NOTES
TO CONENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)
(In
U.S. dollars except for number of shares)
NOTE
1 – ORGANIZATION AND BUSINESS
Entrepreneur
Universe Bright Group (“EUBG” or the “Company”), formerly known as Ketcher Industries LLC and REE International,
Inc., was incorporated in the State of Nevada on April 21, 1999 under the name LE GOURMET CO, INC. Since its inception, the Company had
the following name changes: On March 17, 2003, to Estelle Reyna, Inc.; on September 11, 2003 to Karma Media, Inc.; on July 8, 2005 to
Pitboss Entertainment, Inc.; on March 3, 2006 to US Energy Holdings, Inc.; on December 20, 2006 to Lonestar Group Holdings Company; on
November 9, 2007 to Guardian Angel Group, Inc.; on May 18, 2011 to REE International, Inc.; and on March 23, 2020, the Company filed
a Certificate of Amendment to the Nevada Secretary of State amending Article I of its Articles of Incorporation changing the Company’s
name to Entrepreneur Universe Bright Group, with an effective date of April 3, 2020.
Lonestar
Group Holdings Company was a voluntary filer and filed a Form 15 with the Securities and Exchange Commission (“SEC”) on August
20, 2007.
In
July 2018, XTC Inc. (“XTC”), a shareholder of the Company, petitioned the Eight Judicial District Court in Clark County,
Nevada (the “Court”), for appointment as custodian of the Company. On September 4, 2018, the Court granted XTC custodianship
of the Company with the right to appoint officers and directors, negotiate and compromise debt, execute contracts, issue stock and authorize
new classes of stock (“Custodianship”).
Since
the Form 15 filing on August 20, 2007 and prior to the Custodianship, the management believes that the Company was inactive with no business
operations. In December 2018, XTC filed a Certificate of Revival for a revival of its charter, effective December 13, 2018, with the
Nevada Secretary of State. XTC acted together with MXD Inc. (“MXD”) to revive the Company and to get current. MXD is a private
company incorporated in the State of Colorado. As the president of XTC is also the president of MXD, the Company considered that the
XTC and MXD are under common control.
XTC
and MXD performed the following actions in its capacity as custodian:
|
●
|
Funded
all expenses of the Company including paying off all outstanding liabilities discovered;
|
|
●
|
Brought
the Company back in compliance with the Nevada Secretary of State, resident agent, transfer agent, OTC Markets Group;
|
|
●
|
Brought
in and paid for accounting professionals as well as securities counsel.
|
On
December 18, 2018, the Company formed REE International, Inc. Colorado (“REE-CO”). On December 21, 2018, the Company entered
into an Agreement for Divestiture of Assets to Subsidiary with REE-CO, where the Company transferred all assets, liabilities, and business
to REE-CO. in exchange for 1,000 shares of REE-CO, and became the parent company of REE-CO. Since then, the Company has no assets, liabilities
and business.
On
December 28, 2018, the Company entered into a Sale and Purchase Agreement (the “SPA”) with XTC to transfer 1,000 common shares
of REE-CO to XTC at nil cash consideration (with XTC assuming all of the obligations and liabilities of REE-CO). Pursuant to the SPA,
all the assets and liabilities previously reported in the Company’s financial statements were acquired by XTC and all the continuing
obligations assumed were taken up by XTC. The gain on disposal of $328,423 was recognized in additional paid-up capital for the year
ended December 31, 2018. Since the closing of the SPA, REE-CO ceased to be a subsidiary of the Company on the same date, and the Company
no longer had any assets, liabilities and business.
In
consideration of the payments made to revive the Company and get current by the XTC and MXD, the Company issued 1,000,000 shares of Series
A Preferred Stock to MXD on December 11, 2018 and issued 50,000 shares of Series B Preferred Stock to XTC on February 27, 2019, respectively.
On
March 5, 2019 the total authorized common stock was increased to 1,800,000,000.
On
April 24, 2019, XTC was discharged as custodian of the Company. Prior to the Custodianship and immediately before May 15, 2019, the Company
has abandoned all of its business operations.
On
May 15, 2019, 1,590,605,141 shares of common stock of the Company was issued to MXD (the “Issuance”) as consideration for
its services to revive the Company and get current, at an aggregate fair value of $135,000, which was recognized as share-based payments
for the year ended December 31, 2019. On the same date, MXD and XTC agreed to voluntarily retire 1,000,000 shares of Series A Preferred
Stock and 50,000 shares of Series B Preferred Stock, respectively.
Immediately
after the Issuance, MXD entered into certain Sale and Purchase Agreements, dated May 15, 2019 (the “Stock Purchase Agreements”),
with Tethys Fountain Limited, New Finance Consultants Limited, Jia Wang, Jianyong Li, Haijun Jiang, Xuebin Wu and Fanfan Chen (collectively,
the “Purchasers”), to transfer all its 1,590,605,141 shares of common stock of the Company to the Purchasers in exchange
for an aggregate purchase price of $135,000. Upon the closing of the Stock Purchase Agreements, the Purchasers collectively owned 93.5%
of the issued and outstanding shares of the Company’s common stock, and Tethys Fountain Limited became the controlling shareholder
of the Company.
The
Company currently trades on the Pink Sheet under the symbol “EUBG”. The Company’s fiscal year end is December 31st.
The
Company, through its wholly owned subsidiaries, mainly engages in provision of digital marketing consultation services in Hong Kong and
China.
