Joway Health Industries Group Inc.
We have audited the accompanying balance sheets
of Joway Health Industries Group Inc. (the Company) as of December 31, 2021 and 2020, and the related statements of operations
and other comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two year period ended December 31,
2021, and related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results
of its operations and its cash flows for each of the years in the two year period ended December 31, 2021, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has
suffered recurring significant losses and has accumulated deficiency in stockholders’ equity. These factors raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also discussed
in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor
since 2013.
NOTES
TO FINANCIAL STATEMENTS
Note
1 – ORGANIZATION
The
financial statements include the financial statements of Joway Health Industries Group Inc. (referred to herein as “Joway
Health”). Joway Health is hereinafter referred to as the “Company,” “we” and “us”.
Joway
Health (formerly G2 Ventures, Inc.) was originally incorporated under the laws of the State of Texas on March 21, 2003. On September
21, 2010, Joway Health entered into a Share Exchange Agreement (the “Share Exchange”) with the sole stockholder of Dynamic
Elite International Limited. As a result of the Share Exchange, Dynamic Elite became a wholly-owned subsidiary of Joway Health and the
stockholders of Dynamic Elite acquired approximately 76.08% of the issued and outstanding stock of Joway Health. The share exchange transaction
resulted in the shareholders of Dynamic Elite acquiring a majority voting interest in Joway Health. Generally accepted accounting principles
in the United States of America require that the company whose shareholders retain the majority interest in the combined business be
treated as the acquirer for accounting purposes. The reverse acquisition process utilized the capital structure of Joway Health and the
assets and liabilities of Dynamic Elite recorded at historical cost. On December 22, 2010, Joway Health changed its jurisdiction of incorporation
from the State of Texas to the State of Nevada.
Dynamic
Elite International Limited (referred to herein as “Dynamic Elite”) was incorporated under the laws of the British Virgin
Islands on June 2, 2010 as a limited liability company (a BVI company). Dynamic Elite engaged in manufacturing and distributing tourmaline
products in China. Its wholly owned subsidiary, Tianjin Junhe Management Consulting Co., Ltd. was incorporated on September 15, 2010
in Tianjin, People’s Republic of China (“PRC”). Other than the equity interest in Junhe Consulting, Dynamic Elite does
not own any assets or conduct any operations.
Tianjin
Junhe Management Consulting Co., Ltd. (referred to herein as “Junhe Consulting”) conducted its business through Tianjin Joway
Shengshi Group Co., Ltd.
Tianjin
Joway Shengshi Group Co., Ltd. (referred to herein as “Joway Shengshi”) was incorporated in PRC on May 17, 2007. Joway Shengshi
was owned 99% by Jinghe Zhang, the Company’s current CEO and President and 1% by Song Baogang. Joway Shengshi engages in manufacturing
and distributing tourmaline products in China. Shenyang Joway Electronic Technology Co., Ltd., Tianjin Joway Decoration Engineering Co.,
Ltd. and Tianjin Oriental Shengtang Trading Import & Export Trading Co., Ltd. are subsidiaries of Joway Shengshi.
Shenyang
Joway Electronic Technology Co., Ltd. (referred to herein as “Joway Technology”) was originally named Liaoning Joway Technology
Engineering Co., Ltd. which was incorporated on March 28, 2007 in PRC. The name was changed on June 22, 2011. It engages in the distribution
of Tourmaline Activated Water Machines and the construction of Tourmaline Wellness Houses. Prior to July 25, 2010, Joway Shengshi owned
90.91% of Joway Technology. Joway Shengshi entered into a share acquisition agreement with Jingyun Chen, another stockholder of Joway
Technology on July 25, 2010 to acquire the remaining 9.09% of the share of Joway Technology. As a result of the share acquisition, Joway
Technology became a wholly-owned subsidiary of Joway Shengshi.
Tianjin
Joway Decoration Engineering Co., Ltd. (referred to herein as “Joway Decoration”) was incorporated on April 22, 2009 in PRC.
