Item 1. BUSINESS.
Overview
We are incorporated in the state of Nevada. Prior
to the consummation of the Merger as of December 31, 2020, as more specifically described below, Joway Health Industries Group Inc. (the
“Company” or “Joway Health”), through our PRC Operating Entities, were engaged in the manufacture, distribution
and sales of tourmaline-related healthcare products. Our principal executive offices were located at No. 19. Baowang Road, Baodi
Economic Development Zone, Tianjin City, P.R.China 301800.
As of December 31, 2020, we become a shell company
as a result of the Merger described below as we no longer have any business operations.
Recent Developments
Effects of COVID-19
The COVID-19 pandemic and resulting global disruptions
have affected our businesses, as well as those of our customers and suppliers. To serve our customers while also providing for the safety
of our employees and service providers, we have modified numerous aspects of our logistics, transportation, supply chain, purchasing,
and after-sale processes. Beginning in Q1 2020, we made numerous process updates across our operations nationwide, and adapted our fulfillment
network, to implement employee and customer safety measures, such as enhanced cleaning and physical distancing, personal protective gear,
disinfectant spraying, and temperature checks. We will continue to prioritize employee and customer safety and comply with evolving state
and local standards as well as to implement standards or processes that we determine to be in the best interests of our employees, customers,
and communities.
Due to the COVID-19 pandemic, our PRC subsidiaries
were temporarily shut down from February 1st, 2020 to March 31st, 2020. Our business was negatively impacted and
generated lower revenue and net income in 2020. Revenues from our PRC subsidiaries which had been disposed on December 31, 2020 were $225,419
for the year ended December 31, 2020, a decrease of $383,755, or 63%, compared to $609,174 in the same period of last year. The
decrease in revenues for the year ended December 31, 2020 was mainly due to the impact of COVID-19 pandemic. The extent of the
impact of COVID-19 on the Company’s results of operations and financial condition will depend on the virus’ future developments,
including the duration and spread of the outbreak and the impact on the Company’s customers, which are still uncertain and cannot
be reasonably estimated at this point of time.
Entry into a Material Definitive Agreement
On November 20, 2020, Joway Health entered into
a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and
a wholly-owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Crystal
Globe”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Crystal Globe (“Merger
Sub”). The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth
therein, Merger Sub will be merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving
corporation as a wholly-owned subsidiary of Crystal Globe. The special committee of the Board of Directors of the Company unanimously
approved the Merger Agreement and the transactions contemplated thereby.
Crystal Globe, as the majority shareholder holding
approximately 86.81% of the Company, is also the sole shareholder of Dynamic Elite. Mr. Jinghe Zhang, as the President, Chief Executive
Officer, Chairman and Director, and the majority beneficial owner of the Company, also serves as sole shareholder and executive director
of Crystal Globe. As a result, the Company and Dynamic Elite are under common control of Crystal Globe and Mr. Jinghe Zhang.
Pursuant to the terms of the Merger Agreement,
at the effective time of the Merger (the “Effective Time”) and as a result of the Merger, the ordinary shares of common stock
of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are held by the Company, were cancelled
and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered to pay cash consideration to the Company of $0.045
per share for the outstanding shares of the common stock of the Company (the “Merger Consideration”). At the date of the Merger
Agreement, we had 20,054,000 shares of common stock outstanding.
The consummation of the Merger was subject to
customary closing conditions, including, among others, (i) the Merger having not then been enjoined, made illegal or otherwise prohibited
by any applicable law or any order, judgment, decree, injunction or ruling (whether temporary, preliminary or permanent) of any governmental
authority (each, a “Governmental Order”) or by any proceeding then pending by a governmental authority seeking any Governmental
Order; the truth and accuracy of the other party’s representations and warranties in the Merger Agreement, subject in certain
cases to a de minimis, materiality or material adverse effect (each as described in the Merger Agreement) standard; and (ii) the
compliance with or performance, in all material respects, of the other party’s covenants and obligations in the Merger Agreement
required to be performed at or prior to the consummation of the Merger.
The Merger Agreement contained certain termination
rights for the Company and Crystal Globe if the Merger was not consummated on or before December 31, 2020.
Completion of Acquisition or Disposition
of Assets
Pursuant to the terms of the Merger Agreement
dated November 20, 2020, as of December 31, 2020, the Effective Time of the Merger, the 10,000 ordinary shares of common stock of Dynamic
Elite issued and outstanding immediately which were held by the Company, were cancelled for $0.045 per share for the outstanding shares
of the common stock of the Company as Merger Consideration.
In January 2021, the Company had received $119,070
from Crystal Globe and distributed proportionately to the Company’s minority shareholders, other than Crystal Globe, which represents
2,646,000 shares of our common stock. Since the remaining 17,408,000 shares of our common stock is owned by Crystal Globe, the $0.045
per share payment for the 17,408,000 shares was offset and Crystal Globe did not receive any cash payment in connection with the Merger.
Change in Shell Company Status
As a result of the consummation of the Merger,
the Company became a shell company as of December 31, 2020.
Corporate History
Joway Health Industries Group, Inc.
We were originally formed as a Texas corporation
on March 21, 2003. On October 1, 2010, as a result of a transaction with Dynamic Elite (the “Share Exchange”), Dynamic
Elite became our wholly-owned subsidiary and we ceased to be a shell company. Dynamic Elite was the holding company of all the equity
of Tianjin Junhe Management Consulting Co., Ltd. (“Junhe Consulting”). In December 2010, the Company changed its jurisdiction
of incorporation from the State of Texas to the State of Nevada and changed its name to Joway Health Industries Group, Inc. In connection
with these changes, the Company adopted new Articles of Incorporation and Bylaws.
Share Exchange Transaction
On October 1, 2010, we entered into a Share
Exchange Agreement with Crystal Globe, the sole shareholder of Dynamic Elite International Limited, pursuant to which Crystal Globe transferred
all of its shares in Dynamic Elite to us in exchange for 15,215,426 shares of our common stock. As a result, Dynamic Elite became our
wholly-owned subsidiary and we ceased to be a shell company, and Crystal Globe held a total of 18,515,426 shares (approximately 92.6%)
of our issued and outstanding common stock.
The Share Exchange was treated for accounting
purposes as a reverse acquisition. Therefore, the Company’s financial statements after the Share Exchange were those of Dynamic
Elite and its subsidiaries and controlled companies on a consolidated basis, as if the Share Exchange had been in effect retroactively
for all periods presented.
Dynamic Elite
Dynamic Elite was founded on June 2, 2010
under the laws of the British Virgin Islands by Crystal Globe and Evan Liu, the sole shareholder of Crystal Globe, at the request of Mr.
Jinghe Zhang. Mr. Liu is a friend of Mr. Jinghe Zhang. On September 15, 2010, Dynamic Elite established a wholly-owned subsidiary
— Tianjin Junhe Management Consulting Co., Ltd. (“Junhe Consulting”), as a wholly foreign-owned enterprise (WOFE) under
the laws of the PRC for the purposes of acquiring Tianjin Joway Shengshi Group Co., Ltd. and engaging in the manufacture, distribution
and sale of tourmaline products in China. Under Article 6 of the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises,
adopted April 12, 1986 at the 4th Sess. of the 6th National People’s Congress and as amended on October 31, 2000 (“PRC
WOFE Law”) and Article 7 of the Detailed Rules for the Implementation, any person or entity that intends to establish an enterprise
in the PRC with foreign capital is required to submit an application for examination and approval to the appropriate department under
the State Council. On September 9, 2010, the local Tianjin City government issued a certificate of approval approving the foreign
ownership of Junhe Consulting by Dynamic Elite. Mr. Jinghe Zhang was appointed as the Executive Director of Junhe Consulting.
PRC Operating Entities
All of our business operations were conducted
through our PRC Operating Entities. The chart below sets forth our corporate structure prior to the consummation of the Merger as of December
31, 2020. As of January 1, 2021, as a result of the Merger, we no longer have any subsidiaries.
Joway Shengshi
On May 17, 2007, Mr.
Jinghe Zhang, Mr. Lijun Si and Mr. Baogang Song founded Tianjin Joway Textile Co., Ltd. as a limited liability company under the PRC law.
On November 24, 2009, the company changed its name to Tianjin Joway Shengshi Group Co., Ltd. (“Joway Shengshi”). The
registered capital of Joway Shengshi is RMB 50,000,000 and its term of operation will expire on May 16, 2022. Mr. Jinghe Zhang
is the Executive Director and General Manager of Joway Shengshi. On July 1, 2010, Mr. Lijun Si transferred 4% of the equity interest
in Joway Shengshi to Mr. Jinghe Zhang. As a result, Mr. Zhang owns 99% of the equity interest in Joway Shengshi and Mr. Baogang Song
owns the remaining 1% of the equity interest of Joway Shengshi. As of December 31, 2020 and 2019, Joway Shengshi was the sole shareholder
of Joway Technology, Joway Decoration, and Shengtang Trading.
