Item 1. Description of Business
Introduction
Our Company is a provider of Health and Nutritional supplements and Personal Care products currently sold on the Internet. In June 2014, we suspended our prior sales model which involved sales of our products through another website by means of a network of Direct Sales Associates, or “DSA’s.” In response to the legal action taken by the Chinese authorities that resulted in freezing approximately $3,643,000 of funds held in a Chinese account, since June 2014, we have mainly sold our products over the Internet directly to end-user customers and by phone/email orders directly to our wholesale distributors, and sales have decreased in a material amount due to the elimination of the use of DSA’s.
We currently do not use the DSA model in any country, and we cannot predict when, if ever, we will recommence using this model. To date, sales through our website, www.dailynu.com, and our Affiliate Marketing Program (launched in March 2016) have not generated a significant volume of sales, and no assurance can be provided that sales will improve in the near term or long term.
Company History
E-World USA Holding, Inc., a California corporation and our predecessor, was established in January 2007. In April 2011, E-World USA Holding, Inc., a California corporation entered into a merger agreement with its wholly-owned subsidiary, E-World USA Holding, Inc., a Nevada corporation, which was the survivor of the merger. Under the Merger Agreement, we issued 90,000,000 shares of our common stock on a one share for one share basis for each share of E-World USA Holding, Inc., a California corporation, common stock issued and outstanding at the date of the merger. In addition, we issued Type A and Type B Warrants in exchange for comparable Warrants issued and outstanding in E-World USA Holding, Inc., a California corporation, at the date of the merger. All Type A and Type B Warrants have been fully exercised, and none are currently issued and outstanding.
On October 20, 2014, we established a wholly owned subsidiary, E-World Canada Holding, Inc., for the purpose of acquiring a Company in Canada. Also, on October 24, 2014, we entered into a Share Purchase Agreement for the purchase of the outstanding shares of Prime Nutrisource Inc., Nugale Pharmaceutical Inc., and Prime Nutrisource Inc. (New Jersey), in consideration of CAD$2,000,000, the equivalent of $1,766,071, the issuance of a promissory note in the principal amount of CAD$22,780,000, the equivalent of $20,184,902, and the issuance of 25,000,000 exchangeable shares of the Company. In addition, we agreed to issue to the previous owner of Prime additional shares of exchangeable stock of the Purchaser following the completion of the Offering so that the 25,000,000 exchangeable shares plus such additional shares of exchangeable stock could be exchanged for an aggregate of 25% of the issued and outstanding shares of common stock of our Company immediately following the completion of the Offering.
On April 21, 2015, we terminated our purchase of the Prime Corporations, and entered into a Termination and Release Agreement with the Prime Corporations, the former owners of the Prime Corporations, Guo Yin Xie, Jian Long, Hong Shu Zhu, 2434689 Ontario Inc., 2434691 Ontario Inc., and 2434694 Ontario Inc., and our subsidiary E-World Canada Holding, Inc.. Upon termination of the agreement:
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Prime subsequently returned CAD$1,500,000 of the CAD$2,000,000 cash portion of the purchase, equivalent to $1,247,920. The 25,000,000 exchangeable shares of the Company subsequently were returned to the Company along with the additional contingent consideration of the exchangeable stock for an aggregate of 25% of the issued and outstanding shares of common stock of the Company immediately following the completion of the Offering.
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The promissory note in the principal amount of CAD$22,780,000, the equivalent of $20,201,304, was cancelled.
Products
In June 2014, we suspended our direct marketing model in China in response to the legal action taken by the Chinese authorities. Since June 2014, we have sold our products primarily over the Internet directly to end-user customers and by phone/email orders directly to our wholesale distributors. Certain miscellaneous sales are made directly to customers who walk into the Company and customers who call the Company directly for products. We are now focusing on selling Health and Nutritional supplements and Personal Care products directly on the Internet through our website, www.dailynu.com. As of the date of filing of this Report, the Company continues to market its seven individual nutritional supplement products and seven skin-care products on this website. We also sell similar products of third parties on the site. See "Notice to Investors," above.
Company Products
Our nutritional supplement products are made according to a micro molecular nutrition formula. To achieve the maximum effect of products, micro molecular health foods were designed to be absorbed by cells directly with minimum chemical conversion which we believe promotes faster absorption. We believe our company is one of only a few companies in the market which are using a small molecular nutrition formula.
In November and December 2016, our Dibeier Granules & Oral products successfully passed inspection by the Shenzhen Academy of Metrology & Qualify Inspection and the Guangdong Quality Supervision and Inspection Institution for Food (Shenzhen). A copy of these two inspection reports is filed as exhibits to the Company’s Form 10-K for 2015 filed on February 7, 2017. As a result, we believe that that our Dibeier Granules & Oral products will be able to be directly exported to the China market and to be sold at nutritional supplement stores in China as food, rather than only through our website. The Company has confirmed the proper Harmonized Tariff Schedule classification for export of the Dibeier Products to China with U.S. counsel. In addition, Chinese counsel has advised that the Chinese importation regulatory requirements are satisfied to export the Dibeier products to China. No assurance can be given that such exports will eventually occur or that issues will not arise with exporting the products to China. We anticipate that we will start exporting this product to China in mid-2017, although this timing may be delayed due to unanticipated matters.
The nutritional supplements do not have intellectual property protection for the formulas. Nutritional products consisted of 96% and 98% of total sales for the years ended December 31, 2016 and 2015, respectively.
Our skin-care products were developed, and formulas are owned, by another company from which we purchased the rebranding right. These products focus on restoring epidermal calcium. The products are intended to provide a positive epidermal environment for the homeostasis and regeneration of a person’s own skin barrier. The products were first introduced in 2010 and consisted of 4% and 2% of the 2016 and 2015 annual sales, respectively.
Both types of products were previously sold to persons we called members under our currently discontinued model and are now sold directly to end-user customers from our new website and through our Affiliate Marketing Program. See further discussion in the section "Marketing - The Affiliate Marketing Program."
Other Products
We sell health and nutrition products manufactured by third parties that are already being sold by third party vendors. E-World has obtained permission from the third party vendors to resell the products on our www.dailynu.com website on a purchase order basis.
Sales breakdown
Currently, the Company does not have plans to expand its business beyond the nutritional supplement and skin-care sectors, although the Company is now selling products of third party vendors. Less than 1% of our sales in 2015 came from the sale of products of third parties.
Nutritional Supplements and Price per Bottle/Package
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Dibeier Granules & Oral - $160.00
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Longevity - $140.00
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US-Liver Gold - $88.00
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Cell Power - $88.00
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OPC Spa - $73.00
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Heart Power - $73.00
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O2 Cell Power - $50.00
Skin-care and Price per Bottle/Package
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Anti Aging Cream - $338.00
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Facial Cream - $320.00
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Facial Serum - $200.00
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Body Lotion - $100.00
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Sun Protection - $80.00
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Facial Toner - $32.00
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Facial Cleanser - $30.00
Other Products
Products of third party vendors are sold at retail prices similar to those for which the products are being sold by other merchants.
Return and Refund Policy for Our Products
E-World USA guarantees the quality of its products, and will exchange any product found to be defective. Additionally, customers can apply for a 90% refund of the original amount of purchased products within 60 days of purchase. When products are returned, they must be unopened and resalable. All shipping fees for product exchanges or returns must be fully paid by customers. E-World will not be responsible for any shipping costs. All of the returned products must not be damaged and must be within the validity period specified on the product label. Products not manufactured by E-World have a 60 day return period for exchange, but without the 90% refund policy for the products. In addition to the Company’s 60-day return policy, the Company, at its discretion, may accept a customer’s application for a buy-back of products previously sold within one year at 90% of the original product costs less commissions and shipping costs.
Marketing: The Affiliate Marketing Program
The Company has alerted investors and others reading this Report about risks related to its Affiliate Marketing Program.
See "Notice to Investors," above.
A more complete description of how the AMP operates is as follows:
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The Company’s website (www.dailynu.com) is an online shopping store, and everyone in China can purchase the products from this website by credit card;
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The Affiliate Marketing Program is a performance-based marketing program in which the Company rewards one or more affiliates (the “Affiliate Members”) for each successful customer purchase originated from the Affiliate Members’ own marketing efforts;
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The Company provides the Affiliate Members with a URL (or coupon or advertising banner) which can be shared by the Affiliate Members where they choose to post the link. If anyone purchases products from this link, the Company will pay commissions to the relevant Affiliate Members based on the revenue generated from their links;
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The Affiliate Members are not employees of the Company;
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The Company does not track any customer from the Affiliate Members. The Affiliate Members themselves do not know who will purchase products from the link;
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Currently, the Company has two options for the payment of commission rewards. One alternative is that an Affiliate Member may earn 70% of the monthly sales amount generated from his or her affiliate link if that Affiliate Member achieves total sales in an amount that exceeds $10,000 per month. The other alternative pays every Affiliate Member 20% of the monthly sales amount generated from his or her affiliate link; and
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The commission rewards are in the form of rebate credits that can be used to order the Company’s products, or the Affiliate Members can request a rebate in cash.
Cost-Per-Sale (CPS) Affiliate Marketing
The Affiliate Marketing Program appears on its face to utilize the “Cost-Per-Sale” (CPS) marketing method, a popular internet-based marketing method used by e-commerce companies in China. Under the CPS affiliate marketing method, the cost of advertising is determined by the revenue generated as a result of the advertisement itself.
