Item 1. Description of Business.
SavDen Group Corp. (“we,” “us,” “our,” the “Company” or the “Registrant”) was incorporated in the State of Nevada on October 2, 2014 and maintains its principal executive offices at 1005, 10th Floor, Tower A, New Mandarin Plaza, Tsimshatsui, Kowloon, Hong Kong. The Company was formed to engage in the business of providing a business planning service to small and medium-sized companies.
The Company filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (the “SEC”) on June 19, 2015, which was declared effective on October 22, 2015. In May 2016, management of the Company abandoned its business plan and determined to seek a possible business combination. The current business purpose of the Company is to seek the acquisition of, or merger with, an existing company.
The Company is currently considered to be a “blank check” company. The SEC defines those companies as “any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies.” Under SEC Rule 12b-2 under the Exchange Act, the Company also qualifies as a “shell company,” because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of “blank check” companies in their respective jurisdictions. Management has undertaken steps to have the Company’s common stock traded on the OTC market. The market is illiquid, there has been no trading of any significance and there can be no assurance that a trading market of any significance will develop or that there will be any depth to any such market that may develop. Management does not intend to undertake any significant efforts to cause a market to develop in our securities until we have successfully concluded a business combination. The Company is subject to the periodic reporting requirements of the Exchange Act under Section 15(d) as a result of its registration statement on Form S-1 being declared effective by the SEC and intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements.
We intend to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any business. Although management has not restricted the geographic location of the target companies to China, management believes that it is probable that the target’s operations will be based in China or Asia.
The analysis of new business opportunities will be undertaken by or under the supervision of our management. As of this date, the Company has not entered into any definitive agreement with any party regarding business opportunities for the Company. The Company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In its efforts to analyze potential acquisition targets, the Company will consider the following kinds of factors:
(a)Potential for growth, indicated by new technology, anticipated market expansion or new products;
(b)Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
(c)Strength and diversity of management, either in place or scheduled for recruitment;
(d)Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
(e)The cost of participation by the Company as compared to the perceived tangible and intangible values and potentials;
(f)The extent to which the business opportunity can be advanced;
(g)The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
(h)Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the Company’s limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
Competition
In identifying, evaluating and selecting a target business, we may encounter intense competition from other entities having a business objective similar to ours. There are numerous “public shell” companies either actively or passively seeking operating businesses with which to merge in addition to a large number of “blank check” companies formed and capitalized specifically to acquire operating businesses. Additionally, we are subject to competition from other companies looking to expand their operations through the acquisition of a target business. Many of these entities are well established and have extensive experience in identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. Our ability to compete in acquiring certain sizable target businesses is limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of a target business.
Any of these factors may place us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities with a business objective similar to ours to acquire a target business on favorable terms.
If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the target business. Many of our target business’ competitors are likely to be significantly larger and have far greater financial and other resources than our target. Some of these competitors may be divisions or subsidiaries of large, diversified companies that have access to the financial resources of their respective parent companies. Our target business may not be able to compete effectively with these companies or maintain them as customers while competing with them on other projects. In addition, it is likely that our target business will face significant competition from smaller companies that have specialized capabilities in similar areas. We cannot accurately predict how our target business’ competitive position may be affected by changing economic conditions, customer requirements or technical developments. We cannot assure you that, subsequent to a business combination, we will have the resources to compete effectively.
Form of Acquisition
The manner in which the Company participates in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of the Company and the promoters of the opportunity and the relative negotiating strength of the Company and such promoters.
It is likely that the Company will acquire its participation in a business opportunity through the issuance of common stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called “tax-free” reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”) depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other “tax free” provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares of the surviving entity. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization.
The present stockholders of the Company will likely not have control of a majority of the voting securities of the Company following a reorganization transaction. As part of such a transaction, all or a majority of the Company’s directors may resign, and one or more new directors may be appointed without any vote by stockholders.
In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders’ meeting and obtain the approval of the holders of a majority of the outstanding securities. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval. However, due to the share ownership of management, even if stockholder approval is required, management will also control the shareholder vote.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation might not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred.
We presently have no employees apart from our management. Our management is engaged in outside business activities and anticipates that they will devote very limited time to our business until the acquisition of a successful business opportunity has been identified. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination.
Item 1A.
Item 1A. Risk Factors.
An investment in our securities is highly speculative and subject to numerous and substantial risks. These risks include those set forth below and elsewhere in this Form 10-K. Readers are encouraged to review these risks carefully before making any investment decision.