Joway Technology
Joway Technology was incorporated
under PRC law on March 28, 2007, with a registered capital of RMB 1,100,000. It was formed to engage in intelligent engineering design
and construction, development and sales of electronics, water filters, and other similar products. Prior to July 25, 2010, Joway
Shengshi held 90.91% of Joway Technology. On July 25, 2010 Joway Shengshi acquired the remaining 9.09% of Joway Technology from Mr.
Jingyun Chen for RMB 100,000 in cash. As a result of the acquisition, Joway Shengshi became the sole shareholder of Joway Technology.
Joway Decoration
Joway Decoration was cofounded
by Joway Shengshi and Mr. Jingyun Chen under PRC law on April 22, 2009, with a registered capital of RMB 2,000,000. It was formed
to engage in the business of intelligent electric heating project design and construction, development and sales of electronics technology
and water filters, and the manufacture and sales of wood products. Prior to July 9, 2010, Joway Shengshi owned 90% of Joway Decoration.
On July 9, 2010, Joway Shengshi entered into a share acquisition agreement with Mr. Jingyun Chen to acquire the remaining 10% of
the shares of Joway Decoration for RMB 200,000 in cash. As a result of the acquisition, Joway Shengshi became the sole shareholder of
Joway Decoration.
Shengtang Trading
Shengtang Trading was cofounded
by Joway Shengshi and Mr. Jingyun Chen under PRC law on September 18, 2009, with a registered capital of RMB 2,000,000. It was formed
to engage in the business of importing and exporting merchandise and technology; knitwear, biochemistry (excluding toxic chemicals and
drugs), and the wholesale and retail sale of hardware. Prior to July 28, 2010, Joway Shengshi owned 95% of Shengtang Trading. On
July 28, 2010, Joway Shengshi entered into a share acquisition agreement with Mr. Aiying Wang to acquire the remaining 5% of the
shares of Shengtang Trading for RMB 100,000 in cash. As a result of the acquisition, Joway Shengshi became the sole shareholder of Shengtang
Trading.
VIE Agreements
On September 16, 2010,
prior to the Share Exchange, Junhe Consulting, Dynamic Elite’s wholly owned subsidiary had entered into a series of control agreements
with Joway Shengshi and all of the owners of Joway Shengshi, which agreements allow Junhe Consulting to control Joway Shengshi. Through
our ownership of Dynamic Elite, Dynamic Elite’s ownership of Junhe Consulting and Junhe Consulting’s agreements with Joway
Shengshi, we believe that Joway Health controls Joway Shengshi and therefore, we consolidate the results of operations of Joway Shengshi
and its subsidiaries with ours as variable interest entities.
In connection with the Share
Exchange and as consideration for entering into the VIE Agreements, Mr. Jinghe Zhang and Mr. Baogang Song, the shareholders of Joway Shengshi,
entered into a Call Option Agreement with the sole shareholder of Crystal Globe, pursuant to which the shareholders of Joway Shengshi
have the right to purchase up to 100% of the shares of Crystal Globe at an aggregate price equal to $20,000 over the next three years.
The Call Option vested as to 34% of the shares of Crystal Globe on April 2, 2011, and vests as to 33% on April 2 of 2012 and
2013. As a result, the shareholders of Joway Shengshi became the indirect beneficial owners of the shares of the Company held by Crystal
Globe.
Under PRC law the acquisition
of Joway Shengshi by Junhe Consulting must be structured as a cash transaction with the purchase price based on the appraised value of
the equity interest or assets to be sold. Neither Junhe Consulting nor Dynamic Elite had sufficient cash to pay the appraised value of
the equity interest or assets of Joway Shengshi. Alternatively, the shareholders of Joway Shengshi entered into a series of contractual
agreements (the “VIE Agreements”) which enabled Dynamic Elite to gain control of Joway Shengshi and be entitled to receive
100% of the profits of Joway Shengshi and is obligated for 100% of the losses of Joway Shengshi. As a result of the VIE agreements, we
are able to consolidate Joway Shengshi’s financial statements, including the results of operations, assets and liabilities of Joway
Shengshi and its subsidiaries without triggering the regulatory requirements of PRC law. Under PRC law the VIE Agreements are considered
commercial transactions among legal entities and individuals, and do not trigger the PRC requirements that apply to acquisitions, although
the pledge by Joway Shengshi’s equity holders of all their equity in Joway Shengshi to Junhe Consulting pursuant to the Equity Pledge
Agreement (the “Equity Pledge”) must be registered with the appropriate governmental agency. The Equity Pledge was registered
with local administration department for industry and commerce pursuant to the Section 1 of Article 226 of PRC Property Law passed
by National People’s Congress on March 16, 2007.
Through Junhe Consulting,
we effectively and substantially controlled Joway Shengshi and its three wholly owned subsidiaries Joway Technology, Shengtang Trading
and Joway Decoration.
The VIE Agreements included:
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a Consulting Services Agreement through which Junhe Consulting had the right to advise, consult, manage and operate Joway Shengshi and collected and owned all of the net profits or losses of Joway Shengshi;
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an Operating Agreement through which Junhe Consulting had the right to recommend director candidates and appoint the senior executives of Joway Shengshi, approve any transactions that may materially affect the assets, liabilities, rights or operations of Joway Shengshi, and guarantee the contractual performance by Joway Shengshi of any agreements with third parties, in exchange for a pledge by Joway Shengshi of its accounts receivable and assets;
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a Proxy Agreement under which the two shareholders of Joway Shengshi had vested their collective voting control over Joway Shengshi to Junhe Consulting and may only transfer their respective equity interests in Joway Shengshi to Junhe Consulting or its designee(s);
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an Option Agreement under which the shareholders of Joway Shengshi had granted to Junhe Consulting the irrevocable right and option to acquire all of their equity interests in Joway Shengshi with a consideration equal to the capital paid in by the shareholders in the amount of RMB 50 million (approximately USD $7.52 million). As executive director of Junhe Consulting, Mr. Jinghe Zhang had the power to exercise the option in his sole discretion; and
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an Equity Pledge Agreement under which the owners of Joway Shengshi had pledged all of their rights, titles and interests in Joway Shengshi to Junhe Consulting to guarantee Joway Shengshi’s performance of its obligations under the Consulting Services Agreement.
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Terms of the VIE Agreements
Consulting Agreement
Under the Consulting Agreement,
Joway Shengshi retained Junhe Consulting to (i) provide general advice and assistance relating to the management and operation of
Joway Shengshi’s business; (ii) provide general advice and assistance with respect to employment and staffing issues, including
recruiting and training of management personnel, administrative personnel and other staff, establishing an efficient payroll management
system, and relocation assistance; (iii) provide business development advice and assistance; and (iv) such other advice and
assistance as may be agreed upon by the parties. In return, Joway Shengshi agreed to pay Junhe Consulting quarterly a consulting fee in
an amount equal to all of Joway Shengshi’s net income for that quarter within fifteen (15) days after receipt of Joway Shengshi’s
quarterly financial statements. Joway Shengshi shall cause the owners of Joway Shengshi to pledge their equity interests in Joway Shengshi
to Junhe Consulting to secure the payment of the foregoing consulting fee.
Joway Shengshi was subject
to a number of covenants typical for this type of transaction, including the obligation to provide monthly, quarterly and Annual Reports,
and other information requested by Junhe Consulting. In addition, Joway Shengshi was subject to a number of negative covenants, including
the agreement that it should not (i) issue, purchase or redeem any equity or debt, or equity or debt securities; (ii) create,
incur, assume or suffer to exist any liens upon any of its property or assets (except certain enumerated liens); (iii) wind up, liquidate
or dissolve its affairs or enter into any transaction of merger or consolidation, or sale of all or substantially all of its assets; (iv) declare
or pay any dividends; (v) incur, assume or suffer to exist any indebtedness, (other than certain enumerated exceptions); (vi) lend
money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest
in, or make any capital contribution to, any other Person, except receivables in the ordinary course of business; (vii) enter into
any transaction or series of related transactions, whether or not in the ordinary course of business, with any of its affiliates or related
parties, other than on terms and conditions substantially as favorable to Joway Shengshi as would be obtainable in a comparable arm’s-length
transaction; (viii) make any expenditure for fixed or capital assets (including, without limitation, expenditures for maintenance
and repairs which are capitalized in accordance with generally accepted accounting principles in the PRC and capitalized lease obligations)
during any quarterly period which exceeds the aggregate the amount contained in the budget; (ix) amend or modify or change its Articles
of Association or business license, or any agreement entered into by it, with respect to its capital stock, or enter into any new agreement
with respect to its capital stock; or (x) engage (directly or indirectly) in any business other than those types of business prescribed
within the business scope of its business license.
The Consulting Agreement may
be terminated by Junhe Consulting for any reason at any time. In addition, the Consulting Agreement may be terminated by Junhe Consulting
by written notice in the event of a material breach by Joway Shengshi which, in the case of breach of a non-financial obligation, has
not been remedied within fourteen (14) days following the receipt of such written notice. Either party may terminate the Consulting
Agreement by written notice to the other party if (i) the other party becomes bankrupt or insolvent or is the subject of proceedings
or arrangements for liquidation or dissolution or ceases to carry on business or becomes unable to pay its debts as they become due; (ii) if
the operations of Junhe Consulting are terminated; or (iii) if circumstances arise which materially and adversely affect the performance
or the objectives of the Consulting Agreement.
