ITEM 1. BUSINESS
We are a Nevada corporation incorporated on August 30, 2006, under the name Gateway Certifications, Inc. On November 16, 2009, our corporate name was changed to American Jianye Greentech Holdings, Ltd. on February 13, 2014, our corporate name was changed to AJ Greentech Holdings, Ltd. and on July 17, 2017, our corporate name was changed to Sino United Worldwide Consolidated Ltd.
From November 2009 until October, 2013, through our China subsidiaries, we were engaged in design, marketing and distributing of alcohol base clean fuel which are designed to use less fossil fuel and have less pollution than traditional fuel.
From October 2013 until September, 2017, through our Taiwan subsidiary, we were engaged in design, marketing and distributing of hardware and software technologies, the driving record management system (DMS). On September 30, 2017, we spun off Taiwan DMS subsidiaries through stock transfer and debt cancellation because we felt that, it not our best interest to continue DMS technology business as a result of our decreasing revenue, continued losses and inability to raise capital for our business.
The company led by Chairman Tee-Keat Ong, is developing businesses in various fields through careful review and critical selection of growth businesses as part of his strategic agendas. We are working to accelerate our product strategy by integrating technology, sales and solution marketing to ensure sustainable competitive advantage.
We are working to strengthen our core competencies in high technology and blockchain related businesses, such as the revolutionary sound wave technology with industrial applications, blockchain technology, fintech services, professional consultancy for ICO’s, blockchain educational programs, venture capital in ICO, crypto exchange, AI and other high potential critical blockchain projects.
Employees
The Company currently has 1 full-time employee.
ITEM 1A.
ITEM 1A. RISK FACTORS
RISKS RELATED TO OUR BUSINESS
You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.
Downturns in general economic and market conditions could materially and adversely affect our business.
The IT-communications, mobile apps and blockchain industries are most susceptible to, and greatly affected by economic downturns and policy uncertainties. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increased expenses as we continue to grow our business. If we do not manage these risks and overcome these difficulties successfully, our business will suffer.
If we are not able to compete effectively with other competitors, our prospects for future growth will be jeopardized.
There is significant competition in both the software industry and the blockchain industry with more established companies. We are not only competing with other software and blockchain providers but also with companies offering different kind of software and blockchainh solutions, which are usually more established and have greater resources to devote to research and development, manufacturing and marketing than we have. Our competitors may promote these softwares and blockchain solutions which are more readily accepted by customers than our products and maybe required to reduce the prices of our products in order to remain competitive. Our competitors may also seek to use our financial difficulties in marketing against us.
If critical components become unavailable or contract manufacturers delay their production, our business will be negatively impacted.
Stability of component supply is crucial to determine our manufacturing process. As some critical components, such as solar panels, are supplied by certain third party component manufacturers, we may be unable to acquire necessary amounts of key components at competitive prices. Outsourcing the production of certain parts and components is one way to reduce manufacturing costs. We have selected these particular manufacturers based on their ability to consistently produce these products according to our requirements and ensure the best quality product at the most cost effective price. Contrarily, the loss of all or one of these suppliers or delays in obtaining shipments could have an adverse effect on our operations until an alternative supplier could be found, if one may be located at all. This may cause us to breach our contracts and lose sales.
If our contract manufacturers fail to meet our requirements for quality, quantity and timeliness, our business growth could be harmed.
We design and procure key components (such as solar panels) and outsource our products to contract manufacturers. These manufacturers procure most of the raw materials for us and provide all necessary facilities and labor to manufacture our products. If these companies are to terminate their agreements with us without adequate notice, or fail to provide the required capacity and quality on a timely basis, we would be unable to process and deliver our lighting products to our customers.
Our products could contain defects or they may be installed or operated incorrectly, which could reduce sales of those products or result in claims against us.
Although we have experienced quality control and assurance personnel and established thorough quality assurance practices to ensure good product quality, defects still may be found in the future in our existing or future products. End-users could lose their confidence in our products and company when they unexpectedly use defective products. This could result in loss of revenue, loss of profit margin, or loss of market share. Moreover, these defects could cause us to incur significant warranty, support and repair costs, and harm our relationship with our customers.
If we are unable to recruit and retain qualified personnel, our business could be harmed.
Our growth and success highly depend on qualified personnel. So we are inevitable to make all efforts to recruit and retain skilled technical, sales, marketing, managerial, manufacturing, and administrative personnel. Competitions among the industry could cause us difficultly to recruit or retain a sufficient number of qualified technical personnel, which could harm our ability to develop new products. If we are unable to attract and retain necessary key talents, it definitely will harm our ability to develop competitive product and keep good customers and could adversely affect our business and operating results.
An increase in raw material prices could increase costs and decrease profits.
Changes in the cost of raw materials in the products we distribute could significantly increase the price of those products and affect our ability to market and distribute them. Although the cost of methanol has traditionally been relatively stable, increased use of methanol for fuel would create increased demand and could introduce volatility into the market for methanol. The market price for gasoline distillate is a function of the market price of oil, which has been highly volatile in recent years. The market price of ethanol depends primarily on the availability of feedstocks, which again has become volatile in recent years due to the heightened demand caused by the widespread acceptance of ethanol as a fuel supplement.
