UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_______________
FORM
10-Q
☑
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2017
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For
the transition period from ______ to _______
Commission
File Number 000-53737
SINO
UNITED WORLDWIDE CONSOLIDATED LTD.
(Exact
name of registrant as specified in its charter)
Nevada
(State of incorporation)
136-20
38th Ave. Unit 3G
Flushing,
NY 11354(Address of Principal Executive Offices)
_______________
718-395-8706
(Issuer Telephone number)
_______________
Check
whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
☑
No
☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
☑
No
☐
Indicate by check
mark whether the registrant is a larger accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)
Large
accelerated filer ☐
|
Accelerated filer
☐
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☑
|
|
Emerging
growth company ☐
|
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes
☐
No
☑
At June 30, 2017,
there were 58,985,937 shares of the registrant's common stock issued and outstanding.
SINO
UNITED WORLDWIDE CONSOLIDATED LTD.
FORM
10-Q
June
30, 2017
INDEX
PART
I-- FINANCIAL INFORMATION
Item
1.
|
Financial
Statements
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Item
4.
|
Control
and Procedures
|
PART II-- OTHER
INFORMATION
Item
1.
|
Legal
Proceedings
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
Item
3.
|
Defaults
Upon Senior Securities
|
Item
4.
|
Mine
Safety Disclosures.
|
Item
5.
|
Other
Information.
|
Item
6.
|
Exhibits
|
SIGNATURES
|
Sino
United Worldwide Consolidated Ltd.
June
30, 2017 and 2016
Index
to the consolidated financial statements
Contents
|
Page(s)
|
Consolidated
Balance Sheets at June 30, 2017 (Unaudited) and December 31, 2016 (Audited)
|
F-2
|
Consolidated
Statements of Income and Comprehensive Income for the three Months and six Months Ended
June 30, 2017 and 2016 (Unaudited)
|
F-3
|
Consolidated
Statements of Cash Flows for the six months Ended June 30, 2017 and 2016 (Unaudited)
|
F-4
|
Notes
to the Consolidated Financial Statements
|
F-5
|
Sino
United Worldwide Consolidated Ltd.
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2017
|
|
|
|
December
31, 2016
|
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
|
96,823
|
|
|
|
254,432
|
|
Accounts receivable, net
|
|
|
4,607,182
|
|
|
|
1,331,409
|
|
Inventories
|
|
|
5,329
|
|
|
|
81,058
|
|
Short-term investments
|
|
|
431,916
|
|
|
|
403,617
|
|
Prepaid value added taxes
|
|
|
15,469
|
|
|
|
351
|
|
Tax refund
|
|
|
—
|
|
|
|
—
|
|
Prepayments and other current assets
|
|
|
453,896
|
|
|
|
680
|
|
Total Current Assets
|
|
|
5,610,615
|
|
|
|
2,071,547
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
9,435
|
|
|
|
9,435
|
|
Accumulated depreciation
|
|
|
(1,219
|
)
|
|
|
(545
|
)
|
PROPERTY, PLANT AND EQUIPMENT, net
|
|
|
8,216
|
|
|
|
8,890
|
|
Intangible Assets, net
|
|
|
123,967
|
|
|
|
146,142
|
|
OTHER ASSETS
|
|
|
15,453
|
|
|
|
14,412
|
|
Total
Assets
|
|
|
5,758,251
|
|
|
|
2,240,991
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Short-term loan
|
|
|
502,914
|
|
|
|
427,168
|
|
Accounts payable
|
|
|
1,430,329
|
|
|
|
584,605
|
|
Advances from customers
|
|
|
—
|
|
|
|
132,000
|
|
Advances from related parties
|
|
|
135,261
|
|
|
|
268,141
|
|
Taxes payable
|
|
|
16,806
|
|
|
|
3,417
|
|
Accrued expenses and other current liabilities
|
|
|
—
|
|
|
|
9.000
|
|
Total Current Liabilities
|
|
|
2,085,310
|
|
|
|
1,424,331
|
|
LONG TERM DEBT
|
|
|
429,189
|
|
|
|
433,457
|
|
Total Liabilities
|
|
|
2,514,499
|
|
|
|
1,857,788
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Common stock ($0.001 par value; 394,500,000 shares
authorized; 58,985,937 shares issued and outstanding at June 30, 2017 and December 31, 2016).
|
|
|
58,986
|
|
|
|
58,986
|
|
Additional paid-in capital
|
|
|
593,947
|
|
|
|
593,947
|
|
Retained earnings (Deficit)
|
|
|
2,040,887
|
|
|
|
(960,234
|
)
|
Foreign currency translation gain (loss)
|
|
|
549,932
|
|
|
|
690,504
|
|
Total Stockholders' Equity
|
|
|
3,243,752
|
|
|
|
383,203
|
|
Total
Liabilities and Stockholders' Equity
|
|
|
5,758,251
|
|
|
|
2,240,991
|
|
See accompanying
notes to the consolidated financial statements.
