UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the fiscal year ended
December 31,
2018.
OR
[ ] Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________.
Commission File Number:
000-32341
OMPHALOS, CORP.
(Exact name
of registrant as specified in its charter)
Nevada
|
84-1482082
|
(State or other jurisdiction of incorporation or
|
(I.R.S. Employer Identification No.)
|
organization)
|
|
Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1,
Luchu Dist.,
Taoyuan City 338
Taiwan
(Address of principal executive
offices, Zip Code)
011-8863-322-9658
(Registrants telephone
number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [_] No
[X]
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act.
[_] Yes
[X] No
Note - Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
from their obligations under those Sections.
Indicate by check mark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark whether registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files.)
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer [_]
|
Accelerated filer [_]
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Non-accelerated filer [_]
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Smaller reporting company [X]
|
|
Emerging growth company [_]
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act [_]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold or the average bid and asked price of such
common equity, as of the last business day of the registrants most recently
completed second fiscal quarter: Approximately $491,908.
The number of shares of registrants common stock outstanding,
as of March 27, 2019 was 115,063,760.
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TABLE OF CONTENTS
3
PART I
Item 1. Business.
Soyodo Group Holdings, Inc. (Soyodo) was incorporated on May
15, 1997 as Quixit, Inc. under the laws of the state of Colorado. On January 16,
2003, TOP Group Corp., a New York corporation, purchased 4,400,000 shares of the
company's common stock, which represented 88% of the company's outstanding
capital stock at that time. Prior to the change in control, the company's
purpose was to investigate opportunities to be acquired by a company that
desired to be registered under the Securities Exchange Act of 1934, as amended.
In March 2003, the company changed its state of incorporation from Colorado to
Delaware, and changed its name from Quixit, Inc. to TOP Group Holdings, Inc. In
August of 2005, the company changed its name from TOP Group Holdings, Inc. to
Soyodo Group Holdings, Inc.
In the second quarter of 2005, the company decided to commence
a chain of member-only stores in locations with large Chinese immigrant
populations, offering Chinese culture-related merchandise such as books,
pre-recorded CDs, stationery, gifts, and sports goods. Subsequently, six retail
stores had been opened. On June 30, 2006, however, the Company started to
concentrate on its wholesale operation and sold to its majority shareholder
& principal executive officer all the six retail stores. Then on November
30, 2006, the company decided to go back to its original plan of investigate
opportunities to be acquired and sold to its majority shareholder the remaining
wholesale operation.
Omphalos Corp. was incorporated on February 13, 1991 under the
laws of Republic of China (TWN), initially serving as a sales agent for an
equipment and used machine dealer. Omphalos Corp. (B.V.I.) was incorporated on
October 30, 2001 under the laws of the British Virgin Islands. All Fine
Technology Co., Ltd. was incorporated on March 23, 2004 under the laws of Republic of China. All Fine Technology Co.,
Ltd. (B.V.I.) was incorporated on February 2, 2005 under the laws of the British
Virgin Islands.
On July 4, 2007, Omphalos Corp. (BVI) acquired Omphalos (TWN)
and All Fine Technology Co. (TWN), through a share exchange with the
shareholders of these two entities. On October 19, 2007 Omphalos (BVI) purchased
All Fine Tech (BVI).
On February 5, 2008, Soyodo Group Holdings, Inc. entered into
and completed the transactions contemplated under a Share Exchange Agreement
(the Exchange Agreement) with each of the shareholders (the Shareholders) of
Omphalos Corp. (B.V.I.), a British Virgin Islands corporation, pursuant to which
Soyodo purchased from the Shareholders all issued and outstanding shares of
Omphalos Corp. (B.V.I.) common stock in consideration for the issuance of an
aggregate of 81,996,275 shares of Soyodo common stock (the "Share Exchange").
The Share Exchange resulted in a change in control of Soyodo with the
Shareholders owning 81,996,275 shares of common stock of the Company out of a
total of 90,191,275 issued and outstanding shares after giving effect to the
Share Exchange. Shen-Peir Yang beneficially owned 55,347,485 shares of common
stock and was elected a director and appointed as the Companys President. Chi
Pi Yun beneficially owned 2,049,907 shares of common stock and was appointed as
the Companys Chief Financial Officer. Li Shen-Ren beneficially owned 4,099,814
shares of common stock and was appointed as the Companys Chief Operating
Officer. As a result of the Exchange Agreement, (i) Omphalos Corp. (B.V.I.)
became a wholly-owned subsidiary of Soyodo and (ii) the Soyodo succeeded to the
business of Omphalos Corp. (B.V.I.) as its sole business.
Effective April 18, 2008, Soyodo entered into an Agreement and
Plan of Merger (the Merger Agreement) with Omphalos, Corp., a Nevada
corporation. Pursuant to the Merger Agreement, Soyodo was merged with and into
the surviving corporation, Omphalos Corp. The articles of incorporation and
bylaws of the surviving corporation became the articles of incorporation and
bylaws of the Company, and the directors and officers of Soyodo became the
members of the board of directors and officers of the Company. Following the
execution of the Merger Agreement, the Company filed with the Secretary of State
of Delaware and Nevada a Certificate of Merger. Omphalos, Corp. was incorporated
on April 15, 2008, under the laws of the State of Nevada. The main purpose of
the merger is to change Soyodos name to Omphalos, Corp.
Omphalos, Corp. and these four corporations are referred to
herein collectively as the "Company" or Omphalos.
Overview of Business
Omphalos, through its wholly-owned subsidiaries which serve as
third-party resellers, supplies a wide range of equipment and parts including
refurbished and modified reflow soldering ovens and automated optical inspection
machines for printed circuit board (PCB) manufacturers in Taiwan, China, and
South Asian countries. Omphalos also provides after sale services such as
maintenance and repairs to its customers and sells parts for the equipment for
that purpose.
A reflow oven is a machine used primarily for reflow soldering
of surface mount electronic components to printed circuit boards. Reflow
soldering represents the most common means to attach a component to a circuit
board, and typically consists of applying solder paste, positioning the
components, and reflowing the solder in a specialized oven. The goal of the
reflow process is to melt the powder particles in the solder paste, with the
surfaces being joined together, and solidify the solder to create a strong
metallurgical bond.
Omphalos markets its products in both Taiwan and China.
Omphalos clients are mainly big name Taiwanese electronics manufacturing
giants, including Quanta Computer Inc., Universal Scientific Industrial Co., and
Advantech in Taiwan, and QSMC, in China.
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Products
Omphalos offers a wide range of products, including the following:
Tamura N2 Reflow Ovens.
Omphalos offers the Tamura N2 Reflow Oven as its preferred choice for reflow soldering. The ovens have multiple temperature controlled heat emitting infrared radiation compartments that create a phase change in flux
(Small Soldier Particles) turning the solid into a liquid. When cooled in the final compartment, the flux undergoes another phase change turning from a liquid back into a solid forming a bond between the surface mount component and etched circuit
board. The Tamura Line takes the additional step of being an oxygen-free environment, instead it utilizes nitrogen gas to minimize oxidation.
Gryphon Laser Marking System.
This system is placed at the beginning of the SMT production line where it Laser Etches a Uniquely Identifiable 2-Dimensional Barcode onto the surface of a printed circuit board. 2D barcodes allow for more data
to be physically written to the circuit board, usually the threshold is when more than 20 characters need to be written, 2D barcoding is required. The 2D barcode helps to simplify
Management Information System
(MIS) by making more information
available offline, such as an identification number, time of fabrication, plant of fabrication, etc. making it easier to track defects and finished products to their final destination. This barcode works best when combined with the Argus Management
Information System throughout the fabrication process as its life will be tracked and analyzed. To date, the Company has not derived any significant revenues from this system.
During the year ended December 31, 2018, the Company obtained approximately 29% of the equipment and parts that it sells to its customers from one local suppliers, Jonk Woei Enterprise Co., Ltd. The vendor is a Taiwanese company.
Marketing
Most of the Omphalos’ business is generated through personal relationships with its major customers. In addition, it may participate in trade shows and occasionally run advertisements in trade journals and newspapers.
Markets and Customers
Omphalos’ customers include a number of major electronic manufacturing companies. For the year ended December 31, 2018, one customer accounted for more than 10% of the Company’s total revenues, represented approximately 84% of its total
net revenues.
Regulations
Omphalos is not subject to any significant government regulation that is particular to its business.
Competition
Omphalos’s industry is highly competitive. Omphalos believes that its principal direct competitors are the manufacturers of the equipment themselves. These include Japanese companies such as Sayaka, Tamura Furukawa and Ishikawa.
There are also a number of companies in Asia that resell refurbished equipment. Our main competitors include Xucan Electronic Technology Co., Ltd. and Shenzhen Haimuxing Laser Technology Co., Ltd.
Some of these companies have significantly greater financial, technical and human resources than we do, as well as a wider range of products than we have. In addition, many of our competitors have much greater experience in marketing their products,
as well as more established relationships with our target customers. Our competitors may also have greater name recognition and more extensive customer bases that they can use to their benefit. As a result, we may have difficulty maintaining our
market share.
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We believe that our competitive edge is our responsiveness to
our customers needs, both in terms of speed as well as in our ability to modify
the equipment in accordance with the customers instructions.
Intellectual Property
Omphalos has been granted the following patents:
Name
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Patent No
|
Country
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Patent Term
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Vehicle Camera Apparatus
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M345732
|
Taiwan
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expires 3.31.2019
|
Automatically Marking and Reading/Distinguishing
|
I287752
|
Taiwan
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expires 1.30.2050
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Servo Motor Control Method and Apparatus
Using the Same
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I325031
|
Taiwan
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expires 4.19.2027
|
Laser Machining Module And Laser Machining Table
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M411305
|
Taiwan
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expires 2.3.2021
|
Automatic Board-Flipping Mechanism
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M411758
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Taiwan
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expires 6.7.2026
|
Automatically Marking and Reading/Distinguishing
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11/248,212
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U.S.A
|
expires 6.7. 2026
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Laser Machining Module And
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ZL20112
|
China
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expires 3.18. 2021
|
Laser Machining Table
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0073538.7
|
|
|
Automatic Board-Flipping
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ZL20112
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China
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expires 3.18. 2021
|
Mechanism
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0073727.4
|
|
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Laser Machining Module And Laser Machining
Table
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3175212
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Japan
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expires 4.4. 2022
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Automatic Board-Flipping Mechanism
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3175211
|
Japan
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expires 4.4. 2022
|
Laser Machining Module And Laser Machining
Table
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201120392907.9
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China
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expires 3.05.2021
|
In the future, we expect to expand the number and type of
products we are able to provide to our customers. We intend to use our patents
and improve or add functions to current products, and plan to use these patents
in future products. The issued patents and applications relate to techniques
developed by us for automatically labeling and inspecting, automatically marking
and reading apparatus.
There can be no guarantee that the patents held by us will not
be challenged or invalidated, that patents will be issued for any of our pending
applications or that any claims allowed from existing or pending patents will be
of sufficient scope or strength (or issue in the countries where products
incorporating our technology may be sold) to provide meaningful protection or
any commercial advantage to us. In any event, effective protection of
intellectual property rights may be unavailable or be limited in certain
countries.
Employees
As of March 29, 2019, Omphalos had six full-time employees.
None of its employees is represented by a labor union, and Omphalos considers
its employee relations to be excellent. Omphalos seeks to use contract workers
and anticipates maintaining a small full-time employee base.
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Available Information
We file or furnish annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and any amendments to those
reports filed or furnished pursuant to Section 13(a) and 15(d) of the Securities
Exchange Act of 1934, as amended (the Exchange Act), with the SEC. These
reports will be available as soon as reasonably practical after such reports are
electronically filed with, or furnished to, the SEC. All of these documents are
available in print without charge to stockholders upon request. Our SEC filings
are available to the public over the Internet at the SECs web site at
http://www.sec.gov. You may also read and copy any document we file at the SECs
public reference rooms in Washington, D.C.
Item 1A. Risk Factors.
The following risk factors and other information included in
this Annual Report on Form 10-K should be carefully considered. The risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us or which we currently deem
immaterial also may impair our business operations. If any of the following
risks occur, our business, financial condition, operating results, and cash
flows could be materially adversely affected.
Risk Factors Related to Our Business.
We may need to raise capital to fund our operations, and our
failure to obtain funding when needed may force us to delay, reduce or eliminate
our expansion efforts.
If in the future, we are not capable of generating sufficient
revenues from operations and our capital resources are insufficient to meet
future requirements, we may have to raise funds to continue the development,
commercialization, marketing and sale of our products.
We cannot be certain that funding will be available on
acceptable terms, or at all. To the extent that we raise additional funds by
issuing equity securities, our stockholders may experience significant dilution.
Any debt financing, if available, may involve restrictive covenants that impact
our ability to conduct our business. If we are unable to raise additional
capital if required or on acceptable terms, we may have to significantly delay,
scale back or discontinue the development and/or commercialization of one or
more of our products, obtain funds by entering into agreements on unattractive
terms or restrict or cease our operations and go out of business.
Our declining operating revenues may cause substantial
doubt about our ability to continue as a going concern.
Our audited financial statements for the years ended December
31, 2018 and 2017 were prepared based on the assumption that we will continue
our operations as a going concern. We had net losses of $191,818 and $262,183
during the years ended December 31, 2018 and 2017, respectively. As a result,
there may be substantial doubt about our ability to continue as a going concern.
Our future is dependent upon our ability to implement our business plans and
upon our future profitable operations.
