LONGWEN GROUP CORP. AND SUBSIDIARY
The accompanying notes are an integral part of these
unaudited consolidated financial statements
The accompanying notes are an integral part of these
consolidated financial statements
The accompanying notes are an integral part of these
unaudited consolidated financial statements
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
Longwen Group Corp. (the “Company”), was
originally incorporated as Expertelligence, Inc in the State of California on March 31, 1980 and reincorporated in the State of Nevada
on November 17, 2005. On January 23, 2017, after a series of various name changes, the Company amended its Articles of Incorporation
(“Charter Amendment”) to affect the current name change of Longwen Group Corp with trading symbol of “LWLW”.
On or about April 5, 2016, the Company affected a
1 for 750 share reverse split of its issued and outstanding common stocks and reduced to 127,061 shares outstanding. Effective November
29, 2016, 66,667 shares of common stock of the Company were transferred to Longwen Group Corp., a Cayman Island company (“Longwen
Cayman”). All of the shares held by Longwen Cayman are restricted securities. As a result of the transactions, Mr. Xizhen
Ye, President of Longwen Cayman, was appointed as a sole Director of the Company, and President and Chief Executive Officer and Chief
Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of Board.
From
August 2018 to June 2021, the Company continued to seek for new business opportunities in order to increase its value of the common stock.
However, due to the impact of the Covid-19 pandemic, the progress was delayed and the business goal was not successfully achieved.
On June 9, 2021, Anthony Lombardo (“Lombardo”)
filed an Application for Appointment of Custodian (“Application”) with the Eighth Judicial District Court in Nevada to request
the custodianship of the Company due to the Company’s non-response and late filing with the State of Nevada. On June 24, 2021, a
hearing was held on this Application, where Lombardo was named temporary custodian of the Company. Subsequently after Lombardo’s
custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary of the Company. On September 1, 2021, Deanna Johnson appointed
Joseph Passalaqua (“Joseph”) as CEO, CFO and Secretary and resigned from all positions in the Company, On October 25, 2021,
Mr. Xizhen Ye (“Ye”), the ex-officer and director of the Company prior to Lombardo’s custodianship, and Longwen Cayman,
filed a motion to dissolve custodianship (“Motion”) with the Eighth Judicial District Court of Nevada State. Pursuant to the
Settlement Agreement entered on January 12, 2022, by Longwen Cayman, Mr. Ye, Lombardo, Joseph and Deanna Johnson regarding Lombardo’s
custodianship, Mr. Ye and Mr. Lizhong Lu were reinstated as the officer and directors of the Company, and 65,000,000 common stocks of
the Company was transferred from Joseph to Mr. Ye on February 9, 2022. Further on February 17, 2022, the Eighth Judicial District Court
officially terminated Lombardo’s custodianship over the Company.
On February 23, 2022, the Company entered into an
Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Longwen Enterprise Management Co., Ltd.
(“Hangzhou Longwen”), a wholly foreign-owned enterprise (“WOFE”) in Hangzhou, the People’s Republic of China
(the “PRC”), for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Longwen became the Company’s
wholly owned subsidiary in the PRC. Hangzhou Longwen was originally registered on January 4, 2012 and has minimum operations since its
inception. The Company recognize $993 goodwill upon consummated the acquisition. The purpose of the Company’s acquisition for Hangzhou
Longwen is to seek potential merger and acquisition targets in both China and other countries in Asia.
On March 15, 2022, Hangzhou Longwen entered into a
Consulting Service Agreement (the “Service Agreement”) with Yunnan Yusu Import and Export Trading Co., Ltd (China) (“Yunnan
Yusu”), pursuant to which, Hangzhou Longwen will provide a series of consulting services to Yunnan Yusu, including to assist in
the preparation of jadeite sales and purchase agreement, assist with tax filing, assist with financial report preparation, assist with
jadeite business negotiation and business website maintenance.
Currently, the Company’s revenues are mainly
derived from the consulting services with Yunnan Yusu, which totaled $7,979 for the six months ended June 30, 2022. The Company is also
seeking other potential merger and acquisition targets in both China and other countries in Asia.