Relevant Chinese Law
The Company’s understanding of Chinese law relevant to current AMP activities is as follows:
“Multi-level marketing” (“MLM”) or “pyramid marketing” is not a legal term used under PRC law. However, it is commonly understood as a marketing strategy or salesforce structure in which the sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit. In this sense, MLM is generally prohibited by the Regulations on Prohibition of Chuanxiao (2005) (“Anti-Chuanxiao Regulations”).
Anti-Chuanxiao Regulations use the simplified Chinese term “Chuanxiao” (mandarin pinyin: “chuán xiāo”) to cover those prohibited fraudulent sales and marketing activities. According to the Anti-Chuanxiao Regulations:
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Article 2 The term "Chuanxiao" in these Regulations means the activities conducted by an organizer or operator who recruits members to gain illegal benefits through such means as calculating and paying to the recruited members remuneration on the basis of the number of members they directly or indirectly recruit or the quantity of sales such members achieve, or requiring the recruited members to pay a certain amount of fees as the condition to obtain membership qualification, thereby disrupting the economic order and impairing social stability.
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Article 7 The following activities are Chuanxiao activities:
1)
The organizer or operator recruits members, requires the recruited to recruit other persons into the organization, calculates and pays to the recruited members remuneration (including material awards and other financial benefits, the same below) on the basis of the number of the members they directly or indirectly recruit progressively, and thus gains illegal benefits;
2)
The organizer or operator recruits members, requires the recruited member to pay fees or to do so in disguised form by purchasing commodities in order to obtain the membership qualification or the qualification for recruiting other members, and thus gains illegal benefits; and
3)
The organizer or operator recruits members, requires the recruited member to recruit other persons for forming an upline-and-downline relationship, calculates and pays remuneration to the upline on the basis of the sales achieved by the downline, and thus gains illegal benefits.
According to the above provisions, Anti-Chuanxiao Regulations not only prohibit MLM but also one-level marketing, if the one-level marketing resembles the pattern described in paragraph 2) above.
Neither “affiliate marketing” nor CPS is a legal term under PRC law. PRC law, including the Anti-Chuanxiao Regulations, does not classify CPS or this type of marketing method as an illegal marketing activity. Thus it appears that CPS is a neutral Internet based marketing tool, and that the legality of the Affiliate Marketing Program largely depends on if it is used for illegal purposes or associated with illegal activities.
Potential legal risks in relation to the Affiliate Marketing Program and the activities of the Company and Affiliate Members
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If the Affiliate Marketing Program is misused, the activities of the Company or the Affiliate Members may be regarded as Chuanxiao activities prohibited by the Anti-Chuanxiao Regulations.
Based on the Company’s description of the Affiliate Marketing Program, it appears that the Affiliate Members do not need to pay the Company to join the Affiliate Marketing Program. However, the high percentage commission, especially the 70% commission, may lead to a scenario where the Affiliate Members choose to, or are guided to buy the Company’s products by themselves, with a hope they could earn both a) the high percentage commission under the Affiliate Marketing Program; and b) the profit by selling the products they bought from the Company to third parties. If the Company fails to pay the commission or deliver the products to the Affiliate Members, or if the products delivered are deemed to be illegal or worth significantly less, or if the products are deemed to be a disguise of fraudulent activities, the Affiliate Marketing Program may attract disputes from the Affiliate Members and the Company may be regarded as engaging in Chuanxiao activities according to paragraph 2) of Article 7 of the Anti-Chuanxiao Regulations, which provides “(it is a Chuanxiao activity if) the organizer or operator recruits members, requires the recruited to pay fees or to do so in disguised form by purchasing commodities in order to obtain the membership qualification or the qualification for recruiting other members, and thus gains illegal benefits”. Note under this provision a Chuanxiao activity does not necessarily need to be a multi-level structure, and it can be a one-level structure between the Company and the Affiliate Members.
Given the high percentage commission of the Affiliate Marketing Program, the Affiliate Members may choose to develop a MLM structure in China by themselves and such activities will fall under the prohibited Chuanxiao activities under the Anti-Chuanxiao Regulations.
In addition, the fact that the Company was regarded as a Chuanxiao organization by the local authorities of Zhushan county, Hubei, China, and that a number of the Company’s products were identified to have been used in the previous Chuanxiao activities also adds to the risk that the Company and the Affiliate Members may be regarded as engaging in Chuanxiao activities under the Affiliate Marketing Program.
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The activities of the Company and/or the Affiliate Members may be regarded as a breach of the Food Safety Law (2015) (“Food Safety Law”) and other applicable laws, if the health care products and other products of the Company imported into China do not meet relevant legal requirements, or if the Affiliate Members fail to comply with relevant legal requirements in relation to the advertising of these products in China.
The Company sells, among other things, health care food to customers in China. Health care food is specially regulated under PRC law and imported health care [food] also needs to meet relevant legal requirements. For example, the Food Safety Law provides that imported health care food is subject to the government’s approval or registration before it can be imported into China; imported food, food additives or food-related products shall meet the national food safety standards of China; imported food and food additives shall pass the testing by the entry-exit inspection and quarantine authorities; the labeling of health care food shall not involve disease prevention and treatment function; and advertising of health care food shall not contain any false information or involve information on disease prevention and treatment functions.
The Company also sells cosmetics products to Chinese customers. Imported cosmetics products are also subject to approval/registration requirements and the advertising of cosmetics products also must comply with relevant legal requirements.
If any of the Company’s products are regarded as medicine by the PRC authorities, then such products will be subject to stricter legal requirements on its importation, distribution and advertising in China. If any of the PRC legal requirements applicable to the Company’s products are breached, the activities of the Company and/or the Affiliate Members may be regarded as illegal activities, and the products as well as the advertising of the same may be banned in China.
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The Affiliate Members’ marketing activities may be regarded as a breach of the Regulations on Administration of Direct Sales (2005) (“Direct Sales Regulations”) because the Company is not licensed to engage in direct sales business in China.
Under the Direct Sales Regulations, only licensed direct sales enterprises can hire direct salespersons to engage in direct sales activities in China. Activities of direct salespersons which are not hired by a licensed direct sales enterprise will be regarded as illegal activities.
The term "direct sales" in the Direct Sales Regulations means the method of distribution whereby a direct salesperson recruited by a direct sales enterprise promotes its product, outside any fixed place of business, directly to an ultimate consumer.
While one may argue that the Company only engages in online e-commerce activities from outside China and not direct sales activities in China, the above definition of “direct sales” is broad enough to also capture the Affiliate Marketing Program, under which the Affiliate Members promote the Company’s products directly to the Chinese end customers and such marketing would most likely happen in China, away from the United States where the Company’s place of business is located. In theory the Affiliate Members’ marketing activities may be regarded as direct sales activities. As the Company does not hold a license to operate a direct sales business in China, such marketing activities of the Affiliate Members may be regarded as unlicensed illegal direct sales activities.
Affiliate Members do not know who will purchase the products from the link assigned to an Affiliate Member. Thus, one may argue that there is no direct sales relationship between the Affiliate Member and the customer and that the Affiliate Members’ marketing activities should not be regarded as direct sales activities. However, the definition of “direct sales” activities under the Direct Sales Regulations is broad enough to also cover online purchases by a customer, even if he does not know the relevant Affiliate Member. In addition, as the Affiliate Members also organize free seminars to attract potential customers, a direct sales relationship may be regarded to exist in this scenario. Further, because of the high percentage commissions, the Affiliate Members may have the motive to market the Company’s products to anyone he knows. The direct sales relationship may also be regarded to exist in this scenario.
Further, as the Company is not registered in China and not eligible to apply for or hold the licenses and approvals needed to engage in e-commerce activities in China, if the Affiliate Members are accused of engaging in direct sales activities, they have no defense that they are promoting an e-commerce company recognized by the PRC.
Sourcing and Production
Our Products
In order to maintain high product quality, we anticipated that we would manufacture our products upon successful completion of our acquisition of Prime. As we terminated such acquisition in April 20, 2015, we currently do not manufacture and do not intend in the future to manufacture any of the products we sell. Instead, we acquire our ingredients from the suppliers and contract for production of our proprietary products from the manufacturers that we believe are reliable, reputable and deliver high quality materials, products and service. In 2016, three suppliers, SUSS Technology Corp., Prime Nutrisource and Oxymune America, accounted for approximately 97.0% of our purchases. In 2015, three suppliers, SUSS Technology Corp., Taiwan K.K. Corp and V-Plus Trading Inc., accounted for approximately 71.8% of our purchases. The loss of one or more suppliers could result in a potential loss of our sales and revenues if we cannot find a substitute.
The Company does not have a written or contractual agreement with our other suppliers, or manufacturers. Our product ingredient sourcing and other manufacturing requirements are conducted on a purchase-order basis. If one or more of our current suppliers stopped selling us ingredients and/or if one or more of our current manufacturers stopped manufacturing our products, we would be forced to find other suppliers and manufacturers. The time needed to find other suppliers or manufacturers could outlast the inventory on hand and result in loss of sales.
We maintain a good relationship with our suppliers and do not anticipate that any of our suppliers will terminate the relationship in the near term. We also have ongoing relationships with secondary and tertiary suppliers. In the event we become unable to source any products or ingredients from our major suppliers, we believe that we would be able to produce or replace those products or substitute source these ingredients from our secondary and tertiary other suppliers without great difficulty or significant increases to our cost of goods sold.
