Quarterly Report (10-q)

Date : 08/28/2018 @ 4:47PM
Source : Edgar (US Regulatory)
Stock : Flatworld Acquisition Corp (PN) (FWLAF)
Quote : 0.06  0.0 (0.00%) @ 9:30PM

Quarterly Report (10-q)


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

þ

QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2018

or


q

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                                              to                                          

 

Commission file number: 000-54173

 

FLATWORLD ACQUISITION CORP.

  ( Exact name of registrant as specified in its charter)

 

British Virgin Island

98-0666872

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 

Palm Grove House, Road Town

 

Tortola, British Virgin Islands

VG1110

(Address of principal executive offices)

(Zip Code)

 

+1 (284) 545 6127

Registrant s telephone number, including area code

 N/A

(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes  þ   No  q

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   q

 

Accelerated filer   q

 

Non-accelerated filer   q

 

Smaller reporting company  þ

 

(Do not check if a smaller reporting company)


Emerging growth company q


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. q

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   þ    No   q

As of August 28, 2018, there were 2,869,375 ordinary shares, no par value per share, of the registrant outstanding.

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 þ   No   q







 

 


FLATWORLD ACQUISITION CORP.


TABLE OF CONTENTS



INTRODUCTION

 

 

 

PART I.

 

Financial Information


 

Item 1.

 

Unaudited Condensed Consolidated Financial Statements

2

 

Item 2.


Management s Discussion and Analysis of Financial Condition and Results of Operations

10


Item 3.


Quantitative and Qualitative Disclosures About Market Risk

18


Item 4.

 

Controls and Procedures

18

 



 



Part II.


Other Information



Item 1.

 

Legal Proceedings

18

 

Item 1A.

 

Risk Factors

19

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

19


Item 3.


Defaults Upon Senior Securities

19


Item 4.


Mine Safety Disclosures

19


Item 5.

 

Other Information

19

 

Item 6.

 

Exhibits

20

 

















INTRODUCTION


Unless otherwise indicated and except where the context otherwise requires,

·      references to we, us, our, company or our company are to FlatWorld Acquisition Corp., a company organized under the laws of the British Virgin Islands;

·      references to Securities Act are to the United States Securities Act of 1933, as amended and references to the Exchange Act are to the United States Securities Exchange Act of 1934, as amended;

·      references to a FPI or FPI status are references to a foreign private issuer as defined by and determined pursuant to Rule 3b-4 of the Exchange Act;

·      references to initial business transaction and to business transaction are to our initial acquisition, share exchange, share reconstruction and amalgamation or contractual control arrangement with, or purchase of, all or substantially all of the assets of, or engaging in any other similar business transaction with, an unidentified operating business or assets;

·      references to initial shares are to the 573,875 ordinary shares (net of 58, 625 ordinary shares which were redeemed on January 25, 2011 by us as a result of partial exercise of underwriter s over-allotment option) owned by our sponsor and purchased in a private placement prior to our initial public offering;

·      references to the Companies Act or the Act mean the BVI Business Companies Act of 2004, as amended, of the British Virgin Islands;

·      references to insider warrants are to the warrants to purchase an aggregate of 2,000,000 ordinary shares for the purchase price of $1,500,000, in a private placement that occurred on December 9, 2010;

·      references to public shares are to ordinary shares sold as part of the units in the initial public offering (whether they were purchased in the offering or thereafter in the open market) and pursuant to exercise of underwriter s over-allotment option;

·      references to public shareholders are to holders of public shares, including shares purchased by insiders;

·      references to our sponsor are to FWAC Holdings Limited, a British Virgin Islands business company with limited liability which is  owned  by our officers, directors, advisors, their respective affiliates and other non-affiliates;

·      references to a prospectus are to the Company s initial public offering prospectus dated December 9, 2010 filed with Securities and Exchange Commission;