Sino United Worldwide Consolidated
Ltd.
|
Consolidated Statements of
Operations and Comprehensive Income
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Three Months ended
June
30, 2017
|
|
|
|
The
Three Months ended
June
30, 2016
|
|
|
|
The
Six Months ended
June
30, 2017
|
|
|
|
The
Six Months ended
June
30, 2016
|
|
NET REVENUES
|
|
|
1,221,013
|
|
|
|
490,119
|
|
|
|
5,043,278
|
|
|
|
1,102,123
|
|
COST OF REVENUES
|
|
|
1,160,265
|
|
|
|
394,869
|
|
|
|
1,791,038
|
|
|
|
906,784
|
|
GROSS PROFIT
|
|
|
60,748
|
|
|
|
95,250
|
|
|
|
3,252,240
|
|
|
|
195,339
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and general and administrative expenses
|
|
|
115,691
|
|
|
|
141,919
|
|
|
|
235,609
|
|
|
|
178,666
|
|
Total operating expenses
|
|
|
115,691
|
|
|
|
141,919
|
|
|
|
235,609
|
|
|
|
178,666
|
|
Operating Income or Loss
|
|
|
(54,943
|
)
|
|
|
(46,669
|
)
|
|
|
3,016,631
|
|
|
|
16,673
|
|
Income from interest
|
|
|
70
|
|
|
|
45
|
|
|
|
92
|
|
|
|
45
|
|
Interest Expense
|
|
|
(8,255
|
)
|
|
|
(7,900
|
)
|
|
|
(15,309
|
)
|
|
|
(15,514
|
)
|
Other income (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
(294
|
)
|
|
|
—
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(63,128
|
)
|
|
|
(54,524
|
)
|
|
|
3,001,120
|
|
|
|
1,204
|
|
INCOME TAX EXPENSE
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
NET INCOME (LOSS)
|
|
|
(63,128
|
)
|
|
|
(54,524
|
)
|
|
|
3,001,120
|
|
|
|
1,204
|
|
OTHER COMPREHENSIVE INCOME
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Foreign currency translation gain (loss)
|
|
|
(66,407
|
)
|
|
|
1,275
|
|
|
|
(140,572
|
)
|
|
|
14,524
|
|
COMPREHENSIVE INCOME
|
|
|
(129,535
|
)
|
|
|
(53,249
|
)
|
|
|
2,860,548
|
|
|
|
15,728
|
|
NET INCOME (LOSS) PER COMMON
SHARE - BASIC AND DILUTED:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common
share - basic and diluted
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.05
|
|
|
|
0.00
|
|
Weighted Average Common Shares
Outstanding - basic and diluted
|
|
|
58,985,937
|
|
|
|
58,464,274
|
|
|
|
58,985,937
|
|
|
|
58,453,722
|
|
See
accompanying notes to the consolidated financial statements.
Sino United Worldwide Consolidated
Ltd.
|
Consolidated Statements of
Cash Flows
|
(Unaudited)
|
|
|
|
The
six
|
|
|
|
The
six
|
|
|
|
|
months
ended
|
|
|
|
months
ended
|
|
|
|
|
June
30, 2017
|
|
|
|
June
30, 2016
|
|
Operating Activities, Cash Flows Provided By or
(Used In)
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
3,001,120
|
|
|
|
1,204
|
|
Adjustments to reconcile net loss to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
674
|
|
|
|
—
|
|
Amortization
|
|
|
22,175
|
|
|
|
—
|
|
Changes In operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
Accounts Receivables
|
|
|
(3,275,773
|
)
|
|
|
(253,815
|
)
|
Inventories
|
|
|
75,729
|
|
|
|
—
|
|
Prepayments Other Current Assets
|
|
|
(453,216
|
)
|
|
|
(19,936
|
)
|
Prepaid VAT
|
|
|
(15,118
|
)
|
|
|
—
|
|
Accrued Expenses and Other Current Liabilities
|
|
|
(9,000
|
)
|
|
|
(54,652
|
)
|
Accounts Payables
|
|
|
845,724
|
|
|
|
217,093
|
|
Tax Payables
|
|
|
13,389
|
|
|
|
(22,005
|
)
|
Other Assets
|
|
|
(1,041
|
)
|
|
|
—
|
|
Advances
|
|
|
(132,000
|
)
|
|
|
14,636
|
|
Total Cash Flows From Operating Activities
|
|
|
72,663
|
|
|
|
(117,475
|
)
|
|
|
|
|
|
|
|
|
|
Investing Activities, Cash Flows Provided By or
(Used In)
|
|
|
|
|
|
|
|
|
Short term investment
|
|
|
(28,299
|
)
|
|
|
22,197
|
|
Total Cash Flows From Investing Activities
|
|
|
(28,299
|
)
|
|
|
22,197
|
|
|
|
|
|
|
|
|
|
|
Financing Activities, Cash Flows Provided By or
(Used In)
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
—
|
|
|
|
143,000
|
|
Advances from (repayment made to) related parties
|
|
|
(132,880
|
)
|
|
|
—
|
|
Capital contribution
|
|
|
—
|
|
|
|
100
|
|
Long term debt increase (repayment)
|
|
|
(4,268
|
)
|
|
|
51,121
|
|
Short term debt increase (repayment)
|
|
|
75,746
|
|
|
|
(191,220
|
)
|
Total Cash Flows From Financing Activities
|
|
|
(61,402
|
)
|
|
|
3,001
|
|
|
|
|
|
|
|
|
|
|
Effect Of Exchange Rate Changes
|
|
|
(140,572
|
)
|
|
|
14,409
|
|
Change In Cash and Cash Equivalents
|
|
|
(157,610
|
)
|
|
|
(77,868
|
)
|
Cash at beginning of the period
|
|
|
254,432
|
|
|
|
291,832
|
|
Cash at end of the period
|
|
|
96,823
|
|
|
|
213,964
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
15,309
|
|
|
|
15,514
|
|
Income tax paid
|
|
|
—
|
|
|
|
—
|
|
See
accompanying notes to the consolidated financial statements.