Our skin-care products are developed by a company which owns the intellectual property for those products. We purchased the rebranding right from them to sell these products under our names. Currently we only have one supplier for our skin-care products, and the specific product is solely owned by this supplier. If the supplier were to discontinue this product, we would need to find a substitute supplier for a similar product. We have not identified any substitute supplier or substitute product.
For nutritional products, we purchase our ingredients from third parties and contract with a third party manufacturer for further processing the material into final products to be sold. We do not own a manufacturing plant for processing of our products. We only provide self-developed formulas to be manufactured. Our company is able to obtain the ingredients necessary for production of our nutritional supplements. Our skin-care products are produced by our supplier, and we are unable to obtain the intellectual property rights to produce such products.
We also maintain a good relationship with our manufacturers and do not anticipate that any of our manufacturers will terminate our relationship in the near term. In the event we become unable have our products manufactured by our major manufacturers, we believe that we would be able to reallocate production to our other manufacturers or locate other manufacturers without great difficulty or significant increases to our cost of goods sold.
Other Products
We currently acquire other products we sell from third party vendors on a wholesale basis and then resell them on our website. We acquire most of these products on a purchase order basis. A small amount of products is purchased and stored in our warehouse. Less than 1% of our sales in 2016 and 2015 came from these products.
Order Backlog
We have no current order backlog.
Industry Analysis
The nutrition industry includes many small and medium sized companies that manufacture and distribute products generally intended to enhance the body’s performance and wellness. The four major product categories within the nutrition industry are:
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Nutritional Supplements - products such as vitamins, minerals, nutritional supplements, herbs and botanicals and compounds derived from these substances.
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Natural and Organic Foods - products such as cereals, milk, non-diary beverages and frozen entrees.
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Functional Foods - products with added ingredients or fortification specifically for health or performance purposes.
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Skin-care - products combining nutrition with skin care.
The nutritional supplement market is characterized by:
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Large selections of essentially similar products that are difficult to differentiate.
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Retail consumers’ emphasis on value pricing.
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Constantly changing formulations based on evolving scientific research.
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Low entry barriers resulting from low brand loyalty, rapid change, widely available manufacturing, low regulatory requirements and ready access to large distribution channels, such as the Internet and retail stores selling nutritional supplements and other direct marketing companies.
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A lack of uniform standards regarding product ingredient sources, potency, purity, absorption rate and form.
Marketing Plan
The Company promotes its products through its website and newspaper advertisements. During the early stages of implementation of the website, the Company offered coupon codes for certain products to generate sales and website traffic but has since discontinued this practice.
The majority of the Company’s sales are generated from China for the years ended December 31, 2016 and 2015.
Since June 2014, we have mainly sold our products over the Internet directly to end-user customers through our web site, www.dailynu.com and to wholesale distributors. In March 2016, we launched an Affiliate Marketing Program. See Marketing: The Affiliate Marketing Program in the aforementioned section above.
In addition, we believe that consumers have become more confident in ordering products, like ours, over the Internet. However, the nutritional supplement and skin care product e-business markets have been, and continue to be, increasingly competitive and are rapidly evolving.
The Company hopes to export its Dibeier products into China to be sold over-the-counter in retail locations such as nutritional product stores, rather than only through our website. The Company is currently examining the regulations that may apply to the export of Dibeier products, but no assurance can be given that the export of such products will occur in the future.
Share Distribution Plan
On March 31, 2017, our board of directors approved the following plans:
1) The Company will grant up to thirty million shares of common stock to certain persons outside of the United States who have previously worked with the Company as an incentive for these individuals to assist the Company to develop its international market. In connection with this transaction, Mr. Wang will voluntarily relinquish up to thirty million shares of common stock owned by him to the Company’s Treasury, and thereafter the Company will issue to persons not citizens or residents of the U.S. only an equal number of shares pursuant to Regulation S under the Securities Act of 1933. Accordingly, special legends regarding restrictions on resale of the securities and no-hedging transactions will need to be included on the securities.
2) To thank the people who, directly or indirectly, loaned funds or referred customers to the Company or purchased products from the Company when the Company faced financial hardship, the Company will grant up to five million shares of common stock to these individuals upon approval by the Board of Directors, and the Company will complete the stock transfer. In connection with this transaction, Mr. Wang will voluntarily relinquish up to five million shares of common stock owned by him to the Company’s Treasury. To the extent that these share distributions are being made to anyone outside of the U.S., those distributions will be made under Regulation S and must contain appropriate Regulation S subscription agreements and legends. If anyone within U.S. is to receive those shares, the Company must consult with the Company counsel to comply with U.S. securities laws.
3) The Company will grant up to twenty million shares (from authorized but unissued shares of its common stock) to persons outside the U.S. who sell Company products based on their sales performance in the future. The Company must determine that this type of incentive compensation is legal and appropriate for each country in which it is utilized. For ease of administration, this plan will be implemented solely for persons outside of the United States pursuant to Regulation S under the Securities Act of 1933.
Competition
The market for nutritional products is large and intensely competitive. The Company competes directly with companies that manufacture and market nutritional products. The Company competes with other companies in the nutritional products industry by emphasizing the uniqueness, value and premium quality of the Company's products and convenience of the Company's Internet sales system. Many of the Company's competitors have much greater name recognition and financial resources than the Company. In addition, nutritional products can be purchased in a wide variety of channels of distribution. While the Company believes that consumers appreciate the convenience of ordering products from home through the Internet, the buying habits of many consumers accustomed to purchasing products through traditional retail channels are difficult to change. The Company's product offerings are also relatively small compared to the wide variety of products offered by many other nutritional product companies.
Intellectual Property
We have no registered or patented intellectual property in the United States. We have common law ownership rights for the formulations for six of our seven non-cosmetic products.
The Company has obtained in China a Trademark Registration for the name of “Dibeier” (or mandarin pinyin: “Nuo Lin”) with trademark application number 20669799. Under China law, this trademark is valid for an indefinite period, as there is no expiration date.
The Company has obtained in China a Trademark Registration for the name of “DailyNu” with trademark application number 20683305. Under China law, this trademark is valid for an indefinite period, as there is no expiration date.
Other than the aforementioned trademarks, we do not own any other registered trademarks, trade names or other governmentally approved intellectual property rights for those products.
The three types of cosmetics products have formulation patents owned by our supplier of these products, Genepharm Inc. manufactures these products and packages them with Company designed packaging under an oral agreement with us. The formulation of the O2 Cell Power product is owned by Oxygen America, Inc., which manufactures this product and packages it with Company designed packaging under an oral agreement with us. We are authorized by these suppliers under oral agreements to sell these products worldwide under our brand name without infringing any rights of Genepharm or Oxygen America, Inc.
Research and Development
We are not currently conducting any research and development activities.
Government Regulation
Given uncertainties as to full compliance with network marketing laws in foreign jurisdictions, in 2014, the Company discontinued sales through the network marketing model and began selling directly to end-user customers from its new website. See "Notice to Investors," above.
We believe we are no longer subject to network marketing regulations. Nonetheless, we are still subject to federal, state, local and foreign regulations. Various governmental agencies have an impact on our business. The regulations cover product ingredients, manufacturing, distribution, marketing, sales, compensation and taxation, to name a few. If the Company were to fail to meet standards set by these regulations, then the Company could be prohibited from selling its products. See “Notice to Investors” above, and “Potential legal risks in relation to the Affiliate Marketing Program and the activities of the Company and Affiliate Members,” above.
The Company hopes to export its Dibeier products into China to be sold over-the-counter in retail locations such as nutritional product stores, rather than only through our website. Under China Law, in order to import these products into China, the Company must provide the Inspection Report from Provincial Quality Supervision and Inspection Institution obtained in November and December 2016, the Product Chinese Name registration) obtained in September 2016 and the Trademark registration obtained in September 2016 from the Trademark Office of State Administration for Industry & Commerce of China to the importer in China. The Company currently has no binding contracts or agreement with any person or entity in China to purchase and import the Dibeier products. The Company is currently reviewing U.S. and Chinese import/export regulations regarding the sale of Dibeier products and will not commence the export and sale of Dibeier products until it believes that it is in compliance with these regulations. Additional information concerning this matter will be made available in the Company’s future SEC reports.
Employees
We have the following employees:
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Full time: 5
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Operations - 1
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Administrative - 2
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Management - 1
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Sales - 1
We have no collective bargaining agreement with our employees. We consider our relationship with our employees to be excellent.
Additional Information
We are a public company and are required to file annual, quarterly and special reports and other information with the SEC. We are currently delinquent in our reporting requirements. We are not required to, and do not intend to, deliver an annual report to security holders. You may read and copy any document we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room. Our filings are also available, at no charge, to the public at http://www.sec.gov.
Item 2.
Item 2. Description of Property
We rent the following properties:
U.S. Offices and warehouses
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Address/Size:
9550 Flair Dr., #308, El Monte, CA 91731 (6000 sqft)
9550 Flair Dr., #407, El Monte, CA 91731 (2000 sqft)
9550 Flair Dr., #302, El Monte, CA 91731 (1038 sqft)
9550 Flair Dr., #306, El Monte, CA 91731 (490 sqft)
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Name of Landlord: 95-Royal Center LLC
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Term of Lease:
#308 - throughout 2015 and ended in October 2016,
#407 - throughout 2015 and ended in October 2016,
#302 & 306 - started from March 2015 through October 2018 and month to month thereafter.