LONGWEN GROUP CORP.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Principles of Consolidation
The accompanying unaudited consolidated financial
statements include the accounts of the Company and its subsidiary as described in Note 1. All significant intercompany transactions and
balances have been eliminated in the consolidation.
Basis of Presentation
The unaudited consolidated financial statements presented
herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim
financial information and in accordance with the instructions to Regulation S-X. Accordingly, the financial statements do not include
all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including
normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results
for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December
31, 2022.
Use of Estimates
The preparation of the Company’s consolidated
financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts
reported in the financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions.
Foreign Currency Transactions
The Company’s consolidated financial statements
are presented in U.S. dollars ($), which is the Company’s reporting and functional currency. The functional currency of the Company’s
subsidiary is RMB. The resulting translation adjustments are reported under other comprehensive loss in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 220 (“ASC 220”), “Reporting
Comprehensive Income”. Gains and losses resulting from the translation of foreign currency transactions are reflected in the
consolidated statements of operations and other comprehensive income (loss). Monetary assets and liabilities denominated in foreign currency
are translated at the functional currency using the rate of exchange prevailing at the balance sheet date. Any differences are taken to
profit or loss as a gain or loss on foreign currency translation in the consolidated statements of operations and other comprehensive
income (loss).
The Company translates the assets and liabilities
into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are
translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollars are recorded
in shareholders’ equity as part of accumulated other comprehensive loss. The exchange rate used for financial statements are as
follows:
|
|
Average Rate for the three months ended
June 30, |
|
Average
Rate for the Six months ended June 30, |
|
|
2022 |
|
|
2021 |
|
2022 |
2021 |
China yuan (RMB) |
|
RMB |
6.6102 |
|
|
RMB |
- |
|
RMB |
6.4748 |
RMB |
- |
United States dollar ($) |
|
$ |
1.0000 |
|
|
$ |
- |
|
$ |
1.0000 |
$ |
- |
|
|
Exchange Rate at |
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
China yuan (RMB) |
|
RMB |
6.6981 |
|
|
RMB |
- |
|
United States dollar ($) |
|
$ |
1.0000 |
|
|
$ |
- |
|
LONGWEN GROUP CORP.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
Revenue Recognition
The Company recognizes revenue when a customer obtains
control of promised products or services, in an amount that reflects the consideration expected to be received in exchange for those products
or services. The Company follows the five-step model prescribed under Topic 606: (i) identify the contract(s) with a customer; (ii) identify
the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance
obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies each performance obligation. Revenues are
presented net of any sales or value added taxes collected from customers and remitted to the government.
The Company’s consulting revenues consist of
the delivery of focused insights and recommendations that assist customer with their challenges in developing and executing strategies
around jadeite trade business, valuation of jadeite materials and the customer’s financial reporting. The consulting service provided
are fixed-fee arrangements that are generally in one year term. The Company has concluded that each contract represents a single performance
obligation as each is a single promise to deliver a customized engagement and deliverable. For the majority of these services, either
practically or contractually, the work performed and delivered to the customer has no alternative use to the Company. Additionally, the
Company maintains an enforceable right to payment at all times throughout the contract.
Income Taxes
The Company accounts for income taxes under ASC 740,
“Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance
is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future
operations.
Related Parties
The Company follows ASC 850, Related Party
Disclosures, for the identification of related parties and disclosure of related party transactions.
Accounting Standards Issued but Not Yet Adopted
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, (FASB
ASC Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current
accounting guidance and requires the use of the new forward-looking “expected loss” model, which requires all expected losses
to be determined based on historical experience, current conditions and reasonable and supportable forecasts, rather than the “incurred
loss” model. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including
trade and other receivables, held-to-maturity debt securities, loans and other instruments. The effective date of ASU No. 2016-13 for
smaller reporting companies is postponed to fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. The Company believes the adoption of ASU No. 2016-13 will not have a material impact on its financial position and results of operations.