The success of our business depends on our ability to
successfully obtain a supply of merchandise for our buyers and to attract and
retain active professional buyers to create sufficient demand for our
sellers.
Our ability to increase our revenue and maintain profitability
depends on whether we can successfully expand the supply of merchandise
available for sale and attract and retain active professional buyers to purchase
the merchandise. Our ability to attract sufficient quantities of suitable
merchandise and new buyers will depend on various factors, some of which are out
of our control. These factors include our ability to:
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offer buyers a sufficient supply of merchandise;
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develop and implement effective sales and marketing strategies;
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comply with corporate seller requirements affecting marketing and disposition of certain categories of merchandise;
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efficiently catalogue, handle, store, ship and track merchandise; and
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achieve high levels of seller and buyer satisfaction with the trading experience.
Omphalos is exposed to risks as a result of ongoing changes in the semiconductor and semiconductor-related industries.
The global industries in which we operate are characterized by ongoing changes, including: (1) higher capital requirements for building and operating new semiconductor and LCD fabrication plants and the resulting effect on customers’ ability
to raise the necessary capital; (2) differing rates of market growth for, and capital investments by, various semiconductor device makers, such as memory (including NAND Flash and DRAM), logic and foundry, as well as LCD and solar manufacturers; (3)
industry growth rates; (4) the increasing cost and decreasing affordability of research and development due to many factors, including decreasing line widths, the increasing number of materials, applications and process steps, and the greater
complexity of process development and chip design; (5) the increasing difficulty for customers to move from product design to volume manufacturing; (6) the importance of reducing the cost of system ownership, due in part to the increasing
significance of consumer electronics as a driver for semiconductor and LCD demand and the related focus on lower prices; (7) varying levels of business information technology spending; (8) the heightened importance to customers of system reliability
and productivity, and the effect on demand for systems as a result of their increasing productivity, device yield and reliability; (9) the growing types and varieties of semiconductors and expanding number of applications across multiple substrate
sizes, resulting in customers’ divergent technical demands; (10) demand for shorter cycle times for the development, manufacture and installation of manufacturing equipment; (11) the challenge to semiconductor manufacturers of moving volume
manufacturing from one technology node to the next smaller technology node, and the resulting impact on the technology transition rate and the rate of investment in capital equipment; (12) price trends for certain semiconductor devices and LCDs;
(13) difficulties associated with transitioning to larger substrate sizes; and (14) the increasing importance of the availability of spare parts to assure maximum system uptime. If we do not successfully manage the risks resulting from the ongoing
changes occurring in the semiconductor and semiconductor-related industries, its business, financial condition and results of operations could be materially and adversely affected.
The industries that Omphalos serves are volatile and unpredictable.
As a supplier to the global semiconductor, computer and related industries, we are subject to business cycles, the timing, length and volatility of which can be difficult to predict and which may vary by reportable segment. The industries have
historically been cyclical due to sudden changes in customers’ manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for customers’ products, and inventory levels relative to demand. The
effects on Omphalos of these changes in demand, including end-customer demand, are occurring more rapidly. These changes have affected the timing and amounts of customers’ purchases and investments in technology, and continue to affect our
orders, net sales, gross margin, contributed profit and results of operations.
We must effectively manage our resources to meet rapidly changing demand. During periods of decreasing demand for our products, we must be able to appropriately align our cost structure with prevailing market conditions, motivate and retain key
employees, and effectively manage our supply chain. During periods of increasing demand, we must have sufficient inventory to meet customer demand; attract, retain and motivate a sufficient number of qualified individuals; and effectively manage our
supply chain. If we are not able to timely and appropriately adapt to changes in industry cycles, our business, financial condition or results of operations may be materially and adversely affected.
Omphalos is exposed to risks associated with a highly concentrated customer base in the semiconductor and flat panel display industries.
Our semiconductor and other customer base historically has been, and is becoming even more, highly concentrated. For the year ended December 31, 2018, one major customer accounted for approximately 84.21% of Omphalos’ total revenues. Orders from a relatively limited number of manufacturers have accounted for, and are expected to continue to account for, a substantial portion of our net sales. In addition, the mix and type of customers, and sales to any single customer,
may vary significantly from quarter to quarter and from year to year. If customers do not place orders, or they delay or cancel orders, we may not be able to replace the business. As our products are configured to customer specifications, changing,
rescheduling or canceling orders may result in significant, non-recoverable costs. Major customers may also seek, and on occasion receive, pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us. In
addition, certain customers have undergone significant ownership changes, have outsourced manufacturing activities, and/or have entered into strategic alliances or industry consortia that have increased the influence of key semiconductor
manufacturers in technology decisions made by their partners, which may result in additional complexities in managing customer relationships and transactions. These factors could have a material, adverse effect on our business, financial condition
and results of operations.
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Omphalos is highly dependent on one supplier.
For the year ended December 31, 2018, Omphalos obtained 29.4% of the equipment and parts that it sells to its customers from one vendor. If the vendor was to cease supplying us with products for any reason, this would force us to find alternative
sources for our products. A change in suppliers could cause a delay in availability of products and a possible loss of sales, which could adversely affect our operating results.
Manufacturing interruptions or delays could affect our ability to meet customer demand, while the failure to estimate customer demand accurately could result in excess or obsolete inventory.
Our business depends on our ability to supply equipment, services and related products that meet the rapidly changing technical and volume requirements of our customers, which depends in part on the timely delivery of parts, components and
subassemblies (collectively, parts) from suppliers. Some key parts may be subject to long lead-times and/or obtainable only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers in developing
regions, including China and Southeast Asian countries. Significant interruptions of manufacturing operations or the delivery of services as a result of: (1) the failure or inability of suppliers to timely deliver quality parts; (2) volatility in
the availability and cost of materials; (3) difficulties or delays in obtaining required export approvals; (4) information technology or infrastructure failures; (5) natural disasters (such as earthquakes, floods or storms); or (6) other causes
(such as regional economic downturns, pandemics, political instability, terrorism, or acts of war), could result in delayed deliveries, manufacturing inefficiencies, increased costs or order cancellations. Moreover, if actual demand for our products
is different than expected, we may purchase more/fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. Any or all of these factors could materially and adversely affect our business, financial condition
and results of operations.
We may not be able to effectively manage our growth, which may harm our profitability.
Our strategy envisions expanding our business. If we fail to effectively manage our growth, our financial results could be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand
our business development capabilities, our systems and processes and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We cannot assure you that we will be able to:
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meet our capital needs;
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expand our systems effectively or efficiently or in a timely manner;
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allocate our human resources optimally;
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identify and hire qualified employees or retain valued employees; or
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incorporate effectively the components of any business that we may acquire in our effort to achieve growth.
9
If we are unable to manage our growth, our operations and our financial results could be adversely affected by inefficiency, which could diminish our profitability.
Loss of Sheng-Peir Yang, our Chief Executive Officer, could impair our ability to operate.
If we lose our key employee, Sheng-Peir Yang, our Chief Executive Officer, our business could suffer. Our success is highly dependent on our ability to attract and retain qualified technical and management personnel. We are highly dependent on our
management. Mr. Yang has an employment agreement with the Company. However, the loss of Mr. Yang’s services could have a material adverse effect on our operations. If we were to lose this individual, we may experience difficulties in competing
effectively, developing our technology and implementing our business strategies. We do not have key-man life insurance in place for any person working for us.
Our management team does not have extensive experience in public company matters, which could impair our ability to comply with legal and regulatory requirements
.
Our management team has had limited public company management experience or responsibilities. This could impair our ability to comply with legal and regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable federal securities
laws including filing required reports and other information required on a timely basis. There can be no assurance that our management will be able to implement and effect programs and policies in an effective and timely manner that adequately
respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the
deterioration of our business.
RISKS RELATED TO OUR COMMON STOCK
There has been a limited trading market for our common stock. There is no assurance of an established public trading market, which would adversely affect the ability of our investors to sell their securities in the public markets.
It is anticipated that there will continue to be a limited trading market for the Company's common stock, quoted on the OTCQB. The lack of an active public market may impair your ability to sell your shares at the time you wish to sell them or at a
price that you consider reasonable. The lack of an active public market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our
ability to acquire other companies or technologies by using common stock as consideration.
You may have difficulty trading and obtaining quotations for our common stock.
The common stock may not be actively traded, and the bid and asked prices for our common stock quoted on the OTCQB may fluctuate widely. As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of,
our securities. This severely limits the liquidity of the common stock, and would likely reduce the market price of our common stock and hamper our ability to raise additional capital.
The market price of our common stock may, and is likely to continue to be, highly volatile and subject to wide fluctuations.
The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:
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dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we may make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;
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announcements of new acquisitions, discoveries or other business initiatives by our competitors;
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our ability to take advantage of new acquisitions, discoveries or other business initiatives;
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quarterly variations in our revenues and operating expenses;
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changes in the valuation of similarly situated companies, both in our industry and in other industries;
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changes in analysts’ estimates affecting the Company, our competitors and/or our industry;
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changes in the accounting methods used in or otherwise affecting our industry;
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additions and departures of key personnel;
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fluctuations in interest rates and the availability of capital in the capital markets; and
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significant sales of our common stock, including sales by the investors and/or future investors in future offerings we expect to make to raise additional capital.
These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and/or our results of operations and financial
condition.
We do not expect to pay dividends in the foreseeable future.
We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common
stock, and stockholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in the common stock.
If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
Our internal controls over financial reporting, while they appear to be sufficient for our needs, may have weaknesses and conditions that will need to be addressed, the disclosure of which may have an adverse impact on the price of our common stock.
We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our
business, financial condition or operating results. In addition, management's assessment of our internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial
reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal controls over financial reporting or disclosure of management's assessment of our internal
controls over financial reporting may have an adverse impact on the price of our common stock.
We are controlled by current officers, directors and principal stockholders.
Our directors, executive officers and principal stockholders and their affiliates beneficially own approximately 90% of the outstanding shares of our common stock. So long as our directors, executive officers and principal stockholders and their
affiliates control a majority of our fully diluted equity, they will continue to have the ability to elect our directors and determine the outcome of votes by our stockholders on corporate matters, including mergers, sales of all or substantially
all of our assets, charter amendments and other matters requiring stockholder approval.
This controlling interest may have a negative impact on the market price of our common stock by discouraging third-party investors.
11
Applicable SEC rules governing the trading of “penny stocks” limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.
Shares of common stock may be considered a “penny stock” and be subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and regulate broker-dealer practices in connection
with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer
must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held
in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock
rules which may increase the difficulty investors may experience in attempting to liquidate such stock.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our principal executive offices are located at Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1, Luchu District, Taoyuan City 338, Taiwan and No.92, Bagu Rd., Luchu District, Taoyuan City 338, Taiwan.
Omphalos does not own any real property. The Company leases an office and a warehouse from the wife of our sole director, Mr. Yang. The office maintains administration and sales facilities and the warehouse maintains inventory. The locations of the
office and warehouse are Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1, Luchu District, Taoyuan City, 338Taiwan and No.92, Bagu Rd., Luchu District, Taoyuan City 338, Taiwan, respectively. The office space is approximately 3,700 square feet, and the
warehouse space is approximately 3,334 square feet.
Generally, Omphalos maintains short-term leases for its office and warehouse, with options to renew, where possible. The terms of the lease for office and warehouse have been extended to January 31, 2019 and October 1, 2020, respectively. The
Company paid a monthly rent of approximately $2,810 for the periods ended December 31, 2018 and 2017. Accordingly, rent expense under the office and warehouse lease agreements amounted to approximately $34,300 and $33,945 for the periods
ended December 31, 2018 and 2017, respectively.
Item 3. Legal Proceedings.
None
Item 4. [Removed and Reserved.]
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is quoted on the OTCQB under the trading symbol "OMPS".
The following table sets forth, for the period indicated, the range of the high and low sales prices of our common stock, as reported by the OTCQB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.
12
Year Ended December 31,
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First
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Second
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Third
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Fourth
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
High
|
|
$
|
*
|
|
$
|
0.045
|
|
$
|
*
|
|
$
|
*
|
|
|
|
Low
|
|
$
|
*
|
|
$
|
0.045
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|
$
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*
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$
|
*
|
|
|
|
|
|
|
|
|
|
|
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2017
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High
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$
|
0.10
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$
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*
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$
|
0.10
|
|
$
|
0.045
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|
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Low
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|
$
|
0.10
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|
$
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*
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$
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0.10
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$
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0.045
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2016
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High
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$
|
0.071
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$
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*
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$
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*
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$
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*
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|
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Low
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$
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0.04
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$
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*
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$
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*
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$
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*
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*no public trading volume
There were approximately 72 common stock holders of record of
our common stock as of March 13, 2019.
Although we paid dividends on our common stock in 2008 totaling
$175,260, or approximately $0.00583 per share, we paid no dividends on our
common stock in 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017 or 2018. We
do not have a policy of paying regular dividends and do not expect to pay any
dividends on our common stock in the foreseeable future. We currently intend to
retain any future earnings for our business. The payment of any future dividends
on our common stock will be determined by our Board of Directors and will depend
on business conditions, our financial earnings and other factors.
Recent Transactions Involving Unregistered Securities
None
Item 6. Selected Financial Data.
Not applicable.
Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Forward Looking Statements
Some of the statements contained in this Form 10-K that are not
historical facts are forward-looking statements which can be identified by the
use of terminology such as estimates, projects, plans, believes,
expects, anticipates, intends, or the negative or other variations, or by
discussions of strategy that involve risks and uncertainties. We urge you to be
cautious of the forward-looking statements, that such statements, which are
contained in this Form 10-K, reflect our current beliefs with respect to future
events and involve known and unknown risks, uncertainties, and other factors
affecting our operations, market growth, services, products, and licenses. No
assurances can be given regarding the achievement of future results, as actual
results may differ materially as a result of the risks we face, and actual
events maydiffer from the assumptions underlying the statements that have been
made regarding anticipated events. Factors that may cause actual results, our
performance or achievements, or industry results, to differ materially from
those contemplated by such forward-looking statements include without
limitation:
|
1.
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Our ability to attract and retain management, and to
integrate and maintain technical information and management information
systems;
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2.
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Our ability to generate customer demand for our
services;
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13
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3.
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The intensity of competition; and
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4.
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General economic conditions.
|
All written and oral forward-looking statements made in
connection with this Form 10-K that are attributable to us or persons acting on
our behalf are expressly qualified in their entirety by these cautionary
statements. Given the uncertainties that surround such statements, you are
cautioned not to place undue reliance on such forward-looking statements. This
MD&A should also be read in conjunction with the Item 1.A. Risk Factors.
Overview
The Company, through Omphalos Corp. Taiwan, is in the
business of supplying a wide range of equipment and parts including reflow
soldering ovens and Automated Optical Inspection (AOI) machines to printed
circuit board (PCB) manufacturers in Taiwan and China. The clients are mainly
Taiwanese and Chinese electronics manufacturing companies, including Delta
Electronics (Jiangsu) Ltd., Wistron Corporation, Shenzhen MagicRay Technology
Co., Ltd., and Chicony Electronics CO., Ltd.
The major equipment manufacturer Omphalos represents is TAMURA,
which has complete technical support licensed from the original manufacturers.
The Company operates in an industry characterized by rapid
technological changes. It will need additional investments to complete the
development and improvement necessary for the development and production of the
testing equipment and parts for PCB assembly processes.
The Companys business strategy is to increase its market share
by expanding into other industries. Since PCB has a vast application range, the
Company is currently researching and developing many additional uses for testing
equipment and parts.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and
results of operations are based on our financial statements that have been
prepared under accounting principle generally accepted in the United States of
America. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Basis of Consolidation The condensed consolidated financial
statements include the accounts of Omphalos Corp. and its wholly owned
subsidiaries. All significant intercompany accounts and transactions are
eliminated.
Going Concern The Company has incurred net losses during the
past two years and had an accumulated deficit of $2,220,140 and $2,028,322 as of
December 31, 2018 and 2017, respectively. The accompanying consolidated
financial statements have been prepared assuming that the Company will continue
as a going concern. This basis of accounting contemplates the recovery of the
Companys assets and the satisfaction of liabilities in the normal course of
business. This presentation presumes funds will be available to finance ongoing
research and development, operations and capital expenditures and permit the
realization of assets and the payment of liabilities in the normal course of
operations for the foreseeable future.
There can be no assurances that there will be adequate
financing available to the Company and the consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
14
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) Expanding product lines and
recruiting a strong sales team to significantly increase sales revenue and
profit in 2019; (3) The Company plans to continue actively seeing additional
funding opportunities to improve and expand upon its product lines.
Cash and Cash Equivalents Cash and cash equivalents include
cash on hand and cash in time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or less.
Accounts Receivable Accounts receivable are carried at
original invoice amount less estimates made for doubtful receivables. Management
determines the allowance for doubtful accounts on a quarterly basis based on a
review of the current status of existing receivables, account aging, historical
collection experience, subsequent collections, managements evaluation of the
effect of existing economic conditions, and other known factors. The provision
is provided for the above estimates made for all doubtful receivables. Account
balances are charged off against the allowance only when the Company considers
it is probable that a receivable will not be recovered. Recoveries of trade
receivables previously written off are recorded when received.
Inventory Inventory is carried at the lower of cost and net
realizable value. Net realizable value (NRV) is defined as estimated selling
prices less costs of completion, disposal, and transportation. Cost is
determined by using the specific identification method. The Company periodically
reviews the age and turnover of its inventory to determine whether any inventory
has become obsolete or has declined in value, and charges to operations for
known and anticipated inventory obsolescence. Inventory consists substantially
of finished goods and is net of an allowance for slow-moving inventory of
$436,409 and $450,691 at December 31, 2018 and 2017, respectively.
Property and Equipment Property and equipment are recorded at
cost, less accumulated depreciation. Depreciation is computed on the
straight-line method over the estimated useful lives of the related assets as
follows:
Automobile
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5 years
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Furniture and fixtures
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3 years
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Machinery and equipment
|
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3 to 5
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|
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years
|
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Leasehold improvements
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55 years
|
|
Expenditures for major renewals and betterment that extend the
useful lives of property and equipment are capitalized. Expenditures for repairs
and maintenance are charged to expense as incurred. When property and equipment
are retired or otherwise disposed of, the asset and accumulated depreciation are
removed from the accounts and the resulting profit or loss is reflected in the
statement of income for the period.
The accumulated depreciation was
$121,865 and $123,122 at December 31, 2018 and 2017, respectively. Depreciation
expense was $2,687 and $4,876 for the years ended December 31, 2018 and 2017,
respectively.
Intangible Assets
Include cost of patent
applications that are deferred and charged to operations over their useful
lives. The accumulated amortization is $36,778 and $34,612 at December 31, 2018
and 2017, respectively. Amortization expense was $3,316 and $3,286 for the years
ended December 31, 2018 and 2017, respectively.
Impairment of Long-Lived Assets
The Company has
adopted Accounting Standards Codification subtopic 360-10, Property, Plant and
Equipment (ASC 360-10). ASC 360-10 requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company evaluates its long lived assets for
impairment annually or more often if events and circumstances warrant. Events
relating to recoverability may include significant unfavorable changes in
business conditions, recurring losses, or a forecasted inability to achieve
break-even operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undiscounted cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be adjusted, based on estimates of future discounted cash flows
resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less costs to sell. Management has determined that no impairments of long-lived
assets currently exist.
15
Fair Value Measurements
FASB ASC
820, Fair Value Measurements defines fair value for certain financial and
nonfinancial assets and liabilities that are recorded at fair value, establishes
a framework for measuring fair value and expands disclosures about fair value
measurements. It requires that an entity measure its financial instruments to
base fair value on exit price, maximize the use of observable units and minimize
the use of unobservable inputs to determine the exit price. It establishes a
hierarchy which prioritizes the inputs to valuation techniques used to measure
fair value. This hierarchy increases the consistency and comparability of fair
value measurements and related disclosures by maximizing the use of observable
inputs and minimizing the use of unobservable inputs by requiring that
observable inputs be used when available. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing the assets or
liabilities based on market data obtained from sources independent of the
Company. Unobservable inputs are inputs that reflect the Companys own
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances. The hierarchy prioritizes the inputs into three broad levels
based on the reliability of the inputs as follows:
-
Level 1 Inputs are quoted prices in active markets for identical assets
or liabilities that the Company has the ability to access at the measurement
date. Valuation of these instruments does not require a high degree of
judgment as the valuations are based on quoted prices in active markets that
are readily and regularly available.
-
Level 2 Inputs other than quoted prices in active markets that are either
directly or indirectly observable as of the measurement date, such as quoted
prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities.
-
Level 3 Valuations based on inputs that are unobservable and not
corroborated by market data. The fair value for such assets and liabilities is
generally determined using pricing models, discounted cash flow methodologies,
or similar techniques that incorporate the assumptions a market participant
would use in pricing the asset or liability.
The carrying values of certain assets and liabilities of the
Company, such as cash and cash equivalents, accounts receivable, inventory,
prepaid expenses, accounts payable, accrued liabilities, and due to related
parties, approximate to fair value due to their relatively short maturities. The
carrying amounts of the Company's long-term debt approximate to their fair value
because of the short maturity and/or interest rates which are comparable to
those currently available to the Company on obligations with similar terms.
Revenue Recognition
During the fiscal year
2018, the Company has adopted Accounting Standards Codification (ASC), Topic
606 (ASC 606), Revenue from Contracts with Customers, using the modified
retrospective method to all contracts that were not completed as of January 1,
2018. The Company recognized the cumulative effect of applying the new revenue
standard as an adjustment to the opening balance of accumulated deficit at the
beginning of 2018. The results for the Companys reporting periods beginning on
and after January 1, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported under the accounting
standards in effect for the prior period. Based on the Companys review of
existing sales contracts as of January 1, 2018, the Company concluded that the
adoption of the new guidance did not have a significant change on the Companys
revenue during all periods presented.
Pursuant to ASC 606, the Company recognizes revenue when its
customer obtains control of promised goods or services, in an amount that
reflects the consideration that the Company expects to receive in exchange for
those goods or services. To determine revenue recognition for arrangements that
the Company determines is within the scope of ASC 606, the Company performs the
following five steps: (i) identify the contract(s) with a customer; (ii)
identify the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue when (or as) the Company
satisfies a performance obligation. The Company only applies the five-step model
to contracts when it is probable that the Company will collect the consideration the Company is entitled to in
exchange for the goods or services the Company transfers to the customers. At
inception of the contract, once the contract is determined to be within the
scope of ASC 606, the Company assesses the goods or services promised within
each contract, determines those that are performance obligations, and assesses
whether each promised good or service is distinct. The Company then recognizes
as revenue the amount of the transaction price that is allocated to the
respective performance obligation when (or as) the performance obligation is
satisfied.
16
Merchandise Sales
: The Company
recognizes net revenues from machinery product sales when customers obtain
control of the Companys products, which typically occurs upon delivery to
customer. Product revenues are recorded at the net sales price, or transaction
price, which includes applicable reserves for variable consideration, including
discounts, allowances, and returns.
Trade discount and allowances
:
The Company generally provides invoice discounts on product sales to its
customers for prompt payment. The Company estimates that, based on its
experience, its customers will earn these discounts and fees, and deducts the
full amount of these discounts and fees from its gross product revenues and
accounts receivable at the time such revenues are recognized.
Product returns:
The Company
estimates the amount of each product that will be returned and deducts these
estimated amounts from its gross revenues at the time the revenues are
recognized. For special ordered and customized machinery, no sales returns were
allowed.
To date, product allowance and returns
have been minimal and, based on its experience, the Company believes that
returns of its products will continue to be minimal.
The following tables provide details of revenue by major
products and by geography.
Revenue by Major Products
|
|
|
|
For the year
ended December 31, 2018:
|
|
|
|
Laser Machine
|
$
|
439,972
|
|
Machine Parts
|
|
87,661
|
|
Total
|
$
|
527,633
|
|
|
|
|
|
Revenue by Geography
|
|
|
|
For the year
ended December 31, 2018:
|
|
|
|
Asia Pacific
|
$
|
527,633
|
|
Total
|
$
|
527,633
|
|
Leases
Lease agreements are evaluated to determine if
they are capital leases meeting any of the following criteria at inception: (a)
Transfer of ownership; (b) Bargain purchase option; (c) The lease term is equal
to 75 percent or more of the estimated economic life of the leased property; (d)
The present value at the beginning of the lease term of the minimum lease
payments, excluding that portion of the payments representing executory costs
such as insurance, maintenance, and taxes to be paid by the lessor, including
any profit thereon, equals or exceeds 90 percent of the excess of the fair value
of the leased property to the lessor at lease inception over any related
investment tax credit retained by the lessor and expected to be realized by the
lessor.
If at its inception a lease meets any of the four lease
criteria above, the lease is classified by the lessee as a capital lease; and if
none of the four criteria are met, the lease is classified by the lessee as an
operating lease.
Research and Development Expenses
Research and
development costs are generally expensed as incurred.
Statement of cash flows
In accordance with FASB ASC
Topic 230, Statement of Cash Flows, cash flows from the Companys operations
are calculated based upon the local currencies, and translated to the reporting
currency using an average foreign exchange rate for the reporting period. As a
result, amounts related to changes in assets and liabilities reported on the
statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheets.
17
Income Taxes
The Company accounts for income
taxes in accordance with ASC 740, Income Taxes, which requires that the Company
recognize deferred tax liabilities and assets based on the differences between
the financial statement carrying amounts and the tax basis of assets and
liabilities, using enacted tax rates in effect in the years the differences are
expected to reverse. Deferred income tax benefit (expense) results from the
change in net deferred tax assets or deferred tax liabilities. A valuation
allowance is recorded when, in the opinion of management, it is more likely than
not that some or all of any deferred tax assets will not be realized.
Stock Based Compensation
The Company applies
the fair value provisions of ASC 718,
Compensation-Stock Compensation
(ASC 718). ASC 718 requires the recognition of compensation expense, using
a fair-value based method, for costs related to all share-based payments
including stock options. ASC 718 requires companies to estimate the fair value
of share-based payment awards on the grant date using an option pricing model.
The Company does not have any awards of stock-based compensation issued and
outstanding at December 31, 2018 and 2017.
Loss Per Share
The Company has adopted
Accounting Standards Codification subtopic 260-10, Earnings Per Share (ASC
260-10) which specifies the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings per share have
been calculated based upon the weighted average number of common shares
outstanding. Common equivalent shares are excluded from the computation of the
diluted loss per share if their effect would be anti-dilutive. For the years
ended December 31, 2018 and 2017, the Company did not have any common equivalent
shares.