Increased government regulation of our production and/or marketing operations could diminish our profits.
The fuel production and supply business is highly regulated. Government authorities are concerned with effect of fuel distribution on the national and local economy. To achieve optimal availability of fuel, governments regulate many key elements of both production and distribution of fuel. Increased government regulation may affect our business in ways that cannot be predicted at this time, potentially involving price regulation, distribution regulation, and regulation of manufacturing processes. Any such regulation or a combination could have an adverse effect on our profitability. The effort to obtain the registrations, licenses and permits necessary to carry out our business activities can be daunting. Significant delays can result from the need to obtain governmental approval of our activities. These delays can have an adverse effect on the profitability of our operations. In addition, compliance with regulatory requirements applicable to fuel manufacturing and distribution may increase the cost of our operations, which would adversely affect our profitability.
Currency fluctuations may adversely affect our operating results.
Company generates revenues and incurs expenses and liabilities in foreign currency. However, it will report its financial results in the United States in U.S. Dollars. As a result, our financial results will be subject to the effects of exchange rate fluctuations between these currencies. Any events that result in a devaluation of the foreign currency versus the U.S. Dollar will have an adverse effect on our reported results. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.
We are not likely to hold annual shareholder meetings in the near future.
Management does not expect to hold annual meetings of shareholders in the near future, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them.
Risks Related to our Common Stock
There is a limited market for our common stock, which may make it difficult for you to sell your stock.
Our common stock trades on the OTC under the symbol “SUIC.” There is a limited trading market for our common stock and there is frequently no trading in our common stock. As of December 31, 2018, the last reported sale price was $5.00 per share. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.
Because our common stock is a penny stock, you may have difficulty selling them in the secondary trading market.
Federal regulations under the Securities Exchange Act of 1934 regulate the trading of “penny stock,” which are generally defined as any security not listed on a national securities exchange or Nasdaq, priced at less than $5.00 per share and offered by an issuer with limited net tangible assets and revenues. Our common stock is a penny stock and may not be traded unless a disclosure schedule explaining the penny stock market and the risks associated therewith is delivered to a potential purchaser prior to any trade.
In addition, because our common stock is a penny stock, broker-dealers may not process trades in our stock and brokers that do permit trades in our stock must take certain steps prior to selling a penny stock, which steps include:
• Obtaining financial and investment information from the investor;
• Obtaining a written suitability questionnaire and purchase agreement signed by the investor; and
• Providing the investor a written identification of the shares being offered and the quantity of the shares.
If these penny stock rules are not followed by the broker-dealer, the purchaser has no obligation to purchase the shares. The application of these comprehensive rules will make it more difficult for broker-dealers to sell our common stock and our stockholders, therefore, may have difficulty in selling their shares in the secondary trading market, and some broker-dealers will not process purchases or sales of penny stocks.
Our stock price may be volatile and your investment in our common stock could suffer a decline in value.
As of December 31, 2018, there has only been limited trading activity in our common stock. There can be no assurance that a market will ever develop in our common stock in the future. If a market does not develop then stockholders would be unable to sell any of our common stock likely resulting in a complete loss of any funds they invested.
Should a market develop, the price may fluctuate significantly in response to a number of factors, many of which are beyond our control. These factors include:
• the market’s perception as to our ability to develop or acquire a business;
• our ability or perceived ability to obtain necessary funding for operations;
• if we do develop or acquire any business, such factors as:
o acceptance of our products in the industry;
o announcements of technological innovations or new products by us or our competitors;
o the effect of any regulatory issues relating to the business;
o if the business is conducted in a country outside of the United States, risks associated with that country, its currency, including currency regulations, its government’s policy toward United States entities operating in the country;
o government regulatory action affecting our products or our competitors’ products in both the United States and foreign countries;
o developments or disputes concerning patent or proprietary rights;
o the effects of environmental conditions and regulations;
o economic conditions in the United States or abroad;
o actual or anticipated fluctuations in our operating results;
o broad market fluctuations; and
o
changes in financial estimates by securities analysts.
We cannot assure you that we will be able to adequately address these additional risks. If we were unable to do so, our operations might suffer. Additionally, if we engage in a business or acquire a company located outside of the United States, it is likely that substantially all of our assets would be located outside of the United States and some of our executive officers and directors might reside outside of the United States. As a result, it may not be possible for investors in the United States to enforce their legal rights, to effect service of process upon our directors or executive officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and executive officers under Federal securities laws.
We do not intend to pay any cash dividends in the foreseeable future.
We have not paid any cash dividends on our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable for smaller reporting companies.
ITEM 2.