·      references to a target business are to one or more operating businesses or assets which, we may target for an initial business transaction; and

all dollar amounts in are in U.S. dollars unless otherwise indicated






FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by the use of forward-looking terminology, including the words believes, estimates, anticipates, expects, intends, plans, may, will, potential, projects, predicts, continue, or should, or, in each case, their negative or other variations or comparable terminology. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management s current expectations, but actual results may differ materially due to various factors, including, but not limited to, our:

·            our status as a shell company;

·            our selection of a prospective target business or asset;

·            our issuance of our capital shares or incurrence of debt to complete a business transaction;

·            our ability to consummate an attractive business transaction due to our limited resources and the significant competition for business transaction opportunities;

·            conflicts of interest of our officers and directors;

·            potential current or future affiliations of our officers and directors with competing businesses;

·            our ability to obtain additional financing if necessary;

·            our sponsor s ability to control or influence the outcome of matters requiring shareholder approval due to its substantial interest in us;

·            the adverse effect on the market price our ordinary shares due to the existence of registration rights with respect to the securities owned by our sponsor;

·            the lack of a market for our securities;

·            our being deemed an investment company;

·            our dependence on our key personnel;

·            our dependence on a single company after our business transaction;

·            environmental, permitting and other regulatory risks;

·            foreign currency fluctuations and overall political risk in foreign jurisdictions;

·            our operating and capital expenditures;

·            our competitive position; and

·            expected results of operations and/or financial position. 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

These forward-looking statements are subject to numerous risks, uncertainties and assumptions about us described in our filings with the Securities and Exchange Commission. The forward-looking events we discuss in this Quarterly Report on Form 10-Q speak only as of the date of such statement and might not occur in light of these risks, uncertainties and assumptions. Except as required by applicable law, we undertake no obligation and disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.




1



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FlatWorld Acquisition Corp.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

as of June 30, 2018

 

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Index to Unaudited Condensed Consolidated Financial Statements

 

2

Condensed Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017


3

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017


4

Unaudited Condensed Consolidated Statements of Shareholder s Deficit for the Six Months Ended June 30, 2018


5

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017


6

Notes to Unaudited Condensed Consolidated Financial Statements

     

7






2



FlatWorld Acquisition Corp.

CONDENSED CONSOLIDATED BALANCE SHEETS



June 30, 2018


December 31, 2017


(unaudited)




ASSETS






Current assets






Cash

$


$

Total current assets










Total assets

$


$







LIABILITIES AND SHAREHOLDERS DEFICIT






Current liabilities






Accounts payable and accrued expenses

$

77,040


$

73,090

Due to affiliate


606,612



561,612

Total current liabilities


683,652



634,702







Commitments and contingencies












Shareholders deficit






Preferred shares, no par value; 5,000,000 shares authorized;
no shares issued and outstanding at June 30, 2018 and December 31, 2017










Ordinary shares, no par value, unlimited shares authorized;
2,869,375 shares issued and outstanding at June 30, 2018 and December 31, 2017


311,372



311,372







Additional paid-in capital










Accumulated deficit


(995,024)



(946,074)

Total shareholders deficit


(683,652)



(634,702)

Total liabilities and shareholders deficit

$


$


The accompanying notes are an integral part of the unaudited condensed consolidated financial statements




3



FlatWorld Acquisition Corp.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

Three Months
Ended
June 30, 2018


Three Months
Ended
June 30, 2017


Six Months

Ended

June 30, 2018


Six Months

Ended

June 30, 2017

 




 

 







General and administrative expenses

$

24,475


24,475


$

48,950


$

55,450













Loss from operations


(24,475)


 

(24,475)



(48,950)



(55,450)













Net loss attributable to ordinary shareholders

$

(24,475)


$

(24,475)


$

(48,950)


$

(55,450)

Weighted average number of ordinary shares outstanding, basic and diluted


2,869,375


 

2,869,375



2,869,375



2,869,375

Net loss per ordinary share attributable to ordinary shareholders, basic
and diluted and diluted

$

(0.01)


$

(0.01)


$

(0.02)


$

(0.02)


The accompanying notes are an integral part of the unaudited condensed consolidated financial statements









4



FlatWorld Acquisition Corp.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT

For the six months ended June 30, 2018

(Unaudited)










Ordinary Shares






Total


Shares


Amount no par


Additional
paid-in capital


Accumulated
Deficit


shareholder s
deficit















 


  

  



 


 

 



  


 

 

Balances, December 31, 2017

2,869,375

 

$

311,372

 

$

 

$

(946,074)


$

      (634,702)

 















 

Net loss attributable to ordinary shareholders







(48,950)



(48,950)

 















 

Balances, June 30, 2018

2,869,375


$

311,372


$


$

(995,024)


$

(683,652)

 


The accompanying notes are an integral part of the unaudited condensed consolidated financial statements




5



FlatWorld Acquisition Corp.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Six Months Ended
June 30, 2018


Six Months Ended
June 30, 2017

Cash Flows from Operating Activities






Net loss attributable to ordinary shareholders

$

(48,950)


$

(55,450)

Adjustments to reconcile net loss attributable to ordinary shareholders to net cash used in operating activities:






Changes in operating assets and liabilities:






Increase in due to affiliate


45,000



45,750

Increase in accounts payable and accrued expenses


3,950



9,700

Net cash used in operating activities




Cash Flows from Investing Activities






  Net cash provided by investing activities




Cash Flows from Financing Activities






Net cash provided by financing activities




Net change in cash and cash equivalents




Cash and cash equivalents at beginning of the period




Cash and cash equivalents at end of the period

$


$

Supplemental disclosure of cash flow information






Cash paid during the period for:






Interest

$


$

Income taxes

$


$







Supplemental disclosure of non-cash investing and financing activities:

$


$


The accompanying notes are an integral part of the unaudited condensed consolidated financial statements




6



FlatWorld Acquisition Corp.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three and Six months ended June 30, 2018 and 2017

(Unaudited)


NOTE A DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

FlatWorld Acquisition Corp. (the Company or FlatWorld ) is a blank check company formed on June 25, 2010 as a British Virgin Islands business company with limited liability for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation or contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business transaction, one or more unidentified operating business or assets ( Business Transaction ). The Company s efforts in identifying a prospective target business for its Business Transaction will not be limited to a particular industry, geographic region or minimum transaction value, but will focus its search on identifying a prospective target business in either (i) the global business services sector or (ii) emerging Asian markets. On June 29, 2011, the Company changed its fiscal year solely for financial accounting purposes such that the Company s fiscal year will now end on December 31st of each calendar year. The Company had initially adopted a fiscal year end of June 30th solely for financial accounting purposes.

On December 31, 2013, the Company entered into an agreement with FWC Management Services Ltd and FlatWorld Capital LLC, an entity controlled by three officers of the Company, to assign FWC Management Services Ltd. s interest in the Administrative Services Agreement to FlatWorld Capital LLC. Under such agreement, FlatWorld Capital LLC will continue to provide the services previously performed by, and on the same terms of, FWC Management Services Ltd, and all previous fees outstanding will be payable to FlatWorld Capital LLC.

   Going concern consideration  

The accompanying ( a) condensed consolidated balance sheet as of December 31, 2017, which has been derived from audited consolidated financial statements, and (b) the unaudited interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As indicated in the accompanying unaudited condensed consolidated financial statements, at June 30, 2018, the Company had no cash, current liabilities of $683,652 and a working capital deficit (current liabilities minus current assets) of $683,652. Further, the Company has incurred and expects to continue to incur costs. These factors, among others, indicate that the Company may be unable to continue operations as a going concern unless further financing is consummated.

The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.

