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
unaudited consolidated financial statements.
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
NOTES TO THE UNAUDITED CONSOLIDATED 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.
On March 15, 2022, Hangzhou Longwen entered into a
Consulting 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.
On September 2, 2022, Hangzhou Longwen entered into
a Consulting Service Agreement with Linhai Dingji Auto Service Co., Ltd (China) (“Linhai Dingji”), pursuant to which, Hangzhou
Longwen will provide a series of consulting services to Linhai Dingji, including to assist in the preparation of member sales and purchase
agreement, assist with tax filing, assist with financial report preparation, assist with auto parts business negotiation and auto parts
valuation.
On September 5, 2022, Hangzhou Longwen entered into
a Consulting Service Agreement with Linhai Aodiluo Ecotourism Development Co., Ltd (China) (“Linhai Aodiluo”), pursuant
to which, Hangzhou Longwen will provide a series of consulting services to Linhai Aodiluo, including to assist in the preparation of member
sales and purchase agreement, assist with tax filing, assist with financial report preparation, assist with ecotourism business negotiation
and business website content publicity.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED 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 nine months ended September 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
September 30, |
|
Average
Rate for the nine months ended September 30, |
| |
|
2022 |
|
|
2021 |
|
2022 |
2021 |
| China yuan (RMB) |
|
RMB |
6.8506 |
|
|
RMB |
- |
|
RMB |
6.6001 |
RMB |
- |
| United States dollar ($) |
|
$ |
1.0000 |
|
|
$ |
- |
|
$ |
1.0000 |
$ |
- |
| |
|
Exchange Rate at |
|
| |
|
September 30, 2022 |
|
|
December 31, 2021 |
|
| China yuan (RMB) |
|
RMB |
7.1135 |
|
|
RMB |
- |
|
| United States dollar ($) |
|
$ |
1.0000 |
|
|
$ |
- |
|
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED 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.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 nine months ended September 30, 2022, the Company incurred a net loss of $196,567.
The Company had an accumulated deficit of $18,477,976 as of September 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 September 30, 2022 and December 31, 2021,
prepaid expenses and other current assets comprised as follows:
| |
|
September 30,
2022 |
|
December 31, 2021 |
| |
|
|
|
|
| Prepaid consulting fee |
|
$ |
76,895 |
|
|
$ |
— |
|
| VAT defer tax Assets |
|
|
2,108 |
|
|
|
— |
|
| Prepaid rent and parking lot |
|
|
4,068 |
|
|
|
— |
|
| Total |
|
$ |
83,071 |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 5 – EQUIPMENT, NET
As of September 30, 2022 and December 31, 2021, equipment
consisted of the following:
| | |
September 30, 2022 | |
December 31, 2021 |
| | |
| |
|
| Equipment | |
$ | 7,193 | | |
$ | — | |
| Property | |
| 263,070 | | |
| — | |
| Less: accumulated depreciation | |
| (1,233 | ) | |
| — | |
| Total property and equipment, net | |
$ | 269,030 | | |
$ | — | |
On September 28, 2022, the Company closed an office
suite purchase agreement with a third party. Pursuant to the agreement, the Company issued 2,651,780 common stocks of the Company to purchase
a 118-square-meter office suite located in Hangzhou City, Zhejiang Province, China. The cost of the office suite was measured at the fair
value of the issued common stocks on the close date of $265,178. The office space is intended for internal use.