ITEM 2. PROPERTIES
Our company has a rent offices which is located at 136-20 38th Ave. Unit 12F Flushing, NY 11314, USA. Telephone no. is 718-395-8706.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. MINE AND SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market for Our Common Stock
The following table sets forth, for the periods indicated, the high and low closing prices of our common stock. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
(1) The above tables set forth the range of high and low closing prices per share of our common stock as reported by OTC Bulletin Board and the Pink Sheets, as applicable, for the periods indicated.
Approximate Number of Holders of Our Common Stock
On December 31, 2018, there were approximately 60 stockholders of record of our common stock.
Dividend Policy
The Company has not declared or paid cash dividends or made distributions in the past, and we do not anticipate that we will pay cash dividends or make distributions in the foreseeable future. We currently intend to retain and reinvest future earnings, if any, to finance our operations.
Recent Sales of Unregistered Securities
On October 5, 2017, we issued 21,000 shares of common stock to two investors at a purchase price of $5.00 per share, for a total of $105,000. The funds were used to provide us with funds for working capital purposes. The sale of the shares was exempt from registration pursuant to Regulation S of the SEC. We did not engage any broker or investment banker and we did not pay any brokers, finders’ or placement fee in connection with the sale.
There is no sale of unregistered securities during the fiscal year ending December 31, 2018.
Repurchase of Equity Securities.
On December 27, 2017 the company has retired total 25,503,333 shares of the following:
10,003,333 shares under the name of Chu Li An
5,000,000 shares under the name of Tao Pao-Ju
5,000,000 shares under the name of Huag Wen-Ling
5,000,000 shares under the name of Lei-Yu-Jen
500,000 shares under the name of Kuan Yin Lee
There is no sale of unregistered securities during the fiscal year ending December 31, 2018.
Securities Authorized for Issuance under Equity Compensation Plans
We currently do not have any equity compensation plans.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable for smaller reporting companies.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Annual Report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "management believes" and similar language. The forward-looking statements are based on the current expectations of the Company and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. Actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.
Investors are also advised to refer to the information in our previous filings with the Securities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.
Overview
From November 2009 until October, 2013, through our China subsidiary, we were engaged in design, marketing and distributing of alcohol base clean fuel which are designed to use less fossil fuel and have less pollution than traditional fuel.
From October 2013 until September, 2017, through our Taiwan subsidiary, we were engaged in design, marketing and distributing of hardware and software technologies, including new cell phone apps, as well as solutions and technology in fleet management, the driving record management system (DMS) that provide total solution and management mechanism for vehicles and driver behavior control and analysis, which increase driving safety and efficiency.
On September 30, 2017, pursuant to agreements with one of the Company’s directors, Li-An Chu, the Company transferred the 100% ownership in its wholly owned Taiwan Subsidiary, Jinchih International Limited (“Jinchih”), to Li-An Chu in exchange for cancellation of debt $379,254, and cancellation of total 25,503,333 shares of the Company’s common stock owned by a group of stockholders, including Li-An Chu. As a result of these transactions, Jinchih is no longer a wholly owned subsidiary of the Company as of September 30, 2017.
The Company is developing businesses in various fields through careful review and critical selection of new growth businesses. The Company is working to strengthen our core competencies in high technology and blockchain related businesses, such as blockchain dapps technology, fintech services, professional consultancy for ICO’s, and other high potential critical blockchain projects.
Results of Operations
Years ended December 31, 2018 and
Revenue
The Company recognized $120,000 and $30,000 of revenue from continuing operation during the year ended December 31, 2018 and 2017, respectively. As we discussed above, the Company sold off the wholly-owned subsidiary Jinchih on September 30, 2017, we presented the revenue for the year ended December 31, 2017 as revenue from discontinued operation on Consolidated Statements of Comprehensive Loss.
Our revenue from continuing operation were generated from the I.T. management consulting services.
General and Administrative Expenses:
General and administrative expenses from continuing operations were $114,325 and $185,449 for the years ended December 31, 2018 and 2017, respectively. The decrease was primarily due to decrease in salary expense and travel expense.
Interest expense
During the year ended December 31, 2018, the Company has interest expense of $5,990.
Interest expense from continuing operation was $96,188 for the year ended December 31, 2017 which included the interest on the convertible promissory notes issued for $1,188 and the amount of beneficial conversion feature for $95,000.
Loss from continuing operations
The Company generated loss from continuing operations of $315 and $251,637 for the years ended December 31, 2018 and 2017, respectively.
Loss from discontinued operations
The Company’s operating subsidiary in Taiwan was sold to one of the Company’s directors on September 30, 2017. Hence the Company has presented results of the Taiwan Subsidiary operations as a discontinued operation in the consolidated statements of comprehensive loss. During the years ended December 31, 2017, loss from discontinued operation were $547,872.
Net loss
As a result of the foregoing, the Company generated net loss of $315 and $799,509 for the years ended December 31, 2018 and 2017, respectively.
Liquidity and Capital Resources
We have funded our operations to date primarily through operations, and related party loans and capital contributions. Due to our net loss and negative cash flow from operating activities, there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s management recognizes that the Company must generate sales and obtain additional financial resources to continue to develop its operations
As of December 31, 2018, we had a working capital deficit of $78,823. Our current assets on December 31, 2018 were $45,882 primarily consisting of cash of $25,882, and account receivable of $20,000. Our current liabilities were primarily composed of credit card payable of $14,641, convertible promissory notes of $85,000 and accrued expenses and other current liabilities of $25,064.