The Board of Directors anticipates that the Company will need to raise capital to fund ongoing operations, including the compliance cost of continuing to remain a public reporting company, and to fund the acquisition of an operating business. The Company does not currently have any specific capital-raising plans. The Company may receive funds from some or all of our officers or directors, and it may seek to issue equity securities, including preferred securities for which it may determine the rights and designations, ordinary shares, warrants, equity rights, convertibles notes and any combination of the foregoing. Any such offering may take the form of a private placement, public offering, rights offering, other offering or any combination of the foregoing at fixed or variable market prices or discounts to prevailing market prices. The Company cannot assure you that they will be able to raise sufficient capital on favorable, or any, terms. The Company believes that the issuance of equity securities in such a financing will not be subject to shareholder approval if the Company s Ordinary Shares are not then listed on a national exchange. Accordingly, you may not be entitled to vote on any future financing by the Company. Moreover, shareholders have no preemptive or other rights to acquire any securities that the Company may issue in the future.

NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations (S-X) of the Securities and Exchange Commission (the "SEC") and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results from operations for the three and six months period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The



7



unaudited condensed consolidated financial statements should be read in conjunction with the December 31, 2017 consolidated financial statements and footnotes thereto included in the Company's SEC Form 10-K filed on July 27, 2018.

All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Net loss per share

The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. Net loss per ordinary share is computed by dividing net loss applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the period. Common share equivalents are excluded from the diluted earnings (loss) per share computation if their effect is anti-dilutive. At June 30, 2018, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company.

Cash

The Company considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Reliance on Key Personnel

The Company is heavily dependent on the continued active participation of the current directors and executive officers. The loss of any of the senior management could significantly and negatively impact the business until adequate replacements can be identified and put in place.

Fair value of financial instruments

The fair value of the Company s assets and liabilities, which qualify as financial instruments under FASB ASC 820, Fair Value Measurements and Disclosures , approximates the carrying amounts represented in the balance sheet.

In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price ) in an orderly transaction between market participants at the measurement date.

In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.  Unobservable inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Valuation adjustments and block discounts are not applied to Level 1 securities.  Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction.  To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Those estimated values do not necessarily represent the amounts that may be ultimately realized due to



8



the occurrence of future circumstances that cannot be reasonably determined.  Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed.  Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.  Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date.  The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation.  As of June 30, 2018 and December 31, 2017, the carrying amount reported in the unaudited condensed consolidated balance sheet for accounts payable and accrued expenses and due to affiliates approximates fair value because of the immediate or short-term maturity of these financial instruments.

Use of estimates

The preparation of unaudited condensed 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income tax

The Government of British Virgin Islands will not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the Company or its security holders. The British Virgin Islands is not party to any double taxation treaties.

Notwithstanding the above, the Company complies with FASB ASC 740, Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company did not establish a valuation allowance as of June 30, 2018 as there were no deferred tax assets at that date.

The Company adopted the provisions of FASB ASC 740-10-25 which establishes recognition requirements for the accounting for income taxes. There were no unrecognized tax benefits as of June 30, 2018. The section prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at June 30, 2018. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.  The Company is subject to income tax examinations by major taxing authorities since inception.

Recently issued accounting pronouncements

The Company does not believe that the adoption of any new recently issued accounting standards will have a material impact on its unaudited condensed consolidated financial position and results of operations.

NOTE C RELATED PARTY TRANSACTIONS

On December 9, 2010, the Company entered into an Administrative Services Agreement with FWC Management Services Ltd., an entity controlled by two officers of the Company, for an estimated aggregate monthly fee of $7,500 for office space, secretarial, and administrative services.  On December 21, 2012, the Company entered into an agreement with FWC Management Services Ltd. renewing the Administrative Services Agreement. On December 31, 2013, the Company entered into an agreement with FWC Management Services Ltd and FlatWorld Capital LLC, an entity controlled by three officers of the Company, to assign FWC Management Services Ltd. s interest in the Administrative Services Agreement to FlatWorld Capital LLC. Under such agreement,



9



FlatWorld Capital LLC will continue to provide the services previously performed by, and on the same terms of, FWC Management Services Ltd, and all previous fees outstanding will be payable to FlatWorld Capital LLC. Through June 30, 2018, $675,000 has been incurred under this agreement, of which $150,000 has been paid and $525,000 remains outstanding under due to affiliate. As of June 30, 2018, there was a total balance of $606,612 due to affiliates of the Company for advancing money to settle certain vendor bills on behalf of the Company, $525,000 of which (as described above) was due to FWC Management Services Ltd under the Administrative Services Agreement.