Sino
United Worldwide Consolidated Ltd.
June
30, 2017 and 2016
Notes
to the Consolidated Financial Statements
(Unaudited)
Note 1 –
Organization and Basis of presentation
Organization
Sino United Worldwide
Consolidated Ltd. is 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., and on February 13, 2014, our corporate
name was changed to AJ Greentech Holdings, Ltd., and on July 12, 2017, our corporate name was further 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 that are designed to use less fossil fuel and have less pollution than traditional fuel.
On October 31, 2013,
pursuant to agreements with one of our former directors, we transferred the stock in our China subsidiaries to the former director
in exchange for cancellation of debt totaling $240,000. As a result of the transfer of the subsidiaries, we were no longer engaged
in the China clean fuel business. We transferred the stock of the China subsidiaries because we felt that, it is not in our best
interest to continue China clean fuel business as a result of our decreasing revenue, continued losses and inability to raise
capital for our business.
On October 31, 2013,
Chu Li An acquired, for nominal consideration, 8,000,000 shares of common stock from the director who acquired the subsidiaries
and 12,778,399 shares of common stock from The Chairman, who was also a director. On November 1, 2013, Chu Li An and the Company
entered into a loan agreement pursuant to which the Chu Li An agreed to lend us $100,000 initially with future loan amount up
to $1,000,000, for which we will issue our 6% demand promissory note in the principal amount of $100,000. As of June 30, 2017,
the note has not been issued.
On November 18,
2013, we entered into agreement pursuant to which we issued to Chu Li An and her BVI company, our sole director and chief executive
officer, 180,000,000 shares of common stock, in consideration of the cancellation of debt due to Chu Li An in the amount of $180,000.
On November 30,
2013, the Company entered into an agreement to acquire all of the issued and outstanding stock of Jin Chih International, Ltd.,
a Taiwan corporation, from its sole owner Chu Li An for five million shares of the Company’s common stock. As of June 30,
2017, the stock has not been issued.
As a result of the
above transactions, we carry out the electronic products and general cargo trading and related consulting service business through
our subsidiary named Jin Chih International, Ltd in Taiwan. We still plan to focus on providing greentech products outside of
China in future. Even though the company has disposed China branches, the company's new management will continue to expand the
current green energy and technology business in the United States and globally, at the same time to explore many other green and
renewable energy such as solar, wind power, sea power by signing licensing agreement or joint venture with other research institutes
.
Basis of presentation
The accompanying
consolidated financial statements of Sino United Worldwide Consolidated Ltd. (the “Company”) have been prepared in
accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
NOTE 2 –
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.
Segment Information
ASC 280 requires
companies to report information about operating segment in interim and annual financial statements. It also requires segment disclosures
about products and services geographic and major customers. The Company has determined that it does not have any separately reportable
operating segments.
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
The
Company values inventories, consisting of raw materials, packaging material and finished goods, at the lower of cost or market.
Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the
weighted average cost method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production
cost and an allocated portion of production overhead. 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 market value. Factors utilized in the determination of estimated market 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. Other significant
estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated
to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to
the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal
idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and
other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines
its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.
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.
The Company markets
and distributes electronic products and general cargo for automobile use and follows Section 605-45-45 (formerly EITF 99-19) (“ASC
Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition to report revenue gross as a principal
for its sales since the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards
of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does not act as an agent or broker (including
performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on its sales. The management
of the Company determined that the Company should report revenue based on the gross amount billed to a customer when considering
each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14
as specified (1) The entity is the primary obligor in the arrangement — The Company signs a product sales agreement with
its customer and represents in writing that the Company is responsible for fulfillment, including the acceptability of the product(s)
or service(s) ordered or purchased by the customer; (2) The entity has general inventory risk (before customer order is placed
or upon customer return); (3) The entity has latitude in establishing price — The Company has reasonable latitude, within
economic constraints, to establish the exchange price with a customer for the product or service; (4) The entity changes the product
or performs part of the service— The Company developed a method for blending the raw materials in its manufacturing process,
through its proprietary technology, catalysts can be mixed with fuel and alcohols to become a finished product to be sold after
pumping and piping; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products
ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer;
(6) The entity is involved in the determination of product or service specifications — The Company determines the nature,
type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has physical
loss inventory risk of purchased inventories after customer order; and (8) The entity has credit risk — The Company is responsible
for collecting the sales price from its customer but must pay the amount owed to its supplier after the supplier performs, regardless
of whether the sales price is fully collected.
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.
Fair Value of
Financial Instruments
The fair values
of the Company’s 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 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.
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.
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 Income (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.
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 operations.
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 operations.
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:
Average
Rate for the three months ended on:
|
June
30, 2017
|
June
30, 2016
|
Taiwan
dollar (TWD)
|
1
|
1
|
United
States dollar ($)
|
0.03322
|
0.0308
|
|
|
|
Exchange
Rate at
|
June
30, 2017
|
June
30, 2016
|
Taiwan
dollar (TWD)
|
1
|
1
|
United
States dollar ($)
|
0.03304
|
0.0310
|
Comprehensive
Income (Loss)
Comprehensive income
(loss) includes accumulated foreign currency translation gains and losses with respect to the spun-off entities and the operating
entity in Taiwan.