Cash Flow from Operating Activities
Net cash used in operating activities was $14,162 during the year ended December 31, 2018, which consisted of our net loss from continuing operation of $315, offset by a change of accounts payable of $5,000, a change of accrued expenses of $18,858 and a change of credit card payable of $10,011.
Net cash used in operating activities was $22,994 during the year ended December 31, 2017, which consisted of our net loss from continuing operation of $251,637, offset by non-cash interest of $95,000, a change of accounts receivable of $15,000, a change of credit card payable of $4,630, a change of accrued expenses of $32,188 and net cash provided by discontinued operation of $111,825.
Cash Flow from Investing Activities
Net cash used in investing activities totaled $2,810 for the year ended December 31, 2017, all of which contributed by discontinued operation.
Cash Flow from Financing Activities
Net cash used in financing activities was $10,000 during the year ended December 31, 2018, which primarily consisted of proceeds from non-related party loan of $20,000 and repayment to related party loan of $30,000.
Net cash provided by financing activities was $56,608 during the year ended December 31, 2017, which primarily consisted of proceeds from non-related party loan of $2,734, proceeds from convertible promissory note from related party of $30,000, proceeds from convertible promissory note from non-related party of $65,000, and proceeds from sales of the Company’s common stock of $105,000, offset by net cash used in discontinued operation of $146,126.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
Inflation
We do not believe our business and operations have been materially affected by inflation
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. 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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
A summary of significant accounting policies is included in Note 3 to the consolidated financial statements included in this Annual Report. Of these policies, we believe that the following items are the most critical in preparing our financial statements.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.
Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.
Inventories
Inventories consists of products purchased and are valued at the lower of cost or net realizable value. Cost is determined on the weighted average cost method. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated net realizable value. Factors utilized in the determination of estimated net realizable value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.
The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.
Revenue Recognition
The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Revenue is recognized at the date of shipment to customers 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. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.
The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed acknowledgement of receipt from the customers or a signed bill of lading from the third party trucking company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.
Net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on all of the Company’s products at the rate of 5% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.
Foreign Currency Translation
The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) for foreign currency translation to translate the financial statements of the foreign subsidiary from the functional currency, generally the local currency, into U.S. Dollars. Section 830-10-45 sets out the guidance relating to how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), re-measures the books of record (if necessary), and characterizes transaction gains and losses. the assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment, or local currency, in which an entity primarily generates and expends cash.
The functional currency of each foreign subsidiary is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered. If a subsidiary’s functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements is included in accumulated other comprehensive income. However, if the functional currency is deemed to be the U.S. Dollar, then any gain or loss associated with the re-measurement of these financial statements from the local currency to the functional currency would be included in the consolidated statements of comprehensive income (loss). If the Company disposes of foreign subsidiaries, then any cumulative translation gains or losses would be recorded into the consolidated statements of comprehensive income (loss). If the Company determines that there has been a change in the functional currency of a subsidiary to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within the statement of comprehensive income (loss).
Based on an assessment of the factors discussed above, the management of the Company determined the relevant subsidiaries’ local currencies to be their respective functional currencies.
The financial records of the Company's Taiwan operating subsidiaries acquired on November 30, 2013 are maintained in their local currency, the “TWD”, which is also the functional currency. Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the consolidated financial statements. Foreign currency translation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the consolidated statement of stockholders’ equity.
Most Recent accounting pronouncements
Refer to note 2 in the accompanying consolidated financial statements.
Impact of Most Recent Accounting Pronouncements
There were no recent accounting pronouncements that have had a material effect on the Company’s financial position or results of operations.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
Consolidated Financial Statements
The full text of our audited consolidated financial statements as of December 31, 2018 and 2017 begins on page of this Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company changes auditor on November 5, 2018. Please refer to 8-K dated November 7, 2018.
The Company changes auditor on March 31, 2019. Please refer to 8-K dated April 1, 2019.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures.
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company's management, including the Company's chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
During the course of internal evaluation, following control weaknesses are noted for the fiscal year ended December 31, 2018 that required correction:
• no independent director exists in the Board of Directors, and the directors have a little understanding about U.S. GAAP and Sarbanes-Oxley Act 404 requirements in 2018.
Based upon their evaluation as of the end of the period covered by this annual report, the Company's chief executive officer and chief financial officer concluded that, due to the significant deficiencies in internal control over financial reporting described below, the Company's disclosure controls and procedures are not effective as of December 31, 2018.
Changes in internal controls.
The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of the year covered by this annual report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 and procedures may deteriorate.
A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified some material weaknesses in our internal control over financial reporting.
We lack sufficient personnel with the appropriate level of knowledge, experience and training in the application of accounting operations of our company. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews.