Foreign-currency Transactions Foreign-currency transactions
are recorded in New Taiwan dollars ("NTD") at the rates of exchange in effect
when the transactions occur. Gains or losses resulting from the application of
different foreign exchange rates when cash in foreign currency is converted into
New Taiwan dollars, or when foreign-currency receivables or payables are
settled, are credited or charged to income in the year of conversion or
settlement. On the balance sheet dates, the balances of foreign-currency assets
and liabilities are restated at the prevailing exchange rates and the resulting
differences are charged to current income except for those foreign currency
denominated investments in shares of stock where such differences are accounted
for as translation adjustments under stockholders' equity.
Translation Adjustment
The Company financial
statements are presented in the U.S. dollar ($), which is the Companys
reporting currency, while its functional currency is New Taiwan dollar (NTD).
Transactions in foreign currencies are initially recorded at the functional
currency rate ruling at the date of transaction. Any differences between the
initially recorded amount and the settlement amount are recorded as a gain or
loss on foreign currency transaction in the consolidated statements of income.
Monetary assets and liabilities denominated in foreign currency are translated
at the functional currency rate of exchange ruling at the balance sheet date.
Any differences are taken to profit or loss as a gain or loss on foreign
currency translation in the statements of income.
In accordance with ASC 830, Foreign Currency Matters, the
Company translates the assets and liabilities into U.S. dollar ($) 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 NTD into U.S. dollar are
recorded in stockholders equity as part of accumulated other comprehensive
income.
Reclassifications Certain classifications have been made to
the prior year financial statements to conform to the current year presentation.
The reclassification had no impact on previously reported net loss or
accumulated deficit.
Recently Issued Accounting Pronouncements
Lease:
In February 2016, the Financial Accounting
Standards Board (the FASB) issued ASU 2016-02, Leases (ASC 842), which was
amended by ASU 2018-11, Leases (ASC 842): Targeted Improvements. The new
guidance requires lessee recognition on the balance sheet of a right-of-use
(ROU) asset and a lease liability, initially measured at the present value of
the lease payments. It further requires recognition in the income statement of a
single lease cost, calculated so that the cost of the lease is allocated over the
lease term generally on a straight-line basis. Finally, it requires
classification of all cash payments within operating activities in the statement
of cash flows. The standard is effective for public companies for fiscal years
beginning after December 15, 2018 and early adoption is permitted. The standard
requires a transition adoption election using either 1) a modified retrospective
approach with periods prior to the adoption date being recast or 2) a
prospective adoption approach with a cumulative-effect adjustment recognized to
the opening balance of retained earnings on the adoption date with prior periods
not recast. The Company anticipates adopting this standard with an effective
date of January 1, 2019 using the prospective adoption approach. The Company has
evaluated the changes from this standard to its future financial reporting and
disclosures, and has designed and implemented related processes and controls to
address these changes. The Company believes the most significant effects relate
to (1) the recognition of new ROU assets and lease liabilities on its balance
sheet for its office operating lease; and (2) providing significant new
disclosures about its leasing activities related to the amount, timing and
uncertainty of cash flows arising from leases. The Company is continuing its
assessment, which may identify additional impacts this guidance will have on its
financial statements and disclosures.
18
Income Tax:
In December 2017, the Securities and
Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 118 (as further
clarified by FASB ASU 2018-05, Income Taxes (Topic 740): "Amendments to SEC
Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118") to provide
guidance for companies that may not have completed their accounting for the
income tax effects of the Tax Cut and Jobs Act ("Tax Act") in the period of
enactment, which is the period that includes December 22, 2017. SAB No. 118
provides for a provisional one year measurement period for entities to finalize
their accounting for certain income tax effects related to the Tax Act. SAB No.
118 provides guidance where: (i) the accounting for the income tax effect of the
Tax Act is complete and reported in the Tax Act's enactment period, (ii) the
accounting for the income tax effect of the Tax Act is incomplete and reported
as provisional amounts based on reasonable estimates (to the extent
determinable) subject to adjustments during a limited measurement period until
complete, and (iii) accounting for the income tax effect of the Tax Act is not
reasonably estimable (no related provisional amounts are reported in the
enactment period) and entities would continue to apply accounting based on tax
law provisions in effect prior to the Tax Act enactment until provisional
amounts are reasonably estimable. SAB No. 118 requires disclosure of the reasons
for incomplete accounting additional information or analysis needed, among other
relevant information. The Company is continuing to gather additional information
to determine the final impact.
Fair Value Measurement:
In August 2018, the FASB issued
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement. The ASU
modifies the disclosure requirements in Topic 820, Fair Value Measurement, by
removing certain disclosure requirements related to the fair value hierarchy,
modifying existing disclosure requirements related to measurement uncertainty
and adding new disclosure requirements, such as disclosing the changes in
unrealized gains and losses for the period included in other comprehensive
income for recurring Level 3 fair value measurements held at the end of the
reporting period and disclosing the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value measurements. This ASU is
effective for public companies for annual reporting periods and interim periods
within those annual periods beginning after December 15, 2019. The Company is
currently evaluating the effect, if any, that the ASU will have on its financial
statements.
Results of Operations
The following table presents the consolidated results of the
Company for the years ended December 31, 2018 and 2017.
|
|
Years ended December 31,
|
|
|
Change in
|
|
|
2018
|
|
|
2017
|
|
|
$
|
|
|
%
|
Net sales
|
$
|
527,633
|
|
$
|
588,040
|
|
$
|
(60,407
|
)
|
|
(10.3 )%
|
Cost of sales
|
|
308,996
|
|
|
267,729
|
|
|
41,267
|
|
|
15.4%
|
Gross profit
|
|
218,637
|
|
|
320,311
|
|
|
(101,674
|
)
|
|
(31.7 )%
|
Selling, general and administrative expenses
|
|
386,626
|
|
|
541,090
|
|
|
(154,464
|
)
|
|
(28.5 )%
|
Loss from operations
|
|
(167,989
|
)
|
|
(220,779
|
)
|
|
52,790
|
|
|
(23.9)%
|
Other expenses
|
|
(23,829
|
)
|
|
(41,404
|
)
|
|
17,575
|
|
|
(42.4)%
|
Loss before provision for income tax
|
|
(191,818
|
)
|
|
(262,183
|
)
|
|
70,365
|
|
|
(26.8)%
|
Provision for income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Net Loss
|
$
|
(191,818
|
)
|
$
|
(262,183
|
)
|
$
|
70,365
|
|
|
(26.8)%
|
19
Net Sales:
Net sales were $527,633 for the year ended
December 31, 2018, compared to $588,040 for the year ended December 31, 2017,
representing a decrease of $60,407, or (10.3)%. Net sales from our laser
machine sold were $439,972 and $560,329 for the years ended December 31, 2018
and 2017, respectively. Net sales from our service rendered to customers and
parts sold were $87,661 and $27,711 for the years ended December 31, 2018 and
2017, respectively. The decrease in sales was primarily a result of a decrease
in the selling unit price of laser machine. During the years ended December 31,
2018 and 2017, we sold eight pieces of reflow soldering ovens and automated
optical inspection machines and laser marking system to printed circuit board
(PCB) manufacturers. Due to the highly competitive market, our average selling
price decreased to approximately $55,000 per unit in 2018 compared to
approximately $70,000 per unit in 2017.
Cost of Sales
: Cost of sales was $308,996 or 58.6% of
net sales for the year ended December 31, 2018, as compared to $267,729 or 45.5%
of net sales for the year ended December 31, 2017. The increase in cost of sales
during the year ended December 31, 2018 was mainly attributable to higher
purchasing costs as compared to 2017.
Gross Margin:
Gross profit was $218,637 for the year
ended December 31, 2018, compared to $320,311 for the year ended December 31,
2017, representing a decrease of $101,674, or (31.7)%. Gross profit as a
percent of net sales was 41.4% in 2018, compared to 54.5% in 2017. The decrease
in gross profit percentage was because we sold automated optical inspection
machines with lower margins during the year ended December 31, 2018.
Selling, General and Administrative Expenses:
Selling,
general and administrative expenses were $386,626 or 73.3% of net sales, for the
year ended December 31, 2018, as compared to $541,090 or 92% of net sales for
the year ended December 31, 2017 representing a decrease of $154,464 or (28.5)%
. The decrease in selling, general and administrative expenses was primarily due
to the decreases in payroll expenses, traveling expenses, and professional
service expenses, partially offset by the increase in repair and maintenance
expenses.
Loss from Operations:
Loss from operations has decreased
by $52,790, or (23.9)% to $167,989 for the year ended December 31, 2018 from
$220,779 for the year ended December 31, 2017. The decrease in loss from
operations for the year ended December 31, 2018, compared with loss from
operations for the year ended December 31, 2017, was as a result of the decrease
in selling, general and administrative expenses.
Other Income (Expenses):
Other income (expenses) was
$(23,829) for the year ended December 31, 2018, as compared to $(41,404) for the
year ended December 31, 2017. This change was primarily attributable to the
decrease in foreign currency exchange loss during the year ended December 31,
2018.
Net Loss:
Net loss was $191,818 for the year ended
December 31, 2018, as compared to $262,183 for the year ended December 31, 2017.
The decrease in net loss was due to the reasons described above.
Liquidity and Capital Resources
Our consolidated financial statements are prepared using
generally accepted accounting principles in the United States of America
applicable to a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company
has incurred net losses during the past two years and had an accumulated deficit
of $2,220,140 and $2,028,322 as of December 31, 2018 and 2017, respectively. The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. This basis of accounting
contemplates the recovery of the Companys assets and the satisfaction of liabilities in the normal course of business. This presentation
presumes funds will be available to finance ongoing research and development,
operations and capital expenditures and permit the realization of assets and the
payment of liabilities in the normal course of operations for the foreseeable
future.
20
There can be no assurances that there will be adequate
financing available to the Company and the consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty. These matters
raise substantial doubt about our ability to continue as a going concern. Our
ability to continue as a going concern is dependent on us obtaining adequate
capital to fund operating losses until it becomes profitable. If we are unable
to obtain adequate capital, it could be forced to cease operations. The
accompanying consolidated financial statements do not include any adjustments
that might be necessary if we are unable to continue as a going concern.
Managements Plan to Continue as a Going Concern
The Company has taken certain restructuring steps to provide
the necessary capital to continue its operations. These steps included: (1)
Tightly budgeting and controlling all expenses; (2) Expanding product lines and
recruiting a strong sales team to significantly increase sales revenue and
profit in 2019; (3) The Company plans to continue actively seeing additional
funding opportunities to improve and expand upon its product lines.
Our principal sources of liquidity are cash and cash
equivalents, and cash flow from operations. As of December 31, 2018, we had
working capital deficit of $1,097,896 as compared to working capital deficit of
$1,033,469 as of December 31, 2017. Our cash and cash equivalent have increased
from $23,051 at December 31, 2017 to $55,499 at December 31, 2018.
|
|
For the
|
|
|
|
Years Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash provided by operating activities
|
$
|
33,693
|
|
$
|
1,504
|
|
Net cash used in investing activities
|
|
-
|
|
|
(7,142
|
)
|
Net cash provided by (used in) financing
activities
|
|
-
|
|
|
-
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
(1,245
|
)
|
|
(8,954
|
)
|
Net increase (decrease) in cash and cash
equivalents
|
$
|
32,448
|
|
$
|
(14,592
|
)
|
Net cash flow provided by operating activities was $33,693
during the year ended December 31, 2018, as compared to net cash flow provided
by operating activities of $1,504 during the year ended December 31, 2017. The
increase of $32,189 of cash provided in operating activities was primarily due
to the decrease in accounts receivable and inventory and the increase in due to
related parties for working capital purpose, partially offset by the increase in
prepaid expense and the decrease in accrued expense during the year ended
December 31, 2018.
Net cash used in investing activities was $0 and $7,142 during
the years ended December 31, 2018 and 2017, respectively.
The company did not use in or provide by any cash flow from
financing activities during the years ended December 31, 2018 and 2017,
respectively. We did not enter any loan agreements with our officer and
shareholders.
In light of the significant decreases in our net sales over the
past fiscal year and current uncertain market and economic conditions, we are
aggressively managing our cost structure and cash position to ensure that we
will meet our financial obligations while preserving the ability to make
investments that will enable us to respond to customer requirements and achieve
long-term profitable growth. We currently believe that our cash and cash
equivalents, working capital, and cash generated from operations, will be
sufficient to meet our forecasted operating expenses and capital expenditures
through 2019.
21
Capital Expenditures
Total capital expenditures during the years ended December 31,
2018 and 2017 was $0 and $7,142, respectively.
Currency Exchange Fluctuations
Translation Adjustment
The accounts of the
Company was maintained, and its financial statements were expressed, in New
Taiwan Dollar (NTD). Such financial statements were translated into U.S.
Dollars ($ or USD) in accordance ASC 830, "Foreign Currency Matters", with
the NTD as the functional currency. According to the Statement, all assets and
liabilities are translated at the current exchange rate, stockholder's equity
are translated at the historical rates and income statement items are translated
at the weighted average exchange rate for the period. The resulting translation
adjustments are reported under other comprehensive income as a component of
stockholders equity.
As of December 31, 2018 and December 31, 2017 the exchange
rates between the NTD and the USD ($) were NTD1=$0.03267 and NTD1=$0.03374,
respectively. The weighted-average rates of exchange between NTD and USD were
NTD1=$0.03319 and NTD1=$0.03289 for the years ended December 31, 2018 and
December 31, 2017, respectively. Total translation adjustment recognized as of
December 31, 2018 and December 31, 2017 is $516,668 and $465,722,
respectively.