Company
name
|
|
Place/date
of incorporation
|
|
Principal
activities
|
1.
Entrepreneurship World Technology Holding Group Company Limited
|
|
Hong Kong/May 15, 2019
|
|
Provision of consulting and promotional services
|
|
|
|
|
|
2.
Xian Yunchuang Space Information Technology Co., Ltd.
|
|
The
People’s Republic of China (“PRC”)/October 18, 2019
|
|
Provision of digital marketing consultation services
|
|
|
|
|
|
3.
Xian Yunchuang Space Information Technology Co., Ltd, BaiYin Branch
|
|
PRC/May 7, 2020
|
|
Provision of digital marketing consultation services
|
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States of America generally
accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission
(“SEC”) regarding interim financial reporting. The unaudited condensed consolidated financial statements include the financial
statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
The
interim condensed consolidated financial information as of September 30, 2021 and for the three and nine months periods ended September
30, 2021 and 2020 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote
disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed
or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10/A
for the fiscal year ended December 31, 2020, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2020
included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures,
including notes, required by GAAP.
In
the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to
fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all
adjustments contained herein are of a normal recurring nature. The results of operations for the interim periods presented are not necessarily
indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021.
Use
of Estimates
The
preparation of these financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing
basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that
the Company believes are the most critical to fully understanding and evaluating its condensed consolidated financial statements.
The COVID-19 pandemic
has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns
or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. During the nine months
ended September 30, 2021 and 2020, the Company faced increasing uncertainties around its estimates of revenue collectability and accounts
receivable credit losses. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the
duration and degree of impact associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional
information emerges, and such changes are recognized or disclosed in its condensed consolidated financial statements.
Recently
Adopted Accounting Standards
In
December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income
taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent
application among reporting entities. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all
periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained
earnings as of the beginning of the fiscal year of adoption. The Company applied the new standard beginning January 1, 2021.
In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number
of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models. As a result,
a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features
require bifurcation and recognition as derivatives. For contracts in an entity’s own equity, the type of contracts primarily affected
by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure
to meet the settlement conditions of the derivative scope exception. This update simplifies the related settlement assessment by removing
the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required
to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if adopted as of the beginning of
such fiscal year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the
Company’s unaudited condensed consolidated financial statement presentation or disclosures.
Recently
Issued Accounting Standards
In
May 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-05, which is an update to ASU Update No. 2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected
credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous
incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several
consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which
must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30,
Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this ASU address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized
cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing
an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce
the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful
information. ASU 2019-05 is effective for the Company for fiscal year beginning after December 15, 2022. The Company is currently evaluating
the impact of this new standard on its condensed consolidated financial statements and related disclosures.
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until
a future date are not expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.
Basis
of Consolidation and Noncontrolling Interests
The
unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant
inter-company balances and transactions within the Company have been eliminated upon consolidation.
A
subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the
Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the
meeting of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an
agreement among the shareholders or equity holders.
Leases
The
Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on
the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the
rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate
based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use
(“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and
lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized
based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the
lease term. The Company elected the package of practical expedients permitted under the transition guidance to combine the lease and
non-lease components as a single lease component for operating leases associated with the Company’s office space lease, and to
keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated
statements of income on a straight-line basis over the lease term.
The
operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current
on the Company’s condensed consolidated balance sheets.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers cash, money market funds, investments in interest bearing demand deposit
accounts, time deposits and all highly liquid investments placed with banks or other financial institutions with an original maturity
of three months or less to be cash equivalents.
As
of September 30, 2021, cash held in accounts managed by online payment platforms such as Alipay and WeChat Pay amounted to $232,768 (as
at December 31, 2020: Nil), which have been classified as cash and cash equivalents in the condensed consolidated balance sheets.
Accounts
receivable
Accounts
receivable are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns. 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.
The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions.
Outstanding
accounts receivable balances are reviewed individually for collectability. Account balances are charged off against the allowance after
all means of collection have been exhausted and the potential for recovery is considered remote.
Debt
products
All
debt products are carried at fair value at the end of each reporting period. Changes in the carrying amount of debt products relating
to interest income calculated using the effective interest method are recognized in consolidated statement of profit or loss. Other changes
in the carrying amount of these products, net of any related tax effects, are excluded form earnings and are included in other comprehensive
income or loss and reported as a separate component of stockholders’ equity or deficit until realized. Realized gains and losses
and declines in value judged to be other than temporary, if any, on debt products are included in other income (expense), net.
The
Company regularly reviews all of its investments for other-than-temporary declines in estimated fair value. Its review includes the consideration
of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss
position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it
is more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. When
the Company determines that the decline in estimated fair value of an investment is below the amortized cost basis and the decline is
other-than-temporary, it reduces the carrying value of the security and record a loss for the amount of such decline. The Company has
not recorded any declines in value judged to be other than temporary on its investments in debt securities.
Plant
and equipment
Plant
and equipment are recorded at cost less accumulated depreciation and accumulated impairment. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
|
|
Estimated useful lives
(years)
|
|
Motor vehicle
|
|
4 - 5
|
|
The
gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the lower of the carrying value
or fair value less cost to sell the relevant assets and is recognized in general and administrative expenses in the condensed consolidated
statements of comprehensive income.