Management is currently reviewing its staffing and systems in order to remedy the weaknesses identified in this assessment. However, because of the above condition, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of December 31, 2018. Additionally, the Registrant’s management has concluded that the Registrant has a material weakness associated with its U.S. GAAP expertise.
This Annual Report does not include an attestation report of the Company’s 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 temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth: (1) names and ages of all persons who presently are and who have been selected as directors and executive officers of the Registrant; (2) all positions and offices with the Registrant held by each such person; (3) any period during which he or she has served a such. All directors hold office until the next annual meeting of our shareholders and until their successors have been elected and qualify. Officers serve at the pleasure of the Board of Directors.
On 17, 2017, the Board of Directors (the “Board”) of the Company appointed Mr. Ong Tee Keat as Chairman of the Board of Directors. Mr. Keat was a member of the Parliament of Malaysia until 2013, elected as the Deputy Speaker of House of Representatives, Malaysian Parliament from 1990 to 1999, elected as the Executive Council Member of the Commonwealth Parliamentary Association from 1990 to 1995, served as the Deputy Minister for Youth and Sports Ministry of Malaysia from 2000 to 2006, served as the Deputy Minister for Higher Education Ministry of Malaysia from 2006 to 2008, served as the Minister for Transport of Malaysia from 2008 to 2010, and the 8th president of the Malaysian Chinese Association (MCA).
He is educated at Confucian High School in Kuala Lumpur, Ong went on to the prestigious Methodist Boys' School for Form Six studies. Six years after graduating as a mechanical engineer, and while enjoying a lucrative post at an engineering firm, he quit to become political secretary to the then Housing and Local Government Minister Datuk Lee Kim Sai in 1986. Ong won several literary awards for his works was once a columnist for Chinese daily Sin Chew Jit Poh. His articles ran from 1979 to 1986.
On Oct 1, 2017, the Board of Directors (the “Board”) of the Company appointed Chi-Shun Chang as Chief Executive Officer of the firm. Mr. Chang, 55, has served as president of Rock Computer Technology Company in NY since 1993. Mr. Chang received his Masters Degree in Electronics Engineering from the New York University Tandon School of Engineering (formerly the Polytechnic Institute of New York University).
On Feb 28, 2018,. the board of Director (the “Board”) of the Company appointed Yanru Zhou as interim Chief Executive Officer of the firm. Ms. Zhou, 25, received her undergraduate education in China.
Nominating, Compensation and Audit Committees
The Board of Directors does not have an audit committee, a compensation committee or a nominating committee, due to the small size of the Board. The Board does also not have an “audit committee financial expert” within the definition given by the Regulations of the Securities and Exchange Commission.
Section 16(A) Beneficial Ownership Reporting Compliance
Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws (except where not subsequently dismissed without sanction or settlement), or from engaging in any type of business practice, or a finding of any violation of federal or state securities laws. To the best of our knowledge, no petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of any of our directors or officers, or any partnership in which any of our directors or officers was a general partner at or within two years before the time of such filing, or any corporation or business association of which any of our directors or officers was an executive officer at or within two years before the time of such filing. Except as set forth in our discussion below in “Certain Relationships and Related Transactions, and Director Independence,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Code of Ethics
The Board of Directors has not adopted a code of ethics applicable to the Company’s executive officers. The Board believes that the small number of individuals involved in the Company’s management makes such a code unnecessary.
Board Attendance
During 2018, the board of directors did not hold any meetings. All actions were taken by actions in writing.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table indicates the cash and non-cash compensation earned during the years ended December 31, 2018 and December 31, 2017 by each person who served as chief executive officer during the year ended December 31, 2018.
SUMMARY COMPENSATION TABLE
(1) Ms. Yanru Zhou has served as chief executive and financial officer since Feb. 28 2018 to December 31, 2018.
(2) Mr. Chang has served as chief executive officer from From October 1, 2017 to Feb. 28 2018.
(3) Mr. Ong has not received any compensation as of December 31, 2018.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of December 31, 2018.
Remuneration of Directors
None of the members of the Board of Directors receives remuneration for service on the Board.
Executive Employment Contracts
We have employment agreements with CEO, Yanru Zhou on Feb. 28, 2018 for 5 years, subject to automatic renewals of another 5 years at the rate of $18,000 per year.
Equity Compensation Plan Information
We do not have any compensation plan as of December 31, 2018.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management
The following table summarizes certain information regarding the beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of outstanding Registrant Common Stock as of December 31, 2018 by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding Common Stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all executive officers and directors as a group. Except as indicated in the footnotes below, the security and stockholders listed below possess sole voting and investment power with respect to their shares.
(1) "Beneficial Owner" means having or sharing, directly or indirectly (i) voting power, which includes the power to vote or to direct the voting, or (ii) investment power, which includes the power to dispose or to direct the disposition, of shares of the common stock of an issuer. The definition of beneficial ownership includes shares, underlying options or warrants to purchase common stock, or other securities convertible into common stock, that currently are exercisable or convertible or that will become exercisable or convertible within 60 days. Unless otherwise indicated, the beneficial owner has sole voting and investment power.
