UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal years ended December 31, 2019 and December 31, 2020
or
☐ TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ___________ to ___________
Commission
file number 001-34113
WAVE
SYNC CORP.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
74-2559866
|
(State
or other jurisdiction of
Incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
19
West 44th Street, Suite 1001, New York, NY
|
|
10036
|
(Address of principal executive
offices)
|
|
(Zip Code)
|
Registrant’s
telephone number, including area code: +852 9804 7102
Securities
registered under Section 12(b) of the Exchange Act:
None
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, par value $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 ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes ☐ No ☒
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 ☐ No ☒
Indicate
by check mark whether the registrant has submitted electronically 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 ☐ No ☒
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
|
☐
|
Non-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). Yes ☒ No
☐
State
the aggregate market value of the voting and non-voting common equity held by non-affiliates, as of the last business day of the registrant’s
most recently completed second fiscal quarter was approximately $13,091,534 as of June 30, 2020.
As
of July 20, 2021, the registrant had 31,527,713 shares of common stock issued and outstanding.
TABLE
OF CONTENTS
EXPLANATORY
NOTE
This is the first periodic report of Wave Sync Corp. (the “Company”,
“we”, “us”, and “our”, unless the context indicates otherwise) covering periods after December 31,
2018. Readers should be aware that several aspects of this Annual Report on Form 10-K differ from other annual reports. First, this report
is for each of the fiscal years ended December 31, 2019 and 2020, in lieu of filing separate reports for each of those years. Second,
because of the amount of time that has passed since our last periodic report was filed with the Securities and Exchange Commission (the
“SEC”), the information relating to our company is focused on our more recent periods after December 31, 2018. In addition,
this report includes financial statements and other disclosures for the quarterly periods ended March 31, 2021 and June 30, 2021. We do
not intend to file the Quarterly Reports on Form 10-Q for any of the quarters ended March 31, 2019 through September 30, 2020 or for the
quarters ended March 31, 2021 and June 30, 2021.
We
believe that the filing of this expanded annual report enables us to provide information to investors in a more efficient manner than
separately filing each of the quarterly reports described above.
FORWARD-LOOKING
STATEMENTS
Certain
statements made in this Annual Report on Form 10-K are “forward-looking statements” regarding the plans and objectives of
management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed
or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that
involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions that involve judgments
with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are beyond the control of the Company. We undertake no obligation to
revise or update publicly any forward-looking statements, except as may be required under applicable law.
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.
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.
On June 4, 2021, the Company and Hudson Capital USA Inc. (“Hudson”)
entered into a share transfer agreement (the “Archax SPA”), pursuant to which the Company agreed to buy from Hudson $500,000
of shares (1.74% of ownership) of Archax Holdings Ltd. (“Archax”), a company organized under the laws of England, UK. Archax
is a global digital asset trading platform and ecosystem. In addition, on June 4, 2021, the Company and Hudson entered into another share
transfer agreement (the “Montis SPA”), pursuant to which the Company agreed to buy from Hudson $250,000 of shares (2.63% of
ownership) of Montis Digital Limited (“Montis”), a company organized under the laws of Gibraltar. Montis primarily provides
marketing and consulting services for digital assets and related entities in the digital asset ecosystems
The Company and Hudson
are related parties because the majority of the board of directors of the Company are the board members of Hudson, constituting the
majority of the board of directors of Hudson and Hon Man Yun serves as the Chief Financial Officer of both the Company and
Seller.
On June 16, 2021, the Company and Hudson closed the stock purchase transaction in
accordance with the Montis SPA. On June 17, 2021, the Company and Hudson closed the stock purchase transaction in accordance with
the Archax SPA.
We intend to seek the acquisition
of, or merger with, an existing company. There is no assurance we will succeed in consummating any such transaction.
Employees
As
of the date of this annual report, we have 4 employees, all of them are full-time. 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 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.
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 July 20, 2021, we had approximately 136 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. RESERVED.
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 should be read in conjunction with our financial
statements and the notes to those financial statements that are included elsewhere in this report. 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,
and retention of senior management and other key personnel. 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.
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, 2020 and 2019, 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.
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.
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, 2020 and 2019, $0 and $0 stock-based compensation was recognized.
Foreign
currency translation
The
accompanying financial statements are presented in United States dollars (USD). The functional currency of the Company is the USD and
Renminbi (RMB). The financial statements are translated into USD from RMB at year-end exchange rates as to assets and liabilities and
average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital
transactions occurred.
Exchange rates
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Year-end/period-end RMB : US$ exchange rate
|
|
|
6.5249
|
|
|
|
6.9762
|
|
Average annual/period RMB : US$ exchange rate
|
|
|
6.9010
|
|
|
|
6.8944
|
|
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.
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.
The
following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10
As
of December 31, 2020:
|
|
Quoted
in Active
Markets for
Identical Assets
(Level
1)
|
|
|
Significant
Other Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
Total financial assets
|
|
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
As
of December 31, 2019:
|
|
Quoted
in Active
Markets
for
Identical Assets
(Level
1)
|
|
|
Significant
Other Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
16
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16
|
|
Total financial assets
|
|
|
16
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16
|
|
Results
of Operations
Year
Ended December 31, 2020 and 2019
For
the year ended December 31, 2019, we ceased all active business operations.
Revenue
There
was no revenue for the years ended December 31, 2020 and 2019.
Expenses
General and administrative and financial expenses were related to corporate
overhead, financial and administrative contracted services, such as legal and accounting. General and administrative expenses and financial
expenses for the year ended December 31, 2020 were $39,451 as compared to $33,276 for the comparable period ended December 31, 2019, which
represented an increase of $6,175 or approximately 19%. Such increase was primarily attributed to increase of professional fees.
Liquidity
and Capital Resources
Our
primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures and to service
our debt. We continue to be dependent on our ability to generate revenues, positive cash flows and additional financing.
Working
Capital Summary
|
|
As
of
December 31,
2020
|
|
|
As
of
December 31,
2019
|
|
Current assets
|
|
$
|
3
|
|
|
$
|
16
|
|
Current liabilities
|
|
$
|
71,844
|
|
|
$
|
32,406
|
|
Working capital
|
|
$
|
(71,841
|
)
|
|
$
|
(32,390
|
)
|
Cash
Flows
|
|
Years ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows used in operating activities
|
|
$
|
(13
|
)
|
|
$
|
(286
|
)
|
Cash flows from investing activities
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash flows from financing activities
|
|
$
|
-
|
|
|
$
|
-
|
|
Results
of Operations
Fiscal
Quarters Ended March 31, 2021 and 2020
Revenue
There
was no revenue for the three months ended March 31, 2021 and 2020.
Expenses
General and administrative and financial expenses were related to corporate
overhead, financial and administrative contracted services, such as legal and accounting. General and administrative expenses and financial
expenses for the three months ended March 31, 2021 were $11,003 as compared to $4,396 for the comparable period ended March 31, 2020,
which represented an increase of $6,607 or approximately 150%. Such increase was primarily attributed to increase of professional fees.
Liquidity
and Capital Resources
Our
primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures and to service
our debt. We continue to be dependent on our ability to generate revenues, positive cash flows and additional financing.
Working
Capital Summary
|
|
As
of
March 31,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Current assets
|
|
$
|
3,003
|
|
|
$
|
3
|
|
Current liabilities
|
|
$
|
85,847
|
|
|
$
|
71,844
|
|
Working capital
|
|
$
|
(82,844
|
)
|
|
$
|
(71,841
|
)
|
Cash
Flows
|
|
Three
months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cash flows used in operating activities
|
|
$
|
(17,431
|
)
|
|
$
|
-
|
|
Cash flows from investing activities
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash flows from financing activities
|
|
$
|
20,431
|
|
|
$
|
-
|
|
Results
of Operations
Three
Months Ended June 30, 2021 and 2020
Revenue
There
was no revenue for the three months ended June 30, 2021 and 2020.
Expenses
General and administrative
were related to corporate overhead, professional fees and administrative contracted services, such as legal and accounting. General and
administrative expenses for the three months ended June 30, 2021 were $31,090 as compared to $4,014 for the comparable period ended March
31, 2020, which represented an increase of $27,076 or approximately 675%. Such increase was primarily attributed to increase of professional
fees.
Financial expenses were related
to bank charges, and interest expenses. Financial expenses for the three months ended June 30, 2021 were $400 as compared to $12 for the
comparable period ended June 30, 2020, such increase was primarily attributed to have transactions through bank account and accrued interest
on related party payable.
Six
Months Ended June 30, 2021 and 2020
Revenue
There
was no revenue for the six months ended June 30, 2021 and 2020.
Expenses
General and administrative expenses were related to corporate overhead,
professional fees and administrative contracted services, such as legal and accounting. General and administrative expenses for the six
months ended June 30, 2021 were $41,814 as compared to $8,410 for the comparable period ended March 31, 2020, which represented an increase
of $33,404 or approximately 397%. Such increase was primarily attributed to increase of professional fees.
Financial expenses were related to bank charges, and interest expenses.
Financial expenses for the six months ended June 30, 2021 were $680 as compared to $12 for the comparable period ended June 30, 2020,
such increase was primarily attributed to have transactions through bank account and accrued interest on related party payable.
Liquidity
and Capital Resources
Our
primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures and to service
our debt. We continue to be dependent on our ability to generate revenues, positive cash flows and additional financing.
Working
Capital Summary
|
|
As
of
June 30,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Current assets
|
|
$
|
129,628
|
|
|
$
|
3
|
|
Current liabilities
|
|
$
|
78,963
|
|
|
$
|
71,844
|
|
Working capital
|
|
$
|
50,665
|
|
|
$
|
(71,841
|
)
|
Cash
Flows
|
|
Six months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cash flows used in operating activities
|
|
$
|
(125,608
|
)
|
|
$
|
(12
|
)
|
Cash flows used in investing activities
|
|
$
|
(850,000
|
)
|
|
$
|
-
|
|
Cash flows from financing activities
|
|
$
|
1,052,493
|
|
|
$
|
-
|
|
Cash
flows from operating activities
Since
the change of management in February 25, 2021, the Company has resumed its operation and incurred cash flows used in operating activities.
Cash
flows from investing activities
During
the period ended June 30, 2021, the Company has the following investing activities.
Long
term investment
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 $500,000 worth of shares (1.74%
of ownership) of Archax Holdings Ltd. (“Archax”), a company organized under the laws of England, UK. Archax is a global digital
asset trading platform and ecosystem. In addition, on June 4, 2021, the Company and the Seller entered into another share transfer agreement
(the “Montis SPA”), pursuant to which the Company agreed to buy from the Seller $250,000 worth of shares of (2.63% of ownership)
Montis Digital Limited (“Montis”), a company organized under the laws of Gibraltar. Montis primarily provides marketing and
consulting services for digital assets and related entities in the digital asset ecosystems. Each of the Archax SPA and Montis SPA contained
customary representations and warranties for transactions of this nature and scale.
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.
Property,
plant and equipment
On
May 28, 2021, the Company (the “Buyer”) and Hudson Capital USA Inc. (the “Seller”) entered into vehicle purchase
agreement, pursuant to which the Company agreed to buy from the Seller $100,000 worth of motor vehicle.
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.
Cash
flows from financing activities
On
April 23, 2021, the Company entered into subscription agreements with five accredited investors for the sale and issuance of ten million
and five hundred thousand shares (10,500,000) of the Company’s common stock at a per-share price of $0.10 for aggregate gross proceeds
of $1,050,000. As of the date of this filing, the Company has received gross proceeds of $1,050,000 from this private placement.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are 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.
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.
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.
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 fiscal years ended December 31, 2019 and 2020 and unaudited financial statements for the three months
ended March 31, 2021 and six months ended June 30, 2021 begins on page F-1 of this report.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On
April 19, 2021, the Company engaged Centurion ZD CPA & Co. (“Centurion”) as the Company’s independent registered
public accounting firm.