There may be conflicts of interest between our management and our non-management stockholders.
Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of the Company. A conflict of interest may arise between our management’s personal pecuniary interest and its fiduciary duty to our stockholders. In addition, our management may in the future be involved with other blank check companies, and in the pursuit of business combinations, conflicts with such other blank check companies may arise. If we and any other blank check companies that our management are affiliated with in the future desire to take advantage of the same opportunity, then those members of management that are affiliated with both companies would abstain from voting upon the opportunity. In the event of identical officers and directors, the officers and directors will arbitrarily determine the company that will be entitled to proceed with the proposed transaction.
Our business is difficult to evaluate because we have limited operating history.
Historically, the Company has a very limited operating history, and at present has no operations or revenue and only minimal assets. Therefore, there is a risk that we will be unable to consummate a business combination. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.
There is competition for those private companies suitable for a merger transaction of the type contemplated by management.
The Company is in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
Future success is highly dependent on the ability of management to locate and attract a suitable acquisition.
The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we complete a business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control.
The Company has no existing agreement for a business combination or other transaction.
We have no arrangement, agreement or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. No assurances can be given that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. Management has not identified any particular industry or specific business within an industry for evaluation. We cannot guarantee that we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that funds allocated to the purchase of our shares will not be invested in a company with active business operations.
Management intends to devote only a limited amount of time to seeking a target company which may adversely impact our ability to identify a suitable acquisition candidate.
While seeking a business combination, management anticipates devoting very limited time to the Company’s affairs. We have not entered into a written employment agreement with management and they are not expected to do so in the foreseeable future. This limited commitment may adversely impact our ability to identify and consummate a successful business combination.
The time and cost of preparing a private company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private companies.
Target companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) require reporting companies to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.
The Company may be subject to further government regulation which would adversely affect our operations.
Although we are subject to the reporting requirements under the Exchange Act, management believes we are not subject to regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”), since we are not engaged in the business of investing or trading in securities. If we engage in business combinations which result in our holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act. If so, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the Securities Exchange Commission (“SEC”) as to our status under the Investment Company Act and, consequently, violation of the Investment Company Act could subject us to material adverse consequences.
Any potential acquisition or merger with a foreign company may subject us to additional risks.
If we enter into a business combination with a foreign company, we will be subject to risks inherent in business operations outside of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.
There is only a limited trading market for our common stock, and liquidity of shares of our common stock is limited.
Although our common stock is quoted on the OTC Pink market, there is no significant public trading market for our common stock. Further, we do not anticipate that a significant public trading market will develop in the foreseeable future unless and until the Company completes a business combination with an operating business. Accordingly, the liquidity of our shares of common stock is limited.
We have never paid dividends on our common stock.
We have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy.
The Company may be subject to certain tax consequences in our business, which may increase our cost of doing business.
We may not be able to structure our acquisition to result in tax-free treatment for the companies or their stockholders, which could deter third parties from entering into certain business combinations with us or result in being taxed on consideration received in a transaction. Currently, a transaction may be structured so as to result in tax-free treatment to both companies, as prescribed by various federal and state tax provisions. We intend to structure any business combination so as to minimize the federal and state tax consequences to both us and the target entity; however, we cannot guarantee that the business combination will meet the statutory requirements of a tax-free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes that may have an adverse effect on both parties to the transaction.
Our business will have no revenue unless and until we merge with or acquire an operating business.
We are a development stage company and have had no revenue from operations. We may not realize any revenue unless and until we successfully merge with or acquire an operating business.
The Company intends to issue more shares in a merger or acquisition, which will result in substantial dilution.
Our Articles of Incorporation authorizes the issuance of a maximum of 1,000,000,000 shares of common stock. Any merger or acquisition effected by us may result in the issuance of additional securities without stockholder approval, and the substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, the common stock issued in any such merger or acquisition transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our Board of Directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock or preferred stock are issued in connection with a business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holders of common stock might be materially and adversely affected.
We are controlled by our management, whose interest may differ from those of the other shareholders.
As of the date of this filing, Mr. DONG Yingzhi, the sole officer and director of the Company, has sole voting power over 500,000,000 shares of the Company’s common stock, or approximately 79.5% of the outstanding shares of common stock. Therefore, Mr. DONG Yingzhi may be in a position to elect the Board of Directors and to control the business and affairs of the Company including significant corporate actions such as mergers and acquisitions, the sale or purchase of assets and the issuance and sale of our securities. The Company also may be prevented from entering into transactions that could be beneficial to the Company’s other shareholders. The interest of our largest shareholder, which is controlled by DONG Yingzhi, may differ from the interests of our other shareholders.