Depreciation expenses were $1,316
and $nil for the nine months ended September 30, 2022 and 2021, respectively, which was included in selling, general and
administrative expenses. The difference with accumulated depreciation was due to exchange difference of $83. Depreciation expenses
were $581 and $nil for the three months ended September 30, 2022 and 2021, respectively.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – COMMERCIAL LOANS
The Company’s commercial loans consisted of
the following as of September 30, 2022 and December 31, 2021:
| | |
September 30, 2022 | |
December 31, 2021 |
| Loan with a third-party lender; the loan bears a fixed interest at $500 per annum and matures on December 31, 2022 | |
$ | 12,250 | | |
$ | 12,250 | |
| Loan with a third-party lender; unsecure, non-interest-bearing, and due on demand | |
| 196,809 | | |
| — | |
| Total loans | |
| 209,059 | | |
| 12,250 | |
| Less: current portion | |
| (209,059 | ) | |
| (12,250 | ) |
| Total non-current portion | |
$ | — | | |
$ | — | |
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 September 30, 2022
and December 31, 2021, the outstanding balances of the borrowing were $12,250 and $12,250, and the interest payables were $1,675 and $1,300,
respectively. Total interest expenses for the loan were $125 and $125, respectively, for the three months ended September 30, 2022
and 2021. Total interest expenses for the loan were $375 and $375, respectively, for the nine months ended September 30, 2022 and 2021.
On September 30, 2022, Hangzhou Longwen borrowed
a total of $267,097 (RMB1,900,000)
from a third party for a potential business property acquisition. However, the transaction was terminated, Hangzhou Longwen repaid $70,288
(RMB 500,000) to the third
party on September 30, 2022 and the remaining balance of 196,809
(RMB 1,400,000) on October
2022. The borrowing is non-interest-bearing, unsecured and due on demand.
NOTE 7 – INCOME TAX
As of September 30, 2022 and December 31, 2021, the
Company has incurred an accumulated net loss of approximately $18.5 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 September 30, 2022 and December 31, 2021 consisted of the following:
| |
|
September 30, 2022 |
|
December 31, 2021 |
| Deferred tax assets |
|
|
|
|
|
|
|
|
| Net operating loss carry-forward |
|
$ |
515,505 |
|
|
$ |
474,226 |
|
| Total |
|
$ |
515,505 |
|
|
$ |
474,226 |
|
| Valuation allowance |
|
|
(515,505 |
) |
|
|
(474,226 |
) |
| 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 nine months ended September 30, 2022 and December 31, 2021:
| | |
| |
| |
| |
|
| | |
Three Months Ended September 30, | |
Six Months ended
September 30, |
| | |
2022 | |
2021 | |
2022 | |
2021 |
| Income (loss) at 21% statutory tax rate | |
| 21 | % | |
| 21 | % | |
| 21 | % | |
| 21 | % |
| Taxable difference | |
| 4 | % | |
| — | | |
| 4 | % | |
| — | |
| Nontaxable items | |
| — | | |
| — | | |
| — | | |
| — | |
| GULTI tax | |
| — | | |
| — | | |
| — | | |
| — | |
| Others | |
| — | | |
| — | | |
| — | | |
| — | |
| Valuation allowance | |
| -25 | % | |
| -21 | % | |
| -25 | % | |
| -21 | % |
| | |
| 0 | % | |
| 0 | % | |
| 0 | % | |
| 0 | % |
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – STOCKHOLDERS’ EQUITY
Common Stock
On June 28, 2021, the Company issued 65,000,000 shares
of common stock with a total fair value of $15,600,000, to Joseph to retire $6,500 loan borrowed resulting in a loss on debt settlement
of $15,593,500.
During the nine-month ended September 30, 2022, the
Company sold 635,747 and 876,339 shares of common stock to forty-five non-U.S. investors at $0.30 and $0.10 per share, respectively. Total
$27,357 was received for total 1,512,086 shares of common stocks subscribed. 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.
On September 28, 2022, the Company and its subsidiary,
Hangzhou Longwen closed an Assets Sales and Purchase Agreement with a third-party seller to acquire an office suite located in Hangzhou,
China by issuing 2,651,780 shares of common stock of the Company, $0.10 per share with a total value of $265,178 (Note 5).
NOTE 9 – RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2022, the
Company borrowed total $80,883 from the President of the Company for its normal business operations and the acquisition of Hangzhou Longwen. The
borrowings are non-interest-bearing, unsecured and due on demand. As of September 30, 2022 and December 31, 2021, the balance of the loan
due to our President was $80,883 and $nil, respectively.