Recently Issued
Accounting Pronouncements
In August 2014,
the FASB issued the FASB Accounting Standards Update No. 2014-15
“Presentation of Financial Statements—Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).
In connection with
preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether
there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to
continue as a going concern within one year after the date that the
financial statements are issued
(or within one year
after the date that the
financial statements are available to be issued
when applicable).
Management’s
evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the
financial
statements are issued
(or at the date that the
financial statements are available to be issued
when applicable). Substantial
doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in
the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one
year after the date that the financial statements are issued (or available to be issued). The term
probable
is used consistently
with its use in Topic 450, Contingencies.
When management
identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management
should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial
doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that
the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events
that raise substantial doubt about the entity’s ability to continue as a going concern.
If conditions or
events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated
as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial
statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):
|
a.
|
Principal
conditions or events that raised substantial doubt about the entity’s ability to
continue as a going concern (before consideration of management’s plans).
|
|
b.
|
Management’s
evaluation of the significance of those conditions or events in relation to the entity’s
ability to meet its obligations.
|
|
c.
|
Management’s
plans that alleviated substantial doubt about the entity’s ability to continue
as a going concern.
|
If conditions or
events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated
after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is
substantial doubt about the entity’s ability to continue as a going concern
within one year after the date that the
financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables
users of the financial statements to understand all of the following:
|
a.
|
Principal
conditions or events that raise substantial doubt about the entity’s ability to
continue as a going concern.
|
|
b.
|
Management’s
evaluation of the significance of those conditions or events in relation to the entity’s
ability to meet its obligations.
|
|
c.
|
Management’s
plans that are intended to mitigate the conditions or events that raise substantial doubt
about the entity’s ability to continue as a going concern.
|
The amendments in
this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
Early application is permitted.
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 3 –
Going Concern
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.
These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include
any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 – Accounts Receivable
Accounts receivable at June 30, 2017
and December 31, 2016 consisted of the following:
|
|
|
June
30, 2017
(Unaudited)
|
|
|
|
December
31, 2016
(Audited)
|
|
Accounts receivable
|
|
$
|
4,694,772
|
|
|
$
|
1,418,999
|
|
Allowance for doubtful accounts
|
|
|
87,590
|
|
|
|
87,590
|
|
Total:
|
|
$
|
4,607,182
|
|
|
$
|
1,331,409
|
|
Note 5 – Intangible Assets
On January 1, 2016,
the Company purchased the DMS Technology from Xinyahang Gufen Youxian Gongsi, Taiwan, (“Xinyahang”) for $128,176 and
500,000 shares of Common Stock of AJGH (OTCQB). Also on January 10, 2016, the Company entered into two-year agreement with Xinyahang
to provide design service for the DMS System. The design price was $50,172.
Intangible Assets,
stated at cost, less accumulated amortization, at June 30, 2017 and December 31, 2016 consisted of the following:
|
|
|
June
30, 2017
(Unaudited)
|
|
|
|
December
31, 2016
(Audited)
|
|
Intangible Assets
|
|
$
|
178,348
|
|
|
$
|
178,348
|
|
Total:
|
|
$
|
178,348
|
|
|
$
|
178,348
|
|
Less: Amortization
|
|
|
(54,381
|
)
|
|
|
(32,206
|
)
|
Total:
|
|
$
|
123,967
|
|
|
$
|
146,142
|
|
For the six months ended June 30, 2017
and 2016, the Company recorded amortization expense of $12,203 and $0 respectively.
Note 6 – Property, Plant and
Equipment
Property, plant and equipment, stated
at cost, less accumulated depreciation at June 30, 2017 and December 31, 2016 consisted of the following:
|
|
|
June
30, 2017
(Unaudited)
|
|
|
|
December
31, 2016
(Audited)
|
|
Office equipments
|
|
|
9,435
|
|
|
|
9,435
|
|
Less: Accumulated depreciation
|
|
|
1,219
|
|
|
|
545
|
|
Total:
|
|
$
|
8,216
|
|
|
$
|
8,890
|
|
For the six months ended June 30, 2017
and 2016, the Company recorded depreciation expense of $674 and $545 respectively.
Note 7 – Prepayments and other
current assets
|
|
June
30, 2017
(Unaudited)
|
|
December
31, 2016
(Audited)
|
Advance on purchase
|
|
$
|
—
|
|
|
$
|
—
|
|
Prepayments
|
|
|
453,896
|
|
|
|
680
|
|
Total:
|
|
$
|
453,896
|
|
|
$
|
680
|
|
On June 1, 2017, the Company entered a Mechanical,
Electrical, Pipeline Construction Agreement with Yadi Tienzi Gufen YouXian Gongshi. This amount of $453,896 represented the
fulfillment of materials and supplies for the construction of the multi-function hall of Na
tional
Taiwan University of Arts.
Note 8 –
Borrowing
|
|
|
June
30, 2017
|
|
|
|
Term
|
|
|
|
Int.