Operating Agreement
Under the Operating Agreement,
Junhe Consulting agreed to guarantee Joway Shengshi’s performance of contracts, agreements or transactions with third parties in
consideration for the pledge by Joway Shengshi to Junhe Consulting of all of Joway Shengshi’s assets. In addition, Joway Shengshi
and its shareholders agreed that Joway Shengshi would not, without the prior written consent of Junhe Consulting, enter into any transactions
which may materially affect the assets, obligations, rights or the operations of Joway Shengshi (excluding transactions entered into in
the ordinary course of business and the lien obtained by relevant counter parties due to such agreements), including transactions involving
(i) the borrowing of money or assumption of any debt; (ii) the sale or purchase from any third party any asset or right, including,
but not limited to, any intellectual property rights; (iii) the provision of any guarantees to any third parties using its assets
or intellectual property rights; or (iv) the assignment of any business agreements to any third party. Joway Shengshi and its shareholders
also agreed to appoint to Joway Shengshi’s board of directors, and Joway Shengshi’s General Manager, Chief Financial Officer,
and other senior officers those persons recommended or selected by Junhe Consulting.
Voting Rights Proxy Agreement
Under the Proxy Agreement,
the Shareholders irrevocably granted to Junhe Consulting, for the maximum period of time permitted by law, all of their voting rights
as shareholders of Joway Shengshi. In addition, the Shareholders agreed not to transfer their equity interest in Joway Shengshi to any
third party (other than Junhe Consulting or a designee of Junhe Consulting). The Proxy Agreement may not be terminated without the unanimous
consent of all Parties, except Junhe Consulting, which may terminate the Proxy Agreement with or without cause on thirty (30) days
prior written notice.
Option Agreement
Under the Option Agreement,
the Shareholders irrevocably granted to Junhe Consulting or its designee an exclusive option to purchase at any time, to the extent permitted
under PRC Law, all or a portion of the Shareholders’ Equity Interest in Joway Shengshi for a price equal to the capital paid in
by the Shareholders on a pro rata basis in accordance with the percentage of the Shareholders’ Equity Interest acquired, subject
to applicable PRC laws and regulations.
Equity Pledge Agreement
Under the Equity Pledge Agreement,
the Shareholders pledged all of their right, title and interest in their equity interests in Joway Shengshi to Junhe Consulting to guarantee
Joway Shengshi’s performance of its obligations under the Consulting Services Agreement. The pledge expired two (2) years after
the satisfaction by Joway Shengshi of all of its obligations under the Consulting Services Agreement. During the term of the Equity Pledge
Agreement, Junhe Consulting was entitled to vote, control, sell, or dispose of the Pledged Collateral in the event the Company did not
perform its obligations under the Consulting Services Agreement. In addition, Junhe Consulting was entitled to collect any and all dividends
declared or paid in connection with the Pledged Collateral.
Through these contractual
arrangements, we had the ability to substantially influence the daily operations and financial affairs of Joway Shengshi and to receive,
through our subsidiaries, all of its profits. As a result, we were considered the primary beneficiary of Joway Shengshi and its operations,
and Joway Shengshi and its subsidiaries were deemed to be our variable interest entities. Accordingly, we were able to consolidate into
our financial statements the results, assets and liabilities of Joway Shengshi and its subsidiaries.
Call Option Agreement
As part of the reorganization
of Joway Shengshi, Mr. Liu and the shareholders of Joway Shengshi entered into a Call Option Agreement, pursuant to which the shareholders
of Joway Shengshi had the right to purchase up to 100% of the shares of Crystal Globe at an aggregate price equal of $20,000 over the
next three years. In addition, the Option Agreement also provides that Mr. Liu should not dispose any of the shares of Crystal Globe
without consent of Mr. Jinghe Zhang and Mr. Baogang Song. Upon the consummation of the Share Exchange Transaction, Crystal Globe
became the principal shareholder of Joway Health (f/k/a G2 Ventures, Inc.) and Mr. Zhang and Mr. Song became indirect beneficial
owners of the shares in Joway Health held by Crystal Globe pursuant to this Call Option Agreement.
On November 13, 2016, Mr.
Jinghe Zhang exercised his Call Option as to 99% of the shares of Crystal Globe and Mr. Baogang Song exercised his Call Option as to 1%
of the shares of Crystal Globe. As a result of exercising his Call Option, Mr. Zhang became the controlling shareholder of Crystal Globe
and in turn, the controlling shareholder of the Company. On November 20, 2016, Mr. Song transferred his 1% of the shares of Crystal Globe
to Mr. Zhang. Mr. Zhang thus controlled 17,408,000 shares, or 86.81%, of the issued and outstanding shares of the Company’s common
stock.
As a result of the Merger,
we become a shell company on December 31, 2020 and no longer have any subsidiaries.
Business Description
Prior to the consummation
of the Merger, we, through our PRC Operating Entities, were engaged in the manufacture and sales of tourmaline-related healthcare products,
and had a total of 21 full time employees.
As a result of the consummation
of the Merger on December 31, 2020, we became a shell company and as of the date of this Annual Report, we have no full time employees.
Starting from January 1, 2021, we have no longer any business operations.
Introduction to Tourmaline
Tourmaline is a crystal silicate
mineral compounded with elements such as aluminum, iron, magnesium, sodium, lithium, or potassium. Tourmaline is classified as a semi-precious
stone and the gem comes in a wide variety of colors. (Source: http://en.wikipedia.org/wiki/Tourmaline)
Tourmaline has the ability
to become its own source of electric charge, as it is both pyroelectric, as well as piezoelectric. When it is put under pressure or when
it is dramatically heated or cooled, tourmaline creates an electrical charge capable of emitting far infrared rays (“FIR”)
and negative ions. (Source: http://www.globalhealingcenter.com/tourmaline.html)
FIRs are invisible waves
of energy capable of penetrating deep into the human body. Negative ions are atoms that have a negative electric charge. FIRs and
negative ions are perceived to have certain health benefits. (Source: http://www.globalhealingcenter.com/tourmaline.html)
Because it is a permanent
source of FIRs and negative ions, tourmaline is perceived to have certain health benefits (Source: Niwa Institute for Immunology, Japan.
Int J. Biometeorol 1993 Sep; 37(3) 133-8). In view of its perceived health benefits, tourmaline has been used to manufacture a wide range
of healthcare products, including apparel, bedding, water purifiers, sauna rooms, and personal care products.
While tourmaline has perceived
health benefits, the actual benefits of tourmaline to human health are unknown. The full efficacy of tourmaline to human health requires
further significant clinical study. We are not aware of any formal clinical studies which have validated the health benefits of tourmaline.
We purchased liquid tourmaline
from domestic Chinese companies which, in turn, imported it from South Korea. Liquid tourmaline is readily available and its price has
remained relatively stable. We had not experienced any shortage in tourmaline but as a precaution, we closely monitored its price and
have several back-up suppliers until we become a shell company.
China’s Tourmaline Health-Related Products Market
The use of tourmaline in health-related
products in China began in 2001. Although more and more companies are producing tourmaline health-related products every year, the market
for these products in China is still in its infancy and highly fragmented. (Source: 2010-2012 China’s tourmaline market and investment
prospects research Report, Institute of China Uniway Economics, August, 2010).
Currently, there are numerous
kinds of tourmaline health-related products on the market, including tourmaline clothes, tourmaline mattresses, tourmaline water machines,
etc. In China, users of tourmaline health-related products are typically middle-aged and elderly people and demand for tourmaline health-related
products is still relatively low compared to the size of the Chinese population.
In 2015, New Material is listed
in the state development strategies in the State Council Report by Premier Keqiang Li. Tourmaline is defined as New Material and Tourmaline
Processing Technology is designated as New Material Application Technology.
We believe that the main challenge
for the tourmaline health-related product companies is market development rather than competition. With rising living standards, increasing
disposable income, higher health consciousness and the greater awareness of the health benefits of tourmaline, we believe that the tourmaline
health products market will grow rapidly in the next few years.
Manufacturing Process
Prior to the consummation
of the Merger, we had two manufacturing processes.
One manufacturing process
consisted of applying or infusing raw textiles with liquid or granular tourmaline and then producing products from these tourmaline-infused
textiles. This process was used to produce Male and Female Underpants, Tourmaline Scarves and Tourmaline Pillowcases.
Our second manufacturing process
consisted of applying or infusing already finished products with liquid or granular tourmaline. We purchased finished products, such as
clothing, bedding, and mattresses and then, using one or more of the techniques described below, coat and/or infuse the products with
liquid or granular tourmaline.
We coated or infused liquid
or granular tourmaline into our products using one or more of the following methods:
The Spray Method
We used special high-pressure
nozzles to spray liquid tourmaline onto the surface of the product. Through this process, the tourmaline particles were attached onto
the surface of the product. We then used a high-temperature ironing machine to embed the tourmaline particles into the fibers of the product.
