
Wave Sync Corp. is located at 19 West 44th Street, Suite 1001, New York, NY 10036. Our office space is approximately 3,258 square feet. The space is leased by a related party, PX SPAC Capital Inc., and we currently do not pay rent.
ITEM 3. LEGAL PROCEEDINGS
To the best knowledge of the Company, we are not a party to, and our property is not the subject of, any material legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is quoted under the symbol “WAYS” on the OTC Pink tier of the OTC Markets. There is minimal trading activity in our common stock.
Stockholders of Record
As of August 31, 2021, we had approximately 128 record holders of our common stock.
Dividends
Holders of our common stock are entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available therefore. We have never declared or paid any dividends on our common stock. We intend to retain any future earnings for use in the operation and expansion of our business. Consequently, we do not anticipate paying any cash dividends on our common stock to our stockholders for the foreseeable future.
Equity Compensation Plan Information
We do not have in effect any compensation plans under which our equity securities are authorized for issuance.
ITEM 6. SELECTED FINANCIAL DATA.
As a smaller reporting company, we are not required to make such disclosure under Item 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our results of operations and financial condition since the Company’s inception should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Prospectus. All statements, other than statements of historical facts, included in this report are forward-looking statements. When used in this report, the words “may,” “will,” “should,” “would,” “anticipate,” “estimate,” “possible,” “expect,” “plan,” “project,” “continuing,” “ongoing,” “could,” “believe,” “predict,” “potential,” “intend,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, availability of additional equity or debt financing, changes in sales or industry trends, competition, retention of senior management and other key personnel, availability of materials or components, ability to make continued product innovations, casualty or work stoppages at our facilities, adverse results of lawsuits against us and currency exchange rates. Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Readers of this report are cautioned not to place undue reliance on these forward-looking statements, as there can be no assurance that these forward-looking statements will prove to be accurate and speak only as of the date hereof. Management undertakes no obligation to publicly release any revisions to these forward-looking statements that may reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. This cautionary statement is applicable to all forward-looking statements contained in this report.
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Critical Accounting Policies
Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
C. Principles of Consolidation
The consolidated financial statements include the financial statements of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of those wholly-owned subsidiaries.
As of December 31, 2019 and 2018, the detailed identities of the consolidating subsidiaries are as follows:
| Name of Company | Place of incorporation | Attributable equity interest % | Registered capital | |||||||
| EGOOS Mobile Technology Company Limited (“EGOOS BVI”) | BVI | 100 | % | $ | 1 | |||||
| EGOOS Mobile Technology Company Limited (“EGOOS HK”) | Hong Kong | 100 | % | 1,290 | ||||||
| Move the Purchase Consulting Management (Shenzhen) Co., Ltd. (“WOFE”) | P.R.C | 100 | % | - | ||||||
| Guangzhou Yuzhi Information Technology Co., Ltd. (“GZYZ”) | P.R.C | 100 | % | 150,527 | ||||||
| Shenzhen Qianhai Exce-card Technology Co., Ltd. (“SQEC”) | P.R.C | 100 | % | 150,527 | ||||||
| Guangzhou Rongsheng Information Technology Co., Ltd. (“GZRS”) | P.R.C | 100 | % | 1,505,267 | ||||||
Use of estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, impairment, inventory allowance, taxes and contingencies.
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’s management 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’s management 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.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.
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Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Cash and cash equivalents
The Company classifies the following instruments as cash and cash equivalents: cash on hand, unrestricted bank deposits, and all highly liquid investments purchased with original maturities of three months or less.
Accounts receivable
Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
Other receivables
Other receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is made when recovery of the full amount is doubtful.
Property, plant and equipment
Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method with a salvage value of 10%. Estimated useful lives of the plant and equipment are as follows:
| Computer equipment | 3 years | |||
| Office furniture | 5 years | |||
| Motor vehicle | 5 years |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.
Accounting for the Impairment of Long-lived assets
The long-lived assets held by the Company are reviewed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 360-10-35, “Accounting for the Impairment or Disposal of Long-Lived Assets,” for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Impairment is present if carrying amount of an asset is less than its undiscounted cash flows to be generated.
If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company believes no impairment has occurred to its assets during 2020 and 2019.
Income taxes
The Company uses the accrual method of accounting to determine income taxes for the year. The Company has implemented FASB ASC 740 Accounting for Income Taxes. Income tax liabilities computed according to the United States, People’s Republic of China (PRC), and Hong Kong tax laws provide for the tax effects of transactions reported in the financial statements and consists of taxes currently due, plus deferred taxes, related primarily to differences arising from the recognition of expenses related to the depreciation of plant and equipment, amortization of intangible assets, and provisions for doubtful accounts between financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes.
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A valuation allowance is recognized for deferred tax assets if it is more likely than not, that the deferred tax assets will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.
Stock-based compensation
The Company has elected to use the Black-Scholes-Merton (“BSM”) pricing model to determine the fair value of stock options on the dates of grant. Also, the Company recognizes stock-based compensation using the straight-line method over the requisite service period.
The Company values stock awards using the market price on or around the date the shares were awarded and includes the amount of compensation as a period compensation expense over the requisite service period.
For the years ended December 31, 2019 and 2018, $0 and $1,113,217 stock-based compensation was recognized.
Foreign currency translation
The accompanying financial statements are presented in United States dollars (USD). The functional currency of the Company is the USD and Renminbi (RMB). The financial statements are translated into USD from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
| Exchange rates | December 31, 2019 | December 31, 2018 | ||||||
| Year-end/period-end RMB : US$ exchange rate | 6.9762 | 6.8764 | ||||||
| Average annual/period RMB : US$ exchange rate | 6.8944 | 6.6146 | ||||||
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US Dollar at the rates used in translation.
Revenue recognition
The Company recognizes services revenue when the following criteria have been met: 1.) it has agreed and entered into a contract for service with its customers pursuant to which the Company identifies the contract and determines the transactions price with its customers, 2.) the contract has set forth a fixed fee for the services to be rendered under which the Company has determined the transaction’s price and the allocation of such price to performance obligations with the customers, 3.) the Company has fully rendered service to its customers, and there are no additional obligations that exist under the terms of the contract that the Company has not fulfilled such that the Company recognizes revenue when the performance obligation is satisfied, and 4.) the Company has either received payment, or reasonably expects payment from the customer in accordance to the payment terms set forth in the contract.