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 11 – 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, except disclosed below and the one in Note 6, that require recognition or disclosures
in the consolidated financial statements:
On October 11, 2022, the Company and its subsidiary,
Hangzhou Longwen entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Yusu Trading
Co., Ltd. (“HZYS”), a limited liability company in Hangzhou, the People’s Republic of China (the “PRC”),
for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated HZYS became Hangzhou Longwen’s
wholly owned subsidiary in the PRC. HZYS was originally registered on April 20, 2020 and has minimum operations since its inception.
The Company sold 238,780 shares of common stock to
two non-U.S. investors at $0.10 per share with a total $23,878 subscription received in October 2022. 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.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward-looking
statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,”
“intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based
on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material
set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” generally,
and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Quarterly Report
on Form 10-Q. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in
the following information have been compiled by our management on the basis of assumptions made by management and considered by management
to be reasonable. Our future operating results, however, are impossible to predict and no representation, guarantee, or warranty is to
be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative,
industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing
and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events
do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the
achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking
statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements
Overview
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”.
The Company underwent a change
of control on January 21, 2016, at which time Harold Minsky resigned in all officer positions. G. Reed Petersen and White Rim Cattle Company
LLC each purchased 25,000,000 shares of common stock of the Company from Harold Minsky. Mr. Petersen is the Member Manager of White Rim
Cattle Company, LLC and thus can be considered a control person of all 50,000,000 shares of stock of the Company. Pursuant to a Board
of Directors meeting, Mr. Petersen was elected to and accepted all the officer positions previously held by Harold Minsky.
On or about April 5, 2016,
the Company affected a 1 for 750 share reverse split of its issued and outstanding common stock. On such date, the Company’s common
stock was reduced from 95,164,140 to 127,061 shares outstanding.
Effective November 29, 2016,
G. Reed Peterson sold 66,667 shares of common stock of the Company to Longwen Group Corporation (Cayman Island), a Cayman Island company
(“Longwen Cayman”). All of the shares held by Longwen Cayman are restricted securities. As a result of the transactions,
Mr. Petersen no longer owns any of the Company’s capital stock or securities and he and his affiliates waived all loans and other
amounts due to the Company. In addition, on such date, Mr. Petersen resigned in all officer capacities from the Company, and 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”), who was the officer and director of the Company prior to Lombardo’s
custodianship, and Longwen Group Corporation, a Cayman Island corporation, filed a Motion to Dissolve Custodianship (“Motion”)
with the Eighth Judicial District Court of Nevada State. On January 12, 2022, in accordance with a Settlement Agreement regarding Lombardo’s
custodianship, Mr. Ye was reinstated his positions as the officer and director of the Company, along with the reinstatement of the other
Company’s director, Lizhong Lu, who was also in place prior to Lombardo’s custodianship. On February 9, 2022, pursuant to
the Settlement Agreement, Joseph transferred 65,000,000 common stocks of the Company owned by him to Mr. Ye. On February 17, 2022, the
Eighth Judicial District Court formally dismissed Lombardo’s custodianship for the Company.
On February 23, 2022, the
Company entered into an Acquisition Agreement with a third-party individual to 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 and the Company recognize $993 goodwill as a result of the business acquisition.
On March 15, 2022, Hangzhou
Longwen entered into a Consulting 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.
On September 2, 2022, Hangzhou Longwen entered into
a Consulting Service Agreement with Linhai Dingji Auto Service Co., Ltd (China) (“Linhai Dingji”), pursuant to which, Hangzhou
Longwen will provide a series of consulting services to Linhai Dingji, including to assist in the preparation of member sales and purchase
agreement, assist with tax filing, assist with financial report preparation, assist with auto parts business negotiation and auto parts
valuation.
On September 5, 2022, Hangzhou Longwen entered into
a Consulting Service Agreement with Linhai Aodiluo Ecotourism Development Co., Ltd (China) (“Linhai Aodiluo”), pursuant
to which, Hangzhou Longwen will provide a series of consulting services to Linhai Aodiluo, including to assist in the preparation of member
sales and purchase agreement, assist with tax filing, assist with financial report preparation, assist with ecotourism business negotiation
and business website content publicity.