It engages in the distribution of Tourmaline Activated Water Machines, Tourmaline Wellness Room for family use and Tourmaline Wellness
House materials. Prior to July 9, 2010, Joway Shengshi owned 90% of Joway Decoration. Joway Shengshi entered into a share acquisition
agreement with Jingyun Chen, another stockholder of Joway Decoration on July 9, 2010 to acquire the remaining 10% of the shares of Joway
Decoration. As a result of the share acquisition, Joway Decoration became a wholly-owned subsidiary of Joway Shengshi. Jingyun Chen is
currently the General Manager of Joway Decoration.
Tianjin
Oriental Shengtang Import & Export Trading Co., Ltd. (referred to herein as “Shengtang Trading”) was incorporated on
September 18, 2009 in the PRC. It engages in purchasing raw materials which it sells to other companies of the group. Prior to July 28,
2010, Joway Shengshi owned 95% of Shengtang Trading. Joway Shengshi entered into a share acquisition agreement with Wang Aiying, another
stockholder of Shengtang Trading on July 28, 2010 to acquire the remaining 5% of the shares of Shengtang Trading. As a result of the
share acquisition, Shengtang Trading became a wholly-owned subsidiary of Joway Shengshi.
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 (“Parent”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned
subsidiary of Parent (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Dynamic
Elite (the “Merger”), with Dynamic Elite continuing as the surviving corporation as a wholly-owned subsidiary of Parent.
The special committee of the Board of Directors of the Company unanimously approved the Merger Agreement and the transactions contemplated
thereby.
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 consideration for $119,070 in cash (the “Merger Consideration”).
The Company distributed the Merger Consideration to its shareholders (other than to Parent) in an amount equal to such shareholder’s
proportionate share of the Merger Consideration based on such shareholders’ percentage of the outstanding common stock of the Company.
In addition, the Company received a fairness opinion from an investment banker opining that the Merger Consideration was fair, from a
financial point of view, to the shareholders of the Company.
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 $119,070 in cash as Merger Consideration, or $0.45 per share. 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 represented 2,646,000 shares of our common stock. Since the remaining 17,408,000 shares of our common
stock was 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.
On
December 31, 2020, upon the Company completed the Merger Agreement with Crystal Globe, Joway Health became a “shell company”
(as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Going
forward, the Company intends to seek, investigate and, if such investigation warrants, engage in a business combination with a private
entity whose business presents an opportunity for the Company’s stockholders.
Note
2 – GOING CONCERN
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of
liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying financial statements, for the years
ended December 31, 2021 and 2020, we incurred net losses of $121,788 and $2.3 million, respectively. In addition, we reported cash outflow
of $0.07 million and $0.6 million from our operating activities for the years ended December 31, 2021 and 2020, respectively. As of December
31, 2021, we had an accumulated deficit of approximately $7.4 million. Management believes these factors raise substantial doubt about
our ability to continue as a going concern for the next twelve months.
The
continuation of our company as a going concern through the next twelve months is dependent upon (1) the continued financial support from
our stockholders or external financing. Management believes that our existing stockholders will provide the additional cash to meet our
obligations as they become due, and (2) that it will be able to implement its business plan to expand our company’s operations
and generate sufficient revenues to meet its obligations.
These
conditions raise substantial doubt about our company’s ability to continue as a going concern. These financial statements do not
include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to
obtain additional funding and implement its strategic plan provides the opportunity for our company to continue as a going concern.
Note
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America (“US GAAP”). Prior to the consummation of the
Merger as of December 31, 2020, the Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying
financial statements have been translated and presented in United States Dollars (“USD”). All significant inter-company transactions
and balances have been eliminated. The financial statements include all adjustments that, in the opinion of management, are necessary
to make the financial statements not misleading.
After
the consummation of the Merger as of December 31, 2020, the Company’s functional currency is USD.