Earnings per share
Basic earnings per share is computed on the basis of the weighted average number of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted average number of common stock and common stock equivalents outstanding. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.
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Dilution is computed by applying the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
Comprehensive loss
Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company presents components of comprehensive income with equal prominence to other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.
Subsequent events
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.
Fair Value of Financial Instruments
ASC 825, Financial Instruments, requires that the Company discloses estimated fair values of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.
The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, loan receivables and short-term bank loans, the carrying amounts approximate fair value due to their relatively short maturities. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
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The following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10
As of December 31, 2019:
Quoted in Active (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash | $ | 16 | $ | - | $ | - | $ | 16 | ||||||||
| Total financial assets | $ | 16 | $ | - | $ | - | $ | 16 | ||||||||
As of December 31, 2018:
Quoted in Active (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash | $ | 504 | $ | - | $ | - | $ | 504 | ||||||||
| Total financial assets | $ | 504 | $ | - | $ | - | $ | 504 | ||||||||
Results of Operations
Years Ended December 31, 2019 and 2018
For the year ended December 31, 2019, we did not have any active business operations.
Revenue
For the years ended December 31, 2019 and 2018, our revenues were $0 and $85,573, respectively, reflecting a decrease of $85,573 or 100%. Such significant revenue decline was due to the suspension of all or substantially all of our business operations in 2019.
Expenses
General and administrative and financial expenses were related to corporate overhead, financial and administrative contracted services, such as legal and accounting fees. General and administrative expenses and financial expenses for the year ended December 31, 2019 were $33,276 as compared to that of $1,671,264 for the comparable period ended December 31, 2018, which represented a decrease of $1,637,988 or approximately 98%. Such decrease was primarily attributed to the suspension of our operations in 2019.
Liquidity and Capital Resources
Our primary liquidity and capital resource needs are to finance our operations, to make capital expenditures and to service our debts. We continue to be dependent on our ability to generate positive cash flows and obtain additional financing to fund our operations.
Working Capital Summary
As of December 31, 2019 | As of December 31, 2018 | |||||||
| Current assets | $ | 16 | $ | 7,203 | ||||
| Current liabilities | $ | 32,406 | $ | 1,414,965 | ||||
| Working capital | $ | (32,390 | ) | $ | (1,407,762 | ) | ||
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Cash Flows
| Years ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows used in operating activities | $ | (286 | ) | $ | (283,480 | ) | ||
| Cash flows from investing activities | $ | - | $ | - | ||||
| Cash flows from financing activities | $ | - | $ | 308,860 | ||||
Cash flows from operating activities
The cash used in operating activities for the year ended December 31, 2019 was $286 compared to $283,480 for the year ended December 31, 2018. The major components of the cash used in operating activities for the period ended December 31, 2019 were net loss in the amount of $33,276, offset by non-cash item $584 in depreciation, increase from accrued expenses in the amount of $32,006 and tax payable in the amount of $400. The major components of the cash used in operating activities for the period ended December 31, 2018 were net loss in the amount of $5,607,041, offset by non-cash item $1,113,217 in stock compensation and $2,952,177 in impairment loss on intangible assets and $59,541 in fixed assets, decrease from advance to suppliers in the amount of $36,174 and accounts payable in the amount of $162,602 offset by decrease from other payables $14,225. Other items were insignificant.
Cash flows from investing activities
During the year ended December 31, 2019 and 2018, the Company had no investing activities.
Cash flows from financing activities
The cash provided from financing activities for the year ended December 31, 2019 was $0 compared to $308,860 for the year ended December 31, 2018. The cash provided from financing activities for the year ended December 31, 2018 derived from proceeds from related party transactions.
Off-Balance Sheet Arrangements
As of December 31, 2019, we did not have any off-balance sheet arrangements that had or were reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”, which will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. The standard did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350): simplifying the test for goodwill impairment”, the guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not the difference between the fair value and carrying amount of goodwill which was the step 2 test before. The ASU should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This standard eliminates the current requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. The standard includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period and permits the disclosure of other relevant quantitative information for certain unobservable inputs. The new guidance is effective for interim and annual periods beginning after December 15, 2019. The standard did not have a material impact on our consolidated financial statements.
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In August 2018, the FASB issued ASU 2018-15, “Internal-Use Software — Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement.” This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement service contract with the guidance to capitalize implementation costs of internal use software. The ASU also requires that the costs for implementation activities during the application development phase be capitalized in a hosting arrangement service contract, and costs during the preliminary and post implementation phase are expensed. The new guidance is effective for interim and annual periods beginning after December 15, 2019. The standard did not have a material impact on our consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, (“ASU 2018-17”). ASU 2018-17 requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety for determining whether a decision-making fee is a variable interest. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. Entities are required to apply the amendments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The standard did not have a material impact on our consolidated financial statements
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, (“ASU 2019-04”). ASU 2019-04 clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU 2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The standard did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. ASU 2019-12 will be effective for the Company in the first quarter of 2021. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.
Other than the above, management does not believe that any of the recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The full text of the Company’s audited financial statements for the fiscal years ended December 31, 2018 and 2019 begins on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
10
Our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”) conducted an evaluation of our disclosure controls and procedures. Based on this evaluation, the Certifying Officers concluded that our disclosure controls and procedures were, due to certain factors, not effective as of December 31, 2019 to ensure that material information is recorded, processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.
Management’s Report on Internal Control over Financial Reporting
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
| ● | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
We carried out an assessment of the effectiveness of our internal control over financial reporting based on the framework in in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on our evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2019. Management has specifically observed that our accounting systems and current staffing resources in our finance department are currently insufficient to support the complexity of our financial reporting requirements. We currently do not have adequate staff members in our accounting and finance department who have experience or specialized training in preparing financial statements in the form and format required by the SEC. We have also experienced difficulty in applying complex accounting and financial reporting disclosure rules as required under various aspects of GAAP and SEC reporting regulations including those relating to accounting for business combinations, intangible assets, derivatives and income taxes.
We have instituted certain procedures to mitigate our internal control risks. Our Chief Executive Officer and our Controller based in China review and approve substantially all of our major transactions to ensure the completeness and fair presentation of our consolidated financial statements. We have, when needed, hired outside experts to assist us with implementing complex accounting principles. Management and the Board of Directors believe that the Company must allocate additional human and financial resources to address these matters.
Changes in Internal Control over Financial Reporting.
During the years ended December 31, 2018 and 2019, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION
Not applicable.