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Monthly Rental:
#308 - $6,738,
#407 - $2,250,
#302 & 306 - $3,000 from March 2015 to March 2017 and $3,100 from April 2017 to October 2018
We believe our current facilities, including warehousing facilities, are fully suitable and adequate for our business.
We do not intend to renovate, improve, or develop properties. We are not subject to competitive conditions for property. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.
Item 3.
Item 3. Legal Proceedings
We are not a party to any material legal proceedings nor are we aware of any circumstance that may reasonably lead any third party to initiate material legal proceedings against us, except with respect to the matter described below and as set forth in the "Notice to Investors," above, and as set forth in “Potential legal risks in relation to the Affiliate Marketing Program and the activities of the Company and Affiliate Members,” above.
Notwithstanding the foregoing, on May 26, 2015, the Board of Directors concluded that a material charge for impairment to one of its assets is required under generally accepted accounting principles. The impaired assets are approximately $3,643,000 in cash that is the property of the Company held in bank accounts in the People’s Republic of China, which for administrative reasons in China, were held in the name of Ding Hua Wang, President and Chief Executive Officer of the Company, that have been frozen by authorities in the Chinese legal system (the “Frozen Accounts”) in a case involving alleged illegal activities in China by one or more persons claiming to be officers in the Company in China. The Chinese legal authorities asserted that these activities gave them the right to freeze property of the Company in China, (i.e., the Frozen Accounts), notwithstanding the fact that Company itself was not named in the case. Accordingly, the Board of Directors recognized an impairment of this amount in the financial statements filed in this Report. Although the Company believed that the funds in the Frozen Accounts were improperly frozen, the Company now believes, based on an informal conversation with a person in another company, that the Frozen Accounts will never be returned to the Company. As of the date of this Report, the Company and Mr. Wang are not aware of a separate case having been filed against the Company or Mr. Wang.
On February 6, 2016, our President and Chief Executive Officer of the Company filed a complaint to the Commission for discipline inspection of the Central Committee of the Communist Party of China and is in the process of attempting to recover the Frozen Accounts. No assurance can be provided that the complaint will be successful or that the frozen funds will ever be released to Mr. Wang or the Company. As of the date of this Report, the recovery of the Frozen Accounts is still pending.
Item 4.
Item 4. Mine Safety Disclosures
None
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
Trading History
Our common stock is qualified for quotation on the OTCQB under the symbol “EWLU.”
There have been no trades in our Common Stock as of the date of this Report, as we are not current in our SEC filings. While the Company is committed to bringing its SEC reporting obligations current, no assurance can be provided as to if or when trading in the Company’s securities will be permitted.
Dividends
We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of the Board of Directors and will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other factors that the Board of Directors considers relevant.
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
·
we would not be able to pay our debts as they become due in the usual course of business; or
·
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution, unless otherwise permitted under our articles of incorporation.
Securities Authorized for Issuance Under Equity Compensation Plans
None
Item 6.
Item 6. Selected Consolidated Financial Data
Not required.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-K.
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
Overview
Our Company is a provider of Health and Nutritional supplements and Personal Care products directly to customers on the Internet through our website, www.dailynu.com. In June 2014, we ceased utilizing our prior sales model which involved sales of our products through another website by means of a network of Direct Sales Associates, or “DSA’s." We currently do not use the DSA model in any country.
Since June 2014, we have sold our products over the Internet directly to end-user customers through our web site, www.dailynu.com and to wholesale distributors. In March 2016, we launched an Affiliate Marketing Program. See "Marketing: The Affiliate Marketing Program," above.
We believe consumers have become more confident in ordering products, like ours, over the Internet. However, the nutritional supplement and skin care product e-business markets have been, and continue to be, increasingly competitive and rapidly evolving.
The skin care products are acquired from another company which developed the products. They also are marketed and sold through our web site, www.dailynu.com.
Barriers to entry are minimal, and current and new competitors can launch new websites at a relatively low cost. Many competitors in this area have greater financial, technical and marketing resources than we do. Continued advancement in technology and increasing access to that technology are paving the way for growth in direct marketing. We also face competition for consumers from retailers, duty-free retailers, specialty stores, department stores and specialty and general merchandise catalogs, many of which have greater financial and marketing resources than we have. Notwithstanding the foregoing, we believe that we are well-positioned within the Asian consumer market with our current plan of supplying American merchandise brands to consumers and that our exposure to both the Asian and American cultures gives us a competitive advantage. There can be no assurance that we will maintain our competitive edge or that we will continue to provide only American made merchandise.
Our products are sensitive to business and personal discretionary spending levels and tend to decline or grow more slowly during economic downturns, including downturns in any of our major markets. The global economy is currently undergoing a period of volatility, and the future economic environment, while improving, continues to remain uncertain. This has led, and could further lead, to reduced consumer spending, and which may include spending on nutritional and beauty products and other discretionary items, such as our products. In addition, reduced consumer spending may force us and our competitors to lower prices. These conditions may adversely affect our revenues and profits.
Discontinued operations
On October 20, 2014, we entered into a Share Purchase Agreement for the purchase of the outstanding shares of Prime Nutrisource Inc., Nugale Pharmaceutical Inc., and Prime Nutrisource Inc. (New Jersey), and together as “Prime”. Total purchase price included:
·
CAD$2,000,000 (approximately $1,773,600);
·
Short term debt totaling CAD$22,780,000 (approximately $20,201,304);
·
25,000,000 shares of E-World Common Stock representing 14% ownership in E-World with an opportunity to acquire additional E-World Common Stock attaining a 25% ownership interest.
On April 21, 2015, we terminated our purchase of the Prime Corporations, and entered into a Termination and Release Agreement with each of the Prime Corporations, the former owners of the Prime Corporations, Guo Yin Xie, Jian Long, Hong Shu Zhu, 2434689 Ontario Inc., 2434691 Ontario Inc., and 2434694 Ontario Inc., and the Company’s subsidiary E-World Canada Holding, Inc.. The parties agreed that the Termination Agreement would be deemed effective as of October 20, 2014. Upon termination of the agreement:
·
We received CAD$1,500,000 of the CAD$2,000,000 cash portion of the purchase (approximately $1,247,920);
·
The CAD$22,780,000 (approximately $20,201,304) promissory note was cancelled;
·
The 25,000,000 shares of E-World Common Stock have been returned to us, and the 25% contingent option was cancelled.
In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meet the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.
Results of Operations
Comparison of the fiscal years ended December 31, 2016 and 2015
Total sales increased by approximately $532,000 or 140% from approximately $379,000 in 2015 to approximately $911,000 in 2016. The increase of sales was mainly due to our implementation of AMP in March 2016 and the increased sales of our new nutritional supplement product, Dibeier Granules & Oral, that is sold in powder and liquid form, through our www.dailynu.com website and to our wholesale distributors offset by the decrease in sales of our existing products, Longevity, US-Liver Gold, Cell Power, OPC spa, Heart Power and O2 Cell Power.
The cost of sales decreased by approximately $70,000 or 20% from approximately $345,000 in 2015 to approximately $275,000 in 2016. The decrease was mainly due to the decrease in cost of sales of our existing products, Longevity, US-Liver Gold, Cell Power, OPC spa, Heart Power and O2 Cell Power, which generally have higher unit costs, during 2016 as compared to 2015.
In March 2016, we introduced new nutritional supplement items on our www.dailynu.com website. These items are Dibeier Granules & Oral, a powder and liquid form of the same product. Gross profit percentage is generally higher with the sales of our new items as compared to our existing products, such as, Longevity, US-Liver Gold, Cell Power, OPC spa, Heart Power and O2 Cell Power. As a result, our gross margin increased from approximately $35,000 or 9% in 2015 to approximately $636,000 or 70% in 2016.
Selling expenses decreased from approximately $305,000 in 2015 to approximately $89,000 in 2016. The decrease of approximately $216,000 or 71% was mainly due to a decrease in marketing development expenses incurred for promotion of our own website during 2016 as compared to 2015.
General and administrative expenses decreased by approximately $1,698,000 from approximately $2,888,000 in 2015 to approximately $1,190,000 in 2016. General and administrative expenses decreased significantly as we are no longer required to incur significant professional fees for attorneys, consultants and auditors in relation to the acquisition of Prime after the disposal of Prime in April 2015. In addition, the decrease also is attributable to reduction of payroll expenses, as our CEO waived his salary beginning January 16, 2016 for so long as he determines advisable, in his sole discretion.
Other expense totaled approximately $59,000 in 2016 mainly due to approximately $52,000 interest expense incurred from the interest bearing loans from our shareholders, related parties and third parties and approximately $7,000 interest expense incurred from our credit card charges as compared to other expense totaled approximately $178,000 mainly due to $912,563 of gain from the disposal of Prime in 2015 offset by $1,083,276 from amortization of promissory note discount related to the short term debt issued to acquire Prime in 2015.
Net loss from continuing operations decreased by approximately $2,635,000 from approximately $3,371,000 net loss in 2015 to approximately $737,000 net loss in 2016 mainly due to the increase of gross profit and the decrease of selling and general administrative expenses as mentioned above.
Net loss from discontinued operations totaled approximately $123,000 in 2015 due to the acquisition of Prime on October 20, 2014, which we terminated on April 21, 2015.
Liquidity and Capital Resources
As of December 31, 2016, we had a cash balance of $2,054 and $8,550 at December 31, 2015.