Inflation
Our opinion is that inflation has not had, and is not expected
to have, a material effect on our operations.
Climate Change
Our opinion is that neither climate change, nor governmental
regulations related to climate change, have had, or are expected to have, any
material effect on our operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of
December 31, 2018 and December 31, 2017.
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk.
We are a smaller reporting company as defined in Item 10(f)(1)
of Regulation S-K and are not required to provide information under this item.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of Omphalos, Corp,
including the notes thereto, together with the report thereon of KCCW
Accountancy Corp. is presented beginning at page F-1.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
22
Item 9A. Controls and Procedures
.
Managements Conclusions Regarding Effectiveness of
Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as of December 31, 2018, the end of the year covered by this annual report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief
executive officer and chief financial officer, who is the same person and our sole employee. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer concluded that, due to our limited internal audit function and our very
limited staff, our disclosure controls were not effective as of December 31, 2018, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the chief executive officer/chief financial officer, as appropriate to allow timely decisions regarding disclosure. This Annual Report
does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public
accounting firm pursuant to temporary rules of the SEC.
Management’s Report of Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on
the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting
as of July 31, 2018. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of
internal control over financial reporting as of December 31, 2018, management identified material weaknesses related to (i) our internal audit functions (ii) inadequate levels of review of the financial statements, (iii) a lack of segregation of
duties within accounting functions and (iv) the absence of any independent directors. Therefore, our internal controls over financial reporting were not effective as of December 31, 2018.
Management has determined that our internal controls contain material weaknesses due to the absence of segregation of duties, as well as lack of qualified accounting personnel and excessive reliance on third party consultants for accounting,
financial reporting and related activities. The lack of any separation of duties, with the same person, who is our only employee who serves as both chief executive officer and chief financial officer, and who does not have an accounting background
and serves on a part-time basis, makes it unlikely that we will be able to implement effective internal controls over financial reporting in the near future.
Due to our size and nature, segregation of all conflicting duties is not possible. However, to the extent possible, we plan to implement procedures to assure that the initiation of transactions, the custody of assets and the recording of
transactions will be performed by separate individuals if and when we have sufficient income to enable us to hire such individuals, and we cannot give any assurance that we will be able to hire such personnel. Our financial condition makes it
difficult for us to implement a system of internal controls over financial reporting.
Until we generate significantly greater revenues and employ accounting personnel, it is doubtful that we will be able implement any system which provides us with any degree of internal controls over financial reporting. Due to the nature of this
material weakness in our internal control over financial reporting, there is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements could not be prevented or detected.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of
our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a
material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
23
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies and procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Offices and Corporate
Governance.
Directors and Executive Officers
Name
|
Age
|
Position
|
Sheng-Peir Yang
|
62
|
President, CEO, and Sole
Director
|
Pi-Yun Chu
|
48
|
Chief Financial Officer
|
Shen-Peir Yang, President, Chief Executive Officer and
Director
Mr. Yang is the Companys sole director. He has been President
and Chief Executive Officer of Omphalos since 1991. He holds a degree in
Mechanical Engineering from National Taipei University of Technology. Having run
the Companys business for almost 20 years, he is very well-qualified, having
extensive knowledge of the performance of our business in a variety of economic
cycles, to effectively manage our operations during these challenging economic
times.
Pi-Yun Chu, Chief Financial Officer
Ms. Yun has been with Omphalos since 2000. During that time she
functioned in various accounting related positions. She was appointed our Chief
Financial Officer in October 2007. Ms. Yun has done extensive accounting
coursework. Our director and officers hold office until the earlier of their
resignation, or removal or until their successors have been duly elected and
qualified.
There are no family relationships among our director or
executive officers.
To our knowledge, during the last ten years, none of our
director and executive officers (including those of our subsidiaries) been
subject to any of the following:
-
A petition under the federal bankruptcy laws or any state insolvency law
was filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of which
he was an executive officer at or within two years before the time of such
filing;
-
Convicted in a criminal proceeding or is a named subject of a pending
criminal proceeding (excluding traffic violations and other minor offenses);
24
-
The subject of any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from, or otherwise limiting, the following
activities:
|
(i)
|
Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice in
connection with such activity;
|
|
(ii)
|
Engaging in any type of business practice; or
|
|
|
|
|
(iii)
|
Engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any violation
of federal or state securities laws or federal commodities
laws;
|
-
The subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any federal or state authority barring, suspending or
otherwise limiting for more than 60 days the right of such person to engage in
any activity described in
paragraph (f)(3)(i)
of this item, or to be
associated with persons engaged in any such activity;
-
Found by a court of competent jurisdiction in a civil action or by the SEC
to have violated any federal or state securities law, and the judgment in such
civil action or finding by the SEC has not been subsequently reversed,
suspended, or vacated;
-
Found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities
law, and the judgment in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed, suspended or vacated;
-
The subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not subsequently reversed,
suspended or vacated, relating to an alleged violation of:
|
(i)
|
Any federal or state securities or commodities law or
regulation; or
|
|
|
|
|
(ii)
|
Any law or regulation respecting financial institutions
or insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
|
|
|
|
|
(iii)
|
Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
|
-
The subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization (as
defined in
Section 3(a)(26) of the Exchange Act (15 U.S.C.
78c(a)(26)
)), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its
members or persons associated with a member.
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
The Company is not aware of any securities transaction during
the fiscal year ended December 31, 2018, or subsequent thereto what would
require a filing pursuant to Section 16 of the Exchange Act of 1934, as
amended.
25
Audit Committee Financial Expert
Our current director acts as our audit committee. The current
director was elected President in connection with the merger and is not
independent. By virtue of his education, business experience and specific
experience with the financial reports for the Company, Mr. Sheng-Peir Yang
satisfies the requirements for service as an audit committee financial expert,
except for his position as the Companys President, which disqualifies him as an
independent director, as the term is used in Item 407 of Regulation S-K. An
informal search is under way to identify a suitable candidate for service on the
Board of Directors as an independent director who would be qualified as an audit
committee financial expert.
Audit Committee
We have not yet appointed an audit committee, and our director
currently acts as our audit committee. At the present time, we believe that our
director is capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting. The
Company, however, recognizes the importance of good corporate governance and
intends to add additional directors to the Board of Directors and appoint an
audit committee comprised entirely of independent directors, including at least
one financial expert.
Limitation on Liability and Indemnification of Directors and
Officers
Our articles of incorporation provide that no director or
officer shall have any liability to the Company if that person acted in good
faith and with the same degree of care and skill as a prudent person in similar
circumstances.
Our articles of incorporation and bylaws provide that we will
indemnify our directors and officers and may indemnify our employees or agents
to the fullest extent permitted by law against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices or positions with us. However, nothing in our articles of incorporation
or bylaws protects or indemnifies a director, officer, employee or agent against
any liability to which that person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of that persons office or position. To the
extent that a director has been successful in defense of any proceeding, the
Nevada Revised Statutes provide that the director shall be indemnified against
reasonable expenses incurred in connection with the proceeding.
Code of Ethics
We have not as yet adopted a code of ethics that applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, as we have had
only to executive officers and we have not been able to establish a process for
auditing compliance or reporting noncompliance. We plan to adopt a code of
ethics as independent directors are added to the Board of Directors and
additional executive officers are engaged by the Company, when it will be in a
better position to implement a process for assuring continued compliance with
such code of ethics, at which time, it will be available in print to any person
who requests it and on our website, when our website is completed. Any
amendments and waivers to the code will also be available in print and on our
website.
26
Item 11. Executive Compensation.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
Name and
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive
|
|
|
Compensation
|
|
|
All other
|
|
|
|
|
principal
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Plan
|
|
|
Earnings
|
|
|
compensation
|
|
|
Total
|
|
position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Sheng-Peir
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yang
|
|
2018
|
|
$
|
19,945
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
19,945
|
|
CEO and
|
|
2017
|
|
$
|
22,594
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
22,594
|
|
President
|
|
2016
|
|
$
|
68,887
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
68,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pi-Yun Chu
|
|
2018
|
|
$
|
10,993
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
10,993
|
|
CFO
|
|
2017
|
|
$
|
14,526
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
14,526
|
|
|
|
2016
|
|
$
|
20,554
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
20,554
|
|
We have entered into the follow employment agreements:
-
Sheng-Peir Yang entered into an employment agreement with Omphalos on
November 30, 2007, to serve as its Chief Executive Officer for a term of two
(2) years at a monthly salary of New Taiwan Dollars (NTD) 185,000(equivalent
to $6,044). Effective on February 1, 2017, Mr. Yang agreed to reduce his
monthly salary to NTD45,800, equivalent to $1,496. Mr. Yang is required to
comply with the non- competition provision contained within the employment
agreement. Either party, with proper notice, may terminate the employment
agreement, and the employment agreement will be governed and construed by the
laws of Taiwan. The agreement has renewed annually and remains in effect.
-
Pi-Yun Chu entered into an employment agreement with Omphalos on November
30, 2007, to serve as its Chief Financial Officer for a term of two (2) years
at a monthly salary of NTD55,200 (equivalent to $1,803). Effective on May 1,
2017, Ms. Chu agreed to reduce her monthly salary to NTD27,600, equivalent to
$902. Ms. Chu is required to comply with the non-competition provision
contained within the employment agreement. Either party, with proper notice,
may terminate the employment agreement, and the employment agreement will be
governed and construed by the laws of Taiwan. The agreement has renewed
annually and remains in effect.
Outstanding Equity Awards at Fiscal Year-End
As of our fiscal years ended December 31, 2018 and 2017, we did
not have any stock option plan or stock incentive plan and there were no
outstanding equity awards as of our fiscal years ended December 31, 2018 and
2017. No equity awards were granted during the year ended December 31, 2018.
COMPENSATION OF DIRECTORS
Our Director did not receive compensation for services as a
director. Our director did not receive any reimbursement for travel or other
expenses incurred in connection with attending meetings of the board and its
committees, if any.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth
the number of shares of common stock beneficially owned as of March 29, 2019 by
(i) those persons or groups known to us to beneficially own more than 5% of our
common stock; (ii) each director; (iii) each executive officer; and (iv) all
directors and executive officers as a group. The information is determined in
accordance with Rule 13d-3 promulgated under the Exchange Act based upon
information furnished by persons listed or contained in filings made by them
with the SEC or by information provided by such persons directly to us. Except
as indicated below, each of the stockholders listed below possesses sole voting
and investment power with respect to their shares and the address of each person
is c/o Omphalos, Corp.
27
|
|
|
|
|
Percentage of
|
|
|
|
Common Stock
|
|
|
Common Stock
|
|
|
|
Beneficially
|
|
|
Beneficially
|
|
Name of Beneficial
Owner
|
|
Owned
|
|
|
Owned (1)
|
|
Sheng-Peir Yang
|
|
103,449,162
|
|
|
89.9%
|
|
|
|
|
|
|
|
|
Pi-Yun Chu
|
|
683,302
|
|
|
0.6%*
|
|
|
|
|
|
|
|
|
All officers and directors as a group (2
persons)
|
|
104,132,464
|
|
|
90.5%
|
|
* Denotes less than 1%
Beneficial ownership percentages give effect to the completion
of the Share Exchange, and are calculated based on shares of common stock issued
and outstanding and is based on a total of 115,063,760 shares of common stock
that were issued and outstanding as of March 29, 2019. Beneficial ownership is
determined in accordance with Rule 13d-3 of the Exchange Act. The number of
shares beneficially owned by a person includes shares of common stock underlying
options or warrants held by that person that are currently exercisable or
exercisable within 60 days of March 29, 2019. The shares issuable pursuant to
the exercise of those options or warrants are deemed outstanding for computing
the percentage ownership of the person holding those options and warrants but
are not deemed outstanding for the purposes of computing the percentage
ownership of any other person. The persons and entities named in the table have
sole voting and sole investment power with respect to the shares set forth
opposite that persons name, subject to community property laws, where
applicable, unless otherwise noted in the applicable footnote.
Item 13. Certain Relationships and Related Transactions, and
Director Independence.
Our sole director, Mr. Yang, is a named executive officer of
the Company and, accordingly, is not independent for purposes of any
securities market requirements.
Omphalos does not own any real property. The Company leases an
office from the wife of our sole director, Mr. Yang. The annual rent of
NT$672,000 (NT$56,000 monthly), is approximately US$22,300.
Item 14. Principal Accounting Fees and Services.
Summary of Principal Accounting Fees for Professional
Services Rendered
The following table presents the aggregate fees for
professional audit services and other services rendered by KCCW Accountancy
Corp.
|
|
Year
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December
|
|
|
December
|
|
|
|
31, 2018
|
|
|
31, 2017
|
|
|
|
|
|
|
|
|
Audit Fees
|
$
|
31,000
|
|
$
|
31,000
|
|
Audit-Related Fees
|
|
-
|
|
|
-
|
|
Tax Fees
|
|
-
|
|
|
-
|
|
All Other Fees
|
|
-
|
|
|
-
|
|
|
$
|
31,000
|
|
$
|
31,000
|
|
Audit Fees
consist of fees billed for the annual audit
of our financial statements and other audit services including the provision of
consents and the review of documents filed with the SEC.
28
We do not have an independent audit committee and the full
Board of Directors, therefore, serves as the audit committee for all purposes
relating to communication with our auditors and responsibility for our audit.