This method is generally used in the manufacture of large pieces of textile products, such as mattresses.
The Dip Method
We completely immersed fabrics into liquid tourmaline
and then stirred the fabrics in the liquid tourmaline to ensure the tourmaline particles attach to the surface of the fabrics. Finally,
we embedded the tourmaline particles into the fibers by applying heat with our special high-temperature ironing machine. This method
is used in the manufacture of smaller products, such as underwear, scarves, and shirts.
The Filling Method
We filled the products with
tourmaline particles. This method is generally used to make activated water machines and other water treatment products.
The three methods mentioned
above were keys to our manufacturing process. We protected our manufacturing methods via confidentiality agreements entered into between
us and our employees. Pursuant to the confidentiality agreement, the employees were prohibited from unlawfully revealing and using our
confidential technology during his/her term of employment and ten years after the termination of employment.
Our Products and Services
Prior to the consummation
of the Merger as of December 31, 2020, we were primarily in the manufacture of the following three series of tourmaline-related healthcare
products:
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Healthcare
Knit Goods Series
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For the fiscal years ended December 31, 2020 and
2019, reported as part of loss from operations of our discontinued component, our healthcare knit goods series of products accounted for
approximately 15.5% and 11.3% of our annual sales revenue, respectively. This series of products was comprised of tourmaline treated mattresses,
bed linen, underwear, and shirts. We used either the spray or dip method to embed tourmaline particles into the fabric of this series
of products.
Set forth below is a list of our major healthcare knit goods products,
the trademarks or marks under which they were marketed and the manufacturing method employed prior to the consummation of the Merger as
of December 31, 2020:
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No.
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|
Products
|
|
Trademark/Mark
|
|
Manufacturing Method
|
|
1
|
|
Golden Mattress
|
|
|
|
|
|
Spray Method
|
|
2
|
|
Tourmaline Mattress
|
|
|
|
|
|
Spray Method
|
|
3
|
|
Tourmaline Underwear
|
|
|
|
|
|
Dip Method
|
|
4
|
|
Tourmaline Bed Linens
|
|
|
|
|
|
Spray Method
|
|
5
|
|
Tourmaline Pillow
|
|
|
|
|
|
Spray Method
|
|
|
2.
|
Daily
Healthcare and Personal Care Series
|
For the fiscal years ended
December 31, 2020 and 2019, reported as part of loss from operations of our discontinued component, our daily healthcare and personal
care series of products accounted for approximately 27.9% and 34.7% of our annual sales revenue, respectively. This series was comprised
of tourmaline-treated waist protectors, knee protectors, scarves, and shampoo and soap products. We used all three production methods
to embed tourmaline particles into these products. We believe these tourmaline-treated daily healthcare products and personal care products
produce FIRs and negative ions which have perceived health benefits. This series was also comprised of four edible products without tourmaline
treatment, including Xin-Nao-Ling Fish Oil Soft Gel, Zhi-Li-Bao Fish Oil Soft Gel, Glucosamine Chondroitin Sulfate
& Calcium Capsule and Vegetable and Fruit Enzyme Juice, which are subject to CFDA regulation.
Set forth below is a list
of our major products in the daily healthcare and personal care series, the trademarks or marks under which they were marketed and the
manufacturing method employed prior to the consummation of the Merger as of December 31, 2020:
|
|
3.
|
Wellness House and Activated Water Machine
|
For the years ended December
31, 2020 and 2019, reported as part of loss from operations of our discontinued component, our wellness house and activated water machine
series of products accounted for approximately 56.7% and 54.0% of our annual sales revenue, respectively. This series of products was
comprised mainly of tourmaline wellness houses, foot sauna bucket, tourmaline activated water machines and drinking mugs. Our tourmaline
wellness house resembled a regular sauna room in which users experienced heat sessions. However, the inner layer of our wellness house
were coated with tourmaline, which emits FIRs and negative ions when heated. Tourmaline is perceived to have certain health benefits.
We supplied two types of wellness houses: one for family use, which was designed to be installed in the corner of a room and can contain
three people; the other was customized and constructed on site for commercial bathrooms or spas according to their specifications. Our
tourmaline activated water machines and drinking mugs were infused tourmaline particles into filters. Our Foot Sauna Bucket was filled
with tourmaline particles on the bottom.
Set forth below is a list
of our major products in the wellness house and activated water machine series, the trademarks or marks under which they were marketed
and the manufacturing method employed prior to the consummation of the Merger as of December 31, 2020:
|
No.
|
|
Products
|
|
Trademark/Mark
|
|
Manufacturing Method
|
|
1
|
|
Wellness House for family use
|
|
|
|
Spray Method
|
|
|
|
|
|
|
|
|
|
2
|
|
Tourmaline Water Mug
|
|
|
|
Filling Method
|
|
3
|
|
Tap Water Purifier
|
|
|
|
Filling Method
|
|
4
|
|
Foot Sauna Bucket
|
|
|
|
Filling Method
|
Return Policy
It was our normal commercial
practice to only allow the return of goods that did not conform to the customer’s order due to some occasional error in packaging
or shipment. The return should be requested within seven days of purchase. Customers may also request a free repair of defective products
within 15 days of purchase. For products purchased more than 15 days previously, we charged a service fee of 110% of the cost of repaired
or replaced parts. For the years ended December 31, 2020 and 2019, we did not have sales return occurred.
Services: Wellness House Maintenance
Our wellness house products
generally carry a one-year warranty. When the warranty expires, we provide our customers the option to engage us to service and maintain
their wellness houses for a fee equal to 200% of the cost of the repaired or replaced parts.
For the years ended December
31, 2020 and 2019, the maintenance fees were $2,052 and $27,119, respectively, accounting for approximately 9% and 23% of sauna sales
revenue, respectively.
Manufacturing Facilities
Prior
to the consummation of the Merger as of December 31, 2020, our
manufacturing facilities were located in Baodi District, Tianjin City, PRC, and occupied an area of approximately 2,500 square meters.
We had 1 employee engaged in manufacturing as of December 31, 2020.
After the consummation of
the Merger as of December 31, 2020, we no longer had manufacturing facilities and any employees for the manufacturing facilities.
Customers and Suppliers
Customers
Below is a list of our top
three customers for the years 2020 and 2019, respectively, prior to the consummation of the Merger as of December 31, 2020.
Top Three Customers in 2020
|
No.
|
|
Name
|
|
Amount
(RMB)
|
|
|
Amount
(US$)
|
|
|
Products Sold
|
|
Percentage
of Sales
|
|
|
1
|
|
Xu Xiangyun Store
|
|
¥
|
144,227
|
|
|
$
|
20,910
|
|
|
Foot Sauna Bucket, Wellness House，Mobile Health Care Kit, etc.
|
|
|
9.3
|
%
|
|
2
|
|
Miao Li Store
|
|
¥
|
135,424
|
|
|
$
|
19,633
|
|
|
Tap Water Purifier Tourmaline Mattress, Wellness House, etc.
|
|
|
8.7
|
%
|
|
3
|
|
Wang Xiaojun Store
|
|
¥
|
103,804
|
|
|
$
|
15,049
|
|
|
Wellness House，Foot Sauna Bucket, Tap Water Purifier, etc.
|
|
|
6.7
|
%
|
Top Three Customers in 2019
|
No.
|
|
Name
|
|
Amount
(RMB)
|
|
|
Amount
(US$)
|
|
|
Products Sold
|
|
Percentage
of Sales
|
|
|
1
|
|
Tianjin Baicheng Yitong Technology Co., Ltd.
|
|
¥
|
643,938
|
|
|
$
|
93,345
|
|
|
Xin-Nao-Ling Fish Oil Soft Gel, Tourmaline Mask, Sanitary Napkins, etc.
|
|
|
15.3
|
%
|
|
2
|
|
Miao Li Store
|
|
¥
|
587,515
|
|
|
$
|
85,166
|
|
|
Foot Sauna Bucket, Tourmaline Mattress, Tap Water Purifier, etc.
|
|
|
14.0
|
%
|
|
3
|
|
Xu Xiangyun Store
|
|
¥
|
556,624
|
|
|
$
|
80,688
|
|
|
Wellness House, Foot Sauna Bucket, Tap Water Purifier, etc.
|
|
|
13.2
|
%
|
Our main customers were franchisees
that were authorized to sell our products exclusively. In 2020, we did not have any customer accounted for more than 10% of our annual
sales revenue and in 2019, we had three customers accounted for more than 10% of our annual sales revenue.
Suppliers
Below is a list of our top
three suppliers in 2020 and 2019, respectively, prior to the consummation of the Merger as of December 31, 2020.