There were other updates recently issued. The management
does not believe that other than disclosed above, accounting pronouncements the recently issued but not yet adopted will have a material
impact on its financial position results of operations or cash flows.
NOTE 3 – GOING CONCERN
The Company’s consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments
in the normal course of business. During the six months ended June 30, 2022, the Company incurred a net loss of $156,270. The Company
had an accumulated deficit of $18,437,679 as of June 30, 2022. These factors, among others, raise substantial doubt about the Company’s
ability to continue as a going concern.
The Company’s future success is dependent upon
its ability to acquire and achieve business with profitable operations, generate cash from operating activities and obtain additional
financing. The Company intends to raise funds from the issuance of equity and/or debt securities, but there is no assurance that
additional funds from the issuance of equity will be available for the Company to finance its operations on acceptable terms, or at all.
These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT
ASSETS
As of June 30, 2022 and December 31, 2021, prepaid
expenses and other current assets comprised as follows:
| |
June 30,
2022 | |
December 31, 2021 |
| |
| |
|
Prepaid OTC market fee | |
$ | 1,167 | | |
$ | — | |
Prepaid consulting fee | |
| 79,083 | | |
| | |
Prepaid rent and parking lot | |
| 13,609 | | |
| — | |
Total | |
$ | 93,859 | | |
$ | — | |
NOTE 5 – EQUIPMENT, NET
As of June 30, 2022 and December 31, 2021, equipment
consisted of the following:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
Equipment |
|
$ |
7,639 |
|
|
$ |
- |
|
Less: accumulated depreciation |
|
|
(715 |
) |
|
|
- |
|
Total equipment, net |
|
$ |
6,924 |
|
|
$ |
- |
|
Depreciation expenses were $715 and $nil for the six
months ended June 30, 2022 and 2021, respectively, which was included in selling, general and administrative expenses. Depreciation expenses
were $572 and $nil for the three months ended June 30, 2022 and 2021, respectively.
LONGWEN GROUP CORP.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
NOTE 6 – COMMERCIAL LOAN
The Company’s commercial loan consisted of the
following as of June 30, 2022 and December 31, 2021:
| |
June 30, 2022 | |
December 31, 2021 |
Loan with a third-party lender; the loan bears a fixed interest at $500 annum and matures on December 31, 2022 | |
$ | 12,250 | | |
$ | 12,250 | |
Total loans | |
| 12,250 | | |
| 12,250 | |
Less: current portion of long-term loans | |
| (12,250 | ) | |
| (12,250 | ) |
Total long-term loans | |
$ | — | | |
$ | — | |
On December 31, 2019, the Company entered into a loan
agreement of $12,250 with a third-party individual with three-year term. The borrowing bears interest of $300 at the effective date of
the contract and fixed rate at $500 per annum, which matures on December 31, 2022. The loan will be paid off in a single payment of the
outstanding balance of principal and accrued interest on or before the expiration date of the loan agreement.
As of June 30, 2022 and December 31, 2021, the outstanding
balances of the borrowing were $12,250 and $12,250, and the interest payables were $1,550 and $1,300, respectively. Total interest
expenses for the loan were $125 and $125, respectively, for the three months ended June 30, 2022 and 2021. Total interest expenses for
the loan were $250 and $250, respectively, for the six months ended June 30, 2022 and 2021.
NOTE 7 – INCOME TAX
As of June 30, 2022 and December 31, 2021, the Company
has incurred an accumulated net loss of approximately $18.4 million and $18.3 million which resulted in a net operating loss
for income tax purposes. NOLs can carry forward indefinitely up to offset 80 percent of taxable income after CARES Act effect on December
31, 2017. The deferred tax asset has been fully reserved for valuation allowance as the Company believes they will most-likely-than-not
realize the benefits.