Results of operation for the three months ended
September 30, 2022 and 2021
During the three
months ended on September 30, 2022, the Company generated $11,328 of revenue from its consulting services compared to $nil revenue for
the period of the same quarter of year 2021. During the three months ended September 30, 2022 and 2021, the Company incurred general and
administrative and professional expenses of $51,390 and $nil, respectively. The professional expenses for the three months ended September
30, 2022 of $30,011 mainly included auditing fee, consulting expenses and financial advisor fees. The net loss was $40,297 and $125 for
the three months ended on September 30, 2022 and 2021, respectively. The increase in net loss in the current quarter was mainly due to
the increase of selling, general and administrative and professional expenses as a result of the business operations in Hangzhou Longwen,
as well as to be compliant with the filing requirements of the Securities and Exchange Commission and OTC Markets as a public company.
Results of operation for the nine months ended
September 30, 2022 and 2021
During the nine
months ended on September 30, 2022, the Company generated $19,307 of revenue from its consulting services compared to $nil revenue for
the nine months ended September 30, 2021. During the nine months ended September 30, 2022 and 2021, the Company incurred general and administrative
and professional expenses of $215,527 and $6,500, respectively. The professional expenses of $111,346 for the nine months ended September
30, 2022 mainly included auditing fee, consulting expenses and financial advisor fees. The net loss was $196,540 and $15,600,375 for the
nine months ended on September 30, 2022 and 2021, respectively. The net loss of $15,600,375 for the nine months ended September 30, 2021
was mainly due to the loss on debt settlement by issuance of common stock which occurred on June 28, 2021.
Liquidity and Capital Resources
As of September 30, 2022 and December 31, 2021, we
had an accumulated deficit of $18,477,976 and $18,281,409, respectively. As of September 30, 2022, we had cash of $272,098 and working
capital of $63,552. As of December 31, 2021, we had cash of $nil and a working capital deficit of $13,550. The increase in the working
capital was primarily due to the fund received from our private placement to individual investors and loans received.
Going Concern Assessment
The Company demonstrates adverse conditions that raise
substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions are negative financial trends,
specifically cash outflow from operating activities, operating losses, accumulated deficit and other adverse key financial ratios.
Management’s plan to alleviate the substantial
doubt about the Company’s ability to continue as a going concern include attempting to improve its business profitability, its ability
to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital
funds from the majority shareholder and the President of the Company to eliminate inefficiencies in order to meet its anticipated cash
requirements. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing
capital expenditures and other requirements.
The unaudited condensed financial statements do not
include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities
that might be necessary in the event that the Company cannot continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements
requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions
or conditions.
The critical accounting policies are discussed in
further detail in the notes to the unaudited financial statements appearing elsewhere in this 10-Q report. Management believes that the
application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating
results and financial condition.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
As a “smaller reporting company” we are
not required to provide this information under this item pursuant to Regulation S-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report
on Form 10-Q, our President (principal executive officer) and our Chief Financial Officer performed an evaluation of the effectiveness
of and the operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act.
Based on that evaluation, our President and Chief Financial Officer each concluded that as of the end of the period covered by this report
on Form 10-Q, our disclosure controls and procedures were not effective in timely alerting them to material information relating to Longwen
Group Corp. required to be included in our Exchange Act filings.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over
financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange
Act that occurred during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
As a “smaller reporting company”, we are
not required to provide this information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
LONGWEN GROUP CORP. |
| |
|
| Date: November 3, 2022 |
/s/ Xizhen Ye |
| |
Xizhen Ye, President |
| |
(Principal Executive Officer) |
| Date: November 3, 2022 |
/s/ Xizhen Ye |
| |
Xizhen Ye, Chief Financial Officer |
| |
(Principal Financial and Accounting Officer) |
EXHIBIT INDEX
* Filed herewith.