11
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The executive officers and directors of the Company are as follows. Directors serve until the Company’s next annual meeting of shareholders and until a successor is elected and qualified.
| Directors and Executive Officers | Age | Position / Title | ||
| Jiang Hui | 32 | Chief Executive Officer and Director | ||
| Hon Man Yun | 53 | Chief Financial Officer and Director | ||
| Hong Chen | 52 | Director | ||
| Xiaoyue Zhang | 32 | Director | ||
| Ming Yi | 40 | Director |
Mr. Jiang Hui has been chief executive officer and director of the Company in February 2021. He has worked as the executive vice president at Move the Purchase Consulting Management (Shenzhen) Co., Ltd. since January 2020. Mr. Hui worked as the Vice President at the Industrial and Commercial Bank of China (New York Branch) from August 2018 to December 2019. Mr. Hui was the vice president of Industrial and Commercial Bank of China (London) PLC from January 2017 to August 2018, and the chief compliance officer of investment advisory at Industrial and Commercial Bank of China Financial Services LLC from January 2014 to January 2017. Mr. Hui’s executive experience qualifies him to serve on our board of directors.
Mr. Hon Man Yun has been chief financial officer and director of the Company since February 2021. He has served in several financing and accounting positions at different private and publicly traded companies. Mr. Yun has worked as the CFO and a director at Hudson Capital Inc. since August 2020 and the Chief Financial Officer of Kiwa Bio-tech Products Group Corporate since April 2018. Mr. Yun served as joint company secretary, as a group vice president, the chief accountant and compliance and internal audit officer for Kaisun Energy Group Limited, from May 2017 to August 2020. Mr. Yun was an associate at China Merchants Securities (Hong Kong) Co., Limited from December 2014 to May 2017 and financial controller at E Lighting Group Limited from March 2013 to September 2014. Mr. Yun’s financial and accounting experience qualifies him to serve on our board of directors.
Mr. Hong Chen has been a director of the Company since February 2021. Mr. Chen has worked as the Chairman of the board of directors for Grand Cartel Securities Co., Ltd. (“Grand Cartel Securities”) since 2014. Before Grand Cartel Securities, Mr. Chen served as the Chairman at China Internet Education Group (a Hong Kong listed company with the code 8055) from 2008 to 2014, as the CEO for Peking University Business Network from 2002 to 2008, and the CEO of Shenzhen Chenrun Investment Company from 1998 to 2002. Mr. Chen’s chairman experience qualifies him to serve on our board of directors.
Xiaoyue Zhang has been a director of the Company since February 2021. She founded Zoe Creation LLC in 2019. Previously, Ms. Zhang worked as a Partner at CARA Vision LLC from July 2017 to December 2020. In addition, Ms. Zhang worked as the marketing coordinator in CheersYou International Education Consulting Inc. from July 2016 to July 2017. Ms. Zhang’s marketing experience qualifies her to serve on our board of directors.
Mr. Ming Yi has been a director of the Company since February 2021. He worked as the Chief Financial Officer at SSLJ.com Limited from 2018 to 2019. Prior to that, Mr. Yi worked as the Chief Financial Officer for this Company from 2011 to 2018. Mr. Yi’s financial experience qualifies him to serve on our board of director.
Audit Committee
We do not have a standing audit committee of the Board of Directors. Mr. Ming Yi is our financial expert serving on the Board of Directors and is independent.
12
Code of Ethics
We have not yet adopted a code of ethics that applies to our principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions, since we have been focusing our efforts on developing our business.
Family Relationships
There is no family relationship between any director and executive officer or among any directors or executive officers.
Involvement in 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:
| 1. | 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; |
| 2. | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | 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; |
| 4. | being found by a court of competent jurisdiction in a civil action, the SEC or the CFTC to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| 5. | 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 |
| 6. | 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. |
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth compensation information for services rendered by our named executive officers in all capacities during the last two completed fiscal years.
| Name and Position(s) | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Other ($) | Total Compensation ($) | ||||||||||||||||
| Zuyue Xiang | 2019 | - | - | - | - | - | ||||||||||||||||
| Former Chief Executive Officer(1) | 2018 | - | - | - | - | - | ||||||||||||||||
| Zhenpeng Gao | 2019 | - | - | - | - | - | ||||||||||||||||
| Former Chief Financial Officer(1) | 2018 | - | - | - | - | - | ||||||||||||||||
| Yang Liu | 2019 | - | - | - | - | - | ||||||||||||||||
| Former Chief Executive Officer(2) | 2018 | - | - | - | - | - | ||||||||||||||||
| Mei Yang | 2019 | - | - | - | - | - | ||||||||||||||||
| Former Chief Executive Officer(3) | 2018 | 60,000 | - | - | - | 60,000 | ||||||||||||||||
| Ming Yi | 2019 | - | - | - | - | - | ||||||||||||||||
| Former Chief Financial Officer(4) | 2018 | 48,000 | - | - | - | 48,000 | ||||||||||||||||
| (1) | Mr. Xiang and Mr. Gao were removed as officers of the Company on February 25, 2021. Mr. Xiang and Mr. Gao were appointed as the Company’s CEO and CFO, respectively, on February 4, 2019, effective January 29, 2019. |
| (2) | Mr. Yang Liu resigned as the CEO on August 22, 2018, effective August 30, 2018. |
| (3) | Ms. Mei Yang became the CEO on August 30, 2018 and resigned on February 6, 2019, effective as of January 29, 2019. |
| (4) | Mr. Ming Yi resigned as the CFO on August 23, 2018, effective August 30, 2018. |
13
Outstanding Equity Awards at Fiscal Year-End
The Company did not have any outstanding unexercised options, unvested stocks and equity incentive plan awards held by each of our named executive officers for the years ended December 31, 2018 and 2019. Options which the Company had granted to Mr. Yang Liu were forfeited effective upon his resignation as our chief executive officer on August 30, 2018.
Director Compensation
We did not pay any compensation to directors of the Company in the years of 2018 or 2019 for services as directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The table below sets forth information known to us regarding the beneficial ownership of our Common Stock as of August 25, 2021 for:
| ● | each person we believe beneficially holds more than 5% of our outstanding common shares (based solely on our review of SEC filings); | |
| ● | each of our “named executive officers” and directors; and | |
| ● | all of our current directors and executive officers as a group. |
The number of shares beneficially owned by a person includes shares issuable under options, warrants and other securities convertible into the Common Stock held by that person and that are currently exercisable or that become exercisable within 60 days from August 25, 2021. Percentage calculations assume, for each person and group, that all shares that may be acquired by such person or group pursuant to options, warrants and other convertible securities currently exercisable or that become exercisable within 60 days from August 25, 2021 are outstanding. Nevertheless, shares of the Common Stock that are issuable upon exercise of presently unexercised options, warrants and other convertible securities are not deemed to be outstanding for purposes of calculating the “Percentage of Shares Beneficially Owned” by any other person or any other group.