All engagements for audit services, audit- related services and tax services are
approved in advance by our full Board of Directors. Our Board of Directors has
considered whether the provision of the services described above for the fiscal
year ended December 31, 2018, is compatible with maintaining the auditors
independence.
All audit and non-audit services that may be provided by our
principal accountant to us shall require pre-approval by the Board of Directors.
Further, our auditor shall not provide those services to us specifically
prohibited by the SEC, including bookkeeping or other services related to the
accounting records or financial statements of the audit client; financial
information systems design and implementation; appraisal or valuation services,
fairness opinion, or contribution-in-kind reports; actuarial services; internal
audit outsourcing services; management functions; human resources;
broker-dealer, investment adviser, or investment banking services; legal
services and expert services unrelated to the audit; and any other service that
the Public Company Oversight Board determines, by regulation, is impermissible.
Item 15. Exhibits, Financial Statement Schedules.
1.
|
Financial Statements: See Index to Consolidated
Financial Statements in Part II, Item 8 of the Form 10-K.
|
|
|
2.
|
Financial Statement Schedule: Schedules are included in
the Consolidated Financial Statements or notes of this Form 10-K or are
not required.
|
|
|
3.
|
Exhibits: The exhibits listed in the accompanying index
to exhibits are filed or incorporated by reference as part of this Form
10-K.
|
Exhibit
|
Description
|
Number
|
|
2.1
|
Share Exchange Agreement dated February 5, 2008, between
the Company and the parties set forth on the signature page thereof,
incorporated by reference to Exhibit 2.1 to the Companys current report
on Form 8-K, filed with the Securities and Exchange Commission (the SEC)
on February 11, 2008.
|
3.1
|
Certificate of Incorporation of the Company (incorporated
by reference to the Company's proxy statement on Schedule 14A filed with
the Commission on March 5, 2003 (the "Proxy Statement").
|
3.2
|
Articles of Amendment to the Articles of Incorporation of
the Company (incorporated by reference to the Proxy Statement).
|
3.3
|
Agreement and Plan of Merger between Quixit, Inc., a
Colorado corporation, and TOP Group Corporation (now known as SOYODO Group
Holdings, Inc.), a Delaware corporation (incorporated by reference to the
Proxy Statement).
|
3.4
|
By-Laws of the Company (incorporated by reference to the
Proxy Statement).
|
3.5
|
Amended and Restated Certificate of Incorporation of the
Company Incorporated by reference to the information statement on Schedule
14c filed with the SEC on March 15, 2005).
|
3.6
|
Articles of Amendment to the Articles of Incorporation of
the Company (incorporated by reference to the information statement on
Schedule 14C filed with SEC on August 26, 2005).
|
3.7
|
Amended and Restated By-Laws of Omphalos, Corp.,
incorporated by reference to Exhibit 3.7 of the Companys Annual Report on
Form 10-K filed with the SEC on March 31, 2009.
|
10.1
|
Employment Agreement with Pi-Yun Chu, incorporated by
reference to Exhibit 10.1 to the Companys current report on Form 8-K/A,
filed with the SEC on February 20, 2008.
|
10.2
|
Employment Agreement with Shen-Ren Li, incorporated by
reference to Exhibit 10.2 to the Companys current report on Form 8-K/A,
filed with the SEC on February 20, 2008.
|
10.3
|
Employment Agreement with Sheng-Peir Yang, , incorporated
by reference to Exhibit 10.3 to the Companys current report on Form
8-K/A, filed with the SEC on February 20, 2008.
|
10.4
|
Purchase and Sale Agreement with Tamura Corporation,
incorporated by reference to Exhibit 10.4 to the Companys Annual Report
on Form 10-K, filed with the SEC on March 29, 2011.
|
29
10.5
|
Lease Agreement for property,
incorporated by reference to Exhibit 10.5 to the Companys Annual Report
on Form 10-K, filed with the SEC on March 29, 2011.
|
10.6
|
Debt Conversion Agreement dated November 30,
2018 by and among Omphalos, Corp., Sheng-Peir Yang, Omphalos Corp.
(Taiwan), and All Fine Technology Co., Ltd. (Taiwan), incorporated by
reference to Exhibit 10.1 to the Companys current report on Form 8- K,
filed with the SEC on January 4, 2019.
|
21
|
List of Subsidiaries,
incorporated by reference to Exhibit 21 to the Companys Annual Report on
Form 10-K, filed with the SEC on March 29, 2011.
|
31.1
|
Certification of principal executive officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002++
|
31.2
|
Certification of principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002++
|
32.1
|
Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act++
|
32.2
|
Certification of Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act++
|
++filed herewith
SIGNATURES
Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
Omphalos, Corp.
|
|
|
|
Dated: March 28, 2019
|
By:
|
/s/
Sheng-Peir Yang
|
|
|
Sheng-Peir Yang
|
|
|
Chief Executive Officer
|
In accordance with the Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Name
|
Title
|
Date
|
|
|
|
/
s/Sheng-Peir Yang
|
Chief Executive Officer and
|
March 28, 2019
|
|
Director (Principal Executive
|
|
|
Officer)
|
|
Sheng-Peir Yang
|
|
|
|
|
|
/s/Pi-Yun Chu
|
Chief Financial Officer (Principal
|
|
|
Financial and Accounting Officer)
|
March 28, 2019
|
Pi-Yun Chu
|
|
|
30
OMPHALOS, CORP.
|
|
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
|
DECEMBER 31, 2018 AND 2017 AND
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Omphalos Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Omphalos
Corp. and subsidiaries ( the Company) as of December 31, 2018 and 2017, the
related statements of operations and comprehensive income(loss), stockholders
equity (deficit), and cash flows for the years then ended, and the 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 at December 31, 2018 and 2017, and the results of its
operations and its cash flows for the years ended December 31, 2018 and 2017, in
conformity with the U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
Companys 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 Companys 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.
The accompanying consolidated financial statements have been
prepared assuming that Omphalos, Corp. will continue as a going concern. As
described in Note 1 to the consolidated financial statements, the Company has
incurred losses from operations, has a working capital deficit, and is in need
of additional capital to grow its operations so that it can become profitable.
These factors raise substantial doubt about the Companys ability to continue as
a going concern. Managements plans with regard to these matters are described
in Note 1. The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ KCCW Accountancy Corp
.
We have served as the Companys auditor since 2008.
Diamond
Bar, California
March 19, 2019
The Accompanying Notes Are an Integral Part of the Financial
Statements.
1
OMPHALOS, CORP.
|
CONSOLIDATED BALANCE SHEETS
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
55,499
|
|
$
|
23,051
|
|
Accounts
receivable, net
|
|
16,918
|
|
|
44,204
|
|
Inventory, net
|
|
86,708
|
|
|
118,475
|
|
Prepaid
and other current assets
|
|
40,776
|
|
|
21,023
|
|
Total current assets
|
|
199,901
|
|
|
206,753
|
|
|
|
|
|
|
|
|
Leasehold Improvements and Equipment, net
|
|
4,153
|
|
|
7,019
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
13,056
|
|
|
16,854
|
|
Deposits
|
|
2,782
|
|
|
3,599
|
|
Total Assets
|
$
|
219,892
|
|
$
|
234,225
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable
|
$
|
17,268
|
|
$
|
17,394
|
|
Accrued
salaries and bonus
|
|
6,468
|
|
|
19,448
|
|
Accrued expenses
|
|
31,167
|
|
|
42,397
|
|
Advance
from customers
|
|
744
|
|
|
-
|
|
Due to related parties
|
|
752,113
|
|
|
654,910
|
|
Loan from
shareholders, current portion
|
|
490,037
|
|
|
506,073
|
|
Total current liabilities
|
|
1,297,797
|
|
|
1,240,222
|
|
|
|
|
|
|
|
|
Non-current Liabilities
|
|
|
|
|
|
|
Loan from
shareholders
|
|
490,037
|
|
|
506,073
|
|
Total liabilities
|
|
1,787,834
|
|
|
1,746,295
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
Common stock, $0.0001 par value,
120,000,000 shares authorized,
115,063,760 and 30,063,760 shares
issued and outstanding as of
December 31, 2018 and 2017, respectively
|
|
11,507
|
|
|
3,007
|
|
Additional paid-in capital
|
|
124,023
|
|
|
47,523
|
|
Other comprehensive income
|
|
516,668
|
|
|
465,722
|
|
Accumulated deficit
|
|
(2,220,140
|
)
|
|
(2,028,322
|
)
|
Total Stockholders' equity (deficit)
|
|
(1,567,942
|
)
|
|
(1,512,070
|
)
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders'
Equity(Deficit)
|
$
|
219,892
|
|
$
|
234,225
|
|
The Accompanying Notes Are an Integral Part of the Financial
Statements.
2
OMPHALOS, CORP.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31,
2018 AND 2017
|
|
2018
|
|
|
2017
|
|
Sales, net
|
$
|
527,633
|
|
$
|
588,040
|
|
Cost of sales
|
|
308,996
|
|
|
267,729
|
|
Gross profit
|
|
218,637
|
|
|
320,311
|
|
Selling, general and administrative expenses
|
|
386,626
|
|
|
541,090
|
|
Loss from operations
|
|
(167,989
|
)
|
|
(220,779
|
)
|
Other income (expenses)
|
|
|
|
|
|
|
Interest
income
|
|
175
|
|
|
160
|
|
Interest expense
|
|
(29,871
|
)
|
|
(29,604
|
)
|
Gain
(loss) on foreign currency exchange
|
|
5,867
|
|
|
(11,960
|
)
|
Total other income
(expenses)
|
|
(23,829
|
)
|
|
(41,404
|
)
|
Loss before provision for income taxes
|
|
(191,818
|
)
|
|
(262,183
|
)
|
Provision for income taxes
|
|
-
|
|
|
-
|
|
Net loss
|
$
|
(191,818
|
)
|
$
|
(262,183
|
)
|
Weighted average number of common shares:
|
|
|
|
|
|
|
Basic and
diluted
|
|
37,515,814
|
|
|
30,063,760
|
|
Net loss per share:
|
|
|
|
|
|
|
Basic and
diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
Other Comprehensive Loss:
|
|
|
|
|
|
|
Net loss
|
$
|
(191,818
|
)
|
$
|
(262,183
|
)
|
Foreign currency translation adjustment, net of tax
|
|
50,946
|
|
|
(112,683
|
)
|
Comprehensive Loss
|
$
|
(140,872
|
)
|
$
|
(374,866
|
)
|
The Accompanying Notes Are an Integral Part of the Financial
Statements.
3
OMPHALOS, CORP.
|
CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS'
EQUITY (DEFICIT)
|
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in Capital
|
|
|
Deficits
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
30,063,760
|
|
$
|
3,007
|
|
$
|
47,523
|
|
$
|
(1,766,139
|
)
|
$
|
578,405
|
|
$
|
(1,137,204
|
)
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(112,683
|
)
|
|
(112,683
|
)
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(262,183
|
)
|
|
-
|
|
|
(262,183
|
)
|
Balance at December 31, 2017
|
|
30,063,760
|
|
$
|
3,007
|
|
$
|
47,523
|
|
$
|
(2,028,322
|
)
|
$
|
465,722
|
|
$
|
(1,512,070
|
)
|
Debt conversion
|
|
85,000,000
|
|
|
8,500
|
|
|
76,500
|
|
|
-
|
|
|
-
|
|
|
85,000
|
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50,946
|
|
|
50,946
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(191,818
|
)
|
|
-
|
|
|
(191,818
|
)
|
Balance at December 31, 2018
|
|
115,063,760
|
|
$
|
11,507
|
|
$
|
124,023
|
|
$
|
(2,220,140
|
)
|
$
|
516,668
|
|
$
|
(1,567,942
|
)
|
The Accompanying Notes Are an Integral Part of the Financial
Statements.
4
OMPHALOS, CORP.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
|
2018
|
|
|
2017
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
$
|
(191,818
|
)
|
$
|
(262,183
|
)
|
Adjustments to reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
Amortization and
depreciation
|
|
6,003
|
|
|
8,162
|
|
Allowance
for inventory value decline
|
|
-
|
|
|
(4,401
|
)
|
Foreign currency exchange
(gain) loss
|
|
-
|
|
|
11,960
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
26,299
|
|
|
44,869
|
|
Decrease (increase) in inventory
|
|
28,459
|
|
|
(6,773
|
)
|
Decrease (increase) in prepaid and other assets
|
|
(20,030
|
)
|
|
8,041
|
|
Increase (decrease) in accounts payable
|
|
433
|
|
|
(62,303
|
)
|
Increase (decrease) in accrued expenses
|
|
(22,604
|
)
|
|
9,300
|
|
Increase (decrease) in income tax
payable
|
|
-
|
|
|
(1,306
|
)
|
Increase (decrease) in advance from customers
|
|
756
|
|
|
(25,001
|
)
|
Increase(decrease) in due to related
parties
|
|
206,195
|
|
|
281,139
|
|
Net cash
provided by operating activities
|
|
33,693
|
|
|
1,504
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
-
|
|
|
(7,142
|
)
|
Net cash
used in investing activities
|
|
-
|
|
|
(7,142
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents
|
|
(1,245
|
)
|
|
(8,954
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
32,448
|
|
|
(14,592
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
23,051
|
|
|
37,643
|
|
Ending
|
$
|
55,499
|
|
$
|
23,051
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
Cash paid
during the year for:
|
|
|
|
|
|
|
Interest expense
|
$
|
27,382
|
|
$
|
29,604
|
|
Income
tax
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Non-cash financing and investing activities
|
|
|
|
|
|
|
Shareholder's debt
conversion
|
$
|
85,000
|
|
$
|
-
|
|
The Accompanying Notes Are an Integral Part of the Financial
Statements.