NOTE D COMMITMENTS

Litigation

There is no litigation currently pending or, to our knowledge, contemplated against us, our sponsor or any of our officers or directors in their capacities as such. Although we are not aware of any pending or contemplated litigation, the Company may, from time to time, become subject to certain legal proceedings and claims, which may arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.

NOTE E WARRANTS AND OPTIONS

Units

As of June 30, 2018 there were no warrants or options outstanding.

NOTE F CAPITAL STOCK

The Company is authorized to issue 5,000,000 preferred shares, no par value, divided into five classes, Class A through Class E, each comprising 1,000,000 preferred shares with such designation, rights and preferences as may be determined by the Company's board of directors. The Company has five classes of preferred shares to give it flexibility as to the terms on which each Class is issued. No preferred shares are currently issued and outstanding at June 30, 2018.

The Company is authorized to issue unlimited ordinary shares with no par value. As of June 30, 2018, the Company had 2,869,375 ordinary shares issued and outstanding.

NOTE G - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the unaudited condensed consolidated financial statements were available to be issued, and has concluded that no such events or transactions took place that would require disclosure herein.

ITEM 2.  MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company s Unaudited Condensed Consolidated Financial Statements and footnotes thereto contained in this report.

Overview

We are a blank check or shell company formed as a British Virgin Islands business company with limited liability for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation or contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other similar business transaction with one or more operating businesses or assets that we have yet to identify. While our efforts in identifying a prospective target business for our initial business transaction will not be limited to a particular industry, geographic region or minimum transaction value, we will focus our search on identifying a prospective target business in either (i) the global business services sector or (ii) emerging Asian markets. We do not have any specific business transaction under consideration although we are actively searching for a target business.

As of June 30, 2018, we had $0 of cash on hand.  The issuance of additional ordinary shares in a business transaction:

·      may significantly dilute the equity interests of our shareholders;

·      may subordinate the rights of holders of ordinary shares if we issue preferred stock with rights senior to those afforded to our ordinary shares;

·      may cause a change in control if a substantial number of our ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and

·      may adversely affect prevailing market prices for our ordinary shares.



10



Similarly, any issuance of debt securities could result in:

·      default and foreclosure on our assets if our operating cash flow after a business transaction is insufficient to pay our debt obligations;

·      acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that require the maintenance of certain financial ratios or reserves and any such covenant is breached without a waiver or renegotiation of that covenant;

·      our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; covenants that limit our ability to acquire capital assets or make additional acquisitions;

·      our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding;

·      our inability to pay dividends on our ordinary shares;

·      using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;

·      limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

·      increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and

·      limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

Results of Operations and Known Trends or Future Events

We have neither engaged in any operations nor generated any revenues to date. Our entire activity since inception to the closing of our initial public offering was limited to preparations for that event. Since the consummation of our initial public offering, our activity has been limited to evaluating business transaction candidates. We have not generated any operating revenues and will not until after completion of our initial business transaction, at the earliest. We will generate non-operating income in the form of interest income on cash and cash equivalents. We expect to incur substantially increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence.

For the three months ended June 30, 2018 as compared to the three months ended June 30, 2017

For the three months ended June 30, 2018, we had net loss of $24,475 consisting of general and administrative expenses of $24,475.

For the prior three months ended June 30, 2017, we had a loss of $24,475 consisting of general and administrative expenses of $24,475.  The level of general and administrative expense during the three months ended June 30, 2018 as compared to the three months ended June 30, 2017 was generally consistent between the two periods.  