Except as otherwise indicated in the table or its footnotes, the persons in the table below have sole voting and investment power with respect to all shares of the Common Stock shown as beneficially owned by them, subject to community property laws where applicable.
As of August 25, 2021, we had 59,327,713 shares of the Common Stock issued and outstanding.
| Name and Address of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership |
Percentage | ||||||
| Directors and Executive Officers | ||||||||
| Jiang Hui | 0 | - | ||||||
| Hon Man Yun | 0 | - | ||||||
| Hong Chen | 0 | - | ||||||
| Xiaoyue Zhang | 0 | - | ||||||
| Ming Yi | 43,187 | * | ||||||
| All directors and executive officers as a group (5 persons) | 43,187 | * | ||||||
| 5% Holders | ||||||||
| PX SPAC Capital Inc. | 25,000,000 | 42.14 | % | |||||
| Coco Han | 5,000,000 | 8.43 | % | |||||
| Yue Wang | 3,300,000 | 5.56 | % | |||||
| Hare & Co | 3,077,966 | 5.18 | % | |||||
| Zuyue Xiang | 3,000,000 | 5.05 | % | |||||
| * | less than 1%. |
| (1) | Unless otherwise noted, the business address of each of the following entities or individuals is 19 West 44th Street, Suite 1001, New York, NY 10036. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of the Common Stock beneficially owned by them. |
14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Transactions
For the year ended December 31, 2019, the Company entered into agreement with major shareholders and directors of the subsidiaries of the Company to forgive related party payables amounting to $994,040 and the details consisted of the following:
| December 31, 2019 | ||||
| Beijing Yuxin Shangfang Technology Co., Ltd. | $ | 285,894 | ||
| Hainan Xin Jing Yuan Co., Ltd. | 43,627 | |||
| Xiang, Zuyue, director of SQEC and shareholder | 102,217 | |||
| Xiang, Lingqing, employee of SQEC | 1,504 | |||
| Lim, Jehn Ming, shareholder of EGOOS BVI | 1,289 | |||
| Wang, Yue, director of EGOOS HK | 161,523 | |||
| Yang, Mei, shareholder | 393,963 | |||
| Li, Ping, director of WOFE | 4,023 | |||
| Forgiveness of Related Party Payables | $ | 994,040 | ||
For the year ended December 31, 2019, the Company entered into agreements with major shareholders and directors of the subsidiaries of the Company to assume or receive, as applicable, certain assets and liabilities amounting to $414,226 and the details consisted of the following:
| December 31, 2019 | ||||
| Other receivable | $ | 277 | ||
| Prepaid taxes | 6,422 | |||
| Accounts payable | (322,368 | ) | ||
| Other payable | (51,806 | ) | ||
| Accrued expenses | (46,751 | ) | ||
| Net liabilities undertaken by related party | $ | (414,226 | ) | |
We occupy office space located at 19 West 44th Street, Suite 1001, New York, NY 10036. Our office space is approximately 3,258 square feet. The space is leased by PX SPAC Capital Inc., and we do not pay rent.
Director Independence
We believe that Hong Chen, Xiaoyue Zhang and Ming Yi, are “independent” directors as defined by the Nasdaq Market Place Rules.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table shows the fees that were billed to the Company by its independent auditors, Centurion ZD CPA & Co. in for the services rendered in 2021 for the year of 2019 and WWC, Professional Corporation in 2018.
| Fiscal Year | Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees | ||||||||||||
| 2019 | $ | 27,000 | $ | - | $ | - | $ | - | ||||||||
| 2018 | $ | 35,000 | $ | - | $ | - | $ | - | ||||||||
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements. All other fees relate to professional services rendered in connection with the review of the quarterly financial statements.
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services.
15
PART IV
ITEM 15. EXHIBITS
(a) The following documents are filed as part of this report:
(1) Audited Financial Statements and Report of Independent Registered Public Accounting Firm, which are set forth in the index to Financial Statements on pages F-1 through F-21 of this report.
(2) Financial Statement Schedule: None.
(3) Exhibits
16
ITEM 15. EXHIBITS
| * | Filed herewith. |
| ** | The certifications attached as Exhibits 32.1 and 32.2 accompany this annual report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
| (1) | Incorporated by reference to 8-K filed with the SEC on December 20, 2007. |
| (2) | Incorporated by reference to 10-QSB filed with the SEC on May 15, 2008. |
| (3) | Incorporated by reference to 8-K filed with the SEC on February 11, 2011. |
| (4) | Incorporated by reference to 8-K as filed with the SEC on September 3, 2015. |
| (5) | Incorporated by reference to 8-K filed with the SEC on December 14, 2015. |
| (6) | Incorporated by reference to 10-QSB filed with SEC on May 15, 2008. |
| (7) | Incorporated by reference to 8-K filed with the SEC October 20, 2015. |
| (8) | Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on March 23, 2017. |
| (9) | Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K as filed with the SEC on August 3, 2021. |
ITEM 16. FORM 10-K SUMMARY.
Not applicable.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: September 24, 2021
| WAVE SYNC CORP. | |||
| By: | /s/ Jiang Hui | ||
| Name: | Jiang Hui | ||
| Title: | Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes Yang Liu as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission.
| Signature | Title | Date | ||
| /s/ Jiang Hui | Chief Executive Officer and Director | September 24, 2021 | ||
| Jiang Hui | (Principal Executive Officer) | |||
| /s/ Hon Man Yun | Chief Financial Officer and Director (Principal Financial Officer) | September 24, 2021 | ||
| Hon Man Yun | ||||
| /s/ Hong Chen | Director | September 24, 2021 | ||
| Hong Chen | ||||
| /s/ Xiaoyue Zhang | Director | September 24, 2021 | ||
| Xiaoyue Zhang | ||||
| /s/ Ming Yi | Director | September 24, 2021 | ||
| Ming Yi |
18
Wave Sync Corp.