Rate/Year
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Cathay United Bank
|
|
|
43,092
|
|
|
|
Jan
18, 2017 to
Dec
18, 2017.
|
|
|
|
5.28
|
%
|
Long
term debt: amount payable within 1 year
|
|
|
|
|
|
|
|
|
|
|
|
|
First Commercial Bank Ltd.
|
|
|
41,996
|
|
|
|
Repaid
before June 30, 2018.
|
|
|
|
5.07
|
%
|
Taiwan Business Bank Ltd.
|
|
|
53,152
|
|
|
|
Repaid
before June 30, 2018.
|
|
|
|
3.50
|
%
|
Bank of Panshin
|
|
|
88,612
|
|
|
|
Repaid
before June 30, 2018.
|
|
|
|
3.60
|
%
|
Sunny Bank Ltd.
|
|
|
276,063
|
|
|
|
Repaid
before June 30, 2018.
|
|
|
|
3.49
|
%
|
Total:
|
|
$
|
502,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2016
|
|
|
|
Term
|
|
|
|
Int.
Rate/Year
|
|
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
Cathay United Bank
|
|
|
59,791
|
|
|
|
Dec
18,2016 to
Dec
18, 2017.
|
|
|
|
5.28
|
%
|
Long term debt: amount
payable within 1 year
|
|
|
|
|
|
|
|
|
|
|
|
|
First Commercial Bank Ltd.
|
|
|
45,047
|
|
|
|
Dec
30,2016 to
Dec
30, 2017.
|
|
|
|
5.07
|
%
|
Taiwan Business Bank Ltd.
|
|
|
56,260
|
|
|
|
Dec
25,2016 to
Dec
24, 2017.
|
|
|
|
3.60
|
%
|
Bank of Panshin
|
|
|
45,829
|
|
|
|
Dec
10,2016 to
Dec
10, 2017.
|
|
|
|
3.67
|
%
|
Sunny Bank Ltd.
|
|
|
220,241
|
|
|
|
Dec
21,2016 to
Dec
21, 2017.
|
|
|
|
3.49
|
%
|
Total
|
|
$
|
427,168
|
|
|
|
|
|
|
|
|
|
The long term debt
should be repaid as equal principal by month. The long term debt -the term less than 1 year represented the amount should be repaid
within 1 year.
NOTE 9 – RELATED PARTY TRANSACTIONS
The total amount
advance from related parties consisted of the advance from shareholders for the investment, working capital and the expense. The
balance was $135,261 and $268,141 as of June 30, 2017 and December 31, 2016, respectively.
NOTE 10 – LONG TERM DEBT
|
|
June
30, 2017
(Unaudited)
|
|
Term
|
|
Int.
Rate/Year
|
Taiwan Business
Bank Ltd.
|
|
|
119,592
|
|
|
Sept 25, 2015
to
Sept 25, 2020.
|
|
|
3.63
|
%
|
Bank of Panshin
|
|
|
169,840
|
|
|
June 10, 2015 to
June
10, 2018.
|
|
|
3.75
|
%
|
Sunny Bank Ltd.
|
|
|
34,768
|
|
|
Jan 21, 2015 to
August
5, 2019.
|
|
|
3.49
|
%
|
First Commercial Bank Ltd.
|
|
|
104,989
|
|
|
Jan 30, 2016 to
Jan
30, 2021.
|
|
|
5.09
|
%
|
Total
|
|
$
|
429,189
|
|
|
|
|
|
|
|
|
|
|
December
31, 2016
(Audited)
|
|
|
|
Term
|
|
|
|
Int.
Rate/Year
|
|
Taiwan Business Bank Ltd.
|
|
|
129,620
|
|
|
|
Sept
25, 2015 to
Sept 25, 2020.
|
|
|
|
3.63
|
%
|
Sunny Bank Ltd.
|
|
|
8,507
|
|
|
|
Jan
21, 2015 to
August 5, 2019.
|
|
|
|
3.49
|
%
|
Bank of Panshin
|
|
|
21,107
|
|
|
|
June
10, 2015 to
June 10, 2018.
|
|
|
|
3.75
|
%
|
Sunny Bank Ltd.
|
|
|
164,023
|
|
|
|
Jan 21,
2015 to
August 5,
2019.
|
|
|
|
3.49
|
%
|
First Commercial Bank Ltd.
|
|
|
110,200
|
|
|
|
Jan
30, 2016 to
Jan 30, 2021.
|
|
|
|
5.09
|
%
|
Total
|
|
$
|
433,457
|
|
|
|
|
|
|
|
|
|
NOTE 11 – TAXES PAYABLE
|
|
June
30, 2017
(Unaudited)
|
|
December
31, 2016
(Audited)
|
Income tax payable
|
|
$
|
16,806
|
|
|
$
|
3,204
|
|
Value added tax payable
|
|
|
—
|
|
|
|
213
|
|
Total:
|
|
$
|
16,806
|
|
|
$
|
3,417
|
|
NOTE 12 – 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 a tax asset cannot be realized through future income the Company must allow for this future tax benefit. The operating subsidiary
is organized and located in the Taiwan and does not conduct any business in the United States. Taxation on profits earned in the
Taiwan has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the Taiwan
where the Company operates after taking into account the benefits from any special tax credits or “tax holidays” allowed
in the county of operations.
In accordance with
the relevant tax laws in the Taiwan, the Company statutory rate were 17% and 17% for the quarter ended June 30, 2017 and year
ended December 31, 2016, respectively.