5
OMPHALOS, CORP.
|
|
NOTES TO FINANCIAL STATEMENTS
|
DECEMBER 31, 2018
|
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
Omphalos Corp. was incorporated as
Soyodo Group Holdings, Inc. (the Soyodo) under the laws of Delaware in March
2003. On February 5, 2008, Soyodo acquired the outstanding shares of Omphalos
Corp. Omphalos Corp. (the Omphalos BVI) was incorporated on October 30, 2001
under the laws of the British Virgin Islands. For accounting purposes, the
acquisition was treated as a recapitalization of Omphalos BVI. Omphalos BVI owns
100% of Omphalos Corp. (Taiwan), All Fine Technology Co., Ltd. (Taiwan), and All
Fine Technology Co., Ltd. (B.V.I.). Omphalos Corp. (Taiwan) and was incorporated
on February 13, 1991 under the laws of Republic of China. All Fine Technology
Co., Ltd. (Taiwan) was incorporated on March 23, 2004 under the laws of Republic
of China. All Fine Technology Co., Ltd. (B.V.I.) was incorporated on February 2,
2005 under the laws of the British Virgin Islands. Omphalos Corp. (B.V.I.) and
its subsidiaries supplies a wide range of equipments and parts including reflow
soldering ovens and automated optical inspection machines for printed circuit
board (PCB) manufacturers in Taiwan and China.
Effective April 18, 2008 Soyodo entered into an Agreement and
Plan of Merger (the Merger Agreement) with Omphalos, Corp., a Nevada
corporation. Pursuant to the Merger Agreement, Soyodo was merged with and into
the surviving corporation, Omphalos Corp. The certificate of incorporation and
bylaws of the surviving corporation became the certificate of incorporation and
bylaws of the Company, and the directors and officers of Soyodo became the
members of the board of directors and officers of the Company. Following the
execution of the Merger Agreement, the Company filed with the Secretary of State
of Delaware and Nevada, a Certificate of Merger. Omphalos, Corp is incorporated on April 15, 2008 under the laws of the state of Nevada. The main purpose of the merger is to change the company’s name to Omphalos, Corp.
Basis of Consolidation
— The consolidated financial statements include the accounts of Omphalos Corp. and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated.
Going Concern-
The Company has incurred a net loss of $191,818 and $262,183 during the years ended December 31, 2018 and 2017, respectively. The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. This presentation presumes funds will be available to
finance ongoing research and development, operations and capital expenditures and permit the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.
There can be no assurances that there will be adequate financing available to the Company and the consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: (1) Tightly budgeting and controlling all expenses; (2) Expanding product lines and recruiting a strong sales team
to significantly increase sales revenue and profit; (3) The Company plans to continue actively seeing additional funding opportunities to improve and expand upon its product lines.
Accounting Estimates
— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Cash Equivalents, and Long-term Investments
— Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or
less.
Accounts Receivable
— Accounts receivables are carried at original invoice amount less estimates made for doubtful receivables. Management determines the allowance for doubtful accounts on a quarterly basis based on a review of
the current status of existing receivables, account aging, historical collection experience, subsequent collections, management's evaluation of the effect of existing economic conditions, and other known factors. The provision is provided for the
above estimates made for all doubtful receivables. Account balances are charged off against the allowance only when the Company considers it is probable that a receivable will not be recovered. Recoveries of trade receivables previously written off
are recorded when received. Allowance for doubtful debts amounted to $0 as of December 31, 2018 and 2017, respectively.
Inventory
— Inventory is carried at the lower of cost and net realizable value. Net realizable value (NRV) is defined as estimated selling prices less costs of completion, disposal, and transportation. Cost is determined by
using the specific identification method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and charges to operations for known and anticipated
inventory obsolescence. Inventory consists substantially of finished goods and is net of an allowance for slow-moving inventory of $436,409 and $450,691 at December 31, 2018 and 2017, respectively.
6
Property and Equipment
— Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets as follows:
Automobile
|
5 years
|
Furniture and fixtures
|
3 years
|
Machinery and equipment
|
3 to 5 years
|
Leasehold improvements
|
55 years
|
Expenditures for major renewals and betterment that extend the
useful lives of property and equipment are capitalized. Expenditures for repairs
and maintenance are charged to expense as incurred. When property and equipment
are retired or otherwise disposed of, the asset and accumulated depreciation are
removed from the accounts and the resulting profit or loss is reflected in the
statement of income for the period.
Revenue Recognition
During the fiscal year
2018, the Company has adopted Accounting Standards Codification (ASC), Topic
606 (ASC 606), Revenue from Contracts with Customers, using the modified
retrospective method to all contracts that were not completed as of January 1,
2018. The Company recognized the cumulative effect of applying the new revenue
standard as an adjustment to the opening balance of accumulated deficit at the
beginning of 2018. The results for the Companys reporting periods beginning on
and after January 1, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported under the accounting
standards in effect for the prior period. Based on the Companys review of
existing sales contracts as of January 1, 2018, the Company concluded that the
adoption of the new guidance did not have a significant change on the Companys
revenue during all periods presented.
Pursuant to ASC 606, the Company recognizes revenue when its
customer obtains control of promised goods or services, in an amount that
reflects the consideration that the Company expects to receive in exchange for
those goods or services. To determine revenue recognition for arrangements that
the Company determines is within the scope of ASC 606, the Company performs the
following five steps: (i) identify the contract(s) with a customer; (ii)
identify the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue when (or as) the Company
satisfies a performance obligation. The Company only applies the five-step model
to contracts when it is probable that the Company will collect the consideration
the Company is entitled to in exchange for the goods or services the Company
transfers to the customers. At inception of the contract, once the contract is
determined to be within the scope of ASC 606, the Company assesses the goods or
services promised within each contract, determines those that are performance
obligations, and assesses whether each promised good or service is distinct. The
Company then recognizes as revenue the amount of the transaction price that is
allocated to the respective performance obligation when (or as) the performance
obligation is satisfied.
Merchandise Sales
: The Company
recognizes net revenues from machinery product sales when customers obtain
control of the Companys products, which typically occurs upon delivery to
customer. Product revenues are recorded at the net sales price, or transaction
price, which includes applicable reserves for variable consideration, including
discounts, allowances, and returns.
Trade discount and allowances
:
The Company generally provides invoice discounts on product sales to its
customers for prompt payment. The Company estimates that, based on its
experience, its customers will earn these discounts and fees, and deducts the
full amount of these discounts and fees from its gross product revenues and
accounts receivable at the time such revenues are recognized.
Product returns:
The Company
estimates the amount of each product that will be returned and deducts these
estimated amounts from its gross revenues at the time the revenues are
recognized. For special ordered and customized machinery, no sales returns were
allowed.
To date, product allowance and returns
have been minimal and, based on its experience, the Company believes that
returns of its products will continue to be minimal.
The following tables provide details of revenue by major
products and by geography.
7
Revenue by Major Products
For the year ended
December 31, 2018:
|
|
|
|
Laser Machines
|
$
|
439,972
|
|
Machine Parts
|
|
87,661
|
|
Total
|
$
|
527,633
|
|
Revenue by Geography
|
|
|
|
For the year ended
December 31, 2018:
|
|
|
|
Asia Pacific
|
$
|
527,633
|
|
Total
|
$
|
527,633
|
|
Research and Development Expenses
Research and
development costs are generally expensed as incurred. The Company did not incur
any significant research and development expenses during the years ended
December 31, 2018 and 2017.
Income Taxes
The Company accounts for income
taxes in accordance with ASC 740, Income Taxes, which requires that the Company
recognize deferred tax liabilities and assets based on the differences between
the financial statement carrying amounts and the tax basis of assets and
liabilities, using enacted tax rates in effect in the years the differences are
expected to reverse. Deferred income tax benefit (expense) results from the
change in net deferred tax assets or deferred tax liabilities. A valuation
allowance is recorded when, in the opinion of management, it is more likely than
not that some or all of any deferred tax assets will not be realized.
Stock Based Compensation
The Company applies
the fair value provisions of ASC 718,
Compensation-Stock Compensation
(ASC 718). ASC 718 requires the recognition of compensation expense, using
a fair-value based method, for costs related to all share-based payments
including stock options. ASC 718 requires companies to estimate the fair value
of share-based payment awards on the grant date using an option pricing model.
The Company does not have any awards of stock-based compensation issued and
outstanding at December 31, 2018 and 2017.
Loss Per Share
The Company has adopted
Accounting Standards Codification subtopic 260-10, Earnings Per Share (ASC
260-10) which specifies the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings per share have
been calculated based upon the weighted average number of common shares
outstanding. Common equivalent shares are excluded from the computation of the
diluted loss per share if their effect would be anti-dilutive. For the years
ended December 31, 2018 and 2017, the Company did not have any common equivalent
shares.
Impairment of Long-Lived Assets
The Company has
adopted Accounting Standards Codification subtopic 360-10, Property, Plant and
Equipment (ASC 360-10). ASC 360-10 requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company evaluates its long lived assets for
impairment annually or more often if events and circumstances warrant. Events
relating to recoverability may include significant unfavorable changes in
business conditions, recurring losses, or a forecasted inability to achieve
break-even operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undiscounted cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be adjusted, based on estimates of future discounted cash flows
resulting from the use and ultimate disposition of the asset. ASC 360-10 also
requires assets to be disposed of be reported at the lower of the carrying
amount or the fair value less costs to sell. Management has determined that no
impairments of long-lived assets currently exist.
Concentrations
Credit Risk:
Financial instruments that subject the
Company to credit risk consist primarily of trade accounts receivable and
investments. The Company performs ongoing credit evaluations of its customers
and maintains an allowance for potential credit losses. The Company regularly
evaluates securities to determine whether there has been any diminution in value
that is deemed to be other than temporary.
8
Customers: The Company sells Laser equipment and parts to
printed circuit board (PCB) manufacturers mostly in Taiwan and China. The
Company performs ongoing credit evaluations of its customers financial
condition and generally, requires no collateral. For the year ended December 31,
2017, five customers accounted for more than 10% of the Companys total
revenues, represented approximately 97.8% of its total revenues, and 97.0% of
accounts receivable in aggregate at December 31, 2017. For the year ended
December 31, 2018, one customer accounted for more than 10% of the Companys
total revenues, represented approximately 84.21% of its total revenues, and 0%
of accounts receivable at December 31, 2018.
|
|
Sales for the year
|
|
|
A/R balance as of December 31,
|
|
Customer
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
A
|
$
|
444,155
|
|
$
|
192,210
|
|
$
|
-
|
|
$
|
35,450
|
|
B
|
|
34,377
|
|
|
159,310
|
|
|
15,591
|
|
|
7,410
|
|
C
|
|
2,802
|
|
|
82,886
|
|
|
1,235
|
|
|
-
|
|
D
|
|
-
|
|
|
74,355
|
|
|
-
|
|
|
-
|
|
E
|
|
-
|
|
|
65,226
|
|
|
-
|
|
|
-
|
|
Suppliers: For the year ended December 31, 2017, 40.0% of the
Companys inventory was purchased from two vendors. For the year ended December
31, 2018, 29.4% of the Companys inventory was purchased from one vendor.
Fair Value Measurements
FASB ASC
820, Fair Value Measurements defines fair value for certain financial and
nonfinancial assets and liabilities that are recorded at fair value, establishes
a framework for measuring fair value and expands disclosures about fair value
measurements. It requires that an entity measure its financial instruments to
base fair value on exit price, maximize the use of observable units and minimize
the use of unobservable inputs to determine the exit price. It establishes a
hierarchy which prioritizes the inputs to valuation techniques used to measure
fair value. This hierarchy increases the consistency and comparability of fair
value measurements and related disclosures by maximizing the use of observable
inputs and minimizing the use of unobservable inputs by requiring that
observable inputs be used when available. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing the assets or
liabilities based on market data obtained from sources independent of the
Company. Unobservable inputs are inputs that reflect the Companys own
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances. The hierarchy prioritizes the inputs into three broad levels
based on the reliability of the inputs as follows:
-
Level 1 Inputs are quoted prices in active markets for identical assets
or liabilities that the Company has the ability to access at the measurement
date. Valuation of these instruments does not require a high degree of
judgment as the valuations are based on quoted prices in active markets that
are readily and regularly available.
-
Level 2 Inputs other than quoted prices in active markets that are either
directly or indirectly observable as of the measurement date, such as quoted
prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities.
-
Level 3 Valuations based on inputs that are unobservable and not
corroborated by market data. The fair value for such assets and liabilities is
generally determined using pricing models, discounted cash flow methodologies,
or similar techniques that incorporate the assumptions a market participant
would use in pricing the asset or liability.
9
The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, prepaid expenses, accounts payable, accrued liabilities, and due to related parties, approximate to fair value
due to their relatively short maturities. The carrying amounts of the Company's long-term debt approximate to their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on
obligations with similar terms.
Foreign-currency Transactions
— Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application
of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the
balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in
shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.
Statement of Cash Flows
— Cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheet.
Translation Adjustment
— The accounts of the Company were maintained, and its financial statements were expressed, in New Taiwan Dollar (“NTD”). Such financial statements were translated into U.S. Dollars
(“$” or “USD”) in accordance ASC 830, "Foreign Currency Matters", with the NTD as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder's
equity are translated at the historical rates and income statement items are translated at an average exchange rate for the period.