Our principal stockholder may engage in a transaction to cause the Company to repurchase its shares of common stock.
In order to provide an interest in the Company to a third party, our principal stockholder may choose to cause the Company to sell Company securities to third parties, with the proceeds of such sale being utilized by the Company to repurchase their shares of common stock. As a result of such transaction, our management, principal stockholders and Board of Directors may change.
The Company has conducted limited market research of business opportunities, which may affect our ability to identify a business to merge with or acquire.
The Company has conducted limited market research concerning prospective business opportunities. Therefore, we have no assurances that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination or other transaction for formal evaluation by us, such that it may be expected that any such target business or transaction will present such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available. There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our stockholders.
Because we may seek to complete a business combination through a “reverse merger,” following such a transaction we may not be able to attract the attention of major brokerage firms.
Additional risks may exist since we will assist a privately held business to become public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of our Company since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of our post-merger company in the future.
We cannot assure you that following a business combination with an operating business, our common stock will be listed on NASDAQ or any other securities exchange.
Following a business combination, we may seek the listing of our common stock on NASDAQ or the New York Stock Exchange. However, we cannot assure you that following such a transaction, we will be able to meet the initial listing standards of either of those or any other stock exchange or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange. After completing a business combination, until our common stock is listed on the NASDAQ or another stock exchange, we expect that our common stock would be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system or on the “pink sheets,” where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, we would be subject to an SEC rule that, if it failed to meet the criteria set forth in such rule, imposes various practice requirements on broker-dealers who sell securities governed by the rule to persons other than established customers and accredited investors. Consequently, such rule may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital following a business combination.
This report on Form 10-K contains forward-looking statements and information relating to us, our industry and other businesses.
The forward-looking statements contained in this annual report are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. When used in this annual report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to risks and uncertainties that may cause our actual results to differ materially from those contemplated in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.
The audit report included in this Annual Report was prepared by auditors who may not be inspected by the Public Company Accounting Oversight Board and, as a result, you are deprived of the benefits of such inspection.
The independent registered public accounting firm that issues the audit reports included in our financial reports filed with the SEC, as auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditors are located in Hong Kong, SAR, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Peoples’ Republic of China (PRC) authorities, our auditors are not currently inspected by the PCAOB.
Inspections of other firms that the PCAOB has conducted outside PRC have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct inspections in PRC prevents the PCAOB from regularly evaluating our auditor’s statements, audits and quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.
The inability of the PCAOB to conduct inspections of auditors in PRC makes it more difficult to evaluate the effectiveness of our auditor’s quality control and audit procedures as compared to auditors outside of PRC that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.
Item 1B.
Item 1B. Unresolved Staff Comments.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 2.
Item 2.Description of Property.
The Company neither rents nor owns any properties. The Company utilizes the office space and equipment of its management at no cost. Management estimates such amounts to be immaterial. The Company currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.
Item 3.
Item 3.Legal Proceedings.
To the best knowledge of our management, there are presently no material pending legal proceedings to which the Company, any executive officer or any owner of record or beneficially of more than five percent of any class of voting securities is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
Item 4.
Item 4.Mine Safety Disclosures.
Not applicable.
PART II
Item 5.
Item 5.Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.
Common Stock
Our Articles of Incorporation authorize the issuance of up to 1,000,000,000 shares of common stock, par value $.001 per share (the “Common Stock”). The Common Stock is not “listed” on a publicly-traded market; however, the Common Stock is eligible for quotation on the OTC Pink market under the symbol SVDN. As of August 31, 2018, there were approximately 32 holders of record of the Common Stock and an aggregate of 629,000,000 shares of Common Stock outstanding. The Company sold 1,290,000 shares of its Common Stock under its registration statement on Form S-1 (129,000,000 shares after the 100:1 stock split effected by the Company as of August 26, 2016), and management believes that all of those shares are unrestricted and free trading.
Preferred Stock
Our Articles of Incorporation do not authorize the issuance of any shares of preferred stock.
Dividend Policy
The Company has not declared or paid any cash dividends on its Common Stock and does not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on the Company’s earnings, if any, its capital requirements and financial condition and such other factors as the Board of Directors may consider.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
The Company did not have any unregistered sales of securities during the fiscal year ended May 31, 2018.
Issuer Purchases of Equity Securities
None.