Audited Consolidated Financial Statements
As of December 31, 2019 and 2018
(Stated in US Dollars)
WAVE SYNC CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
 |
中正達會計師事務所 Centurion ZD CPA & Co. Certified Public Accountants (Practising)
|
Unit 1304, 13/F., Two Harbourfront, 22 Tak Fung Street, Hunghom, Hong Kong
香港紅磡德豐街22號海濱廣場二期13樓1304室
Tel : (852) 2126 2388 Fax: (852) 2122 9078
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| To: | The Board of Directors and Shareholders of Wave Sync Corp. |
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Wave Sync Corp. and its subsidiaries (the “Company”) as of December 31, 2019, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows, for the year ended December 31, 2019, 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, 2019, and the consolidated results of its operations and its cash flows for the year ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company had incurred substantial losses in previous years and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 11. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 audits 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 consolidated 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 audits 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 audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Centurion ZD CPA& Co.
Centurion ZD CPA & Co.
We have served as the Company’s auditor since 2021.
Hong Kong, China
September 24, 2021
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Wave Sync Corp.
Opinion of the Financial Statements
We have audited the accompanying balance sheets of Wave Sync Corp. (the “Company”) as of December 31, 2018 , and the related statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year ended December 31, 2018, 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, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company had incurred substantial losses in previous years and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 11. 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 audits 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 audits, 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 audits 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 audits provide a reasonable basis for our opinion.
San Mateo, CA WWC, P.C.
April 12, 2019 Certified Public Accountants
We have served as the Company’s auditor since 2011.
F-3
WAVE SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2019 AND 2018
(Stated in US Dollars)
| As
of December 31, | ||||||||
| 2019 | 2018 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other receivable | ||||||||
| Advance to suppliers | ||||||||
| Prepaid expenses | ||||||||
| Prepaid taxes | ||||||||
| Due from related parties | ||||||||
| Total Current Assets | ||||||||
| Non-current assets | ||||||||
| Property and Equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Deferred Tax Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Other payables | ||||||||
| Accrued expenses | ||||||||
| Related party payable | ||||||||
| Taxes payable | ||||||||
| Total Current Liabilities | ||||||||
| Provision of other liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitment and contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Common Stock ($ | $ | $ | ||||||
| Additional paid in capital | ||||||||
| Accumulated deficits | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
See notes to consolidated financial statements
F-4
WAVE SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Stated in US Dollars)
Year Ended December 31, | Year Ended December 31, | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| General and administrative expenses | ||||||||
| Financial expenses | ||||||||
| Total Operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest income | ||||||||
| Interest expense | ||||||||
| Other expenses | ( | ) | ||||||
| Other income | ||||||||
| Impairment loss | ||||||||
| Total other (expenses) income, net | ( | ) | ||||||
| Loss before income tax expenses | ( | ) | ( | ) | ||||
| Income tax expenses | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss | ||||||||
| Foreign currency translation (loss) gain | ( | ) | ||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares, basic and diluted | ||||||||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | ||
See notes to consolidated financial statements
F-5
WAVE SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Stated in US Dollars)
| Years ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock compensation | ||||||||
| Impairment loss on intangible assets | - | |||||||
| Impairment loss on fixed assets | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | ||||||||
| Advance to suppliers | ||||||||
| Prepaid expenses and taxes | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Other payables | ( | ) | ||||||
| Tax payable | ( | ) | ||||||
| Net cash (used in)/provided by operating activities | $ | ( | ) | $ | ( | ) | ||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ||||||||
| Net cash (used in)/provided by investing activities | $ | $ | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from related party | ||||||||
| Repayment to a related party | ||||||||
| Net cash provided by/ (used in) financing activities | $ | $ | ||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash | $ | ( | ) | $ | ( | ) | ||
| Cash at beginning of year | ||||||||
| Cash at end of year | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Interest received | $ | $ | ||||||
| Interest paid | - | |||||||
| Income taxes paid | ||||||||
| Non- cash operating and financing activities: | ||||||||
| Forgiveness of loans from related parties | $ | ( | ) | $ | - | |||
| Undertaking of assets and liabilities by related parties | $ | ( | ) | $ | ||||
See notes to the consolidated financial statements
F-6
WAVE SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Stated in US Dollars)
| Common Stock | Additional paid-in | Accumulated | Accumulated other comprehensive | Total Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | deficit | income | Equity | |||||||||||||||||||
| Balance as of December 31, 2017 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stock compensation expense | - | - | - | - | ||||||||||||||||||||
| Net (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Net (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Forgiveness of loan from related parties | - | |||||||||||||||||||||||
| Undertaking of assets and liabilities by related parties | - | |||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | - | ( | ) | ||||||||||||||||||
| Balance as of December 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
See notes to the consolidated financial statements
F-7
WAVE SYNC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Stated in US Dollars)
NOTE 1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Wave Sync Corp. formerly known as China Bio-Energy Corp. (the “Company”), and prior to that known as China INSOnline Corp., was incorporated on December 23, 1988 as Lifequest Medical, Inc., a Delaware corporation.
In June 2010, the Company ceased all operations conducted by its then subsidiaries: Ever Trend Investment Limited, Run Ze Yong Cheng (Beijing) Technology, San Teng Da Fei Technology, and Guang Hua Insurance Agency (“Ever Trend Group”); on January 27, 2015, the Company announced the completion of the disposition of the aforementioned subsidiaries. Accordingly, the Company has excluded the accounts of Ever Trend Group in these financial statements and the accompanying notes contained herein.
On
November 12, 2010, the Company entered into a share exchange agreement with Ding Neng Holdings Ltd, an investment holdings company incorporated
in the British Virgin Islands (“Ding Neng Holdings”); the share exchange agreement was amended on December 6, 2010, whereby
the Company, under the share exchange agreement and its related amendment, would have contemplated acquiring
F-8
Given that the Company has not been able to exercise effective control over Ding Neng Bio-Tech or to access Ding Neng Bio-tech’s financial information since 2011, and the VIE Agreements were terminated, the Company has excluded the accounts of Ding Neng Bio-Tech’s in these financial statements and the accompanying notes contained herein; the exclusion of such accounts is considered as a type two material subsequent event that occurred prior to the issuance of the financial statements but after the balance sheets dates that required material adjustments to the financial statements presented. Ding Neng Holdings is delinquent and defunct; the Company has determined that the Company was never registered as the sole shareholder of Ding Neng Holdings pursuant to the share exchange agreement dated November 12, 2010, and amended December 6, 2010; accordingly, the Company has excluded the accounts of Ding Neng and its subsidiaries in these financial statements and the accompanying notes as contained herein; the exclusion of such accounts is considered as a type two material subsequent event that occurred prior to the issuance of the financial statements but after the balance sheets dates that required material adjustments to the financial statements presented. The Company accounted for the issuance of shares to the shareholders of Ding Neng Holdings under the contemplated share exchange transaction as a recapitalization of the Company under reverse take-over accounting; accordingly, the Company’s historical stockholders’ equity has been retroactively restated to the first period presented; as a result of the Company not being updated to Ding Neng Holdings shareholder register, and that Ding Neng Holdings being defunct, the Company has written off all investments made in Ding Neng as loss on investment in subsidiary.