Impairment
of Long-lived Assets
In
accordance with ASC 360-10-35, we review the carrying values of long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The Company assesses the recover-ability of the assets based on
the non-discounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future
cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than
the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated
fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. No impairment has
been recorded by the Company for the three and nine months ended September 30, 2021 and 2020.
Revenue
Recognition
The
Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which it expects to receive in exchange for those goods. The Company recognizes revenues following the five step model prescribed under
ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues
when (or as) we satisfy the performance obligation.
The
Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or net
basis. The Company is acting as the principal if it obtains control over the goods and services before they are transferred to customers.
When the Company is primarily obligated in a transaction, is generally subject to inventory risk, has latitude in establishing prices,
or has several but not all of these indicators, the Company acts as the principal and revenue is recorded on a gross basis. When the
Company is not primarily obligated in a transaction, does not generally bear the inventory risk and does not have the ability to establish
the price, the Company acts as the agent and revenue is recorded on a net basis
The
Company derives its revenue primarily from net transaction services, including consultancy services and sourcing and marketing services.
Consultancy
services
The
Company generates the majority of its revenues by providing consulting services to its clients. Most of its consulting service contracts
are based on one of the following types of arrangements:
Performance-based
arrangements represent forms of variable consideration determined by pre-established fixed rates. In these arrangements, the Company’s
fees are based on the attainment of contractually defined objectives with our client, such as assisting the client in achieving a specific
business objective (e.g. end customer placed an order to buy a product or enroll a course). The Company is entitled a fixed rate on revenue
generated by the client that are related to the scope of respective consultancy services upon client acceptance on the services provided.
Fixed-fee training services are provided
to clients who are interested to conduct live-broadcasting business through social medias. The Company require the clients to pay a pre-established
fee in exchange for the services. Revenues are recognized when promised services (e.g. setting up an e-learning account and delivery of
learning materials) are delivered to the clients.
Fixed-fee
arrangements require the client to pay a pre-established fee in exchange for a pre-determined set of professional services. Generally,
the client agrees to pay a fixed fee prior to contract inception. The Company recognizes revenues for its professional services rendered
under these fixed-fee billing arrangements monthly over the specified contract term.
Sourcing
and marketing services
The
Company provides agency-based sourcing and digital marketing services to connect marketplace operators and merchants. Most of its sourcing
and marketing services are based on one of the following types of arrangements:
Agency-based
sourcing services represents product procurement on behalf of marketplace operators. The Company recognized revenues from agency-based
sourcing at a fixed rate on the value of goods that are sourced and delivered to the ultimate customers by the merchants. The Company
reports revenues from these transactions on a net basis because the performance obligation is to facilitate a transaction between marketplace
operators and merchants, for which the Company did not obtain the control over the products before passing on to the end customers. The
Company is not primarily responsible for fulfilling the promise and not exposed to inventory risk.
Digital
marketing services are provided to the marketplace to promote designated products or services through social medial influencers engaged
by the Company. The Company is entitled to a fixed rate on the revenue generated by the marketplace that are related to the designated
products or services.
The
post-sale services, goods return and other kinds of product issue are responsibilities of the merchants. Upon successful delivery to
ultimate customers by the merchants, there is no unfulfilled obligation that could affect the marketplace operators’ and merchants’
acceptance of the services provided. The acceptance provisions have lapsed, or the Company has objective evidence that all criteria for
acceptance have been satisfied.
The
Company derived services revenues of $1,515,371 and $2,920,165 for the three months ended September 30, 2021 and 2020, respectively;
and $4,268,054 and $6,158,584 for the nine months ended September 30, 2021 and 2020, respectively, from provision of certain consultancy
services and sourcing and marketing services through the program application (“App”) platform managed by a related company,
Xi’an Chuangyetianxia Network Technology Co., Ltd. (“Xian CNT”). The Company CEO, Mr. Tao, has significant influence
over Xian CNT.
During
the three and nine months ended September 30, 2021 and 2020, revenues generated from Xian CNT are disclosed in note 5 of the condensed
consolidated financial statements.
Practical
expedients and exemption
The
Company has not occurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts
with an original expected length of one year or less.
Other
service income is earned when services have been rendered.