During
the two most recent fiscal years and in the subsequent interim period through April 19, 2021, the Company did not consult with Centurion
with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit
opinion that would have been rendered on the Company’s financial statements, or any other matters set forth in Item 304(a)(2)(i)
or (ii) of Regulation S-K.
The
decision to engage Centurion was approved by the Company’s board of directors.
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.
As
of December 31, 2020, March 31, 2021, and June 30, 2021, 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
have concluded that our disclosure controls and procedures were, due to certain factors, not effective 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.
|
As
of December 31, 2020, 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, 2020. 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, 2019 and 2020, and three months ended March 31, 2021, and six months ended June
30, 2021 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.
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.
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)
|
|
2020
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhenpeng Gao
|
|
2019
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Former Chief Financial Officer(1)
|
|
2020
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(1)
Mr. Xiang and Mr. Gao were removed as officers of the Company on February 25, 2021.
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, 2019 and 2020. Options
which the Company had granted to Mr. Yang Lui 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 2019 or 2020 for services as directors.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information regarding the ownership of our capital stock, as of July 20, 2021 by (i) each person known
by us to be the beneficial owner of 5% or more of the outstanding common stock, (ii) each executive officer and director of the Company,
and (iii) all of our executive officers and directors as a group. As of July 20, 2021, the Company had 31,527,713 shares of common stock
issued and outstanding.
Unless
otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them.
Name and Address of Beneficial Owner (1)
|
|
Amount and
Nature of Beneficial Ownership (2)
|
|
|
Percentage
of
Class
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
Jiang Hui
|
|
|
0
|
|
|
|
-
|
|
Hon Man Yun
|
|
|
0
|
|
|
|
-
|
|
Hong Chen
|
|
|
0
|
|
|
|
-
|
|
Xiaoyue Zhang
|
|
|
0
|
|
|
|
-
|
|
Ming Yi*
|
|
|
43,187
|
|
|
|
0.1
|
%
|
All directors and executive officers as a group (5 persons)*
|
|
|
43,187
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
5% Holders
|
|
|
|
|
|
|
|
|
Zaixian Wang(1)
|
|
|
2,875,000
|
|
|
|
9.1
|
%
|
Jianhong Wang
|
|
|
5,530,000
|
|
|
|
17.5
|
%
|
Mei Yang
|
|
|
2,081,837
|
|
|
|
6.6
|
%
|
Zuyue Xiang
|
|
|
3,000,000
|
|
|
|
9.5
|
%
|
Everbroad International LLC
|
|
|
2,000,000
|
|
|
|
6.3
|
%
|
Fortune Gear Ltd
|
|
|
2,000,000
|
|
|
|
6.3
|
%
|
Coco Han
|
|
|
5,000,000
|
|
|
|
15.9
|
%
|
|
(1)
|
Includes 1,000,000 held by
US New Media Holding Group Inc., the beneficiary holder of which is Warren Wang. Zaixian Wang is Warren Wang’s father,
however, Warren Wang disclaims the beneficial ownership of the 2,875,000 shares of Common Stock.
|
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,
2020
|
|
|
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,
2020
|
|
|
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
|
)
|
Due
from related parties consisted of the followings:
|
|
As
of
June 30,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Hon Man Yun
|
|
$
|
12,740
|
|
|
$
|
-
|
|
|
|
$
|
12,740
|
|
|
$
|
-
|
|
The
amount was advance to Hon Man Yun, Chief Financial Officer and director of the Company, for settlement the operating expenses incurred
during the Company’s operations. The amount is unsecured, interest-free and repayable on demand.
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 $500,000 worth of shares (1.74% of ownership) of Archax Holdings
Ltd. (“Archax”), a company organized under the laws of England, UK. Archax is a global digital asset trading platform and
ecosystem. In addition, on June 4, 2021, the Company and the Seller entered into another share transfer agreement (the “Montis SPA”),
pursuant to which the Company agreed to buy from the Seller $250,000 worth of shares (2.63% of ownership) of Montis Digital Limited (“Montis”),
a company organized under the laws of Gibraltar. Montis primarily provides marketing and consulting services for digital assets and related
entities in the digital asset ecosystems. Each of the Archax SPA and Montis SPA contained customary representations and warranties for
transactions of this nature and scale.
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
May 28, 2021, the Company (the “Buyer”) and Hudson Capital USA Inc. (the “Seller”) entered into vehicle purchase
agreement, pursuant to which the Company agreed to buy from the Seller $100,000 worth of motor vehicle.
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.
Related
party payables consisted of the followings:
|
|
As of
June 30,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
PX SPAC Capital Inc.
|
|
$
|
37,493
|
|
|
$
|
-
|
|
|
|
$
|
37,493
|
|
|
$
|
-
|
|
The amount was provided as working capital to financing the Company’s
operations. The amount is unsecured, 2% annual interest bearing and due on demand.
The
Company and PX SPAC Capital Inc. are related parties because Hon Man Yun serves as the Chief Financial Officer of both the Company and
PX SPAC Capital Inc.
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., for professional
services rendered in 2020 and 2019.
Fiscal Year
|
|
Audit
Fees
|
|
|
Audit-Related
Fees
|
|
|
Tax
Fees
|
|
|
All Other
Fees
|
|
2020
|
|
$
|
31,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2019
|
|
$
|
27,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
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.
PART
IV
ITEM
15. EXHIBITS
Exhibit No.
|
|
Description
|
3.1
|
|
Restated Certificate of Incorporation (1)
|
3.2
|
|
Certificate of Amendment to Certificate of Incorporation (2)
|
3.3
|
|
Certificate of Amendment to Certificate of Incorporation (3)
|
3.4
|
|
Certificate of Amendment to Certificate of Incorporation (4)
|
3.5
|
|
Certificate of Amendment to Certificate of Incorporation (5)
|
3.4
|
|
Amended and Restated Bylaws of the Registrant (6)
|
4.1
|
|
Description of Registrant’s Securities*
|
10.1
|
|
Exclusive Service Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, Shenzhen Exce-card, Guangzhou Rongsheng and the WFOE (7)
|
10.2
|
|
Voting Rights Proxy Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, its shareholders, Shenzhen Exce-card, Guangzhou Rongsheng and the WFOE (7)
|
10.3
|
|
Equity Pledge Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, its shareholders, Shenzhen Exce-card, Guangzhou Rongsheng and the WFOE (7)
|
10.4
|
|
Call Option Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, its shareholders, Shenzhen Exce-card, Guangzhou Rongsheng and the WFOE (7)
|
10.5
|
|
Unofficial English translation of Cooperation Agreement, dated July 23, 2014, by and between Shenzhen Exce-card and Hengbao (5)
|
10.6
|
|
Unofficial English translation of Cooperation Agreement, dated July 7, 2014, by and between Shenzhen Exce-card and Tianyu (5)
|
10.7
|
|
Unofficial English translation of Cooperation Agreement, dated September 28, 2015, by and between Shenzhen Exce-card and Hengbao (5)
|
10.8
|
|
Unofficial English translation of Preparation Service Agreement, dated May 1, 2015, by and between Shenzhen Exce-card and Tianyu (5)
|
10.9
|
|
Convertible note exchange agreement, dated March 17, 2017, by and among Wave Sync Corp., Zaixian Wang and Mei Yang (8)
|
10.10
|
|
Advisory and Finder Agreement (9)
|
10.11
|
|
Form of Subscription Agreement (10)
|
10.12
|
|
Share Transfer Agreement between Wave Sync Corp. and Hudson Capital USA (11)
|
10.13
|
|
Share Transfer Agreement between Wave Sync Corp. and Hudson Capital USA (11)
|
31.1
|
|
CEO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
31.2
|
|
CFO Certification, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
32.1
|
|
CEO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
32.2
|
|
CFO Certification, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
101.INS
|
|
XBRL
Instance Document*
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document*
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document.*
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document.*
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document.*
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document.*
|
(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 8-K filed with the SEC on April 6, 2021.
|
(10)
|
Incorporated
by reference to 8-K filed with the SEC on May 19, 2021.
|
(11)
|
Incorporated by reference to 8-K filed with the SEC on June 29, 2021.
|
ITEM
16. FORM 10-K SUMMARY.
Not
applicable.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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: August 3, 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 Jiang Hui 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
|
|
August 3, 2021
|
Jiang Hui
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Hon Man Yun
|
|
Chief Financial Officer and Director
|
|
August 3, 2021
|
Hon Man Yun
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Hong Chen
|
|
Director
|
|
August 3, 2021
|
Hong Chen
|
|
|
|
|
|
|
|
|
|
/s/ Xiaoyue Zhang
|
|
Director
|
|
August 3, 2021
|
Xiaoyue Zhang
|
|
|
|
|
|
|
|
|
|
/s/ Ming Yi
|
|
Director
|
|
August 3, 2021
|
Ming Yi
|
|
|
|
|
WAVE
SYNC CORP. AND SUBSIDIARIES
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Consolidated Balance Sheets as of December 31, 2020 and 2019
|
|
F-3
|
|
|
|
Consolidated Statements of Operations and Comprehensive (Loss) Income for the Years Ended December 31, 2020 and 2019
|
|
F-4
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019
|
|
F-5
|
|
|
|
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2020 and 2019
|
|
F-6
|
|
|
|
Notes to the Consolidated Financial Statements
|
|
F-7 – F-20
|
|
|
|
For the Interim Financial
Statements and Notes:
|
|
|
|
|
|
For the Fiscal Quarter
ended March 31, 2021
|
|
|
|
|
|
Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020
|
|
F-21
|
|
|
|
Consolidated Statements of Operations and Comprehensive (Loss) Income for the Fiscal Quarters Ended March 31, 2021 and 2020 (Unaudited)
|
|
F-22
|
|
|
|
Consolidated Statements of Cash Flows for the Fiscal Quarters Ended March 31, 2021 and 2020 (Unaudited)
|
|
F-23
|
|
|
|
Consolidated Statements of Changes in Shareholders’ Equity for the Fiscal Quarters Ended March 31, 2021 and 2020 (Unaudited)
|
|
F-24
|
|
|
|
Notes to the Consolidated Financial Statements (Unaudited)
|
|
F-25
– F-39
|
|
|
|
For the Fiscal Quarter
ended June 30, 2021
|
|
|
|
|
|
Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020
|
|
F-40
|
|
|
|
Consolidated Statements of Operations and Comprehensive (Loss) Income for the Fiscal Quarters Ended June 30, 2021 and 2020 (Unaudited)
|
|
F-41
|
|
|
|
Consolidated Statements of Cash Flows for the Fiscal Quarters Ended June 30, 2021 and 2020 (Unaudited)
|
|
F-42
|
|
|
|
Consolidated Statements of Changes in Shareholders’ Equity for the Fiscal Quarters Ended June 30, 2021 and 2020 (Unaudited)
|
|
F-43
|
|
|
|
Notes to the Consolidated Financial Statements (Unaudited)
|
|
F-44
– F-58
|
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 consolidated
balance sheets of Wave Sync Corp. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of
operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended December
31, 2020, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the
two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
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.
Critical Audit Matters
The critical audit matters
communicated below are matters arising from the current period audit of the financial statements that were communicated or required to
be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Going Concern
Referring to Note 2T and 10, the Company has suffered
from losses from operation and significant accumulated deficits. The Company’s primary sources of working capital are supporting
from existing stockholders and fund raising activities from existing and new stockholders. During the audited current year, the Company
has no revenue and the primary cash flows from operations are negative. The Company had conducted certain fund raising activities
subsequent to the year ended date, with approximate $ 2.8 million was raised with these activities. Based on the Company’s operating
plan, management believes that the current working capital combined with expected operating and financing cash inflows which will be sufficient
to fund the Company’s operations and satisfy the Company’s obligations as they come due for at least one year from the financial
statement issuance date.