Use
of Estimates
The preparation of the financial statements is in conformity with generally
accepted accounting principles in the United States of America, which require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information
available at the time the estimates are made. Actual results could differ from those estimates.
Reclassification
Certain
prior year balances were reclassified to conform to the current year’s presentation with consideration of reflecting all of the
Company’s subsidiaries and VIEs as discontinued operations. None of these reclassifications had an impact on reported financial
position or cash flows for any of the periods presented.
Basis
of Consolidation
For the periods prior to the consummation of the Merger as of December
31, 2020, the Company consolidated financial statements including Dynamic Elite, its former wholly owned subsidiaries, and controlled
VIEs. The financial statements of Dynamic Elite and controlled VIEs were included as part of the Company’s discontinued component.
All significant inter-company accounts and transactions have been eliminated in the consolidation.
Foreign
Currency Translation
The accompanying financial statements are presented in USD. The functional
currency of the Company is RMB for the periods prior to the consummation of the Merger as of December 31, 2020. The financial statements
are translated into USD from RMB at period-end exchange rates as to assets and liabilities and average exchange rates as to revenues and
expenses. Equity accounts are translated at their historical exchange rates when the equity transactions occurred. The resulting transaction
adjustments are recorded as a component of stockholders’ equity. Gains and losses from foreign currency transactions are included
in net income.
| |
December 31, | |
| |
2020 | |
Year ended RMB: USD Exchange rate | |
| 6.5249 | |
Average yearly RMB: USD Exchange rate | |
| 6.8976 | |
The
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.
No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.
For the years ended December 31, 2021 and 2020 foreign currency translation
adjustments of $0 and $165,413, have been reported as other comprehensive loss in the financial statements. After the consummation of
the Merger as of December 31, 2020, the Company’s functional currency is USD.
Other
Comprehensive Income
Other
comprehensive income is defined as the change in equity during the period from transactions and other events, excluding the changes resulting
from investments by owners and distributions to owners. Other comprehensive income is not included in the computation of income tax expense
or benefit. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.
Concentrations
of Credit Risk
Prior
to the consummation of the Merger as of December 31, 2020, the Company’s operations were carried out in the PRC. Accordingly,
the Company’s business, financial condition, and results of operations were influenced by the political, economic, and legal
environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC were subject
to specific considerations and significant risks not typically associated with companies in North America. The Company’s
results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments
which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable.
As
a result of the consummation of the Merger, as of December 31, 2020, the Company became a shell company, as that term is defined in Rule
12b-2 of the Exchange Act of 1934, as amended (the “Exchange Act”). Going forward, our main business operations consist of
seeking a business combination with a private entity whose business would present an opportunity for its shareholders.
Fair
Value of Financial Instruments
Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 (formerly Statement of Financial
Accounting Standard (“SFAS”) No. 157 Fair Value Measurements) establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value as the following:
|
● |
Level 1—defined as
observable inputs such as quoted prices in active markets for identical assets or liabilities; |
|
● |
Level 2—defined as
inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
|
● |
Level 3—defined as
unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The
carrying amounts reported in the balance sheets for cash, accounts receivable, other receivable, accounts payable, other payable, and
amounts due from related parties generally approximate their fair market values based on the short-term maturity of these instruments.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless
a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should
be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding
instruments.
Revenue
Recognition
The
Company recognizes revenue when control of promised goods or services is transferred to the company’s customers, in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Prior
to the Merger Agreement, with respect to sales of product to both franchisee and non-franchisee customers, the Company transfers control,
invoices the customer and recognizes revenue upon shipment to the customer. Sales prices are based on fixed price lists that are different
depending on whether the price list is for franchisee customers or for non-franchisee customers. Sales, value add and other taxes collected
concurrent with revenue-producing activities are excluded from revenue.
After
the consummation of the Merger as of December 31, 2020, the Company did not report any revenue for the year ended December 31, 2021.
Income
Taxes
The
Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes” (formerly SFAS No. 109 Accounting for
Income Taxes), which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.
ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.
Realization of deferred tax assets is dependent upon future earnings, if any, of which the timing and amount are uncertain.
According
to ASC 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not
that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical
merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the
amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater
than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not
recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions
that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which
the threshold is no longer met. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosures, and transition.
Basic
and Diluted Earnings per Share
The
Company reports earnings per share in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings
per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per share
are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying
the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus
obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments
outstanding during the years ended December 31, 2021 and 2020.
Recently
Issued Accounting Pronouncements
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”),
which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general
principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The
Company adopted the standard in 2021. Adoption of the standard did not have a significant impact on the Company’s statement of
earnings in 2021.
Other accounting standards that have been issued or proposed by the
FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on
the Company’s financial statements upon adoption.
Deconsolidation
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.
Crystal Globe, as the majority shareholder holding
approximately 86.81% of the Company, is also the sole shareholder of Dynamic Elite after the Merger. 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, will be cancelled and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration
of $0.045 per share for outstanding shares of Joway Health’s common stock (the “Merger Consideration”). As of November
20, 2020, Joway Health reported 20,054,000 shares of common stock outstanding. As a result, Joway Health recognized a loss of $1,340,795
from this transaction.
In
January 2021, Joway Health 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 Joway Health’s common stock. Since the remaining 17,408,000 shares
of Joway Health’s common stock is owned by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares is offset.
The
following is a reconciliation of the deconsolidation:
| |
Amount | |
Selling price | |
$ | 902,430 | |
Disposed assets and liabilities: | |
| | |
Cash | |
| 79,446 | |
Current assets | |
| 1,133,812 | |
Fixed assets | |
| 3,194,533 | |
Intangible assets | |
| 465,007 | |
Liabilities | |
| (1,977,822 | ) |
Accumulated other comprehensive income | |
| (651,751 | ) |
| |
| 2,243,225 | |
Loss from disposal of discontinued component, net of income tax | |
$ | (1,340,795 | ) |
Note
4 – RECEIVABLE FROM RELATED PARTY
Receivable
from related party consist of the following:
| |
December 31, | |
| |
2021 | | |
2020 | |
Crystal Globe | |
$ | - | | |
$ | 119,070 | |
The
receivable from Crystal Globe is related to the Merger Agreement which is part of the Merger Consideration for Joway Health’s minority
shareholders who hold 2,646,000 shares of Joway Health’s common stock.
In
January 2021, Joway Health had received $119,070 from Crystal Globe and distributed proportionately to the Company’s minority shareholders.
Note
5 – SPECIAL DIVIDEND PAYABLE
As
of September 30, 2021 and December 31, 2020, the Company reported $0 and $119,070 as special dividend payables, respectively. The payables
are related to the Merger Agreement which is part of the Merger Consideration for Joway Health’s minority shareholders who hold
2,646,000 shares of Joway Health’s common stock.
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.
Crystal Globe, as the majority shareholder holding approximately 86.81%
of the Company, is also the sole shareholder of Dynamic Elite after the Merger. Mr. Jinghe Zhang, as the former 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, will be cancelled and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration
of $0.045 per share for outstanding shares of Joway Health’s common stock (the “Merger Consideration”). As of November
20, 2020, Joway Health reported 20,054,000 shares of common stock outstanding.
As
a result of the Merger Agreement, Joway Health needs to distribute proportionately the Merger Consideration to the Company’s shareholders.
In January 2021, Joway Health 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 Joway Health’s common stock. Since the remaining 17,408,000
shares of Joway Health’s common stock is owned by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares is offset.
Note 6 – OTHER PAYABLES
As of December 31, 2021 and 2020, the Company reported $103,053 and
$51,344 as its other payables, respectively. The other payables mainly consist of payables for professional services, including audit,
legal, and financial statement filing services.