In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. Other than operating expenses, the Company does not have significant cash commitments. Cash requirements include cash needed for payroll, payroll taxes, rent, and other operating expenses. However in response to the reduced liquidity factors described above, the Company has continued to find ways to reduce our operating expenses. In addition, should our Company need additional capital, our principal shareholder and Chief Executive Officer may lend money to the Company from time to time to the extent he is in a position to do so. No assurance can be provided that he will be in a position to continue to lend funds to the Company in the future.
Management has concluded under generally accepted accounting principles that there is substantial doubt about our ability to continue as a going concern as a result of our lack of significant revenues. If we are unable to generate significant revenue or secure financing, we may be required to cease or limit our operations. Our financial statements do not include adjustments that might result from the outcome of this uncertainty.
For 2016, cash used in operating activities amounted to approximately $577,000 as compared to approximately $2.0 million used in operating activities in the same period ended 2015. Cash used in operating activities was mainly due to approximately $737,000 of net loss from the Company, the increase of accounts receivable of approximately $70,000, as we started to extend credit terms to our wholesale customers, the decrease of approximately $104,000 of accounts payable and accrued expenses as we caught up some of our payments for various of our operating expenses, offset by the increase of approximately $103,000 of deferred revenue as we received more customer deposits for sales orders for our new products, Dibeier Granules & Oral, the decrease of inventory of approximately $100,000 as we incurred more sales shipment in this period, the decrease of prepaid expenses of approximately $59,000 as we amortized more prepaid expense during the period, the increase of accrued bonus of approximately $22,000 with our implementation of AMP in March 2016, and net of approximately $51,000 of non-cash operating activities.
For 2016, financing activities provided approximately $571,000 as compared to approximately $1.4 million during the same period in 2015. Net cash received in 2016 for the amount of approximately $1.1 million was from our principal shareholder and Chief Executive Officer, related parties loans and third parties loan offset by our repayment of principal of approximately $478,000 to our principal shareholder and Chief Executive Officer and our related party.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 8.
Item 8. Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of E-World USA Holding, Inc.
El Monte, California
We have audited the accompanying consolidated balance sheets of E-World USA Holding, Inc. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations and other comprehensive loss, shareholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2016. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has working a capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ The Pun Group, LLP
Santa Ana, California
April 28, 2017
200 East Sandpointe Avenue, Suite 600, Santa Ana, California 92707
Tel: 949-777-8800 • Fax: 949-777-8850
www.pungroup.com
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization
E-World USA Holding, Inc. (the "Company"), a Nevada corporation, was formed February 4, 2011. Its predecessor, with the same name was a California company incorporated in 2007. In April 2011, E-World USA Holding, Inc., a California corporation, entered into a merger agreement with its wholly-owned subsidiary, E-World USA Holding, Inc., a Nevada corporation which was the survivor of the merger. Under the Merger Agreement, the Company issued 90,000,000 shares of its common stock on a one share for one share basis for each share of E-World USA Holding, Inc., a California corporation, common stock issued and outstanding at the date of the merger. In addition, the Company issued the Type A Warrants and Type B Warrants in exchange for comparable warrants issued and outstanding of E-World USA Holding, Inc., a California corporation, at the date of the merger.
The Company is a provider of health and nutritional supplements and personal care products currently sold on the Internet through our website, www.dailynu.com, and to wholesale distributors.
Note 2 - Discontinued Operations
On October 20, 2014, the Company entered into a Share Purchase Agreement for the purchase of the outstanding shares of Prime Nutrisource Inc., Nugale Pharmaceutical Inc., and Prime Nutrisource Inc. (New Jersey), and together “Prime”. Total purchase price included:
· CAD$2,000,000 (approximately $1,773,600);
· Promissory note totaling CAD$22,780,000 (approximately $20,201,304);
· 25,000,000 shares of E-World Common Stock representing 14% ownership in E-World with an opportunity to acquire additional E-World Common Stock attaining a 25% ownership (“Contingent Shares”).
On April 21, 2015, the Company terminated its purchase of Prime, and entered into a Termination and Release Agreement with each of Prime, the former owners of the Prime, Guo Yin Xie, Jian Long, Hong Shu Zhu, 2434689 Ontario Inc., 2434691 Ontario Inc., and 2434694 Ontario Inc., and the Company’s subsidiary E-World Canada Holding, Inc. Upon termination of the agreement:
· Prime returned CAD$1,500,000 of the CAD$2,000,000 cash portion of the purchase (approximately $1,247,920);
· The CAD$22,780,000 (approximately $20,201,304) promissory note was cancelled;
· The 25,000,000 shares of Common Stock were returned to the Company, and Prime’s 25% Contingent Shares were cancelled.
Total gain from disposal of Prime on April 21, 2015 was calculated as follows:
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meet the criteria in paragraph ASC 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, committing to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.
Reconciliation of the amounts of major classes of income and losses from discontinued operations in the consolidated statements of operations is as follows:
Note 3 - Going Concern
There is substantial doubt about our ability to continue as a going concern as a result of our lack of significant revenues, significant recurring losses and negative working capital. If we are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations. Our financial statements do not include adjustments that might result from the outcome of this uncertainty.
Management is trying to alleviate the going concern risk by: securing various financing resources, including but not limited to, borrowing from the Company’s major shareholder, and the possibility of raising funds through a future public offering.
Note 4 - Summary of Significant Accounting Policies
Basis of Presentation
These financial statements have been presented by the Company in accordance with accounting principles generally accepted in the United States, are expressed in U.S. dollars and include the accounts of E-World USA Holding, Inc. and its subsidiaries, E-World Canada Holding, Inc., Prime Nutrisource Inc., Nugale Pharmaceutical Inc. and Prime Nutrisource Inc. (New Jersey). As of April 21, 2015, these subsidiaries mentioned above were deconsolidated from E-World USA Holding, Inc. For more details, see Note 2.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of consolidation
The accompanying consolidated financial statements include the financial statements of E-World USA Holding, Inc. and its subsidiaries.
Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
All significant inter-company transactions and balances have been eliminated upon consolidation.
Foreign Currency
The reporting currency of the Company is the U.S. dollar. The Company’s subsidiaries in Canada use the local currency, Canadian Dollars (“CAD$”), as their functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the Bank of New York at the end of the period. The statement of operations accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of change in deficit. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
The equity accounts were stated at their historical rate. The average translation rate applied to statement of operations accounts for the year ended December 31, 2015 was 0.81 CAD$ to $1.00 USD$. Cash flows are also translated at average translation rates for the periods; therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property and equipment, collectability of receivables and fair value of rescission liability - Type A & B Warrants. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are comprised primarily of money market accounts and foreign and domestic bank accounts. To reduce its credit risk, the Company monitors the credit standing of the financial institutions that hold the Company’s cash and cash equivalents.
Accounts Receivable
Trade accounts receivable are periodically evaluated for collectability based on credit history with customers and their current financial condition. Bad debt expense or write-offs of receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current economic conditions.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accounts receivable balance and allowance for doubtful accounts are as follows:
Movement of allowance for doubtful accounts is as follows:
Inventory
Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or market. Inventory consists of nutritional and skin-care products. Management reviews inventory on hand for estimated obsolescence or unmarketable items, as compared to future demand requirements and the shelf life of the various products. Based on the review, the Company records inventory write-downs when costs exceed expected net realizable value. The inventories’ shelf lives are approximately 3 years.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Upon disposition, the cost and related accumulated depreciation is removed from the books, and any resulting gain or loss is included in operations. The Company provides for depreciation using straight-line methods over the estimated useful lives of various classes as follow:
Repair and maintenance is charged to operations when incurred while betterments and renewals are capitalized.
Impairment of Long-Lived Assets
Long-lived assets, including, property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognizes an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, the Company reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of December 31, 2016 and 2015, no impairment of long-lived assets was recognized.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Revenue
Deferred revenue represents product deposits advanced by customers on specified product orders or on future orders that have not been shipped as of the balance sheet date. Deferred revenue also represents shipping fees deposits advanced by customers in relation to the unshipped product orders. Deferred revenue are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.
Accrued Bonus
Accrued bonus represents amount earned by the Company’s affiliated members for each successful customer purchase originated from the Affiliate Members’ own marketing efforts. These bonus earned are in the form of rebate credits that can be used to order the Company’s products, or the Affiliate Members can request a rebate in cash.
Fair Value of Financial Instruments
ASC 825 requires that the Company discloses estimated fair values of financial instruments. The Company believes the carrying value of short-term debt is a reasonable estimate of fair value due to rates being currently offered.
As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of December 31, 2016 and 2015:
Revenue Recognition
The Company recognizes revenue when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. The Company generally receives the net sales price in cash or through credit card payments when products are ordered. When the Company has sales events whereby the sales are non-returnable or non-refundable, the revenue is recognized when products are shipped.
The Company also recognized revenue on shipping and handling fees charged to the Company’s customers. Shipping and handling fee revenue is recognized when products have been delivered. Shipping and handling fee revenues totaled $24,009 and $27,143 for the years ended December 31, 2016 and 2015, respectively.
Product returns are allowed for unopened products purchased under regular sales terms within 60 days. Allowances for product returns are provided at the time the sale is recorded using historic return rates for each country and the relevant return pattern. Historically the Company has a nearly zero return rate. Hence, the allowance as of December 31, 2016 and 2015 is estimated at $0.
In addition to the Company’s 60-day return policy, the Company, at its discretion, may accept a customer’s application for a buy-back of products previously sold within one year at 90% of the original product costs less commissions and shipping costs. The Company implemented its buy-back policy on January 1, 2012. To date, the Company has not received any buy-back applications. As a result, no allowance for buy-backs has been recorded as of December 31, 2016 and 2015.