The components of
the income tax (benefit) expense are as follows:
|
|
|
The
six
months
ended
June
30, 2017
|
|
|
|
The
year
ended
December
31, 2016
|
|
Current provision
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred provision (benefit)
|
|
|
—
|
|
|
|
—
|
|
Total:
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE 13 –
COMMON STOCK
On April 7, 2014,
the shareholder, Chu Li An contributed $165,500 capital to the Company.
On June 30, 2015,
the Company made a reverse split of its common stock at the rate of 1 for 1500.
On July 10, 2015,
the Company issued 50,000,000 shares with a par value of $0.001 per share for cash. The cash was finally offset with debt cancel
due to shareholder.
On July 10, 2015,
the Company issued 800,000 shares with a par value of $0.001 per share in exchange for consulting services.
On August 6, 2015,
the Company issued 5,000,000 shares with a par value of $0.001 per share and 2,500,000 shares with a par value of $0.01 per share
for cash. The cash was finally offset with debt cancel due to shareholder.
On April 4, 2016,
the Company issued 5,000 shares to two investors with a par value of $4.00 per share for cash.
On May 10, 2016,
the Company issued 3,333 shares to director Chu Li An, in exchange for cancellation of debt.
On May 10, 2016,
the Company issued 2,000 shares to an investor with a par value of $4.00 per share for cash.
On May 10, 2016,
the Company issued 3,000 shares to an investor with a par value of $5.00 per share for cash.
On May 10, 2016,
the Company issued 21,000 shares to an investor with a par value of $4.76 per share for cash.
On June 28, 2016,
the Company issued 1,250 shares to an investor with a par value of $2.40 per share for cash.
On July 12, 2016,
the Company issued 500,000 shares to a Xinyahang Electronics Co. Ltd. Taiwan, as part of the payment for technology transfer and
purchase of DMS platform technology.
On July 12, 2016,
the Company issued total 1600 shares to six investors with a par value of $10.00 per share for cash.
On July 12, 2016,
the Company issued 700 shares to an investor with a par value of $12.00 per share for cash.
On July 15, 2016,
the Company issued 2,000 shares to consultant Kuo, Yu-chieh to offset for consulting fees payable, no cash payment received.
On August 8, 2016,
the Company issued 200 shares to an investor with a par value of $14.00 per share for cash.
On September 6,
2016, the Company issued 2400 shares to an investor with a par value of $14.00 per share for cash.
On October 31, 2016,
the Company issued 400 shares to three investors with a par value of $14 per share for Cash.
The Company’s
capitalization is 394,500,000 common shares with a par value of $0.001 per share. There are a total of 58,985,937 common shares
issued and outstanding at June 30, 2017 and December 31, 2016. No preferred shares have been authorized or issued.
NOTE 14 –
FOREIGN OPERATIONS
Operations
Substantially all
of the Company’s operations are carried out and all of its assets are located in the Taiwan. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the political, economic and legal environments in
the Taiwan. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations,
monetary policies, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.
Dividends and
Reserves
Under the laws of
the Taiwan, net income after taxation can only be distributed as dividends after appropriation has been made for the following:
(i) cumulative prior years’ losses, if any; (ii) allocations to the “Statutory Surplus Reserve” of at least
10% of net income after tax, as determined under Taiwan accounting rules and regulations, until the fund amounts to 50% of the
Company’s registered capital; (iii) allocations of 5-10% of income after tax, as determined under Taiwan accounting rules
and regulations, to the Company’s “Statutory Common Welfare Fund”, which is established for the purpose of providing
employee facilities and other collective benefits to employees in PRC; and (iv) allocations to any discretionary surplus reserve,
if approved by stockholders.
As of June 30, 2017,
the Company had no Statutory Surplus Reserve and the Statutory Common Welfare Fund established and segregated in retained earnings.
NOTE 15 - COMMITMENT
AND CONTINGENCIES
The Company had
bank loans. Based on the contract agreement, the future minimum repayments required for the coming years are as follows:
|
Periods
ending June 30, 2017
|
|
|
|
|
|
|
2018
|
|
|
|
502,914
|
|
|
2019
|
|
|
|
218,528
|
|
|
2020
|
|
|
|
176,375
|
|
|
2021
|
|
|
|
34,286
|
|
|
Total:
|
|
|
$
|
932,103
|
|
The Company did
not have other significant capital commitments or significant guarantees as of June 30, 2017, respectively.
NOTE 16 –SUBSEQUENT
EVENTS
The
company is under negotiations with Nanjing City, China government to provide the government with securities management hardware
and all related software and other management services. The initial orders shall be for 300,000 units, and could add up to 10,000,000
units for long-term.
We have also initiated
our new mobile UBI apps and its field testing has begun. So far, the testing is progressing very positively, generating the quality
of accelerometer data needed for accurate scoring. We have also begun establishing connections with various insurance companies,
vehicle fleet companies, and motorists for further testing and introduction of our new mobile UBI apps.
Effective July 17,
2017, the Board of Directors (the “Board”) of the Company appointed Mr. Ong Tee Keat as Chairman of the Board of Directors.
Item 2. Management's
Discussion and Analysis Of Financial Condition And Plan Of Operation.
This Quarterly 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.
On October 31, 2013,
pursuant to agreements with one of our former directors, we transferred the stock in our China subsidiaries to the former director
in exchange for cancellation of debt totaling $240,000. As a result of the transfer of the subsidiaries, we were no longer engaged
in the China clean fuel business. We transferred the stock of the China subsidiaries because we felt that, it's not our best interest
to continue China clean fuel business as a result of our decreasing revenue, continued losses and inability to raise capital for
our business.