Item 6.
Item 6.Selected Financial Data.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 7.
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operation.
Forward Looking Statement Notice
The following discussion should be read in conjunction with the Company’s financial statements, which are included elsewhere in this Form 10-K.
Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) in regard to the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company (referred to herein as “we,” “us,” “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving its ability to identify a target candidate, to negotiate the terms of the acquisition of the target candidate and then to consummate the acquisition. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Annual Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.
Description of Business
The Company intends to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. Our principal business objective for the next twelve months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict our potential candidate target companies to any specific business or industry and, thus, may acquire any business. Although management has not restricted the geographical location of the target companies to China, management believes that it is probable that the target’s operations will be based in China or Asia.
The Company currently does not engage in any business activities that provide cash flow. During the next twelve months, we anticipate incurring costs related to:
(i)filing Exchange Act reports, and
(ii)investigating, analyzing and consummating an acquisition.
We believe we will be able to meet these costs through deferral of fees by certain service providers and additional amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors. There are no assurances that the Company will be able to secure any additional funding as needed. Currently, our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going concern is also dependent on our ability to find a suitable target company and enter into a possible reverse merger with such company. Management’s plan includes obtaining additional funds by equity financing through a reverse merger transaction and/or related party advances; however, there is no assurance of additional funding being available.
The Company may consider acquiring a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish a public trading market for its shares while avoiding, among other things, the time delays, significant expense and loss of voting control which may occur in a public offering.
Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks. Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing and the dilution of interest for present and prospective stockholders which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.
The Company anticipates that the selection of a business combination will be complex and extremely risky. Through information obtained from industry publications and professionals, our management believes that there are numerous firms seeking the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. We do not currently intend to retain any entity to act as a “finder” to identify and analyze the merits of potential target businesses.
Results of Operations
We have not generated any revenue to date and have incurred recurring losses since inception. It is unlikely the Company will have any revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities. Management asserts that these circumstances may hinder the Company’s ability to continue as a going concern. The Company’s plan of operation for the next twelve months shall be to continue its efforts to locate suitable acquisition candidates.
For the fiscal years ended May 31, 2018 and 2017
Revenues
The Company did not generate any revenues during the fiscal years ended May 31, 2018 and May 31, 2017.
Total operating expenses
During the year ended May 31, 2018, we incurred general and administrative expenses of $38,552 compared to $53,109 incurred during the year ended May 31, 2017. General and administrative expenses incurred during the year ended May 31, 2018 were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting, and developmental costs. The decrease in operating expenses was primarily due to the decreased need for professional services during the year ended May 31, 2018.
Other Income
During the year ended May 31, 2018 and May 31, 2017, we received zero other income.
Net loss
For the fiscal year ended May 31, 2018, the Company had net loss of $38,552, as compared to a net loss of $53,109 for the fiscal year ended May 31, 2017.
Liquidity and Capital Resources
As of May 31, 2018 and May 31, 2017, the Company had zero total assets. The Company’s liabilities as of May 31, 2018 were $98,228, which was comprised of accrued expenses and due to shareholder. This compares with total liabilities of $59,676, comprised of accrued expenses and due to shareholder as of May 31, 2017. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.
The following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities for the years ended May 31, 2018, and 2017.
The Company has generated no revenues since inception. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. In addition, the Company is dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable on reasonable terms, the Company may not be able to implement its plan of operations.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the fiscal year ended May 31, 2018, net cash flows used in operating activities were $43,228 consisting primarily of a net loss of $38,552 and decrease of accrued expenses of $4,676. During the fiscal year ended May 31, 2017, net cash flows used in operating activities were $32,559 consisting primarily of a net loss of $53,109 and increase of accrued expenses of $12,217 and decrease of prepaid expense of $8,333.
Cash Flows from Investing Activities
We neither generated, nor used, funds in investing activities during the fiscal year ended May 31, 2018 and May 31, 2017.
Cash Flows from Financing Activities
We have financed our operations primarily from either advances from shareholders or the issuance of equity instruments. For the fiscal year ended May 31, 2018, net cash provided by financing activities was $43,228 for the amount due to shareholder. For the fiscal year ended May 31, 2017, net cash provided by financing activities was $32,559 from amounts due to shareholder.