Top Three Suppliers in 2020
|
No.
|
|
Name
|
|
Amount
(RMB)
|
|
|
Amount
(US$)
|
|
|
Product Purchased
|
|
Percentage
of Purchase
|
|
|
1
|
|
Xuzhou Hailansauna Equipment Co., Ltd
|
|
¥
|
333,983
|
|
|
$
|
48,420
|
|
|
Foot Sauna Bucket、Wellness House
|
|
|
28.1
|
%
|
|
2
|
|
Penglai Huakang Health Products Co. Ltd.
|
|
¥
|
103,982
|
|
|
$
|
15,075
|
|
|
Xin-Nao-Ling Fish Oil Soft Gel and Zhi-Li-Bao Fish Oil Soft Gel
|
|
|
8.8
|
%
|
|
3
|
|
Zhejiang Taikang Biotechnology Co. Ltd
|
|
¥
|
95,346
|
|
|
$
|
13,823
|
|
|
Mattress
|
|
|
8.0
|
%
|
Top Three Suppliers in 2019
|
No.
|
|
Name
|
|
Amount
(RMB)
|
|
|
Amount
(US$)
|
|
|
Product Purchased
|
|
Percentage
of Purchase
|
|
|
1
|
|
Xuchang Baichang Nanotechnology Co., Ltd.
|
|
¥
|
695,000
|
|
|
$
|
100,747
|
|
|
Terahertz equipment
|
|
|
18.5
|
%
|
|
2
|
|
Jiangmen Sangjian Sauna Equipment Co., Ltd.
|
|
¥
|
265,000
|
|
|
$
|
38,414
|
|
|
Foot Sauna Bucket
|
|
|
7.0
|
%
|
|
3
|
|
Cosmaker (Tianjin) Biotechnology Co., Ltd.
|
|
¥
|
174,250
|
|
|
$
|
25,259
|
|
|
Tourmaline Mask and Skincare Series
|
|
|
4.6
|
%
|
In 2020 and 2019, we had one
supplier accounted for 28.1% and 18.5% of our annual raw materials purchases, respectively. We do not have long term contracts with any
of our suppliers since the raw materials we use are readily available on the market at generally stable prices.
Franchise Stores
Prior to the consummation
of the Merger as of December 31, 2020, approximately 88% and 78% of our annual sales in 2020 and 2019, respectively, were made to our
franchisees.
As of December 31, 2020, there
were approximately 49 franchise stores across the PRC that were authorized to sell our products exclusively. Set forth below is a geographical
breakdown of the franchise stores:
|
Region
|
|
Number of
Franchise
Stores
|
|
|
Northeastern China (Liaoning, Jilin, Heilongjiang)
|
|
|
2
|
|
|
Northern China (Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia)
|
|
|
38
|
|
|
Central China (Henan, Hubei, Hunan, Jiangxi)
|
|
|
8
|
|
|
Southwestern China (Chongqing, Sichuan, Guizhou, Yunnan, Tibet)
|
|
|
1
|
|
|
Total
|
|
|
49
|
|
We used multiple criteria
to select our franchisees, including financial condition, sales network, sales personnel, and facilities.
We typically entered into
a standard franchising agreement with the applicant. Pursuant to the agreement, the franchisee was authorized to sell our products exclusively
at a predetermined retail price. In exchange, we provided them with products at a discounted price, geographical exclusivity, and marketing,
training and technological support. The franchisee was also required to adhere to certain standards of product merchandising, promotion
and presentment. No initial franchise fees were required from the franchisee, nor was the franchisee required to pay any continuing royalties.
The agreement was generally for a term of three years and was renewable on the mutual agreement of both parties.
After the consummation of
the Merger as of December 31, 2020, we have no franchise stores across the PRC.
Marketing and Sales
Prior to the consummation
of the Merger as of December 31, 2020, our primary marketing strategies were directed towards both our franchisees and end users, and
the marketing efforts of our franchisees were directed towards end users. We assisted franchisees on monthly product introduction seminars,
which were open to both our franchisees and to the general public.
The franchise stores were
responsible for the cost of organizing the monthly product introduction seminars and meetings and we were responsible for the travel expenses
of our employees who attended these meetings and seminars to explain and promote our various product lines. There were on average 3 such
seminars and meetings each month nationwide in 2019. Generally, we chose the venue for the product seminars and meetings based on market
prospects, sales volume and the extent of meeting preparation. During the year ended December 31, 2020, we did not hold a product seminar
and meeting due to the COVID-19.
Below is a breakdown of our
marketing expenses in the fiscal years 2020 and 2019.
|
|
|
2019
|
|
|
2020
|
|
|
Expenses
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
Promotion
|
|
¥
|
19,396
|
|
|
$
|
2,812
|
|
|
¥
|
6,810
|
|
|
$
|
987
|
|
|
Printing
|
|
|
2,313
|
|
|
|
335
|
|
|
|
-
|
|
|
|
-
|
|
|
Travelling
|
|
|
289,640
|
|
|
|
41,986
|
|
|
|
35,737
|
|
|
|
5,181
|
|
|
Salaries
|
|
|
655,443
|
|
|
|
95,012
|
|
|
|
163,496
|
|
|
|
23,703
|
|
|
Total
|
|
¥
|
966,792
|
|
|
$
|
140,145
|
|
|
¥
|
206,043
|
|
|
$
|
29,871
|
|
After the consummation of
the Merger as of December 31, 2020, we no longer have a marketing and sales budget for sales personnel, and the remainder for travel,
training and other expenses of our sales and marketing department.
Seasonality
Because our products were
for daily use, seasonal variations do not have meaningful impact on the market demand for our products.
Competition
Competitive Environment
China’s tourmaline health
products market is highly segmented and is in the stage with great demand.
However, given the highly
segmented nature of the market, we are unable to locate any information on the size of the tourmaline healthcare-related market in China.
Currently, Japanese and Korean companies are leaders in tourmaline technology. However, they have not yet developed a sizeable market
share for their products in the PRC (Source: 2010-2012 China’s tourmaline market and investment prospects research Report, Institute
of China Uniway Economics, August 2010). Therefore, we believe that there is a great opportunity for us to create demand and market share
and establish ourselves as a leader in the tourmaline-related healthcare products field.
Our Competitors
Our major competitors in the
PRC were as follows prior to the consummation of the Merger, effective as of December 31, 2020:
|
|
●
|
Hanya Nano Technology Co., Ltd. operates in Changsha, Hunan province, PRC. They mainly focus on manufacturing tourmaline sauna rooms and tourmaline health products.
|
|
|
|
|
|
|
●
|
Harbin Handu Tourmaline Nano Technology Development Co., Ltd. operates in PRC. They mainly focus on manufacturing tourmaline sauna rooms and tourmaline health products.
|
Our Competitive Advantages
We believe that by leveraging
the following strengths, we can effectively compete and enhance our market position:
|
|
●
|
Brand Advantage: We are one of the first companies to manufacture, distribute and sell tourmaline health-related products in the PRC and we believe that our trademark, “Joway”, is the most established and well-known brand in the market.
|
|
|
|
|
|
|
●
|
Technology Advantage: We possess several patents for tourmaline health-related products. We also invest a significant amount of time and expense in new product research and development. In 2016, we applied for a new patent on tourmaline after researching with Tianjin University of Technology. In addition, we have 3 types of products put on record of the Class 1 Medical devices in Tianjin Market and Quality Supervision and Administration Commission which lay a foundation of making health care products listed in Tianjin catalogue of medical system.
|
|
|
|
|
|
|
●
|
Product Diversification Advantage: Most of our competitors concentrate on the one of the tourmaline segments. On the contrary, our products cover diversified tourmaline related catalogue such as tourmaline daily health-related products, water treatment products and tourmaline home accessories.
|
|
|
●
|
Sales Channels Advantage: As of December 31, 2020, we had approximately 49 franchise stores in most of the big cities in the PRC and we continue to expand our franchise network. We believe our extensive franchisee network will assure that our sales continue to grow.
|
|
|
|
|
|
|
●
|
Talent Advantage: We have recruited additional employees in the fields of marketing, franchise and training, who have several years of relevant experience in their previous careers. We plan to focus the efforts of these individuals to enhance our marketing and sales.
|
|
|
|
|
|
|
●
|
Public Relation Advantage: We enjoy the benefits of a membership at China Health Care Association and China Home Textile Association. For example, as a member, we are entitled to obtain the fist-hand technology related to tourmaline and apply such technology to our business when necessary.
|
Business Strategy
As a result of the consummation
of the Merger on December 31, 2020, we became a shell company.
As of the date of this Annual
Report, we intend to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose
business presents an opportunity for our shareholders. Our objectives discussed below are extremely general and are not intended to restrict
discretion of our Board of Directors to search for and enter into potential business opportunities or to reject any such opportunities.
We have no particular business combination in mind and have not entered into any negotiations regarding such a combination. Neither our
officers nor any of our affiliates has engaged in any negotiations with any representative of any company regarding the possibility of
an acquisition or combination between our company and such other company. We have not yet entered into any agreement, nor do we have any
commitment or understanding to enter into or become engaged in a transaction.
Research and Development
Prior to the consummation
of the Merger, our research and development focused on developing new products in the daily health-related, tourmaline products, including
tourmaline undergarment, tourmaline scarf and shawl, wellness room for family use. Prior to the consummation of the Merger as of December
31, 2020, we had no employee engaged in research and development activities.