Significant components of the deferred tax assets
and liabilities for income taxes as of June 30, 2022 and December 31, 2021 consisted of the following:
| |
June 30, 2022 | |
December 31, 2021 |
Deferred tax assets | |
| | | |
| | |
Net operating loss carry-forward | |
$ | 38,119 | | |
$ | 5,302 | |
Total | |
$ | 38,119 | | |
$ | 5,302 | |
Valuation allowance | |
| (38,119 | ) | |
| (5,302 | ) |
Net deferred tax assets - noncurrent | |
$ | — | | |
$ | — | |
Reconciliation of income tax provision and the accounting
profit multiplied by U.S. federal income tax rate for the three and six months ended June 30, 2022 and December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended June 30, | |
Six Months ended
June 30, |
| |
2022 | |
2021 | |
2022 |
|
2021 |
Income (loss) at 21% statutory tax rate | |
$ | (23,734 | ) | |
$ | (26 | ) | |
|
$ | (32,817 | ) |
|
$ | (52 | ) |
| |
| | | |
| | | |
|
| | |
|
| | |
Increase (decrease) in income taxes resulting from: | |
| | | |
| | | |
|
| | |
|
| | |
Net operating loss carry forward | |
| — | | |
| — | | |
|
| — | |
|
| | |
Change in valuation allowance | |
| 23,734 | | |
| 26 | | |
|
| 32,817 | |
|
| 52 | |
| |
$ | — | | |
$ | — | | |
|
$ | — | |
|
$ | — | |
LONGWEN GROUP CORP.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
NOTE 8 – STOCKHOLDERS’ EQUITY
Common Stock
On June 28, 2021, the Company issued 65,000,000 shares
of common stock to Joseph to retire $6,500 loan borrowed.
In March 2022, the Company sold 386,955 shares of
common stock to fifteen non-U.S. investors at $0.30 per share. Total $116,087 was received for 386,955 shares common stocks subscribed
in March 2022. Between April 1 and May 31, 2022, the Company sold 248,792 shares of common stock to twenty-six investors for a total amount
of $74,638. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions
were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
NOTE 9 – RELATED PARTY TRANSACTIONS
During the six months ended June 30, 2022, the Company
borrowed total $82,107 from the President of the Company for its normal business operations and the acquisition of Hangzhou Longwen. The
borrowing is non-interest-bearing, unsecured and due on demand. As of June 30, 2022 and December 31, 2021, the balance of the loan due
to our President was $78,088 and $nil, respectively. The difference of $4,021 was due to the fluctuation of foreign exchange rates.
NOTE 10 – CONTINGENCIES
On June 9, 2021, Anthony Lombardo (“Lombardo”)
filed an Application for Appointment of Custodian (“Application”) with the Eighth Judicial District Court in Nevada to request
the custodianship of the Company due to the Company’s non-response and late filing with the State of Nevada. On June 24, 2021, a
hearing was held on this Application, where Lombardo was named temporary custodian of the Company. Subsequently after Lombardo’s
custodianship, Deanna Johnson and Joseph Passalaqua (“Joseph”) were designated as the CEO, CFO and Secretary of the Company
in June and September 2021, respectively.
On October 25, 2021, Mr. Xizhen Ye (“Ye”),
the ex-officer and director of the Company prior to Lombardo’s custodianship, and Longwen Cayman, filed a motion to dissolve custodianship
(“Motion”) with the Eighth Judicial District Court of Nevada State. Pursuant to the Settlement Agreement entered on January
12, 2022, by Longwen Cayman, Mr. Ye, Lombardo, Joseph and Deanna Johnson regarding Lombardo’s custodianship, Mr. Ye and Mr. Lizhong
Lu were reinstated as the officer and directors of the Company, and 65,000,000 common stocks of the Company was transferred from Joseph
to Mr. Ye on February 9, 2022. Further on February 17, 2022, the Eighth Judicial District Court officially terminated Lombardo’s
custodianship over the Company.
NOTE 10 – SUBSEQUENT EVENTS
The Company
has evaluated all other subsequent events through the date these consolidated financial statements were issued and determine that there
were no other subsequent events or transactions that require recognition or disclosures in the consolidated financial statements.