The majority of the Company’s revenues are generated from China. Revenues generated from other countries or within the United States are immaterial to our consolidated financial statements. While all products are priced in US currency, the Company accepts payments in U.S. dollars, Hong Kong dollars and Chinese RMB.
Shipping and Handling Expenses
Shipping and handling costs paid by the Company are included in selling expenses and totaled $49,106 and $23,776 for the years ended December 31, 2016 and 2015, respectively.
Operating Leases
The Company leases all of its properties under operating leases. Lease agreements generally include rent holidays and tenant improvement allowances. The Company records tenant improvement allowances and rent holidays as deferred rent liabilities and amortizes the deferred rent over the term of the lease. There were no deferred rent liabilities.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The Company utilizes ASC 740, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Basic and Diluted Earnings (Loss) Per Share
Accounting principles generally accepted in the United States regarding earnings per share (“EPS”) require presentation of basic and diluted earnings (loss) per share in conjunction with the disclosure of the methodology used in computing such earnings (loss) per share.
Basic earnings (loss) per share are computed by dividing income available to common stockholders by the weighted average of common shares outstanding during the period. Diluted earnings (loss) per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.
For the years ended December 31, 2016 and 2015, Contingent Shares and Type A and Type B Warrants did not have a dilutive effect on loss per share, as the Company had incurred a loss for the periods.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation (FDIC) insured limits for the banks located in the United States, or may exceed Hong Kong Deposit Protection Board (HKDPB) insured limits for the banks located in Hong Kong.
For the years ended December 31, 2016 and 2015, one customer accounted for approximately 54% and 13% of the Company’s sales, respectively.
For the years ended December 31, 2016 and 2015, three suppliers accounted for approximately 97% and 72% of the Company’s product purchases, respectively.
Contingencies
The Company may have inadvertently issued Type A Warrants and Type B Warrants to U.S. citizens or residents in violation of federal securities laws and may be subject to sanctions for such violations. Further, the exchange of the warrants for common shares may also have been in violation of Section 5 of the Securities Act of 1933. Thus, risk exists that former warrant holders may bring legal action against the Company, its officers and directors for securities law violations. The Company determined it is reasonably possible that a loss may have been incurred as a result of these issuances. The Company has recorded a liability equal to the amount it expects to pay to redeem the warrants. See Note 5.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Related Parties
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
New Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02 Amendments to the ASC 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not expect the adoption of ASU 2016-02 to have a material impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07 Investments-Equity and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. The objective is to simplify investor’s accounting for equity method investments as a result of an increase in ownership level or degree of influence over the investee from the prior period and requires prospective application of equity method accounting from the date when an equity investment qualifies for equity method of accounting. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. The adoption of ASU 2016-07 did not have a material impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-08-Revenue from Contracts with Customers (ASC 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The object is to reduce the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance and to reduce the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of Update 2014-09. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year. The Company does not expect the adoption of ASU 2016-08 to have a material impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (ASC 718): Improvements to Employee Share-Based Payment Accounting. The objective is to identity, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintain or improving the usefulness of the information provided to users of financial statements. The areas for simplification include the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas apply only to nonpublic entities. For public business entities, the ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company does not expect the adoption of ASU 2016-09 to have a material impact on the Company’s consolidated financial statements.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in ASC 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. The Company does not expect the adoption of ASU 2016-10 to have a material impact on the Company’s consolidated financial statements.
In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (ASC 606): Narrow-Scope Improvements and Practical Expedients. The object is to address certain issues identified by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for ASC 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year. The Company does not expect the adoption of ASU 2016-12 to have a material impact on the Company’s consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company does not expect the adoption of ASU 2016-15 to have a material impact on the Company’s consolidated financial statements.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance will be effective in the first quarterly of 2018 and early adoption is permitted. The Company does not expect the adoption of ASU 2016-18 to have a material impact on the Company’s consolidated financial statements.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this Update include items brought to the Board’s attention through a variety of sources, including: 1) The Codification’s online feedback mechanism; 2) Submissions to the Transition Resource Group for Revenue Recognition (TRG); and 3) Stakeholder’s technical inquiries. The amendments in this Update affect narrow aspects of the guidance issued in ASU No. 2014-09 for certain areas for correction or improvement. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU No. 2014-09). ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU No. 2014-09 by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not expect the adoption of ASU 2016-20 to have a material impact on the Company’s consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications have no effect on the accompanying consolidated statements of operations and other comprehensive loss and cash flows.
Note 5 - Rescission Liability - Type A & B Warrants
Type A Warrants
As an incentive to increase sales and bring in additional members, the Company issued Type A warrants to its members.
Upon issuance, Type A warrants had no expiration and could be exercised for:
(1)
common shares of the Company at a ratio of 1:1 upon a going public event in the U.S.,
(2)
products of the Company at their retail prices, or
(3)
cancelled membership and a refund in cash at 75% of face value.
From inception, January 5th, 2007 to December 31, 2010, new members purchased a package of products and received an option to include Type A Warrants in the purchase. Net cash proceeds from Type A Warrants sold to members through December 31, 2010 were $8,169,707. During 2011, a total of 18,000 Type A warrants were exercised for cash refunds totaling $22,950 and products of the Company for $7,200. During 2012, all of the remaining Type A warrants were exchanged for the following:
(1) 842,300 warrants for $495,170 in cash refunds
(2) 10,300 warrants for $16,650 in products
(3) 23,296,688 warrants for shares of common stock
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our Type A Warrants may have been issued and exercised in violation of United States federal securities laws. As a result, the common stock issued upon exercise of these warrants during fiscal 2012 may not be valid. We recorded the fair value of these warrants as a liability on the date of issuance (“Rescission Liabilities - Type A Warrants”). The value of the Rescission Liabilities - Type A Warrants was determined by calculating the maximum potential cash outlay if all warrant holders exercised using option 3 above. The total fair value was determined by calculating how much each warrant holder would receive in cash if they exercised the warrant by canceling their membership and receiving 75% of the face value of their warrant in cash and then adding these amounts together to reach the total potential cash outlay. The face value of the warrant is the stated value assigned to each Type A warrant. The face value determines how much the member could receive if exercised for cash and a canceled membership. If members exercise their warrants for cash, the Company reduces the liability by the amount of cash paid. If members exercise their warrants for products, the Company recognizes revenue equal to the retail value of the related products once they have been delivered. During 2014, the Company refunded $2,250, and members returned 9,300 Type A warrant shares. As of December 31, 2016 and 2015, 23,206,888 shares are included in Rescission Liabilities - Type A Warrants and totaled $7,165,413.
Type B Warrants
During 2009 and 2010, the Company issued a total of 2,491,108 Type B warrants as sales incentive compensation to members. Type B warrants entitle the holders to receive 2,491,108 common shares upon a going public event in the U.S. as specified in the Warrant. No additional consideration for the common shares is required upon exercise. During 2012, all of the Company’s Type B Warrants were exercised for shares of common stock. Type B Warrants may have been issued and exercised in violation of United States federal securities laws. As a result, the common stock issued upon exercise of these warrants may not be valid; therefore, we recorded “Rescission Liabilities - Type B Warrants” at the fair value of the shares issued upon exercise of these warrants. The fair value of the common shares was estimated using comparable sales of common stock to members. The Company determined that comparable sales of stock is more reliable as the fair value because goods or services received cannot be reliably measured. The fair value of the Type B warrants as of December 31, 2016 and 2015 was $249,111.
We cannot estimate when this rescission offer liability will end for either the Type A Warrants or the Type B Warrants as this liability will end only when the Company and its legal counsel conclude the rescission liability now shown in the financial statements becomes at least a remote possibility, which has not yet occurred and cannot be reasonably predicted at this time when it will occur.
Note 6 - Inventory
Inventories consist of finished goods available for resale and can be categorized as:
For the years ended December 31, 2016 and 2015, the Company recorded a recovery of prior inventory reserve totaling $481 and $1,546, respectively.
For the year ended December 31, 2016, the Company wrote off $120,595 inventory from the inventory reserve.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Property and Equipment
Property and equipment consist of following:
Depreciation expense totaled $33,174 and $34,071 for the years ended December 31, 2016 and 2015, respectively.
Note 8 - Debt
Due to employee
The Company borrowed money from an employee to fund operations. These advances do not bear interest, are unsecured and are due on demand. As of December 31, 2016 and 2015, the Company owed $95,000 to an employee.
Due to third parties, interest bearing
The Company borrowed money from third parties to fund operations. These third parties consist of the Chief Executive Officer’s (CEO) friends. These advances have an annual interest rate of 6%, are unsecured and are due on demand. As of December 31, 2016 and 2015, the Company owed $89,030 and $0 to these third parties, respectively.
Interest expense for the year ended December 31, 2016 for above loans amounted to $3,219.
Due to third parties, non-interest bearing
The Company borrowed money from third parties to fund operations. These third parties consist of the CEO's friends. These advances do not bear interest and are unsecured. $10,000 of these advances are due in February 2017 and repaid in March 2017. $266,922 of these advances are due in March 2017 and these advances become due on demand after March 2017. As of December 31, 2016 and 2015, the Company owed $276,292 and $0 to these third parties, respectively.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long term loan
In June 2012, the Company purchased a new vehicle by trade-in of the old vehicle with a loan on the purchase. The vehicle was purchased for $179,678. The loan amount was $141,677, with interest of 4.84% to be repaid over 60 even payments of $2,663. During the year ended December 31, 2015, the Company paid $24,855 for the loan.