Revenue
by major service line
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Consultancy services
|
|
|
1,554,834
|
|
|
|
3,128,557
|
|
|
|
4,362,581
|
|
|
|
6,478,673
|
|
Sourcing and marketing services
|
|
|
67,637
|
|
|
|
120,746
|
|
|
|
116,834
|
|
|
|
169,082
|
|
|
|
$
|
1,622,471
|
|
|
$
|
3,249,303
|
|
|
$
|
4,479,415
|
|
|
$
|
6,647,755
|
|
Revenue
by recognition over time vs point in time
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenue recognized at a point in time
|
|
|
1,622,471
|
|
|
|
3,227,405
|
|
|
|
4,479,415
|
|
|
|
6,560,282
|
|
Revenue recognized over time
|
|
|
-
|
|
|
|
21,898
|
|
|
|
-
|
|
|
|
87,473
|
|
|
|
$
|
1,622,471
|
|
|
$
|
3,249,303
|
|
|
$
|
4,479,415
|
|
|
$
|
6,647,755
|
|
Revenue
recorded on a gross vs net basis
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenue recorded on a gross basis
|
|
|
1,554,834
|
|
|
|
3,128,557
|
|
|
|
4,362,581
|
|
|
|
6,478,673
|
|
Revenue recorded on a net basis
|
|
|
67,637
|
|
|
|
120,746
|
|
|
|
116,834
|
|
|
|
169,082
|
|
|
|
$
|
1,622,471
|
|
|
$
|
3,249,303
|
|
|
$
|
4,479,415
|
|
|
$
|
6,647,755
|
|
Contract
liabilities
The
Company’s contract liabilities consist of deferred revenue associated with consultancy fees. The table below presents the activity
of the deferred consultancy services revenue during the three and nine months ended September 30, 2021 and 2020, respectively:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Balance at beginning of period
|
|
$
|
-
|
|
|
$
|
21,889
|
|
|
$
|
-
|
|
|
$
|
87,136
|
|
Consultancy fees collected
|
|
|
852,367
|
|
|
|
-
|
|
|
|
852,367
|
|
|
|
-
|
|
Consultancy income earned
|
|
|
(848,222
|
)
|
|
|
(21,821
|
)
|
|
|
(848,222
|
)
|
|
|
(87,396
|
)
|
Exchange realignment
|
|
|
15
|
|
|
|
(68
|
)
|
|
|
15
|
|
|
|
260
|
|
Balance at end of period
|
|
$
|
4,160
|
|
|
$
|
-
|
|
|
$
|
4,160
|
|
|
|
-
|
|
Cost
of revenue
Cost
of revenues consists primarily of employee compensation, service fees, agency fees, and the related IT expenses, which are directly attributable
to the provision of services.
Employee
benefits
Full
time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension
benefits, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require
that the PRC subsidiary of the Company make contributions to the government for these benefits based on certain percentages of the employees’
salaries, up to a maximum amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions
made. Total amounts of such employee benefit expenses, which were expensed as incurred, were approximately $31,273 and $3,852 for the
three months ended September 30, 2021 and 2020, respectively; and $78,957 and $9,678 for the nine months ended September 30, 2021 and
2020, respectively.
Foreign
Currency and Foreign Currency Translation
The
reporting currency of the Company is the United States dollar (“US dollar”). The financial records of the Company’s
PRC operating subsidiaries are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency.
The financial records of the Company’s Hong Kong operating subsidiary are maintained in its local currency, the Hong Kong Dollar
(“HKD”), which is the functional currency. Assets and liabilities of the subsidiaries are translated into the reporting currency
at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates, and income and expense
items are translated using the average rate for the period. The translation adjustments are recorded in accumulated other comprehensive
loss under shareholders’ equity.
Monetary
assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies
at the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable
functional currencies at historical exchange rates. Transactions in currencies other than the applicable functional currencies during
the period are converted into the functional currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction
gains and losses are recognized in the consolidated statements of operations.
RMB
is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People’s
Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted
for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand.
Translation of amounts from RMB into US dollars has been made at the following exchange rates for the respective periods:
Nine months ended September 30, 2020
|
|
|
|
Balance sheet, except for equity accounts
|
|
RMB 6.8484 to US$1.00
|
|
Income statement and cash flows
|
|
RMB 6.9953 to US$1.00
|
|
|
|
|
|
Nine months ended September 30, 2021
|
|
|
|
Balance sheet, except for equity accounts
|
|
RMB 6.4466 to US$1.00
|
|
Income statement and cash flows
|
|
RMB 6.4714 to US$1.00
|
|
|
|
|
|
Year ended December 31, 2020
|
|
|
|
Balance sheet, except for equity accounts
|
|
RMB 6.5401 to US$1.00
|
|
During
the periods presented, HKD is pegged to the U.S. dollar within a narrow range.
Income
Taxes
Income
taxes are accounted for using an asset and liability approach which requires the recognition of income taxes payable or refundable for
the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s
financial statements or tax returns. Deferred income taxes are determined based on the differences between the accounting basis and the
tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws. Deferred tax assets are reduced
by a valuation allowance, if based on available evidence, it is considered that it is more likely than not that some portion of or all
of the deferred tax assets will not be realized. In making such determination, the Company considers factors including future reversals
of existing taxable temporary differences, future profitability, and tax planning strategies. If events were to occur in the future that
would allow the Company to realize more of its deferred tax assets than the presently recorded net amount, an adjustment would be made
to the deferred tax assets that would increase income for the period when those events occurred. If events were to occur in the future
that would require the Company to realize less of its deferred tax assets than the presently recorded net amount, an adjustment would
be made to the valuation allowance against deferred tax assets that would decrease income for the period when those events occurred.
Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities.
Uncertain
Tax Positions
Management
reviews regularly the adequacy of the provisions for taxes as they relate to the Company’s income and transactions. In order to
assess uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for tax position measurement
and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution
of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more
than 50% likely to be realized upon settlement. As of September 30, 2021 and December 31, 2020, the Company had not recorded any liability
for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized
as a component of income tax expense.
Net
income per Share of Common Stock
The
Company has adopted ASC Topic 260, “Earnings per Share,” (“EPS”) which requires presentation of basic EPS on
the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing
net income by the weighted average number of shares of common stock outstanding during the period.
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net income
|
|
|
207,551
|
|
|
|
1,929,628
|
|
|
$
|
1,296,228
|
|
|
$
|
3,779,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic and diluted
|
|
|
1,701,181,423
|
|
|
|
1,701,181,423
|
|
|
|
1,701,181,423
|
|
|
|
1,701,181,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic and diluted
|
|
$
|
0.00
|
*
|
|
$
|
0.00
|
*
|
|
$
|
0.00
|
*
|
|
$
|
0.00
|
*
|
*
|
Less than $0.01 per share
|
The
calculation of basic net income per share of common stock is based on the net income for the three and nine months ended September 30,
2021 and 2020 and the weighted average number of ordinary shares outstanding.