On November 30,
2013, the company entered into an agreement to acquire all of the issued and outstanding stock of Jin Chih International, Ltd.,
a Taiwan corporation, from its sole owner Chu Li An for five million shares of the Company’s common stock. As of June 30,
2017, the stock has not been issued.
As a result of the
above transactions, we carry out the electronic products and general cargo trading and related consulting service business through
our subsidiary named Jin Chih International, Ltd in Taiwan. We still plan to focus on providing greentech products outside of
China in future. Even though the company has disposed China branches, the company's new management will continue to expand the
current green energy and technology business in the United States and globally, at the same time to explore many other green and
renewable energy such as solar, wind power, sea power by signing licensing agreement or joint venture with other research institutes
.
Results of Operations
For the three and
six months ended June 30, 2017, we derived our revenues of $1,221,031 and $5,043,278 compared to $490,119 and $1,102,123 for the
three and six months ended June 30, 2016, representing an increase of $730,894 and $4,156,336. Our sales came from the electronic
products and general cargo trading and related consulting service to our customers operated by the Taiwan subsidiary. On January
5, 2017, the company entered into license and distribution agreement with Wealthy Link Technology Corp. for the sale of its licensed
product for total of 50,000 units adopting the B2C and B2B business models, resulting to sales revenues of $3,500,000.
Selling, general
and administrative expenses consist of provision for doubtful debts, primarily of payroll, local taxes, investor relation expenses
and professional fees. Selling, general and administrative expenses for the three and six months ended June 30, 2017 were $115,691
and $235,609 comparing to $141,919 and $178,666 for the last period.
Our business operates
primarily in Taiwanese Dollars (“TWD”), but we report our results in our SEC filings in U.S. Dollars. The conversion
of our accounts from TWD to Dollars results in translation adjustments. While our net income is added to the retained earnings
on our balance sheets; the translation adjustments are added to a line item on our balance sheets labeled “accumulated other
comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Taiwanese currencies than
of the success of our business. During the six months June 30, 2017, the effect of converting our financial results to U.S. Dollars
was to decrease US$140,572 to our accumulated other comprehensive income.
Liquidity and
Capital Resources
Our operations to
date have been funded primarily by operations, due from related parties and capital contributions. At June 30, 2017 and December
31, 2016, we had cash and cash equivalents of $96,823 and $254,432, respectively. Our cash at June 30, 2017 was decreased by $157,609
from December 31, 2016.
Our current assets
at June 30, 2017 were $5,610,615, compared to $2,071,547 at December 31, 2016. This increase mainly reflects increase in accounts
receivable, short term investments, prepayments and other assets, and partially offset by decreases in cash and inventory.
Our current liabilities
at June 30, 2017 were $2,085,310, compared to $ 1,424,331 at December 31, 2016. This increase mainly reflects a significant increase
of account payable, borrowing and partially offset by decrease in tax payable and advances from related parties.
Statements of
Cash Flows
Our cash decreased
$157,609 during the first half year of 2017, as compared to $77,868 during 2016. In the half year of 2017, we used cash in the
amount of $28,299 and $61,402 from investing activities and financing activities, we obtained cash the amounts of $72,663 from
our operating activities.
In the first half
year of 2016, we used cash the amounts of $117,475 in operating activities, we obtained cash the amounts of $22,197 and $3,001
from our investing activities and financing activities.
Net Cash provided
by (Used in) Operating Activities
In the
first half year of 2017, net cash provided by operating activities increase of $72,663, and was mainly comprised of the increase
$3,001,120 net income, the increase of depreciation and amortization to $22,849, and the decrease to $2,951,306 from changes in
operating assets and liabilities.
In the first half
year of 2016, net cash used in operating activities of $117,475 comprised of the net income $1,204, and the decrease in operating
assets and liabilities $118,679.
Cash Provided
by (Used in) Investing Activities
In
the half year of 2017, net cash used in investing activities comprised of the increase of $28,299 short-term investment.
In the first six
months of 2016, net cash provided by investing activities of $22,197 comprised of sale proceeds of short-term investment
Cash Provided
by (Used in) Financing Activities
In the
first half year of 2017, cash used in financing activities of $61,402 consisted of the repayment to related parties $132,880,
increase of borrowing $75,746 and the repayment of long term debt of $4,268.
In the first six
months of 2016, net cash provided by financing activities of $3,001 consisted of the issuance of common stock $143,000, the capital
contribution $100, the increased long term debt $51,121, and repayment of borrowing $191,220 .
Off-Balance Sheet
Arrangements
We do not have any
off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition
or results of operations.
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 2 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
The Company values
inventories, consisting of raw materials, packaging material and finished goods, at the lower of cost or market. Cost is determined
on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost
method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production cost and an allocated
portion of production overhead. 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 market
value. Factors utilized in the determination of estimated market 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. Other significant
estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated
to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to
the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal
idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and
other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines
its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.
Revenue Recognition
The Company applies
paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when
it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following
criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been
rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
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.