In December 2015, the Company paid off this debt with proceeds from a new loan balance of $51,263 with an annual interest rate of 2.99% to be repaid over 48 months. During the year ended December 31, 2016, the Company paid $12,278 for the loan.
Future maturities of long term debt are as follows:
Interest expenses for the years ended December 31, 2016 and 2015 amounted to $1,366 and $2,926, respectively.
Promissory note
On October 24, 2014, the Company entered into a Share Purchase Agreement to purchase the outstanding shares in Prime Nutrisource Inc., Nugale Pharmaceutical Inc., and Prime Nutrisource Inc. (New Jersey) which included a CAD$22.78 million (approximately $20.2 million) promissory note.
This short term debt bears no interest and matures upon the earlier of (a) the effective date of a registration statement filed with the Securities and Exchange Commission in connection the completion by the Company of a $30,000,000 debt or equity offering or (b) March 31, 2015. The discount is amortized over the life of the promissory note.
The Company amortized $1,083,276 of the discount for the year ended December 31, 2015.
In April 2015, the Company terminated its purchase of Prime, and the promissory note was cancelled.
Note 9 - Income Taxes
The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended December 31, 2016 and 2015:
The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. The cumulative net operating loss carryforward that may be applied against future taxable income is approximately $9,466,000 for Federal and $8,501,000 for California as of December 31, 2016, and will expire in the years 2030 to 2036. The cumulative net operating loss carryforward that may be applied against future taxable income is approximately $8,854,000 for Federal and $7,889,000 for California as of December 31, 2015. During the years ended December 31, 2016 and 2015, the Company incurred a net loss. As deferred tax assets may not be fully realizable due to potential recurring losses, management has provided 100% valuation allowance for the deferred tax assets.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the deferred tax assets is as follows:
As of December 31, 2016, federal tax returns filed for 2013, 2014 and 2015 remain subject to examination by the taxing authorities. As of December 31, 2016, California tax returns filed for 2012, 2013, 2014 and 2015 remain subject to examination by the taxing authorities.
Note 10 - Related Party Transactions
Due to shareholder, interest bearing
In January 2016, Mr. Dinghua Wang, the CEO of the Company pledged certain of his personal assets and obtained a personal loan and funded the operations of the Company from this loan. The Company agreed to pay for the interest of this loan on Mr. Dinghua Wang’s behalf. This loan has an annual borrowing rate of 9.99%. During the year ended December 31, 2016, advances totaled $471,603. As of December 31, 2016 and 2015, the balance due to shareholder, interest bearing, amounted to $471,603 and $0, respectively. The full balance $471,603 is to be repaid on February 1, 2019.
Interest expense for the year ended December 31, 2016 for above loan amounted to $45,788.
Due to shareholder, non-interest bearing
From time to time, Mr. Dinghua Wang, the CEO of the Company advances monies to the Company. Such business transactions are recorded as due to or from shareholder. During the years ended December 31, 2016 and 2015, advances totaled $174,093 and $1,372,177, respectively and payment to shareholder totaled $437,759 and $308,490, respectively. As of December 31, 2016 and 2015, the balance due to shareholder, non-interest bearing, amounted to $2,947,170 and $3,210,836, respectively. This balance does not bear interest, is unsecured and is due on demand.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Advances from related parties, interest bearing
During the years ended December 31, 2016 and 2015, the Company borrowed $30,000 and $40,000 from a related party to fund operations, respectively. This related party is the son of the CEO. These advances have an annual interest rate of 10% for the year ended December 31, 2016 and bear a one-time $5,000 finance charge for the year ended December 31, 2015, are unsecured and are due on demand. Repayment to this related party amounted to $40,000 and $0 for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, the Company owed $30,000 and $40,000 to this related party, respectively.
During the year ended December 31, 2016, the Company borrowed $20,000 from a related party to fund operations. This related party is the spouse of a board member of the Company. These advances have an annual interest rate of 6%, are unsecured and are due on demand. As of December 31, 2016, the Company owed $20,000 to this related party.
Interest expense for the years ended December 31, 2016 and 2015 for the above loans amounted to $2,038 and $5,000, respectively.
Advances from related parties, non-interest bearing
The Company borrowed money from certain related parties to fund operations. The related parties consist of the CEO's immediate family members and relatives and a board member of the Company. These advances do not bear interest, are unsecured and are due on demand. As of December 31, 2016 and 2015, the Company owed $583,839 and $583,839 to these related parties, respectively.
Note 11 - Commitments
Operating lease
The Company rents office and warehouse space for its main corporate office from March 2015 to October 2018 and thereafter on a month to month basis without future commitment. The Company’s commitment for minimum lease payments under these operating leases as of December 31, 2016 for the next few years is as follow:
The Company incurred rent expenses of $126,500 and $152,559 for the years ended December 31, 2016 and 2015, respectively.
E-WORLD USA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Subsequent Events
Share Distribution Plan
On March 31, 2017, the Company’s Board of Directors approved the following share distribution plans for the Company in accordance with appropriate time frames consistent with applicable law and in the best interests of the Company.
1) The Company will grant up to thirty million shares of common stock to certain persons outside of the United States who have previously worked with the Company as an incentive for these individuals to assist the Company to develop its international market. In connection with this transaction, Mr. Wang will voluntarily relinquish up to thirty million shares of common stock owned by him to the Company’s Treasury, and thereafter the Company will issue to persons not citizens or residents of the U.S. only an equal number of shares pursuant to Regulation S under the Securities Act of 1933. Accordingly, special legends regarding restrictions on resale of the securities and no-hedging transactions will need to be included on the securities.
2) To thank the people who, directly or indirectly, loaned funds or referred customers to the Company or purchased products from the Company when the Company faced financial hardship, the Company will grant up to five million shares of common stock to these individuals upon approval by the Board of Directors, and the Company will complete the stock transfer. In connection with this transaction, Mr. Wang will voluntarily relinquish up to five million shares of common stock owned by him to the Company’s Treasury. To the extent that these share distributions are being made to anyone outside of the U.S., those distributions will be made under Regulation S and must contain appropriate Regulation S subscription agreements and legends. If anyone within U.S. is to receive those shares, the Company must consult with the Company counsel to comply with U.S. securities laws.
3) The Company will grant up to twenty million shares (from authorized but unissued shares of its common stock) to persons outside the U.S. who sell Company products based on their sales performance in the future. The Company must determine that this type of incentive compensation is legal and appropriate for each country in which it is utilized. For ease of administration, this plan will be implemented solely for persons outside of the United States pursuant to Regulation S under the Securities Act of 1933.
Debt
In January 2017 and March 2017, the Company borrowed $80,000 and $260,000 from third parties to fund its operations, respectively. These advances do not bear interest, are unsecured and are due on demand.
Item 9.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosures
None
Item 9A.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Office/Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2016. Based upon such evaluation, the Chief Executive Officer/Chief Financial Officer concluded that, as of December 31, 2016, the Company’s disclosure controls and procedures were not effective. This conclusion by the Company’s Chief Executive Officer/Chief Financial Officer does not relate to reporting periods after December 31, 2016.
Management’s Report on Internal Control over Financial Reporting
Under the supervision of our Chief Executive Officer/ Chief Financial Officer, and with the participation of our management, we conducted an evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2016, based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was 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. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on its evaluation as of December 31, 2016, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2016. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness relates to the following:
1. Lack of Accounting and Finance Expertise - Our current number of accounting staff is relatively small, and we do not have the required infrastructure of meeting the higher demands of being a U.S. public company. This material weakness also relates to a lack of personnel with expertise in preparing financial statements in accordance with U.S. GAAP.
2. Lack of Internal Audit Function - We lack sufficient resources to perform the internal audit function.
3. Lack of sufficient research to ensure proper accounting - We lack sufficient accounting staff to perform research on complicated accounting transactions.
4. Lack of consideration for impact of director meeting minutes on accounting and reporting - We lack of appropriate accounting expertise to properly account for board actions when they result in a financial statement impact and/or disclosure impact.
Remediation
Our management has dedicated resources to correcting the control deficiencies and to ensuring that we take proper steps to improve our internal control over financial reporting in the area of financial statement preparation and disclosure.
We have taken a number of remediation actions that we believe will improve the effectiveness of our internal control over financial reporting, including the following:
·
Hired a consulting firm with expertise in U.S. GAAP financial reporting and accounting.
·
Implemented an internal review process over financial reporting to continue to improve our ongoing review and supervision of our internal control over financial reporting;
This annual report does not and is not required to include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.
Changes in Internal Control over Financial Reporting
No change in the Company’s internal controls over financial reporting occurred during the quarter ended December 31, 2016, that materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act
Directors and Officers
The board of directors elects our executive officers annually. A majority vote of the directors who are in office is required to fill vacancies. Each director shall be elected for the term of one year, and until his successor is elected and qualified, or until his earlier resignation or removal. Our directors and executive officers are as follows:
________
*Resigned on January 4, 2017
Mr. Wang joined our predecessor company in January 2007 as Product Consultant. In November 2007, he became CEO and President of our predecessor company and has been CEO, President and Director of our company since March 2011. From August 2005 to December 2006, he was CEO of Ansheng Company International Products, a nutrition products manufacturing and wholesale company. From January 1999 to August 2005, he was CEO of Ansheng Company, a Chinese herbal medicine imports and store sales company. He studied at Zhejiang University of Traditional Chinese Medicine from January 1986 to February 1991. He attended American Global University in alternative medicine from August 2001 to September 2003 but did not receive a degree. As a member of the board, Mr. Wang contributes significant industry-specific experience and expertise on our products and services. Mr. Wang also contributes his knowledge of the Company and a deep understanding of all aspects of our business, products and markets, as well as substantial experience developing corporate strategy, assessing emerging industry trends, and business operations.