During 2020 and 2019, we spent
$405 (RMB 2,793) and $33,048 (RMB 227,984), respectively, on research and development activities which were reported as part of our discontinued
operations in our financial statements. The following is a breakdown of our research and development expenses for 2020 and 2019.
|
|
|
2019
|
|
|
2020
|
|
|
Item
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
Equipment
|
|
¥
|
6,690
|
|
|
$
|
970
|
|
|
¥
|
-
|
|
|
$
|
-
|
|
|
Samples
|
|
|
130,619
|
|
|
|
18,934
|
|
|
|
121
|
|
|
|
18
|
|
|
Travel Expense
|
|
|
5,038
|
|
|
|
730
|
|
|
|
-
|
|
|
|
-
|
|
|
Salary
|
|
|
60,902
|
|
|
|
8,828
|
|
|
|
-
|
|
|
|
-
|
|
|
Inspection Fee
|
|
|
24,735
|
|
|
|
3,586
|
|
|
|
2,672
|
|
|
|
387
|
|
|
Total
|
|
¥
|
227,984
|
|
|
$
|
33,048
|
|
|
¥
|
2,793
|
|
|
$
|
405
|
|
After the consummation of
the Merger as of December 31, 2020, we no longer have any employees engaged in research and development activities.
Intellectual Property
Prior to the consummation
of the Merger, we regard our trademarks, trade secrets, patents and similar intellectual property as critical factors to our success.
We rely on patent, trademark and trade secret law, as well as confidentiality and license agreements with certain of our employees, customers
and others to protect our proprietary rights.
The trademarks we currently
use include the “Joway” trademark, which is owned by our President, Chief Executive Officer and director, Mr. Jinghe Zhang.
We are permitted to use the “Joway” trademark pursuant to a license agreement with Mr. Jinghe Zhang dated December 1,
2009 for a term of ten years. The agreement was renewed at the end of its respective term. There is no license fee to Mr. Jinghe Zhang
for the use of the trademark.
Set forth below is a detailed
description of the trademarks we used in our business prior to the Merger.
|
Mark
|
|
Registration
/Application No.
|
|
Class
|
|
Effective
Date
|
|
Expiration
Date
|
|
Owner/Applicant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4794111
|
|
Class 24: Fabrics.
Textiles and textile goods, not included in other classes; bed and
table covers.
|
|
February 21, 2009
|
|
February 20, 2029
|
|
Jinghe
Zhang
|
|
|
|
|
|
|
|
|
|
6104256
|
|
Class 3: Cosmetics and Cleaning Preparations.
Bleaching preparations and other substances for laundry use; cleaning,
polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices.
|
|
March 21, 2010
|
|
March 20, 2030
|
|
Tianjin
Joway Shengshi Group Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
6104253
|
|
Class 11: Environmental control apparatus.
Apparatus for lighting, heating, steam generating, cooking, refrigerating,
drying, ventilating, water supply and sanitary purposes.
|
|
February 14, 2010
|
|
February 13, 2030
|
|
Tianjin
Joway Shengshi Group Co., Ltd.
|
|
|
|
|
|
|
|
|
|
8467175
|
|
Class 30: Staple foods.
Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee;
flour and preparations made from cereals, bread, pastry and confectionery, ices; honey, treacle; yeast, baking-powder; salt, mustard;
vinegar, sauces (condiments); spices; ice.
|
|
July 21, 2011
|
|
July 20, 2021
|
|
Tianjin Joway Shengshi Group Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8236524
|
|
Class 24: Fabrics.
Textiles and textile goods, not included in other classes; bed and
table covers.
|
|
April 28, 2011
|
|
April 27, 2021
|
|
Tianjin
Joway Shengshi Group Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8029052
|
|
Class 5: Pharmaceuticals. Pharmaceutical, veterinary and sanitary preparations; dietetic substances adapted for medical use, food for babies; plasters, materials for dressings; material for stopping teeth, dental wax; disinfectants; preparations for destroying vermin; fungicides, herbicides.
|
|
April 14, 2011
|
|
April 13, 2021
|
|
Tianjin Joway Shengshi Group Co., Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8029009
|
|
CLASS 2: Paints
Paints, varnishes, lacquers; preservatives against rust and against
deterioration of wood; colorants; mordents; raw natural resins; metals in foil and powder form for painters, decorators, printers and
artists.
|
|
April 14, 2011
|
|
April 13, 2021
|
|
Tianjin Joway Shengshi Group Co., Ltd.
|
|
Mark
|
|
Registration
/Application No.
|
|
Class
|
|
Effective
Date
|
|
Expiration
Date
|
|
Owner/Applicant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8236733
|
|
Class 30: Staple foods.
Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee;
flour and preparations made from cereals, bread, pastry and confectionery, ices; honey, treacle; yeast, baking-powder; salt, mustard;
vinegar, sauces (condiments); spices; ice.
|
|
December 14, 2011
|
|
December 13, 2021
|
|
Tianjin Joway Shengshi Group Co., Ltd
|
|
|
|
|
|
|
|
|
|
|
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8236538
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Class 24: Fabrics.
Textiles and textile goods, not included in other classes; bed and
table covers.
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June 7, 2011
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June 6, 2021
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Tianjin Joway Shengshi Group Co., Ltd
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8236684
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Class 11: Environmental control apparatus.
Apparatus for lighting, heating, steam generating, cooking, refrigerating,
drying, ventilating, water supply and sanitary purposes
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June 21, 2011
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June 20, 2021
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Tianjin Joway Shengshi Group Co., Ltd
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8236641
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Class 3: Cosmetics and Cleaning Preparations.
Bleaching preparations and other substances for laundry use; cleaning,
polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices.
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May 28, 2011
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May 27, 2021
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Tianjin Joway Shengshi Group Co., Ltd
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11275200
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Class 30: Staple foods.
Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee;
flour and preparations made from cereals, bread, pastry and confectionery, ices; honey, treacle; yeast, baking-powder; salt, mustard;
vinegar, sauces (condiments); spices; ice.
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December 28, 2013
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December 27, 2023
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Tianjin Joway Shengshi Group Co., Ltd
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11232054
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Class 33: Alcoholic beverages.
Fruit extracts [alcoholic], aperitifs, distilled beverages, cider,
digesters [liqueurs and spirits], wine, clear wine, alcoholic beverages [except beer] and sake.
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December 14, 2013
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December 13, 2023
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Tianjin Joway Shengshi Group Co., Ltd.
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11203446
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Class 5: Pharmaceuticals.
Glue ball, Reducing tea, air purifying preparations, mosquito-repellent
incense, sanitary pads, sanitary towels, antisepsis paper and babies’ diapers.
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December 7, 2013
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December 6, 2023
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Tianjin Joway Shengshi Group Co., Ltd.
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Mark
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Registration
/Application No.
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Class
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Effective
Date
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Expiration
Date
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Owner/Applicant
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16579737
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Class 3: Cosmetics and Cleaning Preparations.
Bleaching preparations and other substances for laundry use; cleaning,
polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices.
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June 7, 2016
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June 6, 2026
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TianjinJoway Shengshi Group Co., Ltd.
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16579738
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Class 3: Cosmetics and Cleaning Preparations.
Cleansing lotion, cleanser, facial mask, cosmetics, complexion cream,
wrinkle cream.
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June 7, 2016
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June 6, 2026
|
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Tianjin Joway Shengshi Group Co., Ltd.
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16966456
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Class 3: Cosmetics and Cleaning Preparations.
Cleansing lotion, cleanser, facial mask, cosmetics, complexion cream,
wrinkle cream.
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July 21, 2016
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July 20, 2026
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Tianjin Joway Shengshi Group Co., Ltd.
|
The patents that we used during
the year ended December 31, 2020 are owned by our Chief Executive Officer, Mr. Jinghe Zhang. Pursuant to a license agreement with
our President, Chief Executive Officer and director, Mr. Jinghe Zhang, we are permitted to use the following two patents for free from
the effective date to the expiration date of each patent.
|
No.
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Product
|
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Type
|
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Patent No.
|
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Application Date
|
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Effective Date
|
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Term
|
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Owner &
Inventor
|
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1
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Water Purifier
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Utility
Model
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ZL201620164704.7
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March 3, 2016
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July 6, 2016
|
|
Ten years
|
|
Jinghe Zhang
|
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2
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Tourmaline Wellness House
|
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Utility Model
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ZL201620839876.X
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August 3, 2016
|
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April 26, 2017
|
|
Ten years
|
|
Jinghe Zhang
|
Insurance
We do not carry property insurance
on our buildings, facilities, and major operating assets, but on our vehicles, and we do not have any business interruption insurance
due to the limited availability of this type of coverage in the PRC. During 2020 and 2019, we had no product liability claims.
Employees
Prior to the consummation
of the Merger as of December 31, 2020, we had a total of 21 full time employees. After the consummation of the Merger, we have no full
time employees.
There are no collective bargaining
contracts covering any of our employees. We believe our relationship with our employees is satisfactory.