In connection with the share exchange agreement with the shareholders of Ding Neng Holdings that contemplated the acquisition of Ding Neng Holdings and its subsidiaries, the Company elected to adopt the fiscal year used by Ding Neng Holdings, which was a calendar year; accordingly, the Company’s financial statements presented herein have been, and on a go-forward basis, will be prepared using a December 31 year-end date, and each operating period will cover twelve full calendar months.
Share Purchase Agreement
On
October 19, 2015,
F-9
SQEC was incorporated on November 11, 2013. The Company was in the business of design, development, and proliferation of next generation debit and credit cards for financial institutions employing innovative secured encryption technology transmitted via audio wave technology; the Company intended to work with China Union Pay and China Construction Bank under a potential pilot program to develop and market to end user bank customers and business operators to adopt these next generation of cards by developing point of sale and commercial interfaces via software and other solutions to generate demand for these cards as a value-added alternative to current generation debit and credit cards.
On
January 28, 2015, ownership of SQEC’s was transferred from Bao, Shanshan to Xiang, Zuyue for a consideration of approximately $
On
March 16, 2015, the GZRS was incorporated as a wholly-owned subsidiary of SQEC. GZRS has an authorized capital of RMB
Pursuant to the Share Purchase Agreement the Company
issued a convertible note to EGOOS BVI’s sole shareholder for
The consolidated financial statements were prepared assuming that the Company has controlled EGOOS BVI and its intermediary holding companies, operating subsidiaries, and variable interest entities: EGOOS HK, WOFE, GZYZ, SQEC, and GZRS from the first period presented. The transactions detailed above have been accounted for as reverse takeover transactions and are capitalization of the Company, including the conversion of the convertible promissory note; accordingly, the Company (the legal acquirer) is considered the accounting acquiree and EGOOS BVI (the legal acquiree) is considered the accounting acquirer. No goodwill has been recorded. As a result of this transaction, the Company is deemed to be a continuation of the business of EGOOS BVI and SQEC.
F-10
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Method of Accounting
The Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements.
B. Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
C. Principles of Consolidation
The consolidated financial statements include the financial statements of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation
The
consolidated financial statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary.
All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include
As of December 31, 2019 and 2018, the detailed identities of the consolidating subsidiaries are as follows:
| Name of Company | Place of incorporation | Attributable
equity interest % | Registered
capital | |||||||
| % | $ | |||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
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D. Use of estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, impairment, inventory allowance, taxes and contingencies.
E. 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’s management 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’s management 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.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.
Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
F. Cash and cash equivalents
The Company classifies the following instruments as cash and cash equivalents: cash on hand, unrestricted bank deposits, and all highly liquid investments purchased with original maturities of three months or less.
G. Accounts receivable
H. Other receivables
Other receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is made when recovery of the full amount is doubtful.
I. Property, plant and equipment
Plant
and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the
straight-line method with a salvage value of
| Computer equipment | ||
| Office furniture | ||
| Motor vehicle |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.
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J. Accounting for the Impairment of Long-lived assets
The long-lived assets held by the Company are reviewed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 360-10-35, “Accounting for the Impairment or Disposal of Long-Lived Assets,” for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Impairment is present if carrying amount of an asset is less than its undiscounted cash flows to be generated.
If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company believes no impairment has occurred to its assets during 2020 and 2019.
K. Income taxes
The Company uses the accrual method of accounting to determine income taxes for the year. The Company has implemented FASB ASC 740 Accounting for Income Taxes. Income tax liabilities computed according to the United States, People’s Republic of China (PRC), and Hong Kong tax laws provide for the tax effects of transactions reported in the financial statements and consists of taxes currently due, plus deferred taxes, related primarily to differences arising from the recognition of expenses related to the depreciation of plant and equipment, amortization of intangible assets, and provisions for doubtful accounts between financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes.
A valuation allowance is recognized for deferred tax assets if it is more likely than not, that the deferred tax assets will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.
L. Stock-based compensation
The Company has elected to use the Black-Scholes-Merton (“BSM”) pricing model to determine the fair value of stock options on the dates of grant. Also, the Company recognizes stock-based compensation using the straight-line method over the requisite service period.
The Company values stock awards using the market price on or around the date the shares were awarded and includes the amount of compensation as a period compensation expense over the requisite service period.
For
the years ended December 31, 2019 and 2018, $
M. Foreign currency translation
The accompanying financial statements are presented in United States dollars (USD). The functional currency of the Company is the USD and Renminbi (RMB). The financial statements are translated into USD from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
| Exchange rates | December 31, | December 31, | ||||||
| Year-end/period-end RMB : US$ exchange rate | ||||||||
| Average annual/period RMB : US$ exchange rate | ||||||||
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US Dollar at the rates used in translation.
F-13
N. Revenue recognition
The Company recognizes services revenue when the following criteria have been met: 1.) it has agreed and entered into a contract for service with its customers pursuant to which the Company identifies the contract and determines the transactions price with its customers, 2.) the contract has set forth a fixed fee for the services to be rendered under which the Company has determined the transaction’s price and the allocation of such price to performance obligations with the customers, 3.) the Company has fully rendered service to its customers, and there are no additional obligations that exist that under the terms of the contract that the Company has not fulfilled such that the Company recognizes revenue when the performance obligation is satisfied, and 4.) the Company has either received payment, or reasonably expects payment from the customer in accordance to the payment terms set forth in the contract.
O. Earnings per share
Basic earnings per share is computed on the basis of the weighted average number of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted average number of common stock and common stock equivalents outstanding. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.
Dilution is computed by applying the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
P. Comprehensive loss
Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company presents components of comprehensive income with equal prominence to other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.
Q. Subsequent events
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.