We identified management’s assessment of
the Company’s ability to continue as a going concern as a critical audit matter. The going concern assessment requires management
judgment to critically evaluate its forecasts and liquidity projections. Auditing the management’s going concern assessment involved
especially challenging auditor judgment and audit effort due to the nature and extent of effort required to address these matters.
The primary procedures
we performed to address this critical audit matter included:
|
●
|
Evaluating the reasonableness of management’s assumptions and revision on forecasts and liquidity projections, which included: (i) obtaining an understanding of management’s process for developing cashflow forecasts, (ii) comparing prior period forecasts to actual results, and (iii) assessing the Company’s ability to meet its trailing one year operating expenses covenant for the twelve months period from the date of issuance.
|
|
●
|
Assessing management’s projections in the context of other audit evidence obtained during the audit and historical performance to determine whether it was contradictory to the conclusion reached by management.
|
●
|
Assessing management’s plan to mitigate the going concern including but not limited to subsequent fund raising activities and the successful amount of raised capital from such activities to determine whether the newly raised capital can meet the expenses for the next twelve months operating activities from the date of issuance.
|
/s/ Centurion ZD CPA & Co.
|
|
Centurion ZD CPA & Co.
|
|
|
|
We have served as the Company’s auditor since 2021.
|
|
Hong Kong, China
|
|
|
|
August 3, 2021
|
|
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
AS
OF DECEMBER 31, 2020 AND 2019
(Stated
in US Dollars)
|
|
As of
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3
|
|
|
$
|
16
|
|
Other receivable
|
|
|
-
|
|
|
|
-
|
|
Advance to suppliers
|
|
|
-
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
-
|
|
Prepaid taxes
|
|
|
-
|
|
|
|
-
|
|
Due from related parties
|
|
|
-
|
|
|
|
-
|
|
Total Current Assets
|
|
|
3
|
|
|
|
16
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property and Equipment, net
|
|
|
-
|
|
|
|
-
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
-
|
|
Deferred Tax Assets
|
|
|
-
|
|
|
|
-
|
|
Total Assets
|
|
$
|
3
|
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
-
|
|
|
$
|
-
|
|
Other payables
|
|
|
-
|
|
|
|
-
|
|
Accrued expenses
|
|
|
71,044
|
|
|
|
32,006
|
|
Due to related party
|
|
|
-
|
|
|
|
-
|
|
Taxes payable
|
|
|
800
|
|
|
|
400
|
|
Total Current Liabilities
|
|
|
71,844
|
|
|
|
32,406
|
|
Provision of other liabilities
|
|
|
-
|
|
|
|
-
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
-
|
|
Total Liabilities
|
|
$
|
71,844
|
|
|
$
|
32,406
|
|
|
|
|
|
|
|
|
|
|
Commitment and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
Common Stock ($0.001 par value, 100,000,000 shares authorized, 21,027,713 and 21,027,713 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively)
|
|
$
|
21,027
|
|
|
$
|
21,027
|
|
Additional paid in capital
|
|
|
27,297,495
|
|
|
|
27,297,495
|
|
Accumulated deficits
|
|
|
(27,131,839
|
)
|
|
|
(27,092,388
|
)
|
Accumulated other comprehensive loss
|
|
|
(258,524
|
)
|
|
|
(258,524
|
)
|
Total Shareholders’ Equity
|
|
|
(71,841
|
)
|
|
|
(32,390
|
)
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
3
|
|
|
$
|
16
|
|
See
notes to consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Stated
in US Dollars)
|
|
Year Ended
December 31,
2020
|
|
|
Year Ended
December 31,
2019
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
39,438
|
|
|
|
33,276
|
|
Financial expenses
|
|
|
13
|
|
|
|
-
|
|
Total Operating expenses
|
|
|
39,451
|
|
|
|
33,276
|
|
Loss from operations
|
|
|
(39,451
|
)
|
|
|
(33,276
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
Other expenses
|
|
|
-
|
|
|
|
-
|
|
Other income
|
|
|
-
|
|
|
|
-
|
|
Impairment loss
|
|
|
-
|
|
|
|
-
|
|
Total other (expenses) income, net
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax expenses
|
|
|
(39,451
|
)
|
|
|
(33,276
|
)
|
Income tax expenses
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(39,451
|
)
|
|
$
|
(33,276
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain
|
|
|
-
|
|
|
|
-
|
|
Comprehensive loss
|
|
$
|
(39,451
|
)
|
|
$
|
(33,276
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted
|
|
|
21,027,713
|
|
|
|
21,027,713
|
|
Basic and diluted loss per share
|
|
$
|
(0.00188
|
)
|
|
$
|
(0.00158
|
)
|
See
notes to consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Stated
in US Dollars)
|
|
Years
ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(39,451
|
)
|
|
$
|
(33,276
|
)
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
584
|
|
Stock compensation
|
|
|
-
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
-
|
|
|
|
-
|
|
Advance to suppliers
|
|
|
-
|
|
|
|
-
|
|
Prepaid expenses and taxes
|
|
|
-
|
|
|
|
-
|
|
Accounts payable
|
|
|
-
|
|
|
|
-
|
|
Accrued expenses
|
|
|
39,038
|
|
|
|
32,006
|
|
Other payables
|
|
|
-
|
|
|
|
-
|
|
Tax payable
|
|
|
400
|
|
|
|
400
|
|
Net cash (used in)/provided by operating activities
|
|
$
|
(13
|
)
|
|
$
|
(286
|
)
|
|
|
|
|
|
|
|
|
|
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
|
|
|
-
|
|
|
|
(202
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
$
|
(13
|
)
|
|
$
|
(488
|
)
|
Cash at beginning of year
|
|
|
16
|
|
|
|
504
|
|
Cash at end of year
|
|
$
|
3
|
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
|
13
|
|
|
|
-
|
|
Income taxes paid
|
|
|
-
|
|
|
|
-
|
|
Non- cash financing activities
|
|
|
|
|
|
|
|
|
Forgiveness of loans from related parties
|
|
$
|
-
|
|
|
$
|
(994,040
|
)
|
Undertaking of assets and liabilities by related parties
|
|
$
|
-
|
|
|
$
|
(414,226
|
)
|
See
notes to the consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIENCY)
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(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, 2018
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
25,889,431
|
|
|
$
|
(27,059,112
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(1,407,178
|
)
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,276
|
)
|
|
|
-
|
|
|
|
(33,276
|
)
|
Forgiveness of loan from related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
994,040
|
|
|
|
-
|
|
|
|
-
|
|
|
|
994,040
|
|
Undertaking of assets and liabilities by related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
414,226
|
|
|
|
-
|
|
|
|
-
|
|
|
|
414,226
|
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(202
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(202
|
)
|
Balance as of December 31, 2019
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,092,388
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(32,390
|
)
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(39,451
|
)
|
|
|
-
|
|
|
|
(39,451
|
)
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of December 31, 2020
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,131,839
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(71,841
|
)
|
See
notes to the consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(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 100% of Ding Neng Holdings
in exchange for the issuance of 26,162,505 shares of the Company’s common stock, par value $0.001. Under the share exchange agreement,
the Company would have contemplated owning and operating Ding Neng Holdings and Ding Neng Holdings’ directly, and indirectly held
subsidiaries: Ding Neng Bio-technology Co., Ltd. (“Ding Neng HK”), Zhangzhou Fuhua Biomass Energy Technology Co., Ltd. (“WOFE”),
and Ding Neng Bio-tech. Ding Neng HK was incorporated under the laws of Hong Kong on September 10, 2010. Ding Neng HK did not have any
operations. Ding Neng HK has been delinquent with its annual regulatory filings in Hong Kong, and should be considered dormant and defunct.
Ding Neng HK was wholly-owned by Ding Neng Holdings. Zhangzhou Fuhua Biomass Energy Technology Co., Ltd.(“WFOE”) was incorporated
as a wholly-foreign owned entity under the laws of the People’s Republic of China (“PRC”), on November 2, 2010. WFOE
was wholly-owned by Ding Neng HK. Ding Neng Bio-tech was incorporated under the laws of the PRC on December 8, 2006. It was located in
Zhangzhou city Fujian Province of PRC. Ding Neng Bio-tech was engaged in theproduction, refinement and distribution of bio-diesel fuel
in Southern China. Ding Neng Bio-tech operated a biodiesel manufacturing facility in Zhangzhou city. On October 28, 2010, WFOE and Ding
Neng Bio-tech entered into a set of variable interest entity agreements that included: (1) a Consulting Service Agreement with Ding Neng
Bio-tech, which entitled WFOE toreceive substantially all of the economic benefits of Ding Neng Bio-tech in consideration for services
provided by WFOE to DingNeng Bio-tech, (2) an Option Agreement with Xinfeng Nie, Sanfu Huang, and Shunlong Hu (the shareholders of Ding
Neng Bio-tech) allowing the WFOE to acquire all the shares of Ding Neng Bio-tech as permitted by PRC laws, (3) a Voting Rights Proxy
Agreement that provides WFOE with the all voting rights of the Ding Neng Bio-tech shareholders, and (4) an Equity Pledge Agreement that
pledges the shares in Ding Neng Bio-tech to WFOE (VIE Agreements). These VIE Agreements granted effective control of Ding Neng Bio-tech
to WFOE. On June 4, 2015, WFOE filed a civil action in Haicang District People’s Court of Xiamen, Fujian, PRC (the “Court”)
against Ding Neng Bio-tech, alleging that the purposes of those certain executed VIE Agreements entered into by WFOE and Ding Neng Bio-Tech
on October 28, 2010, had been frustrated, and that these VIE Agreements should be terminated. WFOE alleged that Ding Neng Bio-Tech did
not make any payment of service fees to WFOE, and that Ding Neng Bio-Tech failed to perfect the security interest in the pledged stocks.
On July 14, 2015, this case was settled via in-court mediation directed by the Court. As a result, WFOE and Ding Neng Bio-Tech entered
into binding settlement, among other things, (i) to terminate the VIE Agreements, and (ii) that the litigation fee in the amount of RMB10,000
(approximately$1,610.50) would be borne by Ding Neng Bio-Tech. Ding Neng Holdings is delinquent with its regulatory filings and annual
fees to the British Virgin Islands; accordingly, the Ding Neng Holdings should be considered dormant and defunct.
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, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with EGOOS Mobile
Technology Company Limited, a British Virgin Islands holding company (“EGOOS BVI”), which owns 100% of EGOOS Mobile Technology
Company Limited, a Hong Kong company (“EGOOS HK”), which owns 100% of Move the Purchase Consulting Management (Shenzhen)
Co., Ltd. (“WOFE”), a foreign investment enterprise organized under the laws of the PRC, and which has, through various contractual
agreements known as variable interest entity (“VIE”) agreements. These VIE agreements provide the WOFE 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 (“GZYZ”), which owns 100% of Shenzhen Qianhai Exce-card Technology Co., Ltd., a Chinese corporation
(“SQEC”), which owns 100% of Guangzhou Rongsheng Information Technology Co., Ltd., a Chinese corporation (“GZRS”)
and the sole shareholder of EGOOS BVI. The VIE agreements include: (1) an Exclusive Service Agreement between WOFE and GZYZ, which entitles
WOFE to receive substantially all of the economic benefits of GZYZ in consideration for services provided by WOFE to GZYZ, (2) a Call
Option Agreement with the shareholders of GZYZ, Yang Wenbin and Li Ping, allowing the WOFE to acquire all the shares of GZYZ as permitted
by PRC laws, (3) a Voting Rights Proxy Agreement that provides WOFE with the all voting rights of the GZYZ’s shareholders, and
(4) an Equity Pledge Agreement that pledges the shares in GZYZ to WOFE. Management has assessed the terms of the VIE agreements and determined
that the Company is the primary beneficiary of those agreements based on Management’s ability to direct the use and disposition
of GZYZ assets including the payment of future profits to the Company. Management also determined the Company has implicitly provided
financial support to GYZY; accordingly, Management believes that GZYZ and its subsidiaries should be consolidated as variable interest
entities of the Company.