We are required to contribute
a portion of our employees’ total salaries to the PRC government’s social insurance funds, including pension insurance, medical
insurance, unemployment insurance, work-related injury insurance, and maternity insurance, in accordance with relevant regulations. We
have purchased work injury insurance and medical insurance for all our employees.
Effective January 1,
2008, the PRC introduced a new labor contract law that enhances rights for the nation’s workers, including open-ended work contracts
and severance pay. The legislation requires employers to provide written contracts to their workers, restricts the use of temporary laborers
and makes it harder to lay off employees. It also requires that employees with fixed-term contracts be entitled to an indefinite-term
contract after a fixed-term contract is renewed twice. Although the new labor contract law will increase our labor costs, we do not anticipate
there will be any significantly effects on our overall profitability in the near future since such amount was historically not material
to our operating cost. Management anticipates this may be a step toward improving candidate retention for skilled workers.
Government Regulations and Compliance with Applicable Laws
Below is a list of agencies which may have jurisdiction
over our business prior to the consummation of the Merger as of December 31, 2020:
|
Agency
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Functions
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State Food and Drug Administration (“CFDA”)(1)
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Supervise the entire process from research and development, manufacturing, and distribution to utilization of drugs; supervise and coordinate the safety management of food, health food and cosmetics and organize investigations of serious accidents.
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National Development and Reform Commission (“NDRC”)
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Make strategic and mid- to long-term plans for the PRC healthcare industry; regulate drug prices; manage disaster relief funds and carry out healthcare development projects sponsored by the government.
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Ministry of Commerce (“MOFCOM”)
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Formulate regulations and policies on foreign trade, foreign direct investments, consumer protection, and market competition; negotiate bilateral and multilateral trade agreements.
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Ministry of Science and Technology (“MST”)
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Lay out science and technology development plans and policies; draft relevant regulations and rules and guarantee implementation of regulations and rules
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General Administration of Quality Supervision, Inspection and Quarantine (“AQSIQ”)
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Manage national quality, metrology, entry-exit commodity inspection, entry-exit health quarantine, entry-exit animal and plant quarantine, import-export food safety, certification, accreditation, and standardization, as well as enforce administrative laws
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State Administration of Taxation (“SAT”)
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Draft tax regulations and implementation rules and propose tax policies.
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State Administration of Foreign Exchange (“SAFE”)
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Make regulations and policies governing foreign exchange market activities and manage state foreign exchange reserves.
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(1)
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The
PRC State Food and Drug Administration is responsible for (i) regulating the research and development, manufacturing, distribution
and utilization of drugs; (ii) supervising and coordinating the safety management of food, health food and cosmetics; and (iii) investigating
serious accidents with respect to the foregoing. The products we manufacture are not regulated by the CFDA as they are not drugs, diet
supplements or food consumed by humans. There are no existing laws or regulations in China governing the manufacture and sale of tourmaline
health care products such as those sold by the Company nor are there any inspection requirements applicable to our products.
|
We acted as a distributor
for four edible products including Xin-Nao-Ling Fish Oil Soft Gel, Zhi-Li-Bao Fish Oil Soft Gel, Glucosamine Chondroitin
Sulfate& Calcium Capsule and Vegetable and Fruit Enzyme Juice, which are subject to CFDA regulation.
These products were manufactured by Penglai Huakang Healthcare Industries, Ltd., Wuhan Senlan Biotechnology Co., Ltd. and Weihai Biohigh
Biotechnology Co., Ltd., which had obtained the necessary manufacturing licenses and certifications from the CFDA.
Environmental Regulations
Prior to the consummation
of the Merger as of December 31, 2020, the major environmental regulations applicable to us included the PRC Environmental Protection
Law, the PRC Law on the Prevention and Control of Water Pollution and its Implementation Rules, the PRC Law on the Prevention and Control
of Air Pollution and its Implementation Rules, the PRC Law on the Prevention and Control of Solid Waste Pollution, and the PRC Law on
the Prevention and Control of Noise Pollution.
According to Article 32 of
the PRC Environmental Protection Law, a project that may cause pollution to the environment cannot be undertaken until an environmental
impact statement has been approved by the applicable department of environmental protection administration.
In March 2008, Joway Shengshi
submitted an environmental impact statement with respect to the manufacturing of 300,000 sets of knitwear annually to the Tianjin Baodi
Environmental Protection Bureau. The environmental impact statement assesses the pollution that the manufacturing is likely to produce
and its impact on the environment. In addition, the Report stipulates the preventive and curative measures the company will undertake.
Tianjin Baodi Environmental Protection Bureau approved the environmental impact statement on March 12, 2008 and on April 22,
2009. The Tianjin Baodi Environmental Protection Bureau approved the manufacture of 300,000 sets of knitwear annually.
The Company’s production
process does not produce industrial waste water or waste gas emissions of a type that is regulated by current PRC laws and regulations.
The Company’s other emissions, including noise, waste water, solid waste and atmospheric pollutants meet regulatory standards. According
to the Letter regarding Environment Protection of Tianjin Joway Shengshi Group Co, Ltd. issued by Tianjin Baodi Environmental Protection
Bureau dated August 6, 2014, Joway Shengshi complies with applicable environmental protection laws and regulations and its discharge
of pollutants meets with the standards of the state and Tianjin City.
In addition, Joway Shengshi
obtained ISO 140001 International Environmental Management System Certification on January 15, 2009. ISO 140001 was first published
as a standard in 1996 and specifies the requirements for an organization’s environmental management system. It applies to those
environmental aspects over which an organization has control and where it can be expected to have an influence. Joway Shengshi passed
each annual inspection of the ISO 140001. Such Certification covers the production and service of tourmaline health-related products such
as underwear, bras, scarves, hats, knee-protectors, waist-protectors, socks, bedding and daily commodities.
We have not been named as
a defendant in any legal proceedings alleging violation of environmental laws and have no reasonable basis to believe that there is any
threatened claim, action or legal proceedings against us that would have a material adverse effect on our business, financial condition
or results of operations due to any non-compliance with environmental laws.
During the year ended December
31, 2020, we did not incur any significant costs in connection with complying with PRC national or local environmental laws.
Item 1A. RISK FACTORS.
AS A SMALLER REPORTING COMPANY, WE ARE NOT
REQUIRED TO PROVIDE A STATEMENT OF RISK FACTORS. NONETHELESS, WE ARE VOLUNTARILY PROVIDING RISK FACTORS HEREIN. THIS ANNUAL REPORT CONTAINS
CERTAIN STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY. YOU ARE CAUTIONED THAT SUCH STATEMENTS
ARE ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH
STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS ANNUAL REPORT, INCLUDING THE MATTERS SET FORTH BELOW,
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
An investment in our common
stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to
other information in this Annual Report in evaluating our company and its business before purchasing shares of our common stock. Our business,
operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your
investment due to any of these risks.
Risks Related To Our Business
Because we are currently considered a “shell
company” within the meaning of Rule 12b-2 under the Exchange Act, the ability of holders of our common stock to re-sell their shares
may be limited by applicable regulations.
We are currently considered
a “shell company” within the meaning of Rule 12b-2 under the Exchange Act and Rule 405 of the Securities Act of 1933,
as a result of the consummation of the Merger on December 31, 2020. Accordingly, the ability of holders of our common stock
to re-sell their shares may be limited by applicable regulations. Specifically, shares of common stock which are considered “restricted
securities” may not be sold except through a qualified registration statement under the Securities Act, pursuant to Section 4(1)
of the Securities Act, or by meeting the conditions of Rule 144(i) under the Securities Act.
We have a history of losses, which raise
substantial doubt about our ability to continue as a going concern.
As of December 31, 2020, we
had an accumulated deficit of approximately $7.2 million and a working capital deficit of approximately $0.7 million. In addition, reported
as part of loss from operations of discontinued component, our revenues decreased by $383,755 to $225,419 in 2020 compared with 2019,
mainly due to the slowdown in the growth of the health product industry in China. Our cash as of December 31, 2020, was $0.
On December 31, 2020, we became
a shell company. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future.
In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control,
such as the unpredictability of customers’ expectations and demands, the level of competition and general economic conditions.
We are a shell company and may never be
able to effectuate our business plan.
As a result of the Merger,
the Company ceased operations and is now seeking a business combination with a private entity whose business would present an opportunity
for its shareholders. We intend to seek, investigate and, if such investigation warrants, engage in a business combination with a private
entity whose business presents an opportunity for our shareholders. As a shell company with limited resources we may not be able to successfully
effectuate our business plan. There can be no assurance that we will ever achieve any revenues or profitability. The revenue and income
potential of our proposed business and operations is unproven as the lack of operating history makes it difficult to evaluate the future
prospects of our business. We require financing to acquire businesses and implement our business plan. We cannot assure you that we will
be successful in obtaining financing or acquiring businesses, or in operating those acquired businesses in a profitable manner.
We expect losses in the future because we
have no revenue.
As we have no current revenue,
we are expecting losses over the next twelve (12) months because we do not yet have any revenues to offset the expenses associated with
our business plan. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are
unable to generate revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption
as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating
revenues or ever achieve profitable operations.