For
the three and nine months ended September 30, 2021 and 2020, the Company has no potentially dilutive securities, such as options or warrants,
currently issued and outstanding.
Segments
The
Company uses the “management approach” in determining reportable operating segments. The management approach considers the
internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing
performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision
maker, reviews operating results solely by monthly revenue of marketing consultation services and operating results of the Company and,
as such, the Company has determined that the Company has one operating segment (provision of consulting, sourcing and marketing services
in China) as defined by ASC Topic 280 “Segment Reporting”.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents.
As
of September 30, 2021 and December 31, 2020, $7,723,941 and $3,846,470 of the Company’s cash and cash equivalents, respectively
were held at financial institutions and online payment platforms located in the PRC and Hong Kong that management believes to be of high
credit quality. The Company has not experienced any losses on cash and cash equivalents to date. The Company does not require collateral
or other securities to support financial instruments that are subject to credit risk.
The
Company operates principally in the PRC and Hong Kong and grants credit to its customers in these geographic regions. Although the PRC
is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations.
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, which requires classification
based on observable and unobservable inputs when measuring fair value. Certain current assets and current liabilities are financial instruments.
Management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination
of such instruments and their expected realization and, if applicable, their current interest rates are equivalent to interest rates
currently available. The three levels of valuation hierarchy are defined as follows:
|
●
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
●
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
|
●
|
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
Valuation
of debt products depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future
interest rates, and other relevant terms of the debt. Other factors that may be considered include the borrower’s ability to adequately
service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral
securing the Company’s debt investments. The fair value of these debt products classified as Level 2 are established by reference
to the prices quoted by respective fund administrators.
The
carrying amounts of financial assets and liabilities, such as cash and cash equivalents, account receivables, other receivables, amount
due from a related company, loan to a related company, account payables and other payables, amounts due to a director and a shareholder
and borrowings approximate their fair values because of the short maturity of these instruments or the rate of interest of these instruments
approximate the market rate of interest.
Comprehensive
Income
Comprehensive
income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding
transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income includes cumulative
foreign currency translation adjustment.
NOTE
3 – DEBT PRODUCTS
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Debt products issued by bank, at fair value
|
|
$
|
-
|
|
|
$
|
3,058,041
|
|
Debt
products include financial products issued and managed by banks in the PRC. The fair value of these debt products classified as Level
2 are established by reference to the prices quoted by the bank.
As
at December 31, 2020, the debt products have no maturity date, and bear variable interest rate, currently at 2.35% per annum. No fair
value change has been recognized for the year ended December 31, 2020. The debt products have been subsequently redeemed on February
2, 2021.
During
the nine months ended September 30, 2021, the Company further acquired debt products of $2,781,482, which had no maturity date, and bear
variable interest rate, currently at 2.95% per annum. All these newly acquired debt products had been redeemed on July 15, 2021 with
a gain of $2,053.
NOTE
4 – PLANT AND EQUIPMENT
Plant
and equipment as of September 30, 2021 and December 31, 2020 are summarized below:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Motor vehicle
|
|
$
|
395,094
|
|
|
$
|
389,443
|
|
Less: Accumulated depreciation
|
|
|
(96,785
|
)
|
|
|
(33,834
|
)
|
Plant and equipment, net
|
|
$
|
298,309
|
|
|
$
|
355,609
|
|
Depreciation
expenses, classified as operating expenses, were $20,743 and $9,082 for the three months ended September 30, 2021 and 2020, respectively;
and $62,222 and $18,962 for the nine months ended September 30, 2021 and 2020, respectively.
NOTE
5 – RELATED PARTY TRANSACTIONS
The
following is the list of the related parties with which the Company had transactions for the three and nine months ended September 30,
2021 and 2020:
|
(a)
|
Xian CNT – a company incorporated in the PRC, Xian. As of September 30, 2021, the shareholders of Xian CNT are 90% owned by certain family members of Mr. Guolin Tao, among them - 45% is owned by the sister of Mr. Tao, Ms. Tao Zhiyan and 45% is owned by the brother-in-law of Mr. Guolin Tao, Mr. Pan Chang.
|
|
(b)
|
Baiyin Wujinxia Cultural Communication Co., Ltd. (“Baiyin Wujinxia”) – a company incorporated in the PRC, the Company CEO, Mr Tao held 60% equity interest from October 31, 2019 to January 25, 2021 and on January 26, 2021 fully transferred to Ms. Hanye Chang, spouse of Mr. Guolin Tao.
|
|
(c)
|
Ms.
Hanye Chang, spouse of Mr. Guolin Tao.
|
|
(d)
|
Mr.
Yong Chang, father in law of Mr. Guolin Tao
|
|
(e)
|
Mr.
Jianyong Li, a director of the Company.
|
|
(f)
|
New Finance Consultants Limited, a shareholder of the Company, holding 8.3% equity interest as of September 30, 2021 and December 31, 2020.
|
Related
party transaction
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Sourcing and marketing services income generated from
|
|
|
|
|
|
|
|
|
|
|
|
|
- Xian CNT
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
48,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of motor vehicles from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Ms. Hanye Chang
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
85,771
|
|
- Mr. Yong Chang
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,030
|
|
- Mr. Jianyong Li
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baiyin Wujinxia
|
|
|
-
|
|
|
|
1,474
|
|
|
|
5,777
|
|
|
|
2,472
|
|
Sourcing
and marketing income were received by the Company at fees agreed by both parties in accordance with the relevant agreements.