Note
7 – RELATED PARTY TRANSACTIONS
Payables
due to related parties consist of the following:
| |
December 31, | |
| |
2021 | | |
2020 | |
Jinghe Zhang | |
$ | 3,999 | | |
$ | 233,693 | |
Joway Shengshi | |
| - | | |
| 459,853 | |
Total | |
$ | 3,999 | | |
$ | 693,546 | |
The
amounts owed to related parties are non-interest bearing and have no specified repayment terms.
Transactions
with Jinghe Zhang
During
the years ended December 31, 2021 and 2020, we received financial supports of $66,235 and $182,515 from our former CEO and chairman,
Mr. Jinghe Zhang. The loans due to him are for our daily operating activities without interest charge and due on demand.
On
April 28, 2021, the Company entered into an agreement with Mr. Jinghe Zhang to release the Company from $295,928 of indebtedness owed
to him. As of December 31, 2021 and 2020, the total unpaid principal balance due to Mr. Jinghe Zhang for advances was $3,999 and $233,693,
respectively.
Transactions
with Joway Shengshi
Joway
Shengshi was one of the Company’s subsidiaries but has been sold via the Merger Agreement on December 31, 2020. Mr. Jinghe Zhang
owns 99% of the equity interest in Joway Shengshi. For the years ended December 31, 2021 and 2020, we received $3,844 and $0 of advances
from Joway Shengshi, respectively, for our daily operating activities.
On
April 28, 2021, Joway Shengshi released the Company from $463,698 of indebtedness owed to it. As of December 31, 2021 and 2020, the total
unpaid principal balance due to Joway Shengshi was $0.
Disposal
of all of Joway Health’s subsidiaries and VIEs
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.
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 consideration for $902,430 in cash (the “Merger Consideration”).
The Company was obligated to distribute the Merger Consideration to its shareholders in an amount equal to such shareholder’s proportionate
share of the Merger Consideration based on such shareholders’ percentage of the outstanding common stock of the Company. The Merger
Consideration due from Crystal Globe was partly offset by the distribution due to Crystal Globe at the amount of $783,360. The remaining
portion of $119,070 of Merger Consideration was paid by Crystal Globe in cash and distributed to the Company’s minority shareholders
as a special dividend in January 2022. The transaction was completed on December 31, 2020.
Note
8 – INCOME TAXES
Upon
the Company executed the Merger Agreement on December 31, 2020, no provision was made for federal income taxes since the Company has
significant net operating losses.
The
Company’s income tax returns since inception are subject to audit by regulatory authorities. Changes in tax laws and rates could
also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a
material effect on the Company’s results of operations, cash flows or financial position. The calculation of our tax liabilities
involves dealing with uncertainties in the application of complex tax laws and regulations. FASB ASC Topic 740, Income Taxes provides
that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained
upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. ASC Topic 740
also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition.
We
recognize tax liabilities in accordance with ASC Topic 740 and we adjust these liabilities when our judgment changes as a result of the
evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution
may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected
as increases or decreases to income tax expense in the period in which they are determined.
Note
9 – SUBSEQUENT EVENTS
Change
in Control
On
February 3, 2022, the Company consummated the transactions contemplated by the Stock Purchase Agreement dated as of January 31, 2022
(the “Purchase Agreement”), by and among the Company, Crystal Globe Limited, a company incorporated under the laws of British
Virgin Islands (the “Seller”), and JHP Holdings, Inc., a Nevada corporation (the “Buyer”), pursuant to which
the Buyer purchased 16,644,820 shares of common stock of the Company from the Seller.
On
February 2, 2022, Mr. Ramon Lata was appointed to the board of the directors upon the resignation of Jinghe Zhang, the sole officer and
director of the Company. Mr. Lata was also appointed as the President, Treasurer and Secretary of the Company.
In
connection with the resignation of Mr. Zhang, all obligations owed to Mr. Zhang from the Company were cancelled and there are no further
debts or liabilities owed by the Company to any affiliate or former affiliate of the Company.
384-1990
702
GTVI
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