For the six months ended June 30, 2018 as compared to the six months ended June 30, 2017

For the six months ended June 30, 2018, we had net loss of $48,950 consisting of general and administrative expenses of $48,950.

For the prior six months ended June 30, 2017, we had a net loss of $55,450 consisting of general and administrative expenses of $55,450.  The level of general and administrative expense during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 was generally consistent between the two periods.  



11



Liquidity and Capital Resources

As of June 30, 2018, we had $0 in a bank account available for use by management to cover the costs associated with identifying a target business and negotiating an acquisition or merger.

 For the six months ended June 30, 2018, we used cash of $0 in operating activities which was an increase in money due to affiliate of $45,000 advanced to the Company to settle certain vendor bills on behalf of the Company, an increase in payables of $3,950, together with a net loss for the period of $48,950. The net decrease in cash for six months ending June 30, 2018 was $0. We started with a cash balance of $0 as of January 1, 2018. We ended the period at June 30, 2018 with a cash balance of $0.

We do not believe that the funds available to us as of June 30, 2018 will be sufficient to allow us to operate in the future.  In the future, we will need to raise additional funds for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants, sites or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business transaction.  In order to meet our working capital needs, certain of our officers and directors may, but are not obligated to, loan us funds, from time to time, or at any time, in whatever amount such officer or director deems reasonable in his sole discretion. The unpaid principal amount of any such loans may be converted, at the option of the lender, into different securities of the Company.  The holders of a majority of any such securities that may be issued (or the underlying shares) will be entitled to demand that we register these securities pursuant to an agreement to be entered into at the time of the loan.  The holders of a majority of these securities would have certain piggy-back registration rights with respect to registration statements filed by us subsequent to such date.  We will bear the expense incurred with the filing of any such registration statements.  The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist.  

 We believe we will need to raise additional funds until the consummation of our initial business transaction to meet the expenditures required for operating our business. We may need to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate a business transaction that is presented to us. We may consummate such financing at any time.

The Board of Directors anticipates that the Company will need to raise capital to fund ongoing operations, including the compliance cost of continuing to remain a public reporting company, and to fund the acquisition of an operating business. The Company does not currently have any specific capital-raising plans. We may receive funds from some or all of our officers or directors, and we may seek to issue equity securities, including preferred securities for which we may determine the rights and designations, ordinary shares, warrants, equity rights, convertibles notes and any combination of the foregoing. Any such offering may take the form of a private placement, public offering, rights offering, other offering or any combination of the foregoing at fixed or variable market prices or discounts to prevailing market prices. We cannot assure you that we will be able to raise sufficient capital on favorable, or any, terms. We believe that the issuance of equity securities in such a financing will not be subject to shareholder approval if the Company s Ordinary Shares are not then listed on a national exchange. Accordingly, you may not be entitled to vote on any future financing by the Company. Moreover, shareholders have no preemptive or other rights to acquire any securities that the Company may issue in the future.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We did not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than a monthly fee of $7,500 for office space and general and administrative services payable to FlatWorld Capital LLC, an entity controlled by three officers of the Company. We began incurring this fee on December 9, 2010, and will continue to incur this fee monthly until the date on which the Company ceases its corporate existence in accordance with its Ninth Amended and Restated Memorandum and Articles of Association. The agreement was originally entered into with FWC Management Services Ltd, an entity controlled by two officers of the Company, however on December 31, 2013, we entered into an agreement with FWC Management Services Ltd and FlatWorld Capital LLC to assign FWC Management Services Ltd s interest in the Administrative Services Agreement to FlatWorld Capital LLC.  Under such agreement, FlatWorld Capital LLC will continue to provide the services previously provided by FWC Management Services Ltd, and on the same terms under which such services were performed under the original agreement.  



12



Critical Accounting Policies and Estimates

Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our unaudited condensed consolidated financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our unaudited condensed consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.

We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our unaudited condensed consolidated results of operations, financial position or liquidity for the periods presented in this report.