Going Concern Consideration
The Company has not commenced planned principal operations. The Company had no revenues and incurred a net loss of $38,552 for the fiscal year ended May 31, 2018. In addition, the Company had both a working deficit and a stockholders’ deficit of $98,228 at May 31, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our expenses. This is because we have not generated any revenues and have a limited operating history. There are no assurances that we will be able to either generate sufficient funds from the operations of a target company that we acquire or obtain additional financing through either private placements and/or bank financing or other loans necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the condensed financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material
Item 7A.
Item 7A.Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 8.
Item 8.Financial Statements and Supplementary Data.
Audited financial statements begin on the following page of this report.
中正達會計師事務所有限公司
Centurion ZD CPA Limited
Certified Public Accountants (Practising)
Unit 1304, 13/F., Two Harbourfront, 22 Tak Fung Street, Hunghom, Hong Kong
香港紅磡德豐街22號海濱廣場二期13樓1304室
Tel : (852) 2126 2388 	Fax: (852) 2122 9078
To: The board of directors and stockholders of Savden Group Corp.
Report of Independent Registered Public Accounting Firm
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Savden Group Corp. and subsidiaries (the “Company”) as of May 31, 2018 and 2017, and the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of two years in the period ended May 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended May 31, 2018, 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 suffered from losses from operation and significant accumulated deficits. The Company comes to have insufficient cash flows generated from operation and provided for development. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Centurion ZD CPA Limited
We have served as the Company’s auditor since 2016.
Hong Kong, China
September 24, 2018
SAVDEN GROUP CORP.
BALANCE SHEETS
(Stated in US Dollars except Number of Shares)
The accompanying notes are an integral part of these financial statements.
SAVDEN GROUP CORP.
STATEMENTS OF OPERATIONS
(Stated in US Dollars except Number of Shares)
The accompanying notes are an integral part of these financial statements.
SAVDEN GROUP CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(Stated in U.S. Dollars except Number of Shares)
The accompanying notes are an integral part of these financial statements.
SAVDEN GROUP CORP.
STATEMENTS OF CASH FLOW
(Stated in US Dollars)
The accompanying notes are an integral part of these financial statements.
SAVDEN GROUP CORP.
Notes to the Financial Statements
May 31, 2018
(Stated in US Dollars)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
SavDen Group Corp. (the “Company”) is a for profit corporation established under the corporation laws in the State of Nevada, United States of America on October 2, 2014. Our business office is located at 1005, 10th Floor, Tower A, New Mandarin Plaza, Tsimshatsui, Kowloon, Hong Kong. The Company was formed to engage in the business of providing a business planning service to small and medium-sized companies; however, management of the Company has abandoned that business plan and determined to seek a possible business combination. The current business purpose of the Company is to seek the acquisition of, or merger with, an existing company. As such, the Company is subject to all risks inherent to the establishment of a start-up business enterprise.
On April 20, 2016, Denis Savinskii (the “Seller” or “Savinskii”) entered into a Stock Purchase Agreement with Kimho Consultants Co. Limited, a Hong Kong limited company that is 100% owned and controlled by Kimberly Leung (“Purchaser” or “Kimho”), pursuant to which the Seller sold to the Purchaser an aggregate of 5,000,000 shares (“Shares”) of SavDen Group Corp. common stock, representing approximately 79.5% of the total issued and outstanding shares of common stock, for total consideration of US$381,300, including $356,300 for the purchase of the Shares and reimbursement of Seller’s transaction expenses equal to $25,000. The source of the purchase price was working capital of the Purchaser. We refer to the transaction consummated under the Stock Purchase Agreement as the “Transaction.”
Prior to the closing of the Transaction, the sole officer and director of the Company was Mr. Savinskii. Mr. Savinskii resigned from his positions as President, Secretary, Treasurer and Chief Financial Officer and also resigned from his position as the sole director of the Company. In his capacity as a director, Mr. Savinskii appointed Mr. Chan Wai Lun to fill the vacancy created by his resignation as the sole officer of the Company, and also appointed him to serve as a director of the Company.
Dong Yingzhi (“Purchaser” or “Dong”) acquired 100% of the equity ownership of Sino Expertise Limited (“SEL”) from a third party (“Seller”) on May 16, 2016. Seller had purchased 100% of the ownership of SEL from Kimberly Leung (“Leung”) on May 12, 2016. Dong used his personal funds for the purchase. Leung had caused the 500,000,000 shares (on a post split basis) of SavDen Group Corp. that she acquired from Denis Savinskii on April 20, 2016, to be registered in the name of SEL. As a result of the sale of 100% of the equity ownership of SEL to Purchaser, Purchaser may be deemed to be the beneficial owner of the 500,000,000 shares (on a post split basis) (“Shares”) of the Company held by SEL, which constitutes approximately 79.5% of the total issued and outstanding shares of the Company’s common stock. We refer to the acquisition of 100% of the equity ownership of SEL by Dong as the “Transaction.” The Company effected a forward split of 100:1 of its shares that was effective on August 26, 2016.