(2) For each shareholder, the calculation of percentage of beneficial ownership is based upon 58,985,937 shares of Common Stock outstanding as of December 31, 2018, and shares of Common Stock subject to options, warrants and/or conversion rights held by the shareholder that are currently exercisable or exercisable within 60 days, which are deemed to be outstanding and to be beneficially owned by the shareholder holding such options, warrants, or conversion rights. The percentage ownership of any shareholder is determined by assuming that the shareholder has exercised all options, warrants and conversion rights to obtain additional securities and that no other shareholder has exercised such rights.
EMPLOYMENT AGREEMENTS
We have employment agreements with CEO, Yanru Zhoug on Feb. 28, 2018 for 5 years, subject to automatic renewals of another 5 years at the rate of $18,000 per year.
Equity Compensation Plan Information
As of the date of this Form 10-K, the Company has not authorized any equity compensation plan, nor has our Board of Directors authorized the reservation or issuance of any securities under any equity compensation plan.
Changes in Control
There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
Transactions with Related Persons
During the year of 2018, the Company made repayment of $30,000 to related party loan.
Director Independence
Currently, we have no independent directors on our Board of Directors, and therefore have no formal procedures in effect for reviewing and pre-approving any transactions between us, our directors, officers and other affiliates. We will use our best efforts to insure that all transactions are on terms at least as favorable to the Company as we would negotiate with unrelated third parties.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(1) Consists of fees billed for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.
(2) “Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.
Pre-Approval Policies and Procedures
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our Board to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our Board pre-approved the audit service performed by Yichien Yeh, CPA, for our consolidated financial statements as of and for the year ended December 31, 2018.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.
(1) Filed as exhibits to the registrant’s Form SB-2 filed with the Commission on June 29, 2007.
(2) Filed as exhibits to the registrant’s Form 8-K filed with the Commission on Oct. 1, 2013.
(3) Filed as exhibits to the registrant’s Form 8-K filed with the Commission on February 19, 2014.
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Yanru Zhou
Chief Financial Officer, Director
04/12/2019
Yanru Zhou
(Principal Financial Officer)
/s/ Yanru Zhou
Chief Executive Officer
04/12/2019
Yanru Zhou
Sino United Worldwide Consolidated Ltd. and Subsidiary
December 31, 2018 and 2017
Index to the consolidated financial statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Sino United Worldwide Consolidated Ltd.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Sino United Worldwide Consolidated Ltd. as of December 31, 2018, and the related statement of operations and comprehensive loss, stockholders' deficiency, and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sino United Worldwide Consolidated Ltd. as of December 31, 2018, and the results of operations and cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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.
Consideration of the Company’s Ability to Continue as a Going Concern
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 not created sufficient revenue and obtained additional financing to support the Company’s working capital requirements. The Company has incurred accumulated deficit of $1,760,058 as of December 31, 2018. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans concerning this matter are also described in Note 3. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Yichien Yeh, CPA
We have served as the Company’s auditor since 2019.
Oakland Gardens, New York
April 12, 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Sino United Worldwide Consolidated Ltd.
Flushing, NY
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Sino United Worldwide Consolidated Ltd (the “Company”) as of December 31, 2017, and the related consolidated statement of comprehensive loss, stockholders’ equity (deficiency), and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company had a working capital deficit of $78,508, accumulated deficit of $1,759,743 and stockholders’ deficiency of $78,508 as of December 31, 2017, and has not generated cash or income from its continuing operation. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are described in Note 2. 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 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/Paritz & Company, P.A.
Hackensack, NJ
July 6, 2018
We have served as the Company’s auditor since 2018.
Sino United Worldwide Consolidated Ltd.
Notes to the Consolidated Financial Statements
Note 1 - Organization and Basis of presentation
Organization
Sino United Worldwide Consolidated Ltd. (the “Company”), through its wholly owned subsidiary in Taiwan, Jinchih International Limited (“Jinchih”), engaged in design, marketing and distributing of hardware and software technologies, including new cell phone apps, as well as solutions and technology in fleet management, the driving record management system (DMS) that provide total solution and management mechanism for vehicles and driver behavior control and analysis, which increase driving safety and efficiency.
On September 30, 2017, pursuant to agreements with one of the Company’s directors, Li-An Chu, the Company transferred the 100% ownership in Jinchih, to Li-An Chu in exchange for cancellation of debt $379,254 and cancellation of total 25,503,333 shares of the Company’s common stock owned by a group of stockholders, including Ms Li-An Chu. As a result of these transactions, Jinchih is no longer a wholly owned subsidiary of the Company as of September 30, 2017. (See Note 4)
The Company is developing businesses in various fields through careful review and critical selection of new growth businesses. The Company is working to strengthen our core competencies in high technology and blockchain related businesses, such as blockchain dapps technology, fintech services, professional consultancy for ICO’s, and other high potential critical blockchain projects.