SQEC
was incorporated on November 11, 2013. The Company is 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 intends 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 $1,629,062
(RMB 10,000,000). Simultaneously, Xiang, Zuyue transferred 40% of ownership to Li, Na for a consideration of $651,625 (RMB 4,000,000).
On July 24, 2015, SQEC entire ownership was collectively transferred from Xiang, Zuyue and Li, Na to Guangzhou Yuzhi Information Technology
Co. Ltd. (“GZYZ”) for a consideration of approximately$1,629,062 (RMB 10,000,000).
On
March 16, 2015, the GZRS was incorporated as a wholly-owned subsidiary of SQEC. GZRS has an authorized capital of RMB1,000,000. As of
the date of this report, GZRS has not been capitalized.
Pursuant
to the Share Purchase Agreement the Company issued a convertible note to EGOOS BVI’s sole shareholder for 100%equity interest in
EGOOS BVI. The note is convertible into 15,000,000 shares of the Company’s common stock contingent on the following conditions:
(i) the Company has effectuated a reverse split of all of the issued and outstanding Common Stock as of the date of the issuance of the
note (the “Reverse Split”) and (ii) the average closing price of the common stock for 3 business days within any period of
10 consecutive business days exceeds $1.00 per share (the “Conversion Conditions”). Upon conversion of the note, the existing
shareholders of the Registrant will own an aggregate of 24.7% of the post-acquisition entity. The note was issued at Par, it is unsecured,
interest free, and is due on the second anniversary of the issuance date of the note. In accounting for the note, the Company has assumed
that the note does not carry any discount from face that requires accretion as interest expense to its results of operations, including
any potential beneficial conversion features. On January 26, 2016, the reverse split was effectuated, and subsequently, on February 4,
2016, the convertible promissory note was converted into 15 million newly issued shares of the Company’s common stock. The conversion
of the promissory note has been recognized retroactively to the first period presented as a component of the reverse takeover transactions
detailed below.
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.
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 100% of assets,
liabilities, and net income or loss of those wholly-owned subsidiaries.
As
of December 31, 2020 and 2019, 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
|
|
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
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.
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 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.
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, 2020 and 2019, $0 and $0 stock-based compensation was recognized.
M.
Foreign currency translation
The
accompanying financial statements are presented in United States dollars (USD). The functional currency of the Company is the USD and
Renminbi (RMB). The financial statements are translated into USD from RMB at year-end exchange rates as to assets and liabilities and
average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital
transactions occurred.
Exchange rates
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Year-end/period-end RMB : US$ exchange rate
|
|
|
6.5249
|
|
|
|
6.9762
|
|
Average annual/period RMB : US$ exchange rate
|
|
|
6.9010
|
|
|
|
6.8944
|
|
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.
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.
The
following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10
As
of December 31, 2020:
|
|
Quoted in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
Total financial assets
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
As
of December 31, 2019:
|
|
Quoted in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
16
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16
|
|
Total financial assets
|
|
$
|
16
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16
|
|
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.
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, 2020 and 2019 were $39,451 and $33,276, respectively, and the
accumulated losses as of December 31, 2020 and 2019 were $27,131,839 and $27,092,388, respectively. As of December 31, 2020 and 2019,
the Company has cash and cash equivalents of $3 and $16, respectively and net cash used in operating activities during the year ended
December 31, 2020 and 2019 were $13 and $286, respectively. The Company comes to have insufficient cash flows generated from operations
and provided for development. In addition, the Company continues to experience negative cash flows from operations. These factors raise
substantial doubt about the Company’s ability to continue as a going concern. The management determines that additional effort will
be required to improve the operation so that the Company may generate more profits to sustain its continuous. The Company may explore
the channels to raise additional capital or any opportunities to improve the cash flow in the years to come. Subsequent to the year ended
December 31, 2020, the Company had raised $1,050,000 (gross proceeds) and $1,780,000 (gross proceeds) as of April 23, 2021 and July 29,
2021, respectively, from share placement to improve the financial position and cash flow of the Company.
NOTE
3. CASH AND CASH EQUIVALENTS
Cash
consisted of the following:
|
|
As of
December 31,
2020
|
|
|
As of
December 31,
2019
|
|
Cash on hand
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash in banks
|
|
|
3
|
|
|
|
16
|
|
Total cash
|
|
$
|
3
|
|
|
$
|
16
|
|
NOTE
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment consisted of the following:
|
|
As of
December 31,
2020
|
|
|
As of
December 31,
2019
|
|
Office equipment
|
|
$
|
18,320
|
|
|
$
|
18,320
|
|
Office furniture
|
|
|
12,723
|
|
|
|
12,723
|
|
Total property and equipment
|
|
|
31,043
|
|
|
|
31,043
|
|
Less: accumulated depreciation
|
|
|
(31,043
|
)
|
|
|
(31,043
|
)
|
Less: impairment
|
|
|
-
|
|
|
|
-
|
|
Property, plant and equipment, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Depreciation
expense was $0 and $584, respectively for the years ended December 31, 2020 and 2019.
NOTE
5. 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 $994,040 and the details consisted of the followings:
|
|
December 31,
2020
|
|
|
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 followings:
|
|
December 31,
2020
|
|
|
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
|
)
|
NOTE
6. 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, 2020 and 2019.
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, 2020 and 2019. 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,
2020
|
|
|
Year ended
December 31,
2019
|
|
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.
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.
Taxes
payable consisted of the following:
|
|
As of
December 31,
2020
|
|
|
As of
December 31,
2019
|
|
Corporate income tax payable
|
|
$
|
-
|
|
|
$
|
-
|
|
Franchise tax payable
|
|
|
800
|
|
|
|
400
|
|
Other surtaxes payable
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
800
|
|
|
$
|
400
|
|
NOTE
7. STOCKHOLDERS’ EQUITY
Common
stock
As
of December 31, 2020 and 2019, the Company has 100,000,000 shares of common stock authorized, 21,027,713 shares issued and outstanding
at par value of $0.001 per share.
Stock
option compensation
On
October 20, 2017, the Company issued to Mr. Yang Liu, the option to purchase 1,050,000 shares of the Company’s common stock to
be issued upon his exercise of such option. The option vests in three tranches according to the following schedule: 350,000 shares at
October 19, 2018, 350,000 shares at October 19, 2019, and 350,000 at October 19, 2020. All three tranches expire on October 19, 2022.
The Company has used the widely accepted Black Scholes Merton Option Pricing Model to measure the fair value of these securities, because
of their plain vanilla nature of this option. The Company employed the followings assumptions to calculate the fair value of the option:
expected forfeiture rate: 0%, risk free rate: 2.03%, expiration date: October 19, 2022, exercise price: $1.00, annualized volatility:
602.71%, dividend yield: 0%, and the Company’s closing stock price at year end. For the years ended December 31, 2018 and 2017,
the Company recorded stock option compensation expense of $1,113,217 and $373,509. On August 22, 2018, Mr. Liu resigned from his position
as Chief Executive Officer. The stock options were not fully vested since his resignation was before the anniversary of his employment
period. Mr. Liu had forfeited all his stock options upon his resignation on August 30, 2018.
For
the years ended December 31, 2020 and 2019, no stock option has been issued.
NOTE
8. LOSS PER SHARE
The
following table presents a reconciliation of basic and diluted earnings per share:
|
|
For the years ended
December, 31
|
|
|
|
2020
|
|
|
2019
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(39,451
|
)
|
|
$
|
(33,276
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common stock outstanding - basic and diluted
|
|
|
21,027,713
|
|
|
|
21,027,713
|
|
Loss per share – Basic and diluted:
|
|
$
|
(0.00188
|
)
|
|
$
|
(0.00158
|
)
|
NOTE
9. CONCENTRATION OF 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 $100,000. Accounts located outside of the United States are not
insured and may be subject to such risk.
NOTE
10. 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, 2020 and 2019, the Company had accumulated deficits
of $27,131,839 and $27,092,388, respectively, and working capital deficit of current liabilities exceeding current assets by $71,841 and
$32,390, respectively. Management’s plan to support the Company in operations and to maintain its business strategy is to raise
funds through public and private offerings and to rely on officers and directors to perform essential functions with minimal compensation.
If the Company do not raise all of the money we need from public or private offerings, the Company will have to find alternative sources,
such as loans or advances from our officers, directors or others. Such additional financing may not become available on acceptable terms
and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in the long
term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of
debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. If the Company require additional
cash and cannot raise it, the Company will either have to suspend operations or cease business entirely.
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.
NOTE
11. 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
12. 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”).
Within
two business days of the execution of the Agreement, the Company shall pay JSC an initial advisory fee equal to $12,500 plus $5,000 in
non-accountable expenses. In addition, the Company shall pay JSC another $9,500 advisory fee, $3,000 escrow expense plus additional $5,000
in non-accountable expenses upon the closing of an initial transaction (if any) with investors identified by the Company. With respect
to investors introduced to the Company directly or indirectly by JSC, JSC shall be paid a cash fee equal to ten percent of the gross
proceeds raised by the Company from any such investor (the “Commission Fee”).
The
Agreement shall continue in effect for a period of three (3) months from the Commencement Date and may 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 April 23, 2021, the Company entered into subscription agreements
with five accredited investors for the sale and issuance of 10,500,000 shares of common stock of the Company at a per-share price of $0.10
for aggregate gross proceeds of $1,050,000 (the “Private Placement I”). The Company closed the Private Placement I on April
24, 2021 and intends to use the funds for working capital. No brokers or placement agents was involved. Our Private Placement I is exempt
from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), in reliance
on Section 4(a)(2) thereof and/or Rule 506 of Regulation D and Regulation S thereunder
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
$100,000 worth of motor vehicle.
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 $500,000 worth of shares (1.74% of ownership) of Archax Holdings Ltd. (“Archax”), a company
organized under the laws of England, UK. Archax is a global digital asset trading platform and ecosystem. In addition, on June 4, 2021,
the Company and the Seller entered into another share transfer agreement (the “Montis SPA”), pursuant to which the Company
agreed to buy from the Seller $250,000 worth of shares (2.63% of ownership) of Montis Digital Limited (“Montis”), a company
organized under the laws of Gibraltar. Montis primarily provides marketing and consulting services for digital assets and related entities
in the digital asset ecosystems. Each of the Archax SPA and Montis SPA contained customary representations and warranties for transactions
of this nature and scale.
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 $1,500,000.
On July 29, 2021, the Company entered into subscription
agreements with four accredited investors for the sale and issuance of seventeen million and eighty hundred thousand shares (17,800,000)
shares of common stock at a per-share price of $0.10 for aggregate gross proceeds of $1,780,000 (the “Private Placement II”).
. The Company closed the Private Placement II on July 30, 2021 and intends to use the funds for working capital. No brokers or placement
agents was involved. Our Private Placement II is exempt from the registration requirements the Securities Act, in reliance on Section
4(a)(2) thereof and/or Rule 506 of Regulation D and Regulation S thereunder.
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.