The Company markets
and distributes electronic products and general cargo for automobile use and follows Section 605-45-45 (formerly EITF 99-19) (“ASC
Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition to report revenue gross as a principal
for its sales since the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards
of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does not act as an agent or broker (including
performing services, in substance, as an agent or broker) with compensation on a commission or fee as is on its sales. The management
of the Company determined that the Company should report revenue based on the gross amount billed to a customer when considering
each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14
as specified (1) The entity is the primary obligor in the arrangement — The Company signs a product sales agreement with
its customer and represents in writing that the Company is responsible for fulfillment, including the acceptability of the product(s)
or service(s) ordered or purchased by the customer; (2) The entity has general inventory risk (before customer order is placed
or upon customer return); (3) The entity has latitude in establishing price — The Company has reasonable latitude, within
economic constraints, to establish the exchange price with a customer for the product or service; (4) The entity changes the product
or performs part of the service— The Company developed a method for blending the raw materials in its manufacturing process,
through its proprietary technology, catalysts can be mixed with fuel and alcohols to become a finished product to be sold after
pumping and piping; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products
ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer;
(6) The entity is involved in the determination of product or service specifications — The Company determines the nature,
type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has physical
loss inventory risk of purchased inventories after customer order; and (8) The entity has credit risk — The Company is responsible
for collecting the sales price from its customer but must pay the amount owed to its supplier after the supplier performs, regardless
of whether the sales price is fully collected.
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), remeasures 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 income and 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 income and 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 income and 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
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 3. Quantitative
and Qualitative Disclosures About Market Risk.
Not required for
smaller reporting companies.
Item 4. Controls
and Procedures.
Disclosure
Controls and Procedures
Regulations under
the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls
and procedures,” which are defined as controls and other procedures that are designed to ensure that information required
to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed
by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management,
including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
We conducted an
evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures as of June 30, 2017. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that as of June 30, 2017, our disclosure controls and procedures were not effective at the reasonable assurance
level due to the material weaknesses described below.
In light of the
material weaknesses described below, we performed additional analysis to ensure our financial statements were prepared in accordance
with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly
present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
A material weakness
is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2)
or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual
or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses
which have caused management to conclude that, as of June 30, 2017, our disclosure controls and procedures were not effective
at the reasonable assurance level:
|
1.
|
We
do not have written documentation of our internal control policies and procedures. Written
documentation of key internal controls over financial reporting is a requirement of Section
404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ending June 30,
2017. Management evaluated the impact of our failure to have written documentation of
our internal controls and procedures on our assessment of our disclosure controls and
procedures and has concluded that the control deficiency that resulted represented a
material weakness.
|
|
2.
|
We
do not have sufficient segregation of duties within accounting functions, which is a
basic internal control. Due to our size and nature, segregation of all conflicting duties
may not always be possible and may not be economically feasible. However, to the extent
possible, the initiation of transactions, the custody of assets and the recording of
transactions should be performed by separate individuals. Management evaluated the impact
of our failure to have segregation of duties on our assessment of our disclosure controls
and procedures and has concluded that the control deficiency that resulted represented
a material weakness.
|
To address these
material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included
herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods
presented.
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 June 30, 2017. 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.
Management's
Remediation Initiatives
In an effort to
remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan
to initiate, the following series of measures:
We intend to our
personnel resources and technical accounting expertise within the accounting function. First, we intend to create a position to
segregate duties consistent with control objectives of having separate individuals perform (i) the initiation of transactions,
(ii) the recording of transactions and (iii) the custody of assets. Second, we intend to create a senior position to focus on
financial reporting and standardizing and documenting our accounting procedures with the goal of increasing the effectiveness
of the internal controls in preventing and detecting misstatements of accounting information. Third, we plan to appoint one or
more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning
audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures
such as reviewing and approving estimates and assumptions made by management when funds are available to us. We anticipate the
costs of implementing these remediation initiatives will be approximately $37,500 to $50,000 a year in increased salaries, legal
and accounting expenses.
Management believes
that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy
the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.
PART II —
OTHER INFORMATION
Item 1. Legal
Proceedings.
To the best knowledge
of the officers and directors, the Company was not a party to any legal proceeding or litigation as of June 30, 2017.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults
Upon Senior Securities.
None.
Item 4. Mine
Safety Disclosures
Not applicable.
Item 5. Other
Information.
None.
Item 6. Exhibits.
Exhibit
No.
|
Description
|
31.1
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Chief
Executive Officer Certification of Periodic Financial Report Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
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31.2
|
Chief
Financial Officer Certification of Periodic Financial Report Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
|
32.1
|
Chief
Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes Oxley Act of 2002.
|
32.2
|
Chief
Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes Oxley Act of 2002
|
101
|
The
following materials from Sino United Worldwide Consolidated Ltd.’s Quarterly Report
on Form 10-Q for the period ended June 30, 2017 are formatted in eXtensible Business
Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheet; (ii) the Condensed
Consolidated Statement of Operations;, (iii) the Condensed Consolidated Statements of
Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements. This Exhibit
101 is deemed not filed for purposes of Sections 11 or 12 of the Securities Act of 1933
and Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to
liability under these sections.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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SINO
UNITED WORLDWIDE CONSOLIDATED LTD.
|
|
|
|
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|
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Date: August 8, 2017
|
By:
/s/
Chu Li An
|
|
Chu
Li An
|
|
Chief
Executive Officer
|
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SINO
UNITED WORLDWIDE CONSOLIDATED LTD.
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Date: August 8, 2017
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By:
/s/
Chu Li An
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Chu
Li An
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Chief
Financial Officer
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