Basis of presentation and consolidation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly owned subsidiary. All inter-company transactions and balances are eliminated in consolidation.
Certain amounts in last year’s financial statements have been reclassified to conform to current year presentation.
Note 2 - Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company had a working capital deficit of $78,823, an accumulated deficit of $1,760,058 and stockholders’ deficiency was $78,823 as of December 31, 2018. The Company did not generate cash or income from its continuing operation. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The company is developing new businesses in various fields. There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from any private placements, public offering and/or bank financing are insufficient to support the Company’s working capital requirements, the Company will have to raise additional working capital from additional financing. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may not be able continue its operations.
NOTE 3 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated 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 assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. Significant accounting estimates reflected in the Company’s consolidated financial statements included the valuation of accounts receivable, the estimated useful lives of long-term assets, the valuation of short term investment and the valuation of deferred tax assets.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal and use and with an original maturity of three months or less. The Company maintains its cash in bank deposit accounts. Cash accounts are guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on such cash.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.
Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.
For the years ended December 31, 2018 and 2017, the Company recorded bad debt expense of $0 and $313,430, respectively, which were included in the loss from discontinued operations.
Inventories
Inventories consists of products purchased and are valued at the lower of cost or net realizable value. Cost is determined on the weighted average cost method. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated net realizable value. Factors utilized in the determination of estimated net realizable value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.
The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.
Revenue Recognition
The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Revenue is recognized at the date of shipment to customers 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. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.
The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed acknowledgement of receipt from the customers or a signed bill of lading from the third party trucking company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.
Net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on all of the Company’s products at the rate of 5% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold and tenant improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. The Company periodically reviews assets’ estimated useful lives based upon actual experience and expected future utilization. A change in useful life is treated as a change in accounting estimate and is applied prospectively.
Upon retirement or disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in selling, general and administrative expenses for that period. Major additions and betterments are capitalized to the asset accounts while maintenance and repairs, which do not improve or extend the lives of assets, are expensed as incurred.
Investments in Non-consolidated Entities
Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment are accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy that requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level one - Quoted market prices in active markets for identical assets or liabilities;
Level two - Inputs other than level one inputs that are either directly or indirectly observable; and
Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.
The fair values of the Company’s cash, accounts receivable, accrued expenses and other current liabilities approximate their carrying values due to the relatively short maturities of these instruments. The carrying value of the Company’s short term and long-term debt approximates fair value based on management’s best estimate of the interest rates that would be available for similar debt obligations having similar terms at the balance sheet date.
There are no financial instruments measured at fair value on a recurring basis.
Impairment of Long-Lived Assets
The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, Property, Plant and Equipment. The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.
The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
The Company adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.
Net Loss per Share
The Company calculates its basic and diluted earnings per share in accordance with ASC 260. Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and options and convertible securities. Because the Company incurred losses for the years ended December 31, 2017 and 2016, the number of basic and diluted shares of common stock is the same since any effect from outstanding warrants would be anti-dilutive.
Translation Adjustment
The Company’s financial statements are presented in the U.S. dollar ($), which is the Company’s reporting and functional currency. The functional currency of the Company’s subsidiaries is TWD. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of comprehensive income (loss). Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of comprehensive income (loss).
In accordance with ASC 830, Foreign Currency Matters, the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from TWD into U.S. dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for the financial statements in accordance with ASC 830, Foreign Currency Matters, are as follows:
Comprehensive Income (Loss)
Comprehensive income (loss) includes accumulated foreign currency translation gains and losses with respect to the operating entity in Taiwan.
Recently Issued Accounting Pronouncements
In December 2017, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 118 (the “Bulletin”), which provides accounting guidance regarding accounting for income taxes for the reporting period that includes the enactment of the Tax Act. The Bulletin provides guidance in those situations where the accounting for certain income tax effects of the Tax Act will be incomplete by the time financial statements are issued for the reporting period that includes the enactment date. For those elements of the Tax Act that cannot be reasonably estimated, no effect will be recorded.
The SEC has provided in the Bulletin that in situations where the accounting is incomplete for certain effects of the Tax Act, a measurement period which begins in the reporting period that includes the enactment of the Tax Act and ends when the entity has obtained, prepared and analyzed the information is needed in order to complete the accounting requirements. The measurement period shall not exceed one year from enactment.
In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance is effective for all entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The amendments in ASU 2018-02 should be applied either in the period of adoption or retrospectively to 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 is recognized. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated Financial Statements and related disclosures.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.
NOTE 4 - Discontinued Operation
On September 30, 2017, pursuant to agreements with one of our directors, Li-An Chu, the Company transferred the 100% ownership in Jinchih, to Li-An Chu in exchange for cancellation of loan payable of $379,254 to Li-An Chu and cancellation of total 25,503,333 shares of the Company’s common stock owned by a group of stockholders, including Li-An Chu. As a result of these transactions, Jinchih is no longer a wholly owned subsidiary of the Company as of September 30, 2017. Since Jinchih was sold back to Li-An Chu who is the Company’s director, CEO and CFO at the time of the transaction, no gain or loss was recorded in the statement of comprehensive loss for the year ended December 31, 2017. The net gain of $99,822 from the sale of Jinchih was included in stockholders’ equity.