Xun Zhang joined us as Director in March 2011. From 2003 to date, he has been Assistant Professor, Harvard Medical School, Boston, Massachusetts. From 1988 to date, he has been Assistant in Biochemistry; Director, Neuroendocrine Research Laboratory Massachusetts General Hospital Boston, Massachusetts. He received a PhD, 1994, State University of New York at Albany. With responsibility for product development guidance, he brings his educational and research knowledge and experience to the Board.
Pooi Lam Shun joined us as Director in March 2011. From March 2007 to January 4, 2017, he served as a Director for us and our predecessor. From May 1990 to February 2007, he was an Independent Distributor for Sunrider International, a health food manufacturer. He received a Diploma, 1981, from Singapore Polytechnic. Pooi Lam Shun was responsible for developing marketing strategies in Singapore, Malaysia, China and other Asian markets and brought his knowledge and experience in these markets to our Board, all in the capacity as a Director of the Company. Although rendering this advice to management, he was not in charge of a principal business unit, division or function (such as sales, administration or finance) of the Company and, other than his role as a director, did not perform a policy-making function for the Company with respect to marketing or any other aspect of the Company’s business.
Family Relationships
There are no family relationships between our officers and directors.
Legal Proceedings
No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following, except as noted below:
o
Any bankruptcy petition filed by or against 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,
o
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses),
¨
Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
o
Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
¨
Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.
o
Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.
o
Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.
Because the Chinese legal system is different from that in the U.S., please refer to the Complaint filed as noted in “Legal Proceedings” and filed as an exhibit 10.1 to the 2014 report on Form 10-K as it affects Dinghua Wang. Although not being named a defendant personally, the Complaint discussed Mr. Wang’s activities and indicated that the following order had been issued against Mr. Wang: “After the case was discovered, Dinghua Wang's special accounts for sales under the Company’s DSA model in China were blocked and the funds in the amount of RMB 22,848,737.5 and $1,320.87 in the accounts were frozen.” At the date of filing of this report, the status of this Order was still open. Accordingly, Mr. Wang may be considered to have been involved in one or more of the above named activities in the last 10 years.
Code of Ethics
We do not currently have a Code of Ethics applicable to our principal executive, financial or accounting officer as one person fills all these roles. At such time as there is more than one executive officer, we will consider adopting such a Code.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company’s officers and directors are not subject to Section 16(b), as the Company is a voluntary reporting issuer.
Item 11.
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer, our two most highly compensated executive officers other than our PEO, who occupied such position at the end of our latest fiscal year and up to two additional executive officers who would have been included in the table below except for the fact that they were not executive officers at the end of our latest fiscal year, by us, or by any third party where the purpose of a transaction was to furnish compensation, for all services rendered in all capacities to us or our subsidiary for the latest two fiscal years ended December 31, 2016, and 2015.
Executive Compensation
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END December 31, 2016
No option awards, unexercised options, unvested stock awards or equity incentive plan awards were granted to our named executive officers during fiscal year ended at December 31, 2016.
Director Compensation
The following table summarizes the compensation paid to our directors for the fiscal year ended December 31, 2016:
No director was paid in any form of compensation for acting as a Director as of December 31, 2016. See Executive Compensation table above for salaries paid to these Directors for their role as officers.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following tables set forth the ownership, as of the date of this Form 10-K, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The business address for these shareholders is Flair Dr., Suite 302, El Monte CA 91731.
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*As of the date of this report, Mr. Wang has 8 existing unpaid personal promissory notes with 8 different lenders/lending groups for which he pledged a total of 4,555,966 of his shares of common stock to these lenders as collateral security for the prompt payment and performance of the promissory notes, which are currently in default.
This table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Except as set forth above, applicable percentages are based upon 142,828,993 shares of common stock outstanding as of December 31, 2016.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Due to shareholder, interest bearing
In January 2016, Mr. Dinghua Wang, the CEO of the Company pledged certain of his personal assets and obtained a personal loan and funded the operations of the Company from this loan. The Company agreed to pay for the interest of this loan on Mr. Dinghua Wang’s behalf. This loan has an annual borrowing rate of 9.99%. During the year ended December 31, 2016, advances totaled $471,603. As of December 31, 2016 and 2015, the balance due to shareholder, interest bearing, amounted to $471,603 and $0, respectively. The full balance of $471,603 is to be repaid on February 1, 2019.
Interest expense for the year ended December 31, 2016 for above loan amounted to $45,788.
Due to shareholder, non-interest bearing
From time to time, Mr. Dinghua Wang, the CEO of the Company advances monies to the Company. Such business transactions are recorded as due to or from shareholder. During the years ended December 31, 2016 and 2015, advances totaled $174,093 and $1,372,177, respectively, and payment to shareholder totaled $437,759 and $308,490, respectively. As of December 31, 2016 and 2015, the balance due to shareholder, non-interest bearing, amounted to $2,947,170 and $3,210,836, respectively. This balance does not bear interest, is unsecured and is due on demand.
Advances from related parties, interest bearing
During the years ended December 31, 2016 and 2015, the Company borrowed $30,000 and $40,000 from a related party to fund operations, respectively. This related party is the son of the CEO. These advances have an annual interest rate of 10% for the year ended December 31, 2016 and bear a one-time $5,000 finance charge for the year ended December 31, 2015, are unsecured and are due on demand. Repayment to this related party amounted to $40,000 and $0 for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, the Company owed $30,000 and $40,000 to this related party, respectively.
During the year ended December 31, 2016, the Company borrowed $20,000 from a related party to fund operations. This related party is the spouse of a board member of the Company. These advances have an annual interest rate of 6%, are unsecured and are due on demand. As of December 31, 2016, the Company owed $20,000 to this related party.
Interest expense for the years ended December 31, 2016 and 2015 for the above loans amounted to $2,038 and $5,000, respectively.
Advances from related parties, non-interest bearing
The Company borrowed money from certain related parties to fund operations. The related parties consist of the CEO's immediate family members and relatives and a board member of the Company. These advances do not bear interest, are unsecured and are due on demand. As of December 31, 2016 and 2015, the Company owed $583,839 and $583,839 to these related parties, respectively.
Mr. Dinghua Wang, CEO, voluntarily to relinquish certain of his shares to the Company’s treasury
On March 31, 2017, the Company’s Board of Directors approved the following share distribution plans for the Company in accordance with appropriate time frames consistent with applicable law and in the best interests of the Company.
Plan 1. The Company will grant up to thirty million shares of common stock to certain persons outside of the United States who have previously worked with the Company as an incentive for these individuals to assist the Company to develop its international market. In connection with this transaction, Mr. Wang will voluntarily relinquish up to thirty million shares of common stock currently owned by him to the Company’s Treasury.
Plan 2. To thank the people who, directly or indirectly, loaned funds or referred customers to the Company or purchased products from the Company when the Company faced financial hardship, the Company may grant up to five million shares of common stock to these individuals upon approval by the Board of Directors, and the Company will complete the stock transfer. In connection with this transaction, Mr. Wang will voluntarily relinquish up to five million shares of common stock currently owned by him to the Company’s Treasury.
Director Independence
Our board of directors has determined that we do not have a board member that qualifies as “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.
Item 14.
Item 14. Principal Accountant Fees and Services
The Pun Group LLP was our independent auditor for the years ended December 31, 2016 and 2015 and billed a total of $115,000 and $95,000 for fiscal years 2016 and 2015, respectively.
The following table shows the fees paid or accrued by us for the audit and other services provided by our auditor for fiscal 2016 and 2015.
As defined by the SEC, (i) “audit fees” are fees for professional services rendered by our principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-K, Form 10-Q, or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; (ii) “audit-related fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning; and (iv) “all other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,” “audit-related fees,” and “tax fees.”
Under applicable SEC rules, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditors in order to ensure that they do not impair the auditors’ independence. The SEC’s rules specify the types of non-audit services that an independent auditor may not provide to its audit client and establish the Audit Committee’s responsibility for administration of the engagement of the independent auditors. Until such time as we have an Audit Committee in place, the Board of Directors will pre-approve the audit and non-audit services performed by the independent auditors.
Consistent with the SEC’s rules, the Audit Committee Charter requires that the Audit Committee review and pre-approve all audit services and permitted non-audit services provided by the independent auditors to us or any of our subsidiaries. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee and if it does, the decisions of that member must be presented to the full Audit Committee at its next scheduled meeting.
Item 15.
Item 15. Exhibits
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* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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.
E-World USA Holding, Inc.,
a Nevada corporation
Title
Name
Date
Signature
Principal Executive Officer
Ding Hua Wang
April 28, 2017
/s/ Ding Hua Wang
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE
NAME
TITLE
DATE
/s/ Ding Hua Wang
Ding Hua Wang
Principal Executive Officer,
April 28, 2017
Principal Financial Officer,
Principal Accounting Officer and Director
/s/ Xun Zhang
Xun Zhang
Director
April 28, 2017
EXHIBIT INDEX
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* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.