The
interest income was charged at an interest rate agreed by both parties in accordance with a loan agreement.
Related
party balances
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Loan to a related company
|
|
|
|
|
|
|
|
|
- Baiyin Wujinxia
|
|
$
|
-
|
|
|
$
|
186,796
|
|
|
|
|
|
|
|
|
|
|
Amount due to a director
|
|
|
|
|
|
|
|
|
- Mr. Guolin Tao
|
|
$
|
118,449
|
|
|
$
|
51,309
|
|
|
|
|
|
|
|
|
|
|
Amount due to a shareholder
|
|
|
|
|
|
|
|
|
- New Finance Consultants Limited
|
|
$
|
53,000
|
|
|
$
|
53,000
|
|
On
November 1, 2019, the Company entered into a loan agreement with Baiyin Wujinxia to loan a total amount of $305,804 (RMB2,000,000) for
a period from November 1, 2019 to September 30, 2021. The loan is unsecured and bears fixed interest at 4.75% per annum. The outstanding
amount (including loan interest) as at December 31, 2020 was fully repaid on June 18, 2021 and the loan agreement was early terminated
on the same date.
The
amounts due to director/shareholder as of September 30, 2021 and December 31, 2020 are unsecured, non-interest bearing and repayable
on demand.
NOTE
6 – ACCOUNTS RECEIVABLE, NET
Accounts
receivable as of September 30, 2021 and December 31, 2020:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Account receivables
|
|
$
|
108,596
|
|
|
$
|
202,183
|
|
Less: Allowance for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
108,596
|
|
|
$
|
202,183
|
|
NOTE
7 – OTHER RECEIVABLES AND PREPAYMENTS
Other
receivables and prepayments consisted of the following as of September 30, 2021 and December 31, 2020:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Deposits and other receivables
|
|
$
|
22,101
|
|
|
$
|
19,027
|
|
Receivable from an employee (note)
|
|
|
155,120
|
|
|
|
-
|
|
Prepayments
|
|
|
53,459
|
|
|
|
31,279
|
|
|
|
$
|
230,680
|
|
|
$
|
50,306
|
|
Note:
The
amount was due from an employee who wire funds to an unrelated third party in the mistaken belief that the requests were made by a company
executive or established vendor. As the employee failed to comply with the Company’s internal policies, she agreed to take up the
obligation on her own. The amount has been subsequently received on November 5, 2021.
NOTE
8 – LOAN RECEIVABLES
On
February 8, 2021, the Company has provided a $500,000 loan to an independent customer of the Company’s consultancy business. The
loan was interest-bearing at 10% per annum, repayable on February 7, 2022 and secured by the corporate guarantee of the customer. On
August 5, 2021, the customer fully repaid the loan principal and interest.
Loan
interest income were $4,093 and $23,678 for the three and nine months ended September 30, 2021, respectively.
NOTE
9 – ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued
liabilities and other payables consisted of the following as of September 30, 2021 and December 31, 2020:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Other payables
|
|
|
136,078
|
|
|
|
110,599
|
|
Salary payable
|
|
|
114,616
|
|
|
|
229,010
|
|
Accrued audit fees
|
|
|
34,000
|
|
|
|
221,000
|
|
Other accrued expenses
|
|
|
52,662
|
|
|
|
57,899
|
|
|
|
$
|
337,356
|
|
|
$
|
618,508
|
|
NOTE
10 – BORROWINGS
On
April 20, 2020, the Company borrowed a loan of $128,996 (HK$1,000,000) from an unrelated individual. The loan was interest-free, unsecured,
and repayable on April 2021. The Company repaid the borrowing on February 2, 2021.
NOTE
11 – COMMON STOCK
The
Company was incorporated on April 21, 1999 with an authorized share capital of 25,000,000 common stock with a par value of $0.001 per
share.
On
March 5, 2019, the total number of authorized shares were increased to 1,800,000,000 common stock with a par value of $0.0001 per share.
NOTE
12 – STATUTORY RESERVES
As
stipulated by the relevant laws and regulations in the PRC, company established in the PRC (the “PRC subsidiary”) is required
to maintain a statutory reserve made out of profit for the year based on the PRC subsidiary’ statutory financial statements which
are prepared in accordance with the accounting principles generally accepted in the PRC. The amount and allocation basis are decided
by the director of the PRC subsidiary annually and is not to be less than 10% of the profit for the year of the PRC subsidiary. The aggregate
amount allocated to the reserves will be limited to 50% of registered capital for certain subsidiaries. Statutory reserve can be used
for expanding the capital base of the PRC subsidiary by means of capitalization issue.
In
addition, as a result of the relevant PRC laws and regulations which impose restriction on distribution or transfer of assets out of
the PRC statutory reserve, $65,911 representing the PRC statutory reserve of the subsidiary as of September 30, 2021 and December 31,
2020, are also considered under restriction for distribution.