The results of operations of discontinued operations for the years ended December 31, 2017 was as following:
NOTE 5 - Accounts Receivable
Accounts receivable at December 31, 2018 and 2017 consisted of the following:
NOTE 6 - Short-Term Investment
Short-term investment consists of shares of stock of non-public traded company purchased by the Company which was recorded at cost. For the year ended December 31, 2016, the Company sold 100,000 shares of stock of Xin Tianran Electric Power Co., Ltd. for TWD$10 (approximately $0.33) per share which was same as the cost per share. No gain or loss was recognized. During the year ended December 31, 2017, the Company impaired the full amount of short-term investment and recorded an impairment loss of $425,753 which was included in the loss from discontinued operation.
NOTE 7 - Convertible Promissory Note
On December 1, 2018, the Company entered into a loan agreement with Ms. Shoou Chyn Kan, an related individual.
Pursuant to the loan agreement, Ms. Shoou Chyn Kan agreed to lend the Company $20,000 of loan with 5% of annual interest rate. On the same date, the Company issued a promissory note to Ms. Shoou Chyn Kan for the principal amount of $20,000. Pursuant to the terms of the note, the note is convertible into the Company’s common stock at a conversion price of $0.001 per share. The note begins to accrue interest at 6% per annum when it is past due.
On October 1, 2017, Mr. Tee-Keat Ong, the Chairmen of the Board of Directors, and the Company entered into a loan agreement pursuant to which Mr. Tee-Keat Ong agreed to lend the Company $30,000 initially with future loan amount up to $1,000,000. On the same date, the Company issued a promissory note to Mr. Tee-Keat Ong for the principal amount of $30,000. The promissory note bears interest at five percent (5%) per annum and is due on demand. Pursuant to the terms of the note, the note is convertible into the Company’s common stock at a conversion price of $0.001 per share. The note began to accrue interest at 10% per annum when it is past due. The loan was paid off in year 2018.
On October 1, 2017, the Company entered into a loan agreement with Ms. Shoou Chyn Kan, an unrelated individual. Pursuant to the loan agreement, Ms. Shoou Chyn Kan agreed to lend the Company $65,000 initially with future loan amount up to $1,000,000. On the same date, the Company issued a promissory note to Ms. Shoou Chyn Kan for the principal amount of $65,000. The promissory note bears interest at 5% per annum and is due on demand. Pursuant to the terms of the note, the note is convertible into the Company’s common stock at a conversion price of $0.001 per share. The note began to accrue interest at 10% per annum when it is past due.
Since the conversion price for above notes were lower than the quoted price of the Company’s common stock on OTC market, the beneficial conversion amount of $95,000 was recorded as interest expense in the statement of comprehensive loss for the year ended December 31, 2017.
NOTE 8 - Related Party Transactions and Balances
During the year ended December 31, 2017, the Company paid $37,500 to Rock Computer Technology Company for service provided. The company’s CEO, Mr. Chi-Shun Chang served as the president of Rock Computer Technology Company.
During the year ended December 31, 2017, the Company sold its wholly owned subsidiary, Jinchih, to one of its directors, Li-An Chu. (See Note 4)
During the year ended December 31, 2017, the Company entered a loan agreement and issued a promissory note to the Chairman of Board of Directors (See Note 7).
NOTE 9 - INCOME TAXES
The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has experienced operating losses for U.S. federal income tax purposes since inception. When it is more likely than not that the deferred tax asset cannot be realized through future income the Company must set up allowance for this future tax benefit. As of December 31, 2018, the Company had approximately $1.8 million net operating loss carryforward available in the U.S. from continuing operation to reduce future taxable income. The Company set up 100% valuation allowance for deferred tax assets resulting from net operating loss carryforward.
Taxation on profits earned in the Taiwan has been calculated on the estimated assessable profits for the year at the rates of 17% in the Taiwan after taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operations.
A reconciliation of the provision for income taxes to the Company’s effective income tax rate for continuing operation is as follows:
The Company had deferred tax assets as follows:
The U.S. Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively. The Company's deferred tax assets were remeasured to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a change of deferred tax assets of $142,650 for the year ended December 31, 2017. This amount can be seen on the rate reconciliation as an adjustment to deferred tax asset and corresponding valuation allowance.
NOTE 10 - COMMON STOCK
The Company issue the following shares of common stock during the periods indicated below:
On October 5, 2017, the Company issued 21,000 shares to two investors at five dollars per share for a purchase price of $105,000.
On December 27, 2017, the Company retired 25,503,333 shares returned from various stockholders in connection with the sale of Taiwan subsidiary, Jinchih, pursuant to the agreement with one of the Company’s directors. (See Note 4)
NOTE 11 -SUBSEQUENT EVENTS
The Company has evaluated the existence of significant events subsequent to the balance sheet date through the date the financial statements were issued and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.