As a result of the Transaction and upon the request of Dong, Chan Wai Lun, the sole officer and director of the Company, resigned from his positions as President, Secretary, Treasurer and Chief Financial Officer and also resigned from his position as the sole director of the Company effective on September 1, 2016. In his capacity as a director, Mr. Chan elected Dong to the Board of Directors prior to the effective time of his resignation, and elected Dong as the Company’s President and Chief Executive Officer, Secretary, Chief Financial Officer and Treasurer to take effect immediately following his resignation as an officer of the Company.
The accompanying audited financial statements of the Company and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the fiscal years presented have been reflected herein.
Unless the context otherwise requires, all references to “SavDen Group Corp.,” “we,” “us,” “our” or the “Company” are to SavDen Group Corp.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States (“U.S. GAAP”).
This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Cash and cash equivalents
The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Earnings (loss) per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments, and therefore, basic and diluted earnings (loss) per share are equal.
Prepaid Expenses
Prepaid expenses are cash paid amounts that represent costs incurred from which a service or benefit is expected to be derived in the future. The future write-off period of the incurred cost will normally be determined by the period of benefit covered by the prepayment. When the period arrives to which a prepaid cost relates the costs will be treated as a period cost for the period in question. Normally such prepaid costs will be amortized based on the elapse of time.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains or losses on dispositions of property and equipment are included in other income. Major additions, renewals and betterments are capitalized, while maintenance and repairs are expensed as incurred.
Depreciation and amortization are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service. Estimated useful lives are as follows, taking into account the assets’ estimated residual value:
The estimated useful life of a computer is 3 years.
Revenue Recognition
The Company will recognize revenue in accordance with Accounting Standards Codification No. 605, “Revenue Recognition” (“ASC-605”), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Fair value of financial instruments
The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as 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. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be 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 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of May 31, 2018.
Stock-based compensation
The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
Recent Accounting Pronouncements
Accounting Pronouncements Adopted
The FASB issued an Accounting Standards Update (ASU) that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act.
ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.
The ASU requires financial statement preparers to disclose:
●A description of the accounting policy for releasing income tax effects from AOCI;
●Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and
●Information about the other income tax effects that are reclassified.
The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement-Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP.
The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.
NOTE 3 - GOING CONCERN
The Company’s financial statements as of May 31, 2018 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred a cumulative net loss of $129,028 and a current year loss of $38,552, a negative working capital of $98,228 and cash used in operating activities of $43,228 for the year ended at May 31, 2018. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 - RELATED PARTIES TRANSACTION
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by officers, directors or shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
As of May 31, 2018 and 2017, the amount due to shareholder was $75,787 and $32,559, respectively. The amount due to shareholder is non-interest bearing, due upon demand and unsecured.
NOTE 5 - EQUITY
On June 6, 2015, 5,000,000 common shares at a price of $0.001 per share for total net proceeds of $5,000 were issued to the Company’s sole officer and director.
During the period from June 2015 to April 2016, the Company issued 1,290,000 shares at a price of $0.02 for total proceeds of $25,800.
On May 20, 2016, the Board of Directors of the Company approved resolutions to: (i) increase the authorized number of shares of common stock from 75,000,000 shares of $0.001 par value common stock to 1,000,000,000 shares of $0.001 par value common stock (“Increase in Authorized”), and (ii) effect a 100:1 forward split of the Corporation’s authorized, issued and outstanding shares of common stock at the later of such time as the Directors should determine to make it effective or one day after the Amendment to increase the number of the Corporation’s authorized shares is filed with the Nevada Secretary of State (“Forward Stock Split”). The Increase in Authorized and the Forward Stock Split shall be sometimes referred to collectively as the “Amendments”. On that same date, shareholders of the Corporation holding 79% of the Corporation’s issued and outstanding shares of common stock signed consent resolutions approving the Amendments.
On June 24, 2016, the Company filed an amendment to the Company’s Articles of Incorporation with the Nevada Secretary of State to increase the authorized shares of the Company’s common stock. On June 24, 2016, the Company filed a Certificate of Change with the Nevada Secretary of State to provide notice of the 100:1 forward split of the Company’s common stock. The Board of Directors set the effective date of the Forward Stock Split to be at least 10 business days after approval was received from the Financial Industry Authority (“Effective Date”).