The resulting translation adjustments are reported under other comprehensive income as a component of stockholders’ equity.
Comprehensive Income(Loss)
— Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders’
equity and statements of operations and comprehensive income (loss).
Recently Issued Accounting Pronouncements
Lease:
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (ASC 842), which was amended by ASU 2018-11, Leases (ASC 842): Targeted Improvements. The new guidance requires lessee
recognition on the balance sheet of a right-of-use (ROU) asset and a lease liability, initially measured at the present value of the lease payments. It further requires recognition in the income statement of a single lease cost, calculated so that
the cost of the lease is allocated over the lease term generally on a straight-line basis. Finally, it requires classification of all cash payments within operating activities in the statement of cash flows. The standard is effective for public
companies for fiscal years beginning after December 15, 2018 and early adoption is permitted. The standard requires a transition adoption election using either 1) a modified retrospective approach with periods prior to the adoption date being recast
or 2) a prospective adoption approach with a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. The Company anticipates adopting this standard with an effective
date of January 1, 2019 using the prospective adoption approach. The Company has evaluated the changes from this standard to its future financial reporting and disclosures, and has designed and implemented related processes and controls to address
these changes. The Company believes the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on its balance sheet for its office operating lease; and (2) providing significant new disclosures about its
leasing activities related to the amount, timing and uncertainty of cash flows arising from leases. The Company is continuing its assessment, which may identify additional impacts this guidance will have on its financial statements and disclosures.
10
Income Tax:
In December 2017, the Securities and
Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 118 (as further
clarified by FASB ASU 2018-05, Income Taxes (Topic 740): "Amendments to SEC
Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118") to provide
guidance for companies that may not have completed their accounting for the
income tax effects of the Tax Cut and Jobs Act ("Tax Act") in the period of
enactment, which is the period that includes December 22, 2017. SAB No. 118
provides for a provisional one year measurement period for entities to finalize
their accounting for certain income tax effects related to the Tax Act. SAB No.
118 provides guidance where: (i) the accounting for the income tax effect of the
Tax Act is complete and reported in the Tax Act's enactment period, (ii) the
accounting for the income tax effect of the Tax Act is incomplete and reported
as provisional amounts based on reasonable estimates (to the extent
determinable) subject to adjustments during a limited measurement period until
complete, and (iii) accounting for the income tax effect of the Tax Act is not
reasonably estimable (no related provisional amounts are reported in the
enactment period) and entities would continue to apply accounting based on tax
law provisions in effect prior to the Tax Act enactment until provisional
amounts are reasonably estimable. SAB No. 118 requires disclosure of the reasons
for incomplete accounting additional information or analysis needed, among other
relevant information. The Company is continuing to gather additional information
to determine the final impact.
Fair Value Measurement:
In August 2018, the FASB issued
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement. The ASU
modifies the disclosure requirements in Topic 820, Fair Value Measurement, by
removing certain disclosure requirements related to the fair value hierarchy,
modifying existing disclosure requirements related to measurement uncertainty
and adding new disclosure requirements, such as disclosing the changes in
unrealized gains and losses for the period included in other comprehensive
income for recurring Level 3 fair value measurements held at the end of the
reporting period and disclosing the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value measurements. This ASU is
effective for public companies for annual reporting periods and interim periods
within those annual periods beginning after December 15, 2019. The Company is
currently evaluating the effect, if any, that the ASU will have on its financial
statements.
NOTE 2. PROPERTY AND EQUIPMENT
The following is a summary of the Companys property and
equipment as of December 31:
|
|
2018
|
|
|
2017
|
|
Machinery and equipment
|
$
|
68,075
|
|
$
|
70,303
|
|
Vehicle
|
|
46,275
|
|
|
47,789
|
|
Leasehold improvements
|
|
11,668
|
|
|
12,049
|
|
|
|
126,018
|
|
|
130,141
|
|
Less: accumulated depreciation
|
|
(121,865
|
)
|
|
(123,122
|
)
|
Property and equipment, net
|
$
|
4,153
|
|
$
|
7,019
|
|
Depreciation expense for the years ended December 31, 2018 and
2017 were $2,687 and $4,876 respectively.
NOTE 3. INTANGIBLE ASSETS
The following reconciliation of intangible assets is as
follows:
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
Value
|
|
|
Amortization
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
Patents
|
$
|
49,834
|
|
$
|
36,778
|
|
11
Amortization of intangible assets was $3,316 and $3,286 for the
years ended December 31, 2018 and 2017, respectively.
Estimated amortization for the next five years and thereafter
is as follows:
2019
|
|
3,261
|
|
2020
|
|
3,261
|
|
2021
|
|
2,815
|
|
2022
|
|
957
|
|
2023
|
|
768
|
|
Thereafter
|
|
1,994
|
|
|
$
|
13,056
|
|
NOTE 4. INCOME TAXES
U.S.A
The Company is incorporated in the State of Nevada in the
United States of America and is subject to the U.S. federal and state taxation.
No provision for income taxes have been made as the Company has no taxable
income.
On December 22, 2017 H.R. 1, originally known as the Tax Cuts
and Jobs Act, (the Tax Act) was enacted. Among the significant changes to the
U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income
tax rate (Federal Tax Rate) from 35% to 21% effective January 1, 2018. The 21%
Federal Tax Rate will apply to earnings reported for the full 2018 fiscal year.
In addition, the Company must re-measure its net deferred tax assets and
liabilities using the Federal Tax Rate that will apply when these amounts are
expected to reverse. As of December 31, 2018, the Company can determine a
reasonable estimate for certain effects of tax reform and is recording that
estimate as a provisional amount. The provisional remeasurement of the deferred
tax assets and allowance valuation of deferred tax assets at December 31, 2018
resulted in a net effect of $0 discrete tax expenses (benefit) which lowered the
effective tax rate by 14% for the year ended December 31, 2018. The provisional
remeasurement amount is anticipated to change as data becomes available allowing
more accurate scheduling of the deferred tax assets and liabilities primarily
related to net operating loss carryover.
Income before income taxes for the years ended December 31,
2018 and 2017 includes the results of operations of Taiwan and British Virgin
Islands.
British Virgin Islands
Omphalos Corp. (B.V.I.) and All Fine Technology Co., Ltd.
(B.V.I.) are incorporated in British Virgin Islands and are not required to pay
income tax.
Taiwan
Omphalos Corp. and All Fine Technology Co., Ltd. are
incorporated in Taiwan and are subject to Taiwan tax law. The statutory tax rate
under Taiwan tax law is 17%. According to the amendments to the Income Tax Act
enacted by the office of the President of Taiwan on February 7, 2018, an
increase in the statutory income tax rate from 17% to 20% and decrease in the
undistributed earning tax from 10% to 5% are effective from January 1, 2018.
This increase in the statutory income tax rate does not affect the amounts of
the current taxes recognized as of December 31, 2017 and for the year then
ended. Omphalos Corp. and All Fine Technology Co., Ltd. incurred losses for the
years 2018 and 2017. As a result, no tax liability was incurred.
The provision for income taxes calculated at the statutory
rates in the combined statements of income is as follows for the years ended
December 31:
|
|
2018
|
|
|
2017
|
|
Current provision:
|
|
|
|
|
|
|
Computed (provision for) income taxes at statutory rates in
U.S.
|
$
|
-
|
|
$
|
-
|
|
Computed (provision for) income taxes at
statutory rates in BVI
|
|
-
|
|
|
-
|
|
Computed (provision for)income taxes at statutory rates in
Taiwan
|
|
-
|
|
|
-
|
|
Total current provision
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Deferred provision
:
|
|
|
|
|
|
|
U.S
|
|
-
|
|
|
-
|
|
BVI
|
|
-
|
|
|
-
|
|
Taiwan- Net operating loss carryforward
|
|
-
|
|
|
-
|
|
Valuation allowance
|
|
-
|
|
|
-
|
|
Total deferred provision
|
|
-
|
|
|
-
|
|
Provision for income taxes
|
$
|
-
|
|
$
|
-
|
|
12
The following is a reconciliation of the statutory tax rate to
the effective tax rate for the years ended December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
U.S. Federal tax at statutory rate
|
|
21%
|
|
|
34%
|
|
Provisional remeasurement of deferred taxes
|
|
-
|
|
|
(13%
|
)
|
Valuation allowance
|
|
(21%
|
)
|
|
(21%
|
)
|
Foreign income tax- Taiwan
|
|
20%
|
|
|
17%
|
|
Other (a)
|
|
(20%
|
)
|
|
(17%
|
)
|
Effective tax rate
|
|
0%
|
|
|
0%
|
|
(a)
|
Other represents expenses incurred by the Company that
are not deductible for Taiwan income taxes and changes in valuation
allowance for Taiwanese entities for the years ended December 31, 2018 and
2017, respectively.
|
NOTE 5. RELATED-PARTY TRANSACTIONS
Operating Leases
The Company leases an office from the sole directors wife of
the Company under an operating lease agreement which expires on January 31,
2019. On January 31, 2019, the lease term was extended for another three years,
which expires on January 31, 2022. The monthly base rent is approximately
$1,859. Rent expense under this lease agreement amounted to approximately
$22,300 and $22,104 for the years ended December 31, 2018 and 2017,
respectively.
Loan from related party
On July 26, 2013, the Company entered a loan agreement bearing
interest at a fixed rate at 3% per annum with its shareholder to advance
NT$5,000,000, equivalent approximately $163,347 for working capital purpose. The
term of the loan started from July 30, 2013 with maturity date on July 29, 2015.
On July 31, 2015, the loan with the same amount of NT$5,000,000, equivalent
approximately $163,347, and the same fixed interest rate of 3% per annum was
extended for another two years starting from August 1, 2015 with maturity date
on July 31, 2017. On August 1, 2017, the loan with the same amount of
NT$5,000,000, equivalent approximately $163,347, and the same fixed interest
rate of 3% per annum was extended for another three years starting from August
1, 2017 with maturity date on July 31, 2020.
On December 31, 2013, the Company entered another loan
agreement bearing interest at a fixed rate at 3% per annum with its officer and
shareholder to advance NT$5,000,000, equivalent approximately $163,347 for
working capital purpose. The term of the loan started from January 1, 2014 with
maturity date on December 31, 2015. On December 31, 2015, the loan with the same
amount of NT$5,000,000, equivalent approximately $163,347, and the same fixed
interest rate of 3% per annum was extended for another two years starting from
January 1, 2016 with maturity date on December 31, 2018. On January 1, 2019, the loan with the same
amount of NT$5,000,000, equivalent approximately $163,347, and the same fixed
interest rate of 3% per annum was extended for another three years starting from
January 1, 2019 with maturity date on December 31, 2021.
13
On July 5, 2015, the Company entered another loan agreement
bearing interest at a fixed rate at 3% per annum with its shareholder to advance
NT$10,000,000, equivalent approximately $326,690, for working capital purpose.
The term of the loan started from July 1, 2015 with maturity date on June 30,
2018. On July 1, 2018, the loan with the same amount of NT$10,000,000,
equivalent approximately $326,690, and the same fixed interest rate of 3% per
annum was extended for another three years starting from July 1, 2018 with
maturity date on June 30, 2021.
On July 1, 2016, the Company entered another loan agreement
bearing interest at a fixed rate at 3% per annum with its shareholder to advance
NT$10,000,000, equivalent approximately $326,690, for working capital purpose.
The term of the loan started from July 1, 2016 with maturity date on June 30,
2019.
As of December 31, 2018 and December 31, 2017, there were
$980,074 and $1,012,146 advances outstanding, of which $490,037 and $506,073 was
presented under current liabilities, respectively.
Interest expense was $29,871 and $29,604 for the years ended
December 31, 2018 and 2017, respectively.
Advances from related party
The Company also has advanced funds from its officer and
shareholder for working capital purposes. The Company has not entered into any
agreement on the repayment terms for these advances. The advances bear no
interest rate and are due upon demand by shareholders.
On November 30, 2018, the Company and Mr. Sheng-Peir Yang, the
chief executive officer and chairman of the Company entered into a Debt
Conversion Agreement (the Debt Conversion Agreement). Pursuant to the Debt
Conversion Agreement, the Company agreed to issue Mr. Yang 85,000,000 shares of
its $0.0001 par value common stock at a conversion price of $0.001 per share in
exchange for Mr. Yangs forgiveness of $85,000 that Mr. Yang provided in the
form of debt to fund the business operations of the Company.
As of December 31, 2018 and December 31, 2017, there were
$752,113 and $654,910 advances outstanding, respectively. The outstanding
balance bears no interest and is due upon request.
NOTE 6. COMMITMENT
Operating Leases
The Company leases its office from a related party (Note 5) and
warehouse facilities from outside parties under operating leases that expire on
various dates through 2022. Rental expense for these leases consisted of $46,938
and $46,972 for the years ended December 31, 2018 and 2017, respectively.
Future minimum lease payments under the operating leases are
summarized as follows:
Fiscal Year
|
|
Amount
|
|
2019
|
$
|
34,708
|
|
2020
|
|
31,720
|
|
2021
|
|
22,759
|
|
2022
|
|
1,935
|
|
Total
|
|
91,122
|
|
14
NOTE 7. SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date
which the financial statements are available to be issued. All subsequent events
requiring recognition as of December 31, 2018 have been incorporated into these
financial statements and there are no additional subsequent events that require
disclosure in accordance with FASB ASC Topic 855, Subsequent Events.
******
15
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