13



Basis of presentation

The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission ( SEC ).

All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Net loss per share

The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. Net loss per ordinary share is computed by dividing net loss applicable to shareholders by the weighted average number of ordinary shares outstanding for the period. At June 30, 2018, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary share and then share in the earnings of the Company.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Reliance on Key Personnel

The Company is heavily dependent on the continued active participation of the current directors and executive officers. The loss of any of the senior management could significantly and negatively impact the business until adequate replacements can be identified and put in place.



14



Fair value of financial instruments

The fair value of the Company s assets and liabilities, which qualify as financial instruments under FASB ASC 820, Fair Value Measurements and Disclosures , approximates the carrying amounts represented in the balance sheet.

In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price ) in an orderly transaction between market participants at the measurement date.

In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.  Unobservable inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Valuation adjustments and block discounts are not applied to Level 1 securities.  Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.



15



Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction.  To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined.  Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed.  Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.

  Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.  Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date.  The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation.

Use of estimates

The preparation of unaudited condensed 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



16



Income tax

The Company complies with FASB ASC 740, Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company did not establish a valuation allowance as of June 30, 2018 as there were no deferred tax assets at that date.

The Company adopted the provisions of FASB ASC 740-10-25 which establishes recognition requirements for the accounting for income taxes. There were no unrecognized tax benefits as of June 30, 2018. The section prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at June 30, 2018. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.  The Company is subject to income tax examinations by major taxing authorities since inception. The adoption of the provisions of FASB ASC 740-10-25 did not have a material impact on the Company s financial position and results of operation and cash flows as of and for the period ended June 30, 2018.

Recently issued accounting pronouncements

The Company does not believe that the adoption of any new recently issued accounting standards will have a material impact on its unaudited condensed consolidated financial position and results of operations.



17



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

For quantitative and qualitative disclosures about market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our annual report on Form 10-K for the year ended December 31, 2017. Our exposures to market risk have not changed materially since December 31, 2017.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures

The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company s management, including the Principal Executive Officer and the Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company s CEO and CFO concluded that due to a lack of segregation of duties the Company s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC s rules and forms, and that such information is accumulated and communicated to the Company s management, including the Company s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Subject to receipt of additional financing or revenue generated from operations, the Company intends to retain additional individuals to remedy the ineffective controls.

Change in internal control over financial reporting

During the period covered by this Quarterly Report on Form 10-Q, the Company has made no changes to its internal controls over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

There is no litigation currently pending or, to our knowledge, contemplated against us, our sponsor or any of our officers or directors in their capacities as such.



18



ITEM 1A. RISK FACTORS.

Factors that could cause the Company s actual results to differ materially from those in this Report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2017, which is incorporated herein by reference. Any of these factors could result in a significant or material adverse effect on the Company s results of operations or financial condition. Additional risk factors not presently known to the Company or that the Company currently deems immaterial may also impair its business or results of operations.

As of the date of this Report, there have been no material changes to the risk factors disclosed in the Company s Annual Report on Form 10-K for the year ended December 31, 2017, except the Company may disclose changes to such factors or disclose additional factors from time to time in its future filings with the SEC.


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.



19



ITEM 6. EXHIBITS.

(a) Exhibits

Exhibit No.

 

Description

 

 

 

31.1


Certification of the Principal Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2


Certification of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1


Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)*

101.INS


XBRL Instance Document**

101.SCH


XBRL Taxonomy Extension Schema Document**

101.CAL


XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF


XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB


XBRL Taxonomy Extension Label Linkbase Document**

101.PRE


XBRL Taxonomy Extension Presentation Linkbase Document**




(*) Filed herewith.

(**) XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.



20



SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


FLATWORLD ACQUISITION CORP.




August 28, 2018      

By:

/s/ Jeffrey A. Valenty



Jeffrey A. Valenty



President and Chief Financial Officer




August 28, 2018      

By:

/s/ Raj K. Gupta



Raj K. Gupta



Chief Executive Officer








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