The Forward Stock Split became effective on August 10, 2016. As a result of the Forward Stock Split, the number of the Company’s issued and outstanding shares of common stock was increased from 6,290,000 to 629,000,000.
As at May 31, 2018, 629,000,000 shares of common stock were issued and outstanding.
NOTE 6 - INCOME TAX
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. There are no material uncertain tax positions for any of the reporting periods presented.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal corporate income taxes on dividends from foreign subsidiaries; and (4) providing modification to subpart F provisions and new taxes on certain foreign earnings such as Global Intangible Low-Taxed Income (GILTI). Except for the one-time transition tax, most of these provisions go into effect starting January 1, 2018.
The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on unrepatriated earnings of our foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, in addition to other factors, the amount of post-1986 undistributed earnings and profits (E&P) of its foreign subsidiaries, as well as the amount of foreign income taxes paid on such earnings and profits. The portion of earnings and profits comprised of cash and liquid assets is taxed at a rate of 15.5 percent and any remaining amount of earnings and profits from non-liquid assets is taxed at a rate of 8 percent.
The Company did not have any earnings incurred in foreign jurisdictions and did not have any estimated post 1986 undistributed and untaxed accumulated foreign earnings. Therefore, for the fiscal year ended May 31, 2018, the Company did not incur any toll-charge income and transition tax.
As of May 31, 2018, the Company in the United States had $129,028 in net operating loss carry forwards available to offset future taxable income. Federal net operating losses can generally be carried forward twenty years. Under the Tax Act, NOLs incurred in the years beginning after December 31, 2017 will be subject to 80 percent limitation and carryforwards indefinitely. NOLs generated in 2017 and earlier would retain twenty years and be available to offset 100 percent of taxable income subject to certain limitations.
The Company believes that it is more likely than not that these net accumulated operating losses will not be utilized in the near future. Therefore, the Company has provided a full valuation allowance for the deferred tax assets arising from the losses at US. Accordingly, the Company has no net deferred tax assets under the US entity.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of May 31, 2018, the Company has not completed its accounting for the effects of the Tax Act as additional information is needed to be obtained, prepared and analyzed in order to complete the accounting requirements under ASC Topic 740. The Company is continuing to gather additional information to more precisely evaluate and compute the potential tax liability, if any, and will monitor future guidance set forth by the Department of Treasury with regard to the Transition Tax provisions under the Act. When information becomes available, the final determination of the deemed incremental income tax expense, deemed re-measurement of the deferred assets and liabilities or other applicable provisions of the Tax Act will be completed as additional information becomes available within the 12 month re-measurement period.
NOTE 7 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were available to be issued, and based on their evaluation no events have occurred that would require disclosure.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosure.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive officer and principal financial officer, DONG Yingzhi, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of May 31, 2018. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were ineffective at such time to ensure that information required to be disclosed by us in the reports filed or submitted under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls, which are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, were inappropriate to allow timely decisions regarding required disclosure.
Based on management’s assessment, the Company determined that there were material weaknesses in its internal control over financial reporting as of May 31, 2018 based on the material weaknesses described below:
● Because the Company consists of one person who acts as the sole officer and director of the Company, there are limited controls over information processing.
● There is inadequate segregation of duties consistent with control objectives as management is composed of only one person. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter after the Company completes a reverse merger or business combination to determine whether improvement in segregation of duties is feasible.
● The Company does not have a formal audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.
● There is a lack of formal policies and procedures necessary to adequately review significant accounting transactions.
The Company utilizes a third party independent contractor for the preparation of its financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third party independent contractor is not involved in the day to day operations of the Company and may not be provided information from management on a timely basis to allow for adequate reporting/consideration of certain transactions.
As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of May 31, 2018. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.
In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with U.S. GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP. Management believes that this will lessen the possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis, and we will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
Evaluation of Internal Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive, principal operating and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, 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 because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting at May 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment under those criteria, management has determined that, as of May 31, 2018, our internal control over financial reporting was not effective.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuers that are not “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Changes in Internal Controls over Financial Reporting
There have been no changes to our internal controls over financial reporting that occurred during our last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.
(a) Identification of Directors and Executive Officers.