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
AS
OF MARCH 31, 2021 AND DECEMBER 31, 2020
(Stated in US Dollars)
|
|
As of
March 31,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,003
|
|
|
$
|
3
|
|
Other receivable
|
|
|
-
|
|
|
|
-
|
|
Advance to suppliers
|
|
|
-
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
-
|
|
Prepaid taxes
|
|
|
-
|
|
|
|
-
|
|
Due from related parties
|
|
|
-
|
|
|
|
-
|
|
Total Current Assets
|
|
|
3,003
|
|
|
|
3
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property and Equipment, net
|
|
|
-
|
|
|
|
-
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
-
|
|
Deferred Tax Assets
|
|
|
-
|
|
|
|
-
|
|
Total Assets
|
|
$
|
3,003
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
-
|
|
|
$
|
-
|
|
Other payables
|
|
|
-
|
|
|
|
-
|
|
Accrued expenses
|
|
|
64,216
|
|
|
|
71,044
|
|
Related party payables
|
|
|
20,431
|
|
|
|
-
|
|
Taxes payable
|
|
|
1,200
|
|
|
|
800
|
|
Total Current Liabilities
|
|
|
85,847
|
|
|
|
71,844
|
|
Provision of other liabilities
|
|
|
-
|
|
|
|
-
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
-
|
|
Total Liabilities
|
|
$
|
85,847
|
|
|
$
|
71,844
|
|
|
|
|
|
|
|
|
|
|
Commitment and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
Common Stock ($0.001 par value, 100,000,000 shares authorized, 21,027,713 and 21,027,713 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)
|
|
$
|
21,027
|
|
|
$
|
21,027
|
|
Additional paid in capital
|
|
|
27,297,495
|
|
|
|
27,297,495
|
|
Accumulated deficits
|
|
|
(27,142,842
|
)
|
|
|
(27,131,839
|
)
|
Accumulated other comprehensive loss
|
|
|
(258,524
|
)
|
|
|
(258,524
|
)
|
Total Shareholders’ Equity
|
|
|
(82,844
|
)
|
|
|
(71,841
|
)
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
3,003
|
|
|
$
|
3
|
|
See
notes to consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR
THE FISCAL QUARTERS ENDED MARCH 31, 2021 AND 2020 (Unaudited)
(Stated
in US Dollars)
|
|
Three Months Ended
March 31,
2021
|
|
|
Three Months Ended
March 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
10,723
|
|
|
|
4,396
|
|
Financial expenses
|
|
|
280
|
|
|
|
-
|
|
Total Operating expenses
|
|
|
11,003
|
|
|
|
4,396
|
|
Loss from operations
|
|
|
(11,003
|
)
|
|
|
(4,396
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
Other expenses
|
|
|
-
|
|
|
|
-
|
|
Other income
|
|
|
-
|
|
|
|
-
|
|
Impairment loss
|
|
|
-
|
|
|
|
-
|
|
Total other (expenses) income, net
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax expenses
|
|
|
(11,003
|
)
|
|
|
(4,396
|
)
|
Income tax expenses
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(11,003
|
)
|
|
$
|
(4,396
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain
|
|
|
-
|
|
|
|
-
|
|
Comprehensive loss
|
|
$
|
(11,003
|
)
|
|
$
|
(4,396
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted
|
|
|
21,027,713
|
|
|
|
21,027,713
|
|
Basic and diluted loss per share
|
|
$
|
(0.00052
|
)
|
|
$
|
(0.00021
|
)
|
See
notes to consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE FISCAL QUARTERS ENDED MARCH 31, 2021 AND 2020 (Unaudited)
(Stated
in US Dollars)
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,003
|
)
|
|
$
|
(4,396
|
)
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
-
|
|
Stock compensation
|
|
|
-
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
-
|
|
|
|
-
|
|
Advance to suppliers
|
|
|
-
|
|
|
|
-
|
|
Prepaid expenses and taxes
|
|
|
-
|
|
|
|
-
|
|
Accounts payable
|
|
|
-
|
|
|
|
-
|
|
Accrued expenses
|
|
|
(6,828
|
)
|
|
|
3,996
|
|
Other payables
|
|
|
-
|
|
|
|
-
|
|
Tax payable
|
|
|
400
|
|
|
|
400
|
|
Net cash (used in)/provided by operating activities
|
|
$
|
(17,431
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
20,431
|
|
|
|
-
|
|
Repayment to a related party
|
|
|
-
|
|
|
|
-
|
|
Net cash provided by/ (used in) financing activities
|
|
$
|
20,431
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
$
|
3,000
|
|
|
$
|
-
|
|
Cash at beginning of year
|
|
|
3
|
|
|
|
16
|
|
Cash at end of period
|
|
$
|
3,003
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
|
-
|
|
|
|
-
|
|
Income taxes paid
|
|
|
-
|
|
|
|
-
|
|
Non- cash financing activities
|
|
|
|
|
|
|
|
|
Forgiveness of loans from related parties
|
|
$
|
-
|
|
|
$
|
-
|
|
Undertaking of assets and liabilities by related parties
|
|
$
|
-
|
|
|
$
|
-
|
|
See
notes to the consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIENCY)
FOR
THE FISCAL QUARTERS ENDED MARCH 31, 2021 AND 2020 (Unaudited)
(Stated
in US Dollars)
|
|
Three months ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
income
|
|
|
Equity
|
|
Balance as of December 31, 2020
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,131,839
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(71,841
|
)
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,003
|
)
|
|
|
-
|
|
|
|
(11,003
|
)
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of March 31, 2021
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,142,842
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(82,844
|
)
|
|
|
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
income
|
|
|
Equity
|
|
Balance as of December 31, 2019
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,092,388
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(32,390
|
)
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,396
|
)
|
|
|
-
|
|
|
|
(4,396
|
)
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of March 31, 2020
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,096,784
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(36,786
|
)
|
See
notes to the consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED STATEMENTS
FOR
THE FISCAL QUARTERS ENDED MARCH 31, 2021 AND 2020 (Unaudited)
(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 100% of Ding Neng Holdings
in exchange for the issuance of 26,162,505 shares of the Company’s common stock, par value $0.001. Under the share exchange agreement,
the Company would have contemplated owning and operating Ding Neng Holdings and Ding Neng Holdings’ directly, and indirectly held
subsidiaries: Ding Neng Bio-technology Co., Ltd. (“Ding Neng HK”), Zhangzhou Fuhua Biomass Energy Technology Co., Ltd. (“WOFE”),
and Ding Neng Bio-tech. Ding Neng HK was incorporated under the laws of Hong Kong on September 10, 2010. Ding Neng HK did not have any
operations. Ding Neng HK has been delinquent with its annual regulatory filings in Hong Kong, and should be considered dormant and defunct.
Ding Neng HK was wholly-owned by Ding Neng Holdings. Zhangzhou Fuhua Biomass Energy Technology Co., Ltd.(“WFOE”) was incorporated
as a wholly-foreign owned entity under the laws of the People’s Republic of China (“PRC”), on November 2, 2010. WFOE
was wholly-owned by Ding Neng HK. Ding Neng Bio-tech was incorporated under the laws of the PRC on December 8, 2006. It was located in
Zhangzhou city Fujian Province of PRC. Ding Neng Bio-tech was engaged in theproduction, refinement and distribution of bio-diesel fuel
in Southern China. Ding Neng Bio-tech operated a biodiesel manufacturing facility in Zhangzhou city. On October 28, 2010, WFOE and Ding
Neng Bio-tech entered into a set of variable interest entity agreements that included: (1) a Consulting Service Agreement with Ding Neng
Bio-tech, which entitled WFOE toreceive substantially all of the economic benefits of Ding Neng Bio-tech in consideration for services
provided by WFOE to DingNeng Bio-tech, (2) an Option Agreement with Xinfeng Nie, Sanfu Huang, and Shunlong Hu (the shareholders of Ding
Neng Bio-tech) allowing the WFOE to acquire all the shares of Ding Neng Bio-tech as permitted by PRC laws, (3) a Voting Rights Proxy
Agreement that provides WFOE with the all voting rights of the Ding Neng Bio-tech shareholders, and (4) an Equity Pledge Agreement that
pledges the shares in Ding Neng Bio-tech to WFOE (VIE Agreements). These VIE Agreements granted effective control of Ding Neng Bio-tech
to WFOE. On June 4, 2015, WFOE filed a civil action in Haicang District People’s Court of Xiamen, Fujian, PRC (the “Court”)
against Ding Neng Bio-tech, alleging that the purposes of those certain executed VIE Agreements entered into by WFOE and Ding Neng Bio-Tech
on October 28, 2010, had been frustrated, and that these VIE Agreements should be terminated. WFOE alleged that Ding Neng Bio-Tech did
not make any payment of service fees to WFOE, and that Ding Neng Bio-Tech failed to perfect the security interest in the pledged stocks.
On July 14, 2015, this case was settled via in-court mediation directed by the Court. As a result, WFOE and Ding Neng Bio-Tech entered
into binding settlement, among other things, (i) to terminate the VIE Agreements, and (ii) that the litigation fee in the amount of RMB10,000
(approximately$1,610.50) would be borne by Ding Neng Bio-Tech. Ding Neng Holdings is delinquent with its regulatory filings and annual
fees to the British Virgin Islands; accordingly, the Ding Neng Holdings should be considered dormant and defunct.
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, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with EGOOS Mobile
Technology Company Limited, a British Virgin Islands holding company (“EGOOS BVI”), which owns 100% of EGOOS Mobile Technology
Company Limited, a Hong Kong company (“EGOOS HK”), which owns 100% of Move the Purchase Consulting Management (Shenzhen)
Co., Ltd. (“WOFE”), a foreign investment enterprise organized under the laws of the PRC, and which has, through various contractual
agreements known as variable interest entity (“VIE”) agreements. These VIE agreements provide the WOFE 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 (“GZYZ”), which owns 100% of Shenzhen Qianhai Exce-card Technology Co., Ltd., a Chinese corporation
(“SQEC”), which owns 100% of Guangzhou Rongsheng Information Technology Co., Ltd., a Chinese corporation (“GZRS”)
and the sole shareholder of EGOOS BVI. The VIE agreements include: (1) an Exclusive Service Agreement between WOFE and GZYZ, which entitles
WOFE to receive substantially all of the economic benefits of GZYZ in consideration for services provided by WOFE to GZYZ, (2) a Call
Option Agreement with the shareholders of GZYZ, Yang Wenbin and Li Ping, allowing the WOFE to acquire all the shares of GZYZ as permitted
by PRC laws, (3) a Voting Rights Proxy Agreement that provides WOFE with the all voting rights of the GZYZ’s shareholders, and
(4) an Equity Pledge Agreement that pledges the shares in GZYZ to WOFE. Management has assessed the terms of the VIE agreements and determined
that the Company is the primary beneficiary of those agreements based on Management’s ability to direct the use and disposition
of GZYZ assets including the payment of future profits to the Company. Management also determined the Company has implicitly provided
financial support to GYZY; accordingly, Management believes that GZYZ and its subsidiaries should be consolidated as variable interest
entities of the Company.
SQEC
was incorporated on November 11, 2013. The Company is 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 intends 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 $1,629,062
(RMB 10,000,000). Simultaneously, Xiang, Zuyue transferred 40% of ownership to Li, Na for a consideration of $651,625 (RMB 4,000,000).
On July 24, 2015, SQEC entire ownership was collectively transferred from Xiang, Zuyue and Li, Na to Guangzhou Yuzhi Information Technology
Co. Ltd. (“GZYZ”) for a consideration of approximately$1,629,062 (RMB 10,000,000).
On
March 16, 2015, the GZRS was incorporated as a wholly-owned subsidiary of SQEC. GZRS has an authorized capital of RMB1,000,000. As of
the date of this report, GZRS has not been capitalized.