If our business plans are not successful,
we may not be able to continue operations as a going concern and our stockholders may lose their entire investment in us.
We will, in all likelihood,
sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result
in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable
business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.
If we cannot continue as a going concern, our stockholders may lose their entire investment in us.
We do not have any agreement for a business
combination or other transaction.
We have no arrangement, agreement
or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. We cannot
assure you that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination.
Management has not identified any particular industry or specific business within an industry for evaluation. We cannot guarantee that
we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that future funds allocated to
the purchase of our shares will not be invested in a company with active business operations.
Future success is highly dependent on the
ability of management to locate and attract a suitable acquisition.
The success of our proposed
plan of operation will depend to a great extent on the operations, financial condition and management of the identified target company.
While business combinations with entities having established operating histories are preferred, there can be no assurance that we will
be successful in locating candidates meeting such criteria. The decision to enter into a business combination will likely be made without
detailed feasibility studies, independent analysis, market surveys or similar information which, if we had more funds available to it,
would be desirable. In the event we complete a business combination, the success of our operations will be dependent upon management of
the target company and numerous other factors beyond our control. We cannot assure you that we will identify a target company and consummate
a business combination.
There is competition for those private companies
suitable for a merger or combination transaction of the type contemplated by management.
We are in a highly competitive
market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination.
We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions
of small private and public entities. A large number of established and well-financed entities, including small public companies and venture
capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities
have significantly greater financial resources, technical expertise and managerial capabilities than we do. Consequently, we will be at
a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive
factors may reduce the likelihood of our identifying and consummating a successful business combination.
We have not conducted market research to
identify business opportunities, which may affect our ability to identify a business to merge with or acquire.
We have neither conducted
nor have others made available to us results of market research concerning prospective business opportunities. Therefore, we have no assurances
that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination
or other transactions for formal evaluation by us, such that it may be expected that any such target business or transaction will present
such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available.
There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business
opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our
stockholders.
Management intends to devote only a limited
amount of time to seeking a target company, which may adversely impact our ability to identify a suitable acquisition candidate.
While seeking a business combination,
our sole officer and director anticipates devoting limited time to our affairs in total. Our sole officer has not entered into a written
employment agreement with us and is not expected to do so in the foreseeable future. This limited commitment may adversely impact our
ability to identify and consummate a successful business combination.
We are dependent on the services
of our sole officer to obtain capital required to implement our business plan and for identifying, investigating, negotiating and integrating
potential acquisition opportunities. The loss of services of our sole officer could have a substantial adverse effect on us. The expansion
of our business will be largely contingent on our ability to attract and retain highly qualified corporate and operations level management
team. We cannot assure you that we will find suitable management personnel or will have financial resources to attract or retain such
people if found.
The time and cost of preparing a private
company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private
companies.
Target companies that fail
to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require reporting
companies to provide certain information about significant acquisitions, including audited consolidated financial statements for the company
acquired.
The time and additional costs
that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation
of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may
be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.
Any potential acquisition or merger with
a foreign company may subject us to additional risks.
If we enter into a business
combination with a foreign concern, we will be subject to risks inherent in business operations outside of the United States. These risks
include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks
related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies
may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development,
rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.
We will need to raise additional capital
to execute our business plan. If our operations do not produce the necessary cash flow, or if we cannot obtain needed funds, we may be
forced to reduce or cease our activities with consequent loss to investors.
We have a need for cash in
order to pay obligations currently due in a timely manner, and to finance our business operations. Our continued operations will depend
upon the sustainability of cash flow from our ability to raise additional funds, as required, through equity or debt financing. There
is no assurance that we will be able to obtain additional funding when it is needed, or that such funding, if available, will be obtainable
on terms acceptable to us. If we cannot obtain needed funds, we may be forced to reduce or cease our activities with consequent loss to
investors. In addition, should we incur significant presently unforeseen expenses or delays, we may not be able to accomplish our goals.
If we fail to develop and maintain an effective
system of internal controls, we may not be able to accurately report our financial results or prevent fraud, as a result, current and
potential shareholders could lose confidence in our financial reports, which could harm our business and the trading price of our Common
Stock.
Effective internal controls
are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002
requires us to evaluate and report on our internal controls over financial reporting. We plan to comply with Section 404 by strengthening,
assessing and testing our system of internal controls to provide the basis for our report. The process of strengthening our internal controls
and complying with Section 404 is expensive and time consuming, and requires significant management attention, especially given that we
have not yet undertaken any efforts to comply with the requirements of Section 404. We cannot be certain that the measures we will undertake
will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able
to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will
be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we discover a material weakness
in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence
in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative
sanctions, including the suspension of trading, ineligibility for listing on the OTC Markets, one of the national securities exchanges,
and the inability of registered broker-dealers to make a market in our Common Stock, which would further reduce our stock price.
Investors may experience difficulties in
effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based upon United States
laws, including the federal securities laws or other foreign laws against us or our management.
Our president and all of our
officers are nationals and residents of the PRC. All the assets of these persons are located outside the United States and in the PRC.
As a result, it may not be possible to effect service of process within the United States or elsewhere outside the PRC upon these persons. In
addition, uncertainty exists as to whether the PRC courts would recognize or enforce judgments of United States courts obtained against
such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state
thereof, or be competent to hear original actions brought in the PRC against us or such persons predicated upon the securities laws of
the United States or any state thereof.
If we are found to be in violation of current
or future PRC laws, rules or regulations regarding the legality of foreign investment in the PRC with respect to our ownership structure,
we could be subject to severe penalties.
We currently reside solely
in the PRC. As a result, our subsidiaries in the PRC are regarded as FIEs under PRC law and we are subject to PRC law limitations on foreign
ownership of PRC companies. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations,
including, but not limited to, the laws and regulations governing our healthcare products distribution and production businesses.
Accordingly, it is possible
that the relevant PRC authorities could, at any time, assert that any portion of our existing or future ownership structure and businesses
violate existing or future PRC laws, regulations or policies. It is also possible that the new laws or regulations governing our
business operations in the PRC that have been adopted or may be adopted in the future will prohibit or restrict foreign investment in,
or other aspects of, any of our PRC Operating Entities’ and our current or proposed businesses and operations. The effectiveness
of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws
and regulations that affect existing and proposed future businesses may also be applied retroactively.
The PRC government has broad
discretion in dealing with violations of laws and regulations, including:
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levying fines;
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●
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confiscating our income;
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●
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revoking business and other licenses;
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●
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requiring us to discontinue any portion or all of our business;
|
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●
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requiring us to restructure our ownership structure or operations; and
|
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●
|
requiring actions necessary for compliance.
|
In particular, licenses and
permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot
predict the effect of the interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you that
our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As
a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain
services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial
portion of our business operations, which, in turn, could materially and adversely affect our business, financial condition and results
of operations.
Risks Relating to Investment in Our Securities
An active public market for our common stock
may not develop or be sustained, which would adversely affect the ability of our investors to sell their securities in the public market.
We cannot predict the extent
to which an active public market for our common stock will develop or be sustained.
Shares eligible for future sale may adversely
affect the market price of our common stock, as the future sale of a substantial amount of outstanding stock in the public marketplace
could reduce the price of our common stock.
Holders of a significant number
of our shares and/or their designees may be eligible to sell our shares of common stock by means of ordinary brokerage transactions in
the open market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”), subject to certain limitations. In
general, pursuant to Rule 144, a non-affiliate stockholder (or stockholders whose shares are aggregated) who has satisfied a six-month
holding period, and provided that there is current public information available, may sell all of its securities. Rule 144 also permits
the sale of securities, without any limitations, by a non-affiliate that has satisfied a one-year holding period. Any substantial
sale of common stock pursuant to any resale prospectus or Rule 144 may have an adverse effect on the market price of our common stock
by creating an excessive supply.
If we fail to maintain effective internal
controls, we may not be able to accurately Report our financial results or prevent fraud, and our business, financial condition, results
of operations and reputation could be materially and adversely affected.
The effectiveness of our internal
controls is essential to the integrity of our business and financial results. Our public Reporting obligations currently place and are
expected to continue to place a strain on our management, operational and financial resources and systems. We have implemented measures
to enhance our internal controls, and plan to take steps to further improve our internal controls. We cannot assure you that the measures
taken to improve our internal controls will be effective. If we fail to maintain effective internal controls in the future, our business,
financial condition, results of operations and reputation may be materially and adversely affected.
Compliance with changing regulation of corporate
governance and public disclosure will result in additional expenses.
Changing laws, regulations
and standards relating to corporate governance and public disclosure, including SOX and related SEC regulations, have created uncertainty
for public companies and significantly increased the costs and risks associated with accessing the public markets and public Reporting. Our
management team will need to invest significant management time and financial resources to comply with both existing and evolving standards
for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention
from revenue generating activities to compliance activities.
We do not foresee paying cash dividends
in the near future.
We do not plan to declare
or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for
funding growth. As a result, investors should not rely on an investment in our securities if they require the investment to produce
dividend income.