The following table sets forth certain information regarding the Company’s directors and executive officers:
Mr. DONG, age 41, has approximately 20 years of experience in banking and finance. He is currently the Chairman of the Board of Baishan Jiangyuan Countryside Commercial Bank in Baishan, Jilin Province, China. Mr. DONG began his banking career with Dalian Bank as an accountant, and served in several different positions with that bank during the 16 years he was employed at that bank. His last position before joining Baishan Jiangyuan Countryside Commercial Bank was as an Assistant to the President with responsibility for all primary bank services in Dalian Bank Beijing Branch. Mr. DONG received his bachelor’s degree from Northeast University of Financial and Economics in accounting in 2000, and in 2006 received a Master’s degree in public management from that same university.
The term of office of each director expires at our annual meeting of stockholders or when his or her successor is duly elected and qualified. Directors are not compensated for serving as such. Officers serve at the discretion of the Board of Directors.
(b) Significant Employees.
As of the date hereof, the Company has no significant employees.
(c) Family Relationships.
There are no family relationships among directors, executive officers or persons nominated or chosen by the issuer to become directors or executive officers.
(d) Involvement in Certain Legal Proceedings.
There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of the Company during the past five years.
(e) Prior Blank Check Company Experience
Mr. DONG Yingzhi has not been involved with any other blank check companies.
Compliance with Section 16(a) of the Exchange Act
Not Applicable
Nominating Committee
We have not adopted any procedures by which security holders may recommend nominees to our Board of Directors.
Audit Committee
The Board of Directors acts as the audit committee. The Company does not have a qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert.
Item 11.
Item 11. Executive Compensation.
The following table sets forth all compensation awarded to, earned by or paid by the Company to each of our named executive officers and directors for the fiscal years ended May 31, 2018, 2017 and 2016.
(1)Mr. Dong has served as the sole officer and director of the Company since September 2016.
(2)Mr. Chan served as sole officer and director of the Company from April 2016 until September 2016.
(3)Mr. Savinski served as sole officer and director of the Company from October 2014 (inception) until April 2016.
The Company’s officers and directors have not received any cash or other compensation since inception. They will not receive any compensation until the consummation of an acquisition. No compensation of any nature has been paid on account of services rendered by a director in such capacity. Our officers and directors intend to devote very limited time to our affairs.
It is possible that, after the Company successfully consummates a business combination with an unaffiliated entity, that entity may desire to employ or retain members of our management for the purposes of providing services to the surviving entity.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees.
There are no understandings or agreements regarding compensation our management will receive after a business combination.
The Company does not have a standing compensation committee or a committee performing similar functions, since the Board of Directors has determined not to compensate the officers and directors until such time that the Company completes a reverse merger or business combination.
Employment Agreements
The Company is not a party to any employment agreements.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
(a) The following tables set forth certain information as of August 31, 2018, regarding (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director, nominee and executive officer of the Company, and (iii) all officers and directors as a group.
(1)100% of these shares are owned of record by Sino Expertise Limited. Mr. DONG Yingzhi, the Company’s sole officer and director, is the sole owner and managing director of Sino Expertise Limited and has sole voting and investment power over the shares.
(b) The Company currently has not authorized any compensation plans or individual compensation arrangements.
Item 13.
Item 13. Certain Relationships and Related Transactions.
The Company utilizes the office space and equipment of its officers and directors at no cost. Management estimates such costs to be immaterial.
As of May 31, 2018 and 2017, the amount due to shareholder was $75,787 and $32,559 respectively. The amount due to shareholder is non-interest bearing, due upon demand and unsecured.
Except as otherwise indicated herein, there have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 and Item 407(a) of Regulation S-K.
Item 14.
Item 14. Principal Accounting Fees and Services
Centurion ZD CPA Limited (“Centurion ZD”) is the Company’s independent registered public accounting firm. Centurion ZD changed its name from DCAW (CPA) Limited on September 13, 2016.
Fees billed to the Company are set forth below:
As of May 31, 2018, the Company did not have a formal documented pre-approval policy for the fees of the principal accountant. The Company does not have an audit committee. The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
Part IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
(a) We set forth below a list of our audited financial statements included in Item 8 of this annual report on Form 10-K.
(b) Index to Exhibits required by Item 601 of Regulation S-K.
* Filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on June 19, 2015, and incorporated herein by this reference.
** Filed with the Securities and Exchange Commission on August 22, 2016, and incorporated herein by this reference.
SIGNATURES
In accordance with 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.
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: September 24, 2018 By: /s/ DONG Yingzhi
DONG Yingzhi
President, CEO, Secretary, Treasurer,
CFO and sole Director