Pursuant
to the Share Purchase Agreement the Company issued a convertible note to EGOOS BVI’s sole shareholder for 100%equity interest in
EGOOS BVI. The note is convertible into 15,000,000 shares of the Company’s common stock contingent on the following conditions:
(i) the Company has effectuated a reverse split of all of the issued and outstanding Common Stock as of the date of the issuance of the
note (the “Reverse Split”) and (ii) the average closing price of the common stock for 3 business days within any period of
10 consecutive business days exceeds $1.00 per share (the “Conversion Conditions”). Upon conversion of the note, the existing
shareholders of the Registrant will own an aggregate of 24.7% of the post-acquisition entity. The note was issued at Par, it is unsecured,
interest free, and is due on the second anniversary of the issuance date of the note. In accounting for the note, the Company has assumed
that the note does not carry any discount from face that requires accretion as interest expense to its results of operations, including
any potential beneficial conversion features. On January 26, 2016, the reverse split was effectuated, and subsequently, on February 4,
2016, the convertible promissory note was converted into 15 million newly issued shares of the Company’s common stock. The conversion
of the promissory note has been recognized retroactively to the first period presented as a component of the reverse takeover transactions
detailed below.
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.
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 100% of assets,
liabilities, and net income or loss of those wholly-owned subsidiaries.
As
of March 31, 2021 and December 31, 2020, 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
|
|
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
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.
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 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.
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 three months ended March 31, 2021 and 2020.
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 three months ended March 31, 2021 and 2020, $0 and $0 stock-based compensation
was recognized.
M.
Foreign currency translation
The
accompanying financial statements are presented in United States dollars (USD). The functional currency of the Company is the USD and
Renminbi (RMB). The financial statements are translated into USD from RMB at year-end/period-end exchange rates as to assets and liabilities
and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital
transactions occurred.
Exchange rates
|
|
March 31,
2021
|
|
|
March 31,
2020
|
|
|
December 31,
2020
|
|
Year-end/period-end RMB : US$ exchange rate
|
|
|
6.5713
|
|
|
|
7.0216
|
|
|
|
6.5249
|
|
Average annual/period RMB : US$ exchange rate
|
|
|
6.4844
|
|
|
|
6.9798
|
|
|
|
6.9010
|
|
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.
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 under which the
Company identifies the contract and determines the transaction’s 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 transactions 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.
The
following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10
As
of March 31, 2021:
|
|
Quoted
in Active
Markets for
Identical Assets
(Level
1)
|
|
|
Significant
Other Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,003
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,003
|
|
Total financial assets
|
|
$
|
3,003
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,003
|
|
As
of December 31, 2020:
|
|
Quoted
in Active
Markets for
Identical Assets
(Level
1)
|
|
|
Significant
Other Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
Total financial assets
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
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.
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 fiscal quarters ended March 31, 2021 and 2020 were $11,003 and $4,396,
respectively, and the accumulated losses as of March 31, 2021 and 2020 were $27,142,842 and $27,096,784, respectively. As of March 31,
2021 and December 31, 2020, the Company has cash and cash equivalents of $3,003 and $15, respectively and net cash used in operating activities
during the quarters ended March 31, 2021 and 2020 were $17,431 and $0, respectively. The Company comes to have insufficient cash flows
generated from operations and provided for development. In addition, the Company continues to experience negative cash flows from operations.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. The management determines that
additional effort will be required to improve the operation so that the Company may generate more profits to sustain its continuous. The
Company may explore the channels to raise additional capital or any opportunities to improve the cash flow in the years to come. Subsequent
to the fiscal quarter ended March 31, 2021, the Company had raised $1,050,000 (gross proceeds) and $1,780,000 (gross proceeds) as of April
23, 2021 and July 29, 2021, respectively, from private placements to improve the financial position and cash flow of the Company.
NOTE
3. CASH AND CASH EQUIVALENTS
Cash
consisted of the following:
|
|
As
of
March 31,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cash on hand
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash in banks
|
|
|
3,003
|
|
|
|
3
|
|
Total cash
|
|
$
|
3,003
|
|
|
$
|
3
|
|
NOTE
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment consisted of the following:
|
|
As
of
March 31,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Office equipment
|
|
$
|
18,320
|
|
|
$
|
18,320
|
|
Office furniture
|
|
|
12,723
|
|
|
|
12,723
|
|
Total property and equipment
|
|
|
31,043
|
|
|
|
31,043
|
|
Less: accumulated depreciation
|
|
|
(31,043
|
)
|
|
|
(31,043
|
)
|
Less: impairment
|
|
|
-
|
|
|
|
-
|
|
Property, plant and equipment, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Depreciation
expense was $0 and $0, respectively for the three months ended March 31, 2021 and 2020.
NOTE
5. RELATED PARTY PAYABLES
Related
party payables consisted of the followings:
|
|
As
of
March 31,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
PX SPAC Capital Inc.
|
|
$
|
20,431
|
|
|
$
|
-
|
|
|
|
$
|
20,431
|
|
|
$
|
-
|
|
The
amount was provided as working capital to financial the Company’s operations. The amount is unsecured, 2% annual interest bearing
and due on demand.
The
Company and PX SPAC Capital Inc. are related parties because Hon Man Yun serves as the Chief Financial Officer of both the Company and
PX SPAC Capital Inc.
NOTE
6. 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 three months ended March 31, 2021 and 2020.
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 three months ended March 31, 2021 and 2020. 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:
|
|
Three months ended
March 31,
2021
|
|
|
Three months ended
March 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
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 three months ended March 31, 2021, and 2020, 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.
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 March 31, 2021 and December 31, 2020, 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.
Taxes
payable consisted of the following:
|
|
As of
March 31,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Corporate income tax payable
|
|
$
|
-
|
|
|
$
|
-
|
|
Franchise tax payable
|
|
|
1,200
|
|
|
|
800
|
|
Other surtaxes payable
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,200
|
|
|
$
|
800
|
|
NOTE
7. STOCKHOLDERS’ EQUITY
Common
stock
As
of March 31, 2021 and December 31, 2020, the Company has 100,000,000 shares of common stock authorized, 21,027,713 shares issued and
outstanding at par value of $0.001 per share.
NOTE
8. LOSS PER SHARE
The
following table presents a reconciliation of basic and diluted earnings per share:
|
|
Three months ended
March 31,
2021
|
|
|
Three months ended
March 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,003
|
)
|
|
$
|
(4,396
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common stock outstanding - basic and diluted
|
|
|
21,027,713
|
|
|
|
21,027,713
|
|
Loss per share – Basic and diluted:
|
|
$
|
(0.00052
|
)
|
|
$
|
(0.00021
|
)
|
NOTE
9. CONCENTRATION OF 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 $100,000. Accounts located outside of the United States are not
insured and may be subject to such risk.
NOTE
10. 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 March 31, 2021 and December 31, 2020, the Company had accumulated
deficits of $27,142,842 and $27,131,839, respectively, and working capital deficit of current liabilities exceeding current assets by
$82,844 and $71,841, respectively. Management’s plan to support the Company in operations and to maintain its business strategy
is to raise funds through public and private offerings and to rely on officers and directors to perform essential functions with minimal
compensation. If the Company do not raise all of the money we need from public or private offerings, the Company will have to find alternative
sources, such as loans or advances from our officers, directors or others. Such additional financing may not become available on acceptable
terms and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in
the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the
case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. If the Company require additional
cash and cannot raise it, the Company will either have to suspend operations or cease business entirely.
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.
NOTE
11. 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.
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”).
Within
two business days of the execution of the Agreement, the Company shall pay JSC an initial advisory fee equal to $12,500 plus $5,000 in
non-accountable expenses. In addition, the Company shall pay JSC another $9,500 advisory fee, $3,000 escrow expense plus additional $5,000
in non-accountable expenses upon the closing of an initial transaction (if any) with investors identified by the Company. With respect
to investors introduced to the Company directly or indirectly by JSC, JSC shall be paid a cash fee equal to ten percent of the gross
proceeds raised by the Company from any such investor (the “Commission Fee”).
The
Agreement shall continue in effect for a period of three (3) months from the Commencement Date and may 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”).
NOTE
12. SUBSEQUENT EVENTS
On April 23, 2021, the Company entered into subscription
agreements with five accredited investors for the sale and issuance of ten million and five hundred thousand shares (10,500,000) shares
of common stock of the Company at a per-share price of $0.10 for aggregate gross proceeds of $1,050,000 (the “Private Placement
I”). The Company closed the Private Placement I on April 24, 2021 and intends to use the funds for working capital. No brokers or
placement agents was involved. Our Private Placement I is exempt from the registration requirementof the Securities Act, in reliance on
Section 4(a)(2) thereof and/or Rule 506 of Regulation D and Regulation S thereunder.
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
$100,000 worth of motor vehicle.
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 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 $500,000 USD worth of shares (1.74% of ownership) of Archax Holdings Ltd. (“Archax”), a company
organized under the laws of England, UK. Archax is a global digital asset trading platform and ecosystem. In addition, on June 4, 2021,
the Company and the Seller entered into another share transfer agreement (the “Montis SPA”), pursuant to which the Company
agreed to buy from the Seller $250,000 worth of shares (2.63% of ownership) of Montis Digital Limited (“Montis”), a company
organized under the laws of Gibraltar. Montis primarily provides marketing and consulting services for digital assets and related entities
in the digital asset ecosystems. Each of the Archax SPA and Montis SPA contained customary representations and warranties for transactions
of this nature and scale.
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 $1,500,000.
On July 29, 2021, the Company entered into subscription
agreements with four accredited investors for the sale and issuance of 17,800,000 shares of common stock at a per-share price of $0.10
for aggregate gross proceeds of $1,780,000 (the “Private Placement II”). The Company closed the Private Placement II on July
30, 2021 and intends to use the funds for working capital. No brokers or placement agents was involved. Our Private Placement II is exempt
from the registration requirements of the Securities Act, in reliance on Section 4(a)(2) thereof and/or Rule 506 of Regulation D and Regulation
S thereunder.
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.