R. Fair Value of Financial Instruments
ASC 825, Financial Instruments, requires that the Company discloses estimated fair values of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.
The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, loan receivables and short-term bank loans, the carrying amounts approximate fair value due to their relatively short maturities. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
F-14
The following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10
As of December 31, 2019:
Quoted
in Active (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
As of December 31, 2018:
Quoted
in Active (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
S. Recently issued accounting standards
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”, which will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. The standard did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350): simplifying the test for goodwill impairment”, the guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not the difference between the fair value and carrying amount of goodwill which was the step 2 test before. The ASU should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This standard eliminates the current requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. The standard includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period and permits the disclosure of other relevant quantitative information for certain unobservable inputs. The new guidance is effective for interim and annual periods beginning after December 15, 2019. The standard did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, “Internal-Use Software — Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement.” This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement service contract with the guidance to capitalize implementation costs of internal use software. The ASU also requires that the costs for implementation activities during the application development phase be capitalized in a hosting arrangement service contract, and costs during the preliminary and post implementation phase are expensed. The new guidance is effective for interim and annual periods beginning after December 15, 2019. The standard did not have a material impact on our consolidated financial statements.
F-15
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, (“ASU 2018-17”). ASU 2018-17 requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety for determining whether a decision-making fee is a variable interest. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. Entities are required to apply the amendments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The standard did not have a material impact on our consolidated financial statements
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, (“ASU 2019-04”). ASU 2019-04 clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU 2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The standard did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. ASU 2019-12 will be effective for the Company in the first quarter of 2021. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.
In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, (“ASU 2020-03”). ASU 2020-03 improves various financial instruments topics, including the CECL Standard. ASU 2020-03 includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments related to Issue 1, Issue 2, Issue 4 and Issue 5 were effective upon issuance of ASU 2020-03. The amendments related to Issue 3, Issue 6 and Issue 7 were effective for the Company beginning on January 1, 2020. The Company does not anticipate that the adoption of the new standard will have a material effect on its consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this standard can be applied anytime between the first quarter of 2020 and the fourth quarter of 2022. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures.
Other than the above, management does not believe that any of the recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
T. Going Concern
The
Company has suffered from losses from operation and significant accumulated deficits. It’s net loss for the year ended December
31, 2019 and 2018 were $
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NOTE 3. CASH AND CASH EQUIVALENTS
Cash consisted of the following:
| As
of December 31, 2019 | As
of December 31, 2018 | |||||||
| Cash on hand | $ | $ | ||||||
| Cash in banks | ||||||||
| Total cash | $ | $ | ||||||
NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following:
As of December 31, | As of December 31, | |||||||
| At Cost: | ||||||||
| Office equipment | $ | $ | ||||||
| Office furniture | ||||||||
| Total property and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Less: impairment | ||||||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation
expense was $
NOTE 5. INTANGIBLE ASSETS, NET
Intangible assets consisted of the following:
As of December 31, | As of December 31, | |||||||
| At Cost: | ||||||||
| Patent | $ | $ | ||||||
| Software | ||||||||
| Total intangible assets | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Less: impairment | ||||||||
| Intangible assets, net | $ | $ | ||||||
On
July 7, 2017, SQEC and the director and CEO of the Company, Mr. Zuyue Xiang (“Xiang”), entered into an intangible asset transfer
agreement. Xiang transferred his rights and ownership of the patent to a voice smart card and trading system for a consideration of RMB
Amortization
expense was $
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NOTE 6. RELATED PARTY PAYABLE
The details of Related Party Payables consisted of the followings:
| December 31,
2019 | December 31,
2018 | |||||||
| Beijing Yuxin Shangfang Technology Co., Ltd. | $ | $ | ||||||
| Hainan Xin Jing Yuan Co., Ltd. | ||||||||
| Xiang, Zuyue, director of SQEC and shareholder | ||||||||
| Xiang, Lingqing, employee of SQEC | ||||||||
| Lim, Jehn Ming, shareholder of EGOOS BVI | ||||||||
| Wang, Yue, director of EGOOS HK | ||||||||
| Yang, Mei, shareholder | ||||||||
| Li, Ping, director of WOFE | ||||||||
| Forgiveness of Related Party Payables | $ | $ | ||||||
NOTE 7. RELATED PARTY TRANSACTIONS
For
the year ended December 31, 2019, the Company entered into agreements with major shareholders and directors of the subsidiaries of the
Company to forgive the Related Party Payables amounting to $
| December 31,
2019 | ||||
| Beijing Yuxin Shangfang Technology Co., Ltd. | $ | |||
| Hainan Xin Jing Yuan Co., Ltd. | ||||
| Xiang, Zuyue, director of SQEC and shareholder | ||||
| Xiang, Lingqing, employee of SQEC | ||||
| Lim, Jehn Ming, shareholder of EGOOS BVI | ||||
| Wang, Yue, director of EGOOS HK | ||||
| Yang, Mei, shareholder | ||||
| Li, Ping, director of WOFE | ||||
| Forgiveness of Related Party Payables | $ | |||
For
the year ended December 31, 2019, the Company entered into agreements with major shareholders and directors of the subsidiaries of the
Company to assume or receive, as applicable certain assets and liabilities amounting to $
| December 31,
2019 | ||||
| Other receivable | $ | |||
| Prepaid taxes | ||||
| Accounts payable | ( | ) | ||
| Other payable | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Net liabilities undertaken by related party | $ | ( | ) | |
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NOTE 8. TAXATION
| a) | Corporate Income Taxes |
The Company was incorporated in the United States of America (“USA”). The Company did not generate any taxable income from its operations for the years ended December 31, 2019 and 2018.
The Company was incorporated in the United States (“USA”) and subject to taxes in the United States. The Company did not generate any taxable income from its operations for the years ended December 31, 2019 and 2018. The Company has evaluated their respective income tax positions and has determined that they do not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through their income tax expense.
The Company is subject to franchise tax filing requirements in the State of Delaware.