NOTE
13 – INCOME TAXES
(a)
|
The
local (United States) and foreign components of income (loss) before income taxes were comprised of the following:
|
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
- Local
|
|
|
(156,168
|
)
|
|
|
-
|
|
|
$
|
(344,756
|
)
|
|
$
|
(100,055
|
)
|
- Foreign, representing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HK
|
|
|
(3,278
|
)
|
|
|
12,672
|
|
|
|
(26,845
|
)
|
|
|
61,202
|
|
PRC
|
|
|
568,786
|
|
|
|
2,857,982
|
|
|
|
2,539,892
|
|
|
|
5,653,230
|
|
Income before income taxes
|
|
|
409,340
|
|
|
|
2,870,654
|
|
|
$
|
2,168,291
|
|
|
$
|
5,614,377
|
|
Income
is subject to tax in the various countries in which the Company operates.
The
Company is incorporated in the State of Nevada and is subject to the U.S. federal tax and state tax. The Tax Cuts and Jobs Act of (“TCJ
Act”) was signed into law in December 2017, and among its many provisions, it imposed a mandatory one-time transition tax on undistributed
international earnings and reduced the U.S. corporate income tax rate to 21%, effective January 1, 2019. No provision for income taxes
in the United States has been made as the Company had no taxable income for the three and nine months ended September 30, 2021 and 2020.
The
Company mainly conducts its operating business through its subsidiaries in China, including Hong Kong.
The
subsidiary incorporated in Hong Kong is subject to Hong Kong taxation on income derived from their activities conducted in Hong Kong.
Hong Kong Profits Tax has been calculated at 16.5% of the estimated assessable profit for the three and nine months ended September 30,
2021 and 2020. The provision for Hong Kong Profits Tax is calculated at 8.25% on assessable profits up to $256,907 (HK$2,000,000) for
the three and nine months ended September 30, 2021 and 2020 and subject to a waiver of 100% of the profits tax under a cap of $1,285
(HK$10,000) for the three and nine months ended September 30, 2021 and 2020, respectively.
The
subsidiary incorporated in mainland China is governed by the Income Tax Law of the PRC concerning foreign invested enterprises and foreign
enterprises and various local income tax laws (the Income Tax Laws), and are subject to 25% tax rate throughout the periods presented.
Under
the PRC EIT law, withholding income tax is imposed on dividend paid by PRC entities out of its profits earned since January 1, 2008
to its overseas investors (including Hong Kong investors). Deferred taxation on the undistributed profits of the PRC subsidiaries has
been provided in the condensed consolidated financial statements to the extent that in the opinion of the directors such profits will
be distributed in the foreseeable future. Total undistributed profits of the Company’s PRC subsidiary at September 30, 2021 and
December 31, 2020 were $3,240,920 and $6,269,752, respectively. At September 30, 2021 and December 31, 2020, the Company recognized deferred
tax liabilities of $324,092 and $626,975, respectively, in respect of the undistributed profits.
Income
tax expense consists of the following:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Current tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
(841
|
)
|
|
|
375
|
|
|
$
|
(841
|
)
|
|
$
|
3,756
|
|
China
|
|
|
154,923
|
|
|
|
719,347
|
|
|
|
676,433
|
|
|
|
1,417,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
|
47,707
|
|
|
|
221,304
|
|
|
|
196,471
|
|
|
|
413,365
|
|
Total
|
|
|
201,789
|
|
|
|
941,026
|
|
|
$
|
872,063
|
|
|
$
|
1,834,615
|
|
The
provision for income taxes consisted of the following:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Income before income tax
|
|
|
409,340
|
|
|
|
2,870,654
|
|
|
$
|
2,168,291
|
|
|
$
|
5,614,377
|
|
Statutory income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax credit computed at statutory income rate
|
|
|
85,962
|
|
|
|
602,837
|
|
|
|
455,342
|
|
|
|
1,179,019
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses
|
|
|
45,792
|
|
|
|
4,183
|
|
|
|
116,073
|
|
|
|
25,195
|
|
Effect of tax reliefs granted to Hong Kong subsidiary
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(1,289
|
)
|
Over-provision in prior period
|
|
|
(841
|
)
|
|
|
-
|
|
|
|
(841
|
)
|
|
|
|
|
Rate differential in different tax jurisdictions
|
|
|
23,169
|
|
|
|
112,704
|
|
|
|
105,018
|
|
|
|
218,325
|
|
Deferred tax provided on dividends withholding tax of PRC subsidiaries
|
|
|
47,707
|
|
|
|
221,304
|
|
|
|
196,471
|
|
|
|
413,365
|
|
Income tax expense
|
|
|
201,789
|
|
|
|
941,026
|
|
|
$
|
872,063
|
|
|
$
|
1,834,615
|
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of September 30, 2021 and December 31, 2020 are presented below:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accelerated depreciation
|
|
$
|
1,239
|
|
|
$
|
429
|
|
Deductible temporarily difference arising from other payable
|
|
|
12,504
|
|
|
|
-
|
|
Less: Net off with deferred tax liabilities for financial reporting purposes
|
|
|
(13,743
|
)
|
|
|
(429
|
)
|
Net total deferred tax assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Undistributed profits of a PRC subsidiary
|
|
|
324,092
|
|
|
|
626,975
|
|
Taxable temporarily difference arising from receipt in advance
|
|
|
3,383
|
|
|
|
-
|
|
Less: Net off with deferred tax assets for financial reporting purposes
|
|
|
(13,743
|
)
|
|
|
(429
|
)
|
Net total deferred tax liabilities
|
|
$
|
313,732
|
|
|
$
|
626,546
|
|
NOTE
14 – LEASE
On
May 13, 2020, the Company entered into a lease agreement for office space in Xian, the PRC with a non-cancellable lease term, commencing
on May 13, 2020 and expiring on July 15, 2021. The monthly rental payment is approximately $4,092 (RMB28,244) per month.