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
AS
OF JUNE 30, 2021 AND DECEMBER 31, 2020
(Stated
in US Dollars)
|
|
As of
June 30,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
76,888
|
|
|
$
|
3
|
|
Other receivable
|
|
|
20,000
|
|
|
|
-
|
|
Advance to suppliers
|
|
|
-
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
20,000
|
|
|
|
-
|
|
Prepaid taxes
|
|
|
-
|
|
|
|
-
|
|
Due from related parties
|
|
|
12,740
|
|
|
|
-
|
|
Total Current Assets
|
|
|
129,628
|
|
|
|
3
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Long term investment
|
|
|
750,000
|
|
|
|
-
|
|
Property and Equipment, net
|
|
|
100,000
|
|
|
|
-
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
-
|
|
Deferred Tax Assets
|
|
|
-
|
|
|
|
-
|
|
Total Assets
|
|
$
|
979,628
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
-
|
|
|
$
|
-
|
|
Other payables
|
|
|
-
|
|
|
|
-
|
|
Accrued expenses
|
|
|
40,270
|
|
|
|
71,044
|
|
Related party payables
|
|
|
37,493
|
|
|
|
-
|
|
Taxes payable
|
|
|
1,200
|
|
|
|
800
|
|
Total Current Liabilities
|
|
|
78,963
|
|
|
|
71,844
|
|
Provision of other liabilities
|
|
|
-
|
|
|
|
-
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
-
|
|
Total Liabilities
|
|
$
|
78,963
|
|
|
$
|
71,844
|
|
|
|
|
|
|
|
|
|
|
Commitment and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
Common Stock ($0.001 par value, 100,000,000 shares authorized, 31,527,713 and 21,027,713 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)
|
|
$
|
31,527
|
|
|
$
|
21,027
|
|
Additional paid in capital
|
|
|
28,301,995
|
|
|
|
27,297,495
|
|
Accumulated deficits
|
|
|
(27,174,333
|
)
|
|
|
(27,131,839
|
)
|
Accumulated other comprehensive loss
|
|
|
(258,524
|
)
|
|
|
(258,524
|
)
|
Total Shareholders’ Equity
|
|
|
900,665
|
|
|
|
(71,841
|
)
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
979,628
|
|
|
$
|
3
|
|
See
notes to consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR
THE FISCAL QUARTERS ENDED JUNE 30, 2021 AND 2020 (Unaudited)
(Stated
in US Dollars)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
31,090
|
|
|
|
4,014
|
|
|
|
41,814
|
|
|
|
8,410
|
|
Financial expenses
|
|
|
400
|
|
|
|
12
|
|
|
|
680
|
|
|
|
12
|
|
Total Operating expenses
|
|
|
31,490
|
|
|
|
4,026
|
|
|
|
42,494
|
|
|
|
8,422
|
|
Loss from operations
|
|
|
(31,490
|
)
|
|
|
(4,026
|
)
|
|
|
(42,494
|
)
|
|
|
(8,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Impairment loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total other (expenses) income, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax expenses
|
|
|
(31,490
|
)
|
|
|
(4,026
|
)
|
|
|
(42,494
|
)
|
|
|
(8,422
|
)
|
Income tax expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(31,490
|
)
|
|
$
|
(4,026
|
)
|
|
$
|
(42,494
|
)
|
|
$
|
(8,422
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Comprehensive loss
|
|
$
|
(31,490
|
)
|
|
$
|
(4,026
|
)
|
|
$
|
(42,494
|
)
|
|
$
|
(8,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted
|
|
|
28,989,251
|
|
|
|
21,027,713
|
|
|
|
25,030,475
|
|
|
|
21,027,713
|
|
Basic and diluted loss per share
|
|
$
|
(0.00109
|
)
|
|
$
|
(0.00019
|
)
|
|
$
|
(0.00170
|
)
|
|
$
|
(0.00040
|
)
|
See
notes to consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)
(Stated
in US Dollars)
|
|
Six months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(42,494
|
)
|
|
$
|
(8,422
|
)
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
-
|
|
Stock compensation
|
|
|
-
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
(20,000
|
)
|
|
|
-
|
|
Advance to suppliers
|
|
|
-
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
(20,000
|
)
|
|
|
-
|
|
Accounts payable
|
|
|
-
|
|
|
|
-
|
|
Accrued expenses
|
|
|
(30,774
|
)
|
|
|
8,010
|
|
Other payables
|
|
|
-
|
|
|
|
-
|
|
Due from related parties
|
|
|
(12,740
|
)
|
|
|
-
|
|
Tax payable
|
|
|
400
|
|
|
|
400
|
|
Net cash (used in)/provided by operating activities
|
|
$
|
(125,608
|
)
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(100,000
|
)
|
|
|
-
|
|
Purchases of long term investment
|
|
|
(750,000
|
)
|
|
|
-
|
|
Net cash (used in)/provided by investing activities
|
|
$
|
(850,000
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from related party
|
|
|
37,493
|
|
|
|
-
|
|
Repayment to a related party
|
|
|
-
|
|
|
|
-
|
|
Proceeds from share placing (net of offering cost of $35,000)
|
|
|
1,015,000
|
|
|
|
-
|
|
Net cash provided by/ (used in) financing activities
|
|
$
|
1,052,493
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
$
|
76,885
|
|
|
$
|
(13
|
)
|
Cash at beginning of year
|
|
|
3
|
|
|
|
16
|
|
Cash at end of period
|
|
$
|
76,888
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
|
-
|
|
|
|
12
|
|
Income taxes paid
|
|
|
-
|
|
|
|
-
|
|
Non- cash financing activities
|
|
|
|
|
|
|
|
|
Forgiveness of loans from related parties
|
|
$
|
-
|
|
|
$
|
-
|
|
Undertaking of assets and liabilities by related parties
|
|
$
|
-
|
|
|
$
|
-
|
|
See
notes to the consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIENCY)
FOR
THE FISCAL QUARTERS JUNE 30, 2021 AND 2020 (Unaudited)
(Stated
in US Dollars)
|
|
Six months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
income
|
|
|
Equity
|
|
Balance as of December 31, 2020
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,131,839
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(71,841
|
)
|
Proceeds from issuance of share, net
|
|
|
10,500,000
|
|
|
|
10,500
|
|
|
|
1,004,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,015,000
|
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(42,494
|
)
|
|
|
-
|
|
|
|
(42,494
|
)
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of June 30, 2021
|
|
|
31,527,713
|
|
|
$
|
31,527
|
|
|
$
|
28,301,995
|
|
|
$
|
(27,174,333
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
900,665
|
|
|
|
Six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
income
|
|
|
Equity
|
|
Balance as of December 31, 2019
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,092,388
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(32,390
|
)
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,422
|
)
|
|
|
-
|
|
|
|
(8,422
|
)
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of June 30, 2020
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,100,810
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(40,812
|
)
|
|
|
Three months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
income
|
|
|
Equity
|
|
Balance as of March 31, 2021
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,142,842
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(82,844
|
)
|
Proceeds from issuance of share, net
|
|
|
10,500,000
|
|
|
|
10,500
|
|
|
|
1,004,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,015,000
|
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,490
|
)
|
|
|
-
|
|
|
|
(31,490
|
)
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of June 30, 2021
|
|
|
31,527,713
|
|
|
$
|
31,527
|
|
|
$
|
28,301,995
|
|
|
$
|
(27,174,333
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
900,665
|
|
|
|
Three months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
income
|
|
|
Equity
|
|
Balance as of March 31, 2020
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,096,784
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(36,786
|
)
|
Net (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,026
|
)
|
|
|
-
|
|
|
|
(4,026
|
)
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of June 30, 2020
|
|
|
21,027,713
|
|
|
$
|
21,027
|
|
|
$
|
27,297,495
|
|
|
$
|
(27,100,810
|
)
|
|
$
|
(258,524
|
)
|
|
$
|
(40,812
|
)
|
See
notes to the consolidated financial statements
WAVE
SYNC CORP. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED STATEMENTS
FOR
THE FISCAL QUARTERS ENDED JUNE 30, 2021 AND 2020 (Unaudited)
(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 100% of Ding Neng Holdings
in exchange for the issuance of 26,162,505 shares of the Company’s common stock, par value $0.001. Under the share exchange agreement,
the Company would have contemplated owning and operating Ding Neng Holdings and Ding Neng Holdings’ directly, and indirectly held
subsidiaries: Ding Neng Bio-technology Co., Ltd. (“Ding Neng HK”), Zhangzhou Fuhua Biomass Energy Technology Co., Ltd. (“WOFE”),
and Ding Neng Bio-tech. Ding Neng HK was incorporated under the laws of Hong Kong on September 10, 2010. Ding Neng HK did not have any
operations. Ding Neng HK has been delinquent with its annual regulatory filings in Hong Kong, and should be considered dormant and defunct.
Ding Neng HK was wholly-owned by Ding Neng Holdings. Zhangzhou Fuhua Biomass Energy Technology Co., Ltd.(“WFOE”) was incorporated
as a wholly-foreign owned entity under the laws of the People’s Republic of China (“PRC”), on November 2, 2010. WFOE
was wholly-owned by Ding Neng HK. Ding Neng Bio-tech was incorporated under the laws of the PRC on December 8, 2006. It was located in
Zhangzhou city Fujian Province of PRC. Ding Neng Bio-tech was engaged in theproduction, refinement and distribution of bio-diesel fuel
in Southern China. Ding Neng Bio-tech operated a biodiesel manufacturing facility in Zhangzhou city. On October 28, 2010, WFOE and Ding
Neng Bio-tech entered into a set of variable interest entity agreements that included: (1) a Consulting Service Agreement with Ding Neng
Bio-tech, which entitled WFOE toreceive substantially all of the economic benefits of Ding Neng Bio-tech in consideration for services
provided by WFOE to DingNeng Bio-tech, (2) an Option Agreement with Xinfeng Nie, Sanfu Huang, and Shunlong Hu (the shareholders of Ding
Neng Bio-tech) allowing the WFOE to acquire all the shares of Ding Neng Bio-tech as permitted by PRC laws, (3) a Voting Rights Proxy
Agreement that provides WFOE with the all voting rights of the Ding Neng Bio-tech shareholders, and (4) an Equity Pledge Agreement that
pledges the shares in Ding Neng Bio-tech to WFOE (VIE Agreements). These VIE Agreements granted effective control of Ding Neng Bio-tech
to WFOE. On June 4, 2015, WFOE filed a civil action in Haicang District People’s Court of Xiamen, Fujian, PRC (the “Court”)
against Ding Neng Bio-tech, alleging that the purposes of those certain executed VIE Agreements entered into by WFOE and Ding Neng Bio-Tech
on October 28, 2010, had been frustrated, and that these VIE Agreements should be terminated. WFOE alleged that Ding Neng Bio-Tech did
not make any payment of service fees to WFOE, and that Ding Neng Bio-Tech failed to perfect the security interest in the pledged stocks.
On July 14, 2015, this case was settled via in-court mediation directed by the Court. As a result, WFOE and Ding Neng Bio-Tech entered
into binding settlement, among other things, (i) to terminate the VIE Agreements, and (ii) that the litigation fee in the amount of RMB10,000
(approximately$1,610.50) would be borne by Ding Neng Bio-Tech. Ding Neng Holdings is delinquent with its regulatory filings and annual
fees to the British Virgin Islands; accordingly, the Ding Neng Holdings should be considered dormant and defunct.
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, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with EGOOS Mobile
Technology Company Limited, a British Virgin Islands holding company (“EGOOS BVI”), which owns 100% of EGOOS Mobile Technology
Company Limited, a Hong Kong company (“EGOOS HK”), which owns 100% of Move the Purchase Consulting Management (Shenzhen)
Co., Ltd. (“WOFE”), a foreign investment enterprise organized under the laws of the PRC, and which has, through various contractual
agreements known as variable interest entity (“VIE”) agreements. These VIE agreements provide the WOFE 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 (“GZYZ”), which owns 100% of Shenzhen Qianhai Exce-card Technology Co., Ltd., a Chinese corporation
(“SQEC”), which owns 100% of Guangzhou Rongsheng Information Technology Co., Ltd., a Chinese corporation (“GZRS”)
and the sole shareholder of EGOOS BVI. The VIE agreements include: (1) an Exclusive Service Agreement between WOFE and GZYZ, which entitles
WOFE to receive substantially all of the economic benefits of GZYZ in consideration for services provided by WOFE to GZYZ, (2) a Call
Option Agreement with the shareholders of GZYZ, Yang Wenbin and Li Ping, allowing the WOFE to acquire all the shares of GZYZ as permitted
by PRC laws, (3) a Voting Rights Proxy Agreement that provides WOFE with the all voting rights of the GZYZ’s shareholders, and
(4) an Equity Pledge Agreement that pledges the shares in GZYZ to WOFE. Management has assessed the terms of the VIE agreements and determined
that the Company is the primary beneficiary of those agreements based on Management’s ability to direct the use and disposition
of GZYZ assets including the payment of future profits to the Company. Management also determined the Company has implicitly provided
financial support to GYZY; accordingly, Management believes that GZYZ and its subsidiaries should be consolidated as variable interest
entities of the Company.
SQEC
was incorporated on November 11, 2013. The Company is 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 intends 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 $1,629,062
(RMB 10,000,000). Simultaneously, Xiang, Zuyue transferred 40% of ownership to Li, Na for a consideration of $651,625 (RMB 4,000,000).
On July 24, 2015, SQEC entire ownership was collectively transferred from Xiang, Zuyue and Li, Na to Guangzhou Yuzhi Information Technology
Co. Ltd. (“GZYZ”) for a consideration of approximately$1,629,062 (RMB 10,000,000).
On
March 16, 2015, the GZRS was incorporated as a wholly-owned subsidiary of SQEC. GZRS has an authorized capital of RMB1,000,000. As of
the date of this report, GZRS has not been capitalized.