The components of the income tax expense are as follows:
| Year ended December 31, 2019 | Year ended December 31, 2018 | |||||||
| Current | $ | $ | ||||||
| Deferred | ||||||||
| Total | $ | $ |
Uncertain Tax Positions
Interest associated with unrecognized tax benefits are classified as income tax, and penalties are classified in selling, general and administrative expenses in the statements of operations. For the years ended December 31, 2020, and 2019, the Company had no unrecognized tax benefits and related interest and penalties expenses. Currently, the Company is not subject to examination by major tax jurisdictions.
| b) | Deferred Taxes |
Deferred income tax benefits arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating the Company’s ability to recover the deferred tax assets, the management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates that the Company is using to manage the underlying businesses. As of December 31, 2020 and 2019, management was uncertain as to whether or not the Company would be able to utilize the potential deferred tax assets arising from net operating losses’ since the Company is not currently generating any revenue; accordingly, the Company has not recognized a deferred tax asset.
| c) | Taxes Payable |
Taxes payable consisted of the following:
As of December 31, | As
of December 31, 2018 | |||||||
| Corporate income tax payable | $ | $ | ||||||
| Franchise tax payable | ||||||||
| Other surtaxes payable | ||||||||
| Total | $ | $ | ||||||
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NOTE 9. STOCKHOLDERS’ EQUITY
Common stock
As of December 31, 2019 and 2018, the Company
had
Stock option compensation
On
October 20, 2017, the Company issued to Mr. Yang Liu, the option to purchase
For
the years ended December 31, 2018 and 2017, the Company recorded stock option compensation expense of $
For the years ended December 31, 2019, no stock option has been issued.
NOTE 10. LOSS PER SHARE
The following table presents a reconciliation of basic and diluted earnings per share:
| For
the years ended December, 31 | ||||||||
| 2019 | 2018 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted average number of common stock outstanding - basic and diluted | ||||||||
| Loss per share – Basic and diluted: | $ | ( | ) | $ | ( | ) | ||
NOTE 11. GOING CONCERN UNCERTAINTIES
These financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As
of December 31, 2019 and 2018, the Company had accumulated deficits of $
The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
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NOTE 12. CONCENTRATION OF RISK
| a) | Major Customer |
The
Company has certain customers who represented
| b) | Major Vendors and Accounts Payable |
The
Company has certain vendors who represented
| c) | Credit Risk |
The
Company maintains cash balances at several financial institutions located in the United States and the PRC. Accounts located in the United
States are insured by the Federal Deposit Insurance Corporation up to $
NOTE 13. SIGNIFICANT EVENTS
In December 2019, there was an outbreak of the novel coronavirus (COVID-19) in China that has since spread to many other regions of the world. The outbreak was subsequently labeled as a global pandemic by the World Health Organization in March 2020. It is anticipated that the COVID-19 outbreak may ultimately have a material adverse impact on the Company’s results of operations, financial position and cash flow in 2020 including, but not limited to:
Transportation delays and cost increases, more extensive travel restrictions, closures or disruptions of businesses and facilities or social, economic, political or labor instability in the affected areas, may impact the Company’s customers’ operations. Customers may not be able to repay their loans on time due to lack of capital.
The extent of the impact of COVID-19 on the Company’s operations and financial results depends on future developments and is highly uncertain due to the unknown duration and severity of the outbreak. The situation is changing rapidly and future impacts may materialize that are not yet known. The Company continues to monitor the situation closely and may implement further measures to provide additional financial flexibility and improve the Company’s cash position and liquidity.
NOTE 14. SUBSEQUENT EVENTS
On February 25, 2021, the holder of the majority outstanding voting stock of the Company restructured the board of directors (the “Board”) of the Company by removing Mei Yang, Zuyue Xiang and Minqin Tang from the Board and appointing the following individuals to the Board (the “New Board”): Jiang Hui, Hon Man Yun, Hong Chen, Xiaoyue Zhang and Ming Yi, effective immediately. Among the member of the New Board, Ming Yi shall serve as the Chair of the Audit Committee, Hong Chen the Chair of the Compensation Committee and Xiaoyue Zhang the Chair of the Nominating and Corporate Committee.
On February 25, 2021, the New Board removed Zuyue Xiang as the Chief Executive Officer (the “CEO”) and Zhenpeng Gao as the Chief Financial Officer (“CFO”) and appointed Jiang Hui as the new CEO and Hon Man Yun as the new CFO, effective immediately. The New Board believes that the new CEO and CFO shall use their best efforts to execute the Board’s vision to change the direction of the Company’s business.
On March 31, 2021 (the “Commencement Date”), the Company and Joseph Stone Capital, LLC (“JSC”) entered into an Advisory and Finder Agreement (the “Agreement”). Pursuant to the Agreement, JSC has been engaged to advise the Company on matters related to the Company’s capital market activities. Additionally, at the request of the Company, JSC will help the Company identify one or more investors, business and/or financing opportunities (each a “Target”).
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Pursuant to the Agreement, the Company paid JSC an initial advisory
fee equal to $
The Agreement continued in effect for a period of three (3) months from the Commencement Date and might be terminated upon thirty (30) days of written notice by either party after the three (3) months. Should the Company effectuate a transaction (as defined in the Agreement) with any of the Target(s) identified by Advisor in the eighteen (18)-month period after termination of Agreement, Advisor will be due the Commission Fee. JSC also has a right of first refusal with respect to any financings that the Company decides to commence during the 18-month period following the consummation of a Transaction (as defined in the Agreement”).
On
May 28, 2021, the Company and Hudson Capital USA Inc. (the “Seller”) entered into a vehicle purchase agreement, pursuant
to which the Company agreed to buy from the Seller $
The Company and Seller are related parties because the majority of the board of directors of the Company are the board members of the Seller, constituting the majority of the board of directors of the Seller and Hon Man Yun serves as the Chief Financial Officer of both the Company and Seller.
On
June 4, 2021, the Company (the “Buyer”) and Hudson Capital USA Inc. (the “Seller”) entered into a share transfer
agreement (the “Archax SPA”), pursuant to which the Company agreed to buy from the Seller $
The Company and Seller are related parties because the majority of the board of directors of the Company are the board members of the Seller, constituting the majority of the board of directors of the Seller and Hon Man Yun serves as the Chief Financial Officer of both the Company and Seller.
On June 16, 2021, the Company and Seller closed the stock purchase transaction in accordance with the Montis SPA. On June 17, 2021, the Company and Seller closed the stock purchase transaction in accordance with the Archax SPA.
On
July 19, 2021, the Company entered into a Consulting Agreement with PX Global Advisors, LLC. for acting as advisor to assist the Company
on business combination and listing on a U.S. national stock exchange for a consultancy fee of $
On
July 29, 2021,
Except for the above mentioned matters, no other material events are required to be adjusted or disclosed as of the report date of the consolidated financial statements.
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