On
June 10, 2021, the Company entered into a lease agreement for office space in Xian, the PRC with a non-cancellable lease term, commencing
on July 16, 2021 and expiring on July 15, 2024. The monthly rental payment is approximately $5,111 (RMB32,951) per month.
Operating
lease expense for the nine months and three months ended September 30, 2021 and 2020 was as follows:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Operating lease cost – straight line
|
|
|
13,362
|
|
|
|
11,607
|
|
|
|
39,248
|
|
|
|
19,205
|
|
Total lease expense
|
|
|
13,362
|
|
|
|
11,607
|
|
|
$
|
39,248
|
|
|
$
|
19,205
|
|
The
following is a schedule, by years, of maturities of lease liabilities as of September 30, 2021:
|
|
Operating
leases
|
|
12 months ending September 30,
|
|
|
|
|
2022
|
|
$
|
61,337
|
|
2023
|
|
|
61,337
|
|
2024
|
|
|
46,003
|
|
2025
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Total undiscounted cash flows
|
|
|
168,677
|
|
Less: imputed interest
|
|
|
(10,529
|
)
|
Present value of lease liabilities
|
|
$
|
158,148
|
|
Lease
term and discount rate
|
|
September 30,
2021
|
|
Weighted-average remaining lease term - year
|
|
|
2.75
|
|
Weighted-average discount rate (%)
|
|
|
4.90
|
%
|
NOTE
15 – CONTINGENIES AND COMMITMENTS
Contingencies
Certain
conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss
to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management
and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings,
the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought. There was no contingency of this type as of September 30, 2021 and December
31, 2020.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates
that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the
nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.
There was no contingency of this type as of September 30, 2021 and December 31, 2020.
Loss
contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee
would be disclosed.
NOTE
16 – CERTAIN RISKS AND CONCENTRATIONS
The
Company had the following customers that individually comprised 10% or more of net revenue for the three and nine months ended September
30, 2021 and 2020 as follows:
|
|
Three months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Customer A
|
|
$
|
210,337
|
|
|
|
13
|
%
|
|
$
|
1,864,084
|
|
|
|
57
|
%
|
Customer B
|
|
|
170,019
|
|
|
|
10
|
%
|
|
|
780,554
|
|
|
|
24
|
%
|
Customer C
|
|
|
172,765
|
|
|
|
11
|
%
|
|
|
*
|
|
|
|
*
|
|
|
*
|
Comprised
less than 10% of net revenue for the respective period.
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Customer A
|
|
$
|
1,321,937
|
|
|
|
30
|
%
|
|
$
|
3,966,906
|
|
|
|
60
|
%
|
Customer B
|
|
|
905,215
|
|
|
|
20
|
%
|
|
|
1,028,392
|
|
|
|
15
|
%
|
Customer C
|
|
|
627,321
|
|
|
|
14
|
%
|
|
|
*
|
|
|
|
*
|
|
|
*
|
Comprised
less than 10% of net revenue for the respective period.
|
The
Company had the following customers that individually comprised 10% or more of net accounts receivable as of September 30, 2021 and December
31, 2020 as follows:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Customer A
|
|
$
|
|
*
|
|
|
|
*
|
|
$
|
57,608
|
|
|
|
28
|
%
|
Customer B
|
|
|
|
*
|
|
|
|
*
|
|
|
39,291
|
|
|
|
19
|
%
|
Customer C
|
|
|
71,354
|
|
|
|
66
|
%
|
|
|
31,379
|
|
|
|
16
|
%
|
Customer D
|
|
|
12,228
|
|
|
|
11
|
%
|
|
|
*
|
|
|
|
*
|
|
|
*
|
Comprised
less than 10% of net account receivable for the respective period.
|
The
Company had the following service vendors that individually comprised 10% or more of cost of revenue for the three and nine months ended
September 30, 2021 and 2020 as follows:
|
|
Three months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Service vendor A
|
|
$
|
400,105
|
|
|
|
46
|
%
|
|
$
|
*
|
|
|
|
*
|
|
Service vendor B
|
|
|
126,819
|
|
|
|
15
|
%
|
|
|
*
|
|
|
|
*
|
|
*
|
Comprised
less than 10% of cost of revenue for the respective period.
|
|
|
Nine months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Service vendor A
|
|
$
|
400,105
|
|
|
|
31
|
%
|
|
$
|
*
|
|
|
|
*
|
|
|
*
|
Comprised
less than 10% of cost of revenue for the respective period.
|
The
Company had the following service vendors that individually comprised 10% or more of accounts payable as of September 30, 2021 and December
31, 2020 as follows:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Service vendor A
|
|
$
|
425,741
|
|
|
|
99
|
%
|
|
$
|
*
|
|
|
|
*
|
|
|
*
|
Comprised
less than 10% of accounts payable for the respective period.
|
At
September 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents included bank deposits in accounts maintained
in China and Hong Kong and liquid funds in online payment platforms. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant risks on its cash in bank accounts.
For
the credit risk related to trade accounts receivable, the Company performs ongoing credit evaluations of its customers and, if necessary,
maintains reserves for potential credit losses.