Pursuant
to the Share Purchase Agreement the Company issued a convertible note to EGOOS BVI’s sole shareholder for 100%equity interest in
EGOOS BVI. The note is convertible into 15,000,000 shares of the Company’s common stock contingent on the following conditions:
(i) the Company has effectuated a reverse split of all of the issued and outstanding Common Stock as of the date of the issuance of the
note (the “Reverse Split”) and (ii) the average closing price of the common stock for 3 business days within any period of
10 consecutive business days exceeds $1.00 per share (the “Conversion Conditions”). Upon conversion of the note, the existing
shareholders of the Registrant will own an aggregate of 24.7% of the post-acquisition entity. The note was issued at Par, it is unsecured,
interest free, and is due on the second anniversary of the issuance date of the note. In accounting for the note, the Company has assumed
that the note does not carry any discount from face that requires accretion as interest expense to its results of operations, including
any potential beneficial conversion features. On January 26, 2016, the reverse split was effectuated, and subsequently, on February 4,
2016, the convertible promissory note was converted into 15 million newly issued shares of the Company’s common stock. The conversion
of the promissory note has been recognized retroactively to the first period presented as a component of the reverse takeover transactions
detailed below.
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.
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 100% of assets,
liabilities, and net income or loss of those wholly-owned subsidiaries.
As
of June
30, 2021 and December 31, 2020, 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
|
|
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
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.
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 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.
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 six months ended June 30, 2021 and 2020.
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 fiscal quarters ended June 30, 2021 and 2020, $0 and $0 stock-based compensation was recognized.
M.
Foreign currency translation
The
accompanying financial statements are presented in United States dollars (USD). The functional currency of the Company is the USD and
Renminbi (RMB). The financial statements are translated into USD from RMB at year-end/period-end exchange rates as to assets and liabilities
and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital
transactions occurred.
Exchange rates
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
December 31,
2020
|
|
Year-end/period-end RMB : US$ exchange rate
|
|
|
6.4601
|
|
|
|
7.0651
|
|
|
|
6.5249
|
|
Average annual/period RMB : US$ exchange rate
|
|
|
6.4718
|
|
|
|
7.0328
|
|
|
|
6.9010
|
|
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.
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 under which the Company identifies the contract
and determines the transaction’s 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 such that the Company has not fulfilled 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.
The
following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10
As
of June 30, 2021:
|
|
Quoted in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
76,888
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
76,888
|
|
Long term investment
|
|
|
-
|
|
|
|
-
|
|
|
|
750,000
|
|
|
|
750,000
|
|
Total financial assets
|
|
$
|
76,888
|
|
|
$
|
-
|
|
|
$
|
750,000
|
|
|
$
|
826,888
|
|
As
of December 31, 2020:
|
|
Quoted in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
Total financial assets
|
|
$
|
3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
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.
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.
NOTE
3. CASH AND CASH EQUIVALENTS
Cash
consisted of the following:
|
|
As
of
June 30,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Cash on hand
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash in banks
|
|
|
76,888
|
|
|
|
3
|
|
Total cash
|
|
$
|
76,888
|
|
|
$
|
3
|
|
NOTE
4. LONG TERM INVESTMENT
The
long term investment was valued at cost and consisted of the following:
|
|
As
of
June 30,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Archax Holdings Ltd.
|
|
$
|
500,000
|
|
|
$
|
-
|
|
Montis Digital Limited
|
|
|
250,000
|
|
|
|
-
|
|
|
|
$
|
750,000
|
|
|
$
|
-
|
|
Less: impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
750,000
|
|
|
$
|
-
|
|
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 $500,000 worth of shares (1.74%
of ownership) of Archax Holdings Ltd. (“Archax”), a company organized under the laws of England, UK. Archax is a global digital
asset trading platform and ecosystem. In addition, on June 4, 2021, the Company and the Seller entered into another share transfer agreement
(the “Montis SPA”), pursuant to which the Company agreed to buy from the Seller $250,000 worth of shares (2.63% of ownership)
of Montis Digital Limited (“Montis”), a company organized under the laws of Gibraltar. Montis primarily provides marketing
and consulting services for digital assets and related entities in the digital asset ecosystems. Each of the Archax SPA and Montis SPA
contained customary representations and warranties for transactions of this nature and scale.
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.
NOTE
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment consisted of the following:
|
|
As
of
June 30,
2021
|
|
|
As
of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Office equipment
|
|
$
|
18,320
|
|
|
$
|
18,320
|
|
Office furniture
|
|
|
12,723
|
|
|
|
12,723
|
|
Motor vehicle
|
|
|
100,000
|
|
|
|
-
|
|
Total property and equipment
|
|
|
131,043
|
|
|
|
31,043
|
|
Less: accumulated depreciation
|
|
|
(31,043
|
)
|
|
|
(31,043
|
)
|
Less: impairment
|
|
|
-
|
|
|
|
-
|
|
Property, plant and equipment, net
|
|
$
|
100,000
|
|
|
$
|
-
|
|
Depreciation
expense was $0 and $0, respectively for the three months ended June 30, 2021 and 2020. Depreciation expense was $0 and $0, respectively
for the six months ended June 30, 2021 and 2020.
NOTE
6. RELATED PARTY TRANSACTIONS
DUE
FROM RELATED PARTIES
Due
from related parties consisted of the followings:
|
|
As of
June 30,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Hon Man Yun
|
|
$
|
12,740
|
|
|
$
|
-
|
|
|
|
$
|
12,740
|
|
|
$
|
-
|
|
The
amount was advance to Hon Man Yun, Chief Financial Officer and director of the Company, for settlement the operating expenses incurred
during the Company’s operations. The amount is unsecured, interest-free and repayable on demand.
LONG
TERM INVESTMENT
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 $500,000 worth of shares (1.74% of ownership) of Archax Holdings Ltd. (“Archax”),
a company organized under the laws of England, UK. Archax is a global digital asset trading platform and ecosystem. In addition, on June
4, 2021, the Company and the Seller entered into another share transfer agreement (the “Montis SPA”), pursuant to which the
Company agreed to buy from the Seller $250,000 worth of shares (2.63% of ownership) of Montis Digital Limited (“Montis”),
a company organized under the laws of Gibraltar. Montis primarily provides marketing and consulting services for digital assets and related
entities in the digital asset ecosystems. Each of the Archax SPA and Montis SPA contained customary representations and warranties for
transactions of this nature and scale.
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.
PROPERTY,
PLANT AND EQUIPMENT
On
May 28, 2021, the Company (the “Buyer”) and Hudson Capital USA Inc. (the “Seller”) entered into vehicle purchase
agreement, pursuant to which the Company agreed to buy from the Seller $100,000 worth of motor vehicle.
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.
RELATED
PARTY PAYABLES
Related
party payables consisted of the followings:
|
|
As of
June 30,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
PX SPAC Capital Inc.
|
|
$
|
37,493
|
|
|
$
|
-
|
|
|
|
$
|
37,493
|
|
|
$
|
-
|
|
The
amount was provided as working capital to financial the Company’s operations. The amount is unsecured, 2% annual interest bearing
and due on demand.
The
Company and PX SPAC Capital Inc. are related parties because Hon Man Yun serves as the Chief Financial Officer of both the Company and
PX SPAC Capital Inc..
NOTE
7. 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 fiscal quarters ended June 30, 2021 and 2020.
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 fiscal quarters ended June 30, 2021 and 2020. 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:
|
|
|
Six months ended
June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Current
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
Three months ended
June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
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 fiscal quarters ended June 30, 2021, and 2020, 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.
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 June 30, 2021 and December 31, 2020, 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.
Taxes
payable consisted of the following:
|
|
As of
June 30,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Corporate income tax payable
|
|
$
|
-
|
|
|
$
|
-
|
|
Franchise tax payable
|
|
|
1,200
|
|
|
|
800
|
|
Other surtaxes payable
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,200
|
|
|
$
|
800
|
|
NOTE
8. STOCKHOLDERS’ EQUITY
Common
stock
As
of June 30, 2021 and December 31, 2020, the Company has 100,000,000 shares of common stock authorized, 31,527,713 shares and 21,027,713
shares issued and outstanding at par value of $0.001 per share, respectively.
On April 23, 2021, the Company entered into subscription agreements
with five accredited investors for the sale and issuance of 10,500,000 shares of common stock at a per-share price of $0.10 for aggregate
gross proceeds of $1,050,000 (the “Private Placement I”).
NOTE
9. LOSS PER SHARE
The
following table presents a reconciliation of basic and diluted earnings per share:
|
|
Six months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(42,494
|
)
|
|
$
|
(8,422
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common stock outstanding - basic and diluted
|
|
|
25,030,475
|
|
|
|
21,027,713
|
|
Loss per share – Basic and diluted:
|
|
$
|
(0.00170
|
)
|
|
$
|
(0.00040
|
)
|
|
|
Three months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(31,490
|
)
|
|
$
|
(4,026
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common stock outstanding - basic and diluted
|
|
|
28,989,251
|
|
|
|
21,027,713
|
|
Loss per share – Basic and diluted:
|
|
$
|
(0.00109
|
)
|
|
$
|
(0.00019
|
)
|
NOTE
10. CONCENTRATION OF 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 $100,000. Accounts located outside of the United States are not
insured and may be subject to such risk.
NOTE
11. 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.
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”).
Within
two business days of the execution of the Agreement, the Company shall pay JSC an initial advisory fee equal to $12,500 plus $5,000 in
non-accountable expenses. In addition, the Company shall pay JSC another $9,500 advisory fee, $3,000 escrow expense plus additional $5,000
in non-accountable expenses upon the closing of an initial transaction (if any) with investors identified by the Company. With respect
to investors introduced to the Company directly or indirectly by JSC, JSC shall be paid a cash fee equal to ten percent of the gross
proceeds raised by the Company from any such investor (the “Commission Fee”).
The
Agreement shall continue in effect for a period of three (3) months from the Commencement Date and may 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 April 23, 2021, the Company entered into subscription agreements
with five accredited investors for the sale and issuance of 10,500,000 shares of common stock of the Company at a per-share price of $0.10
for aggregate gross proceeds of $1,050,000 (the “Private Placement I”). The Company closed the Private Placement I on April
24, 2021 and intends to use the funds for working capital. No brokers or placement agents was involved. Our Private Placement I is exempt
from the registration requirements the “Securities Act, in reliance on Section 4(a)(2) thereof and/or Rule 506 of Regulation D and
Regulation S thereunder.
On June 4, 2021, the Company 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 $500,000 worth of shares (1.74% of ownership) of Archax Holdings Ltd. (“Archax”), a company
organized under the laws of England, UK. Archax is a global digital asset trading platform and ecosystem. In addition, on June 4, 2021,
the Company and the Seller entered into another share transfer agreement (the “Montis SPA”), pursuant to which the Company
agreed to buy from the Seller $250,000 worth of shares (2.63% of ownership) of Montis Digital Limited (“Montis”), a company
organized under the laws of Gibraltar. Montis primarily provides marketing and consulting services for digital assets and related entities
in the digital asset ecosystems. Each of the Archax SPA and Montis SPA contained customary representations and warranties for transactions
of this nature and scale.
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.
NOTE
12. SUBSEQUENT EVENTS
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 $1,500,000.
On July 29, 2021, the Company entered into subscription
agreements with four accredited investors for the sale and issuance of 17,800,000 shares of common stock at a per-share price of $0.10
for aggregate gross proceeds of $1,780,000 (the “Private Placement II”). The Company closed the Private Placement II on July
30, 2021 and intends to use the funds for working capital. No brokers or placement agents was involved. Our Private Placement II is exempt
from the registration requirements of the “Securities Act, in reliance on Section 4(a)(2) thereof and/or Rule 506 of Regulation
D and Regulation S thereunder.
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.
Wave Sync (CE) (USOTC:WAYS)
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