OMPHALOS, CORP.
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
17,825
|
|
$
|
55,499
|
|
Accounts receivable, net
|
|
30,856
|
|
|
16,918
|
|
Inventory, net
|
|
62,489
|
|
|
86,708
|
|
Prepaid and other current assets
|
|
19,223
|
|
|
40,776
|
|
Total current assets
|
|
130,393
|
|
|
199,901
|
|
|
|
|
|
|
|
|
Leasehold improvements and equipment, net
|
|
506
|
|
|
4,153
|
|
Operating lease right-of-use assets
|
|
62,346
|
|
|
-
|
|
Intangible assets, net
|
|
10,456
|
|
|
13,056
|
|
Deposits
|
|
2,742
|
|
|
2,782
|
|
Total Assets
|
$
|
206,443
|
|
$
|
219,892
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable
|
$
|
40,367
|
|
$
|
17,268
|
|
Accrued salaries and bonus
|
|
9,283
|
|
|
6,468
|
|
Accrued expenses
|
|
25,492
|
|
|
31,167
|
|
Advance from customers
|
|
-
|
|
|
744
|
|
Due to related parties
|
|
812,788
|
|
|
752,113
|
|
Loan from shareholders current
portion
|
|
161,000
|
|
|
490,037
|
|
Operating lease
liability current portion
|
|
33,104
|
|
|
-
|
|
Total current liabilities
|
|
1,082,034
|
|
|
1,297,797
|
|
|
|
|
|
|
|
|
Non-current Liabilities
|
|
|
|
|
|
|
Loan from shareholders,
less current portion
|
|
805,000
|
|
|
490,037
|
|
Operating lease liability, less current
portion
|
|
29,242
|
|
|
-
|
|
Total
liabilities
|
|
1,916,276
|
|
|
1,787,834
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
Common stock, $0.0001 par value,
120,000,000 shares
|
|
|
|
|
|
|
authorized, 115,063,760 shares issued and
outstanding
|
|
|
|
|
|
|
as of
September 30, 2019 and December 31, 2018
|
|
11,507
|
|
|
11,507
|
|
Additional paid-in capital
|
|
124,023
|
|
|
124,023
|
|
Accumulated other comprehensive income
|
|
540,409
|
|
|
516,668
|
|
Accumulated deficit
|
|
(2,385,772
|
)
|
|
(2,220,140
|
)
|
Total stockholders' equity (deficit)
|
|
(1,709,833
|
)
|
|
(1,567,942
|
)
|
Total Liabilities and Stockholders' Deficit
|
$
|
206,443
|
|
$
|
219,892
|
|
See accompanying Notes to Condensed Consolidated Financial
Statements
F-1
OMPHALOS, CORP.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND
OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
|
FOR THE NINE
|
|
|
FOR THE THREE
|
|
|
|
MONTHS ENDED
SEPTEMBER
|
|
|
MONTHS ENDED
SEPTEMBER
|
|
|
|
30,
|
|
|
|
|
|
30,
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, net
|
$
|
179,310
|
|
$
|
504,319
|
|
$
|
33,352
|
|
$
|
18,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
130,979
|
|
|
295,988
|
|
|
10,682
|
|
|
2,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
48,331
|
|
|
208,331
|
|
|
22,670
|
|
|
15,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
202,673
|
|
|
325,783
|
|
|
66,102
|
|
|
87,743
|
|
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(154,342
|
)
|
|
(117,452
|
)
|
|
(43,432
|
)
|
|
(72,071
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
37
|
|
|
146
|
|
|
-
|
|
|
(1
|
)
|
Interest expense
|
|
(21,735
|
)
|
|
(22,569
|
)
|
|
(7,209
|
)
|
|
(7,332
|
)
|
Gain (loss) on foreign
currency
|
|
323
|
|
|
5,574
|
|
|
(158
|
)
|
|
489
|
|
exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on disposal
of fixed
|
|
10,085
|
|
|
-
|
|
|
(25
|
)
|
|
-
|
|
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
(11,290
|
)
|
|
(16,849
|
)
|
|
(7,392
|
)
|
|
(6,844
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income
|
|
(165,632
|
)
|
|
(134,301
|
)
|
|
(50,824
|
)
|
|
(78,915
|
)
|
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(165,632
|
)
|
$
|
(134,301
|
)
|
$
|
(50,824
|
)
|
$
|
(78,915
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
Weighted average number of
|
|
|
|
|
|
|
|
|
|
|
|
|
common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
115,063,760
|
|
|
30,063,759
|
|
|
115,063,760
|
|
|
30,063,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(165,632
|
)
|
$
|
(134,301
|
)
|
$
|
(50,824
|
)
|
$
|
(78,915
|
)
|
Foreign currency translation
|
|
23,741
|
|
|
43,154
|
|
|
2,298
|
|
|
2,249
|
|
adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
$
|
(141,891
|
)
|
$
|
(91,147
|
)
|
$
|
(48,526
|
)
|
$
|
(76,666
|
)
|
See accompanying Notes to Condensed Consolidated Financial
Statements.
F-2
OMPHALOS, CORP.
CONSOLIDATED STATEMENTS OF CHANGE
IN STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount Paid-in Capital
|
|
|
Deficits
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
30,063,760
|
|
$
|
3,007
|
|
$
|
47,523 $
|
|
|
(2,028,322
|
)$
|
|
465,722
|
|
$
|
(1,512,070
|
)
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(28,403
|
)
|
|
(28,403
|
)
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(53,785
|
)
|
|
-
|
|
|
(53,785
|
)
|
Balance at March 31, 2018
|
|
30,063,760
|
|
$
|
3,007
|
|
$
|
47,523 $
|
|
|
(2,082,107
|
)$
|
|
437,319
|
|
$
|
(1,594,258
|
)
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
69,308
|
|
|
69,308
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,601
|
)
|
|
-
|
|
|
(1,601
|
)
|
Balance at June 30, 2018
|
|
30,063,760
|
|
$
|
3,007
|
|
$
|
47,523 $
|
|
|
(2,083,708
|
)$
|
|
506,627
|
|
$
|
(1,526,551
|
)
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,249
|
|
|
2,249
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(78,915 )
|
|
|
-
|
|
|
(78,915
|
)
|
Balance at September 30, 2018
|
|
30,063,760
|
|
$
|
3,007
|
|
$
|
47,523 $
|
|
|
(2,162,623
|
)$
|
|
508,876
|
|
$
|
(1,603,217
|
)
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount Paid-in Capital
|
|
|
Deficits
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
|
115,063,760
|
|
$
|
11,507
|
|
$
|
124,023 $
|
|
|
(2,220,140
|
)$
|
|
516,668
|
|
$
|
(1,567,942
|
)
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
13,486
|
|
|
13,486
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(75,262
|
)
|
|
-
|
|
|
(75,262
|
)
|
Balance at March 31, 2019
|
|
115,063,760
|
|
$
|
11,507
|
|
$
|
124,023 $
|
|
|
(2,295,402
|
)$
|
|
530,154
|
|
$
|
(1,629,718
|
)
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,957
|
|
|
7,957
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(39,546
|
)
|
|
-
|
|
|
(39,546
|
)
|
Balance at June 30, 2019
|
|
115,063,760
|
|
$
|
11,507
|
|
$
|
124,023 $
|
|
|
(2,334,948
|
)$
|
|
538,111
|
|
$
|
(1,661,307
|
)
|
Translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,298
|
|
|
2,298
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(50,824
|
)
|
|
-
|
|
|
(50,824
|
)
|
Balance at September 30, 2019
|
|
115,063,760
|
|
$
|
11,507
|
|
$
|
124,023 $
|
|
|
(2,385,772
|
)$
|
|
540,409
|
|
$
|
(1,709,833
|
)
|
See accompanying Notes to Condensed Consolidated Financial
Statements
F-3
OMPHALOS, CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(UNAUDITED)
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
$
|
(165,632
|
)
|
$
|
(134,301
|
)
|
Adjustments
to reconcile net loss to net cash used in
|
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
|
Amortization and depreciation
|
|
3,203
|
|
|
4,535
|
|
Gain (loss)
on disposal of fixed assets
|
|
(10,085
|
)
|
|
-
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
Increase in
accounts receivable
|
|
(13,938
|
)
|
|
(732
|
)
|
Decrease in inventory
|
|
24,219
|
|
|
26,888
|
|
Decrease (increase)
in prepaid and other assets
|
|
21,593
|
|
|
(18,522
|
)
|
Increase in accounts payable
|
|
23,099
|
|
|
6,606
|
|
Decrease in accrued
expenses
|
|
(3,604
|
)
|
|
(18,989
|
)
|
Increase in due to related parties
|
|
60,675
|
|
|
130,061
|
|
Net cash used in operating activities
|
|
(60,470
|
)
|
|
(4,454
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Proceeds from disposal of equipment
|
|
12,880
|
|
|
-
|
|
Net cash provided by investing activities
|
|
12,880
|
|
|
-
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents
|
|
9,916
|
|
|
(527
|
)
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
(37,674
|
)
|
|
(4,981
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning
|
|
55,499
|
|
|
23,051
|
|
Ending
|
$
|
17,825
|
|
$
|
18,070
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
Interest
expense
|
$
|
4,842
|
|
$
|
22,569
|
|
Income tax
|
$
|
-
|
|
$
|
-
|
|
See accompanying Notes to Condensed Consolidated Financial
Statements
F-4
OMPHALOS, CORP.
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
|
|
|
Basis of Presentation The
accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
in the United States ("GAAP") for interim financial reporting and in
accordance with instructions for Form 10-Q and Article 10 of Regulation S-
X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited
condensed consolidated financial statements contained in this report
reflect all adjustments that are normal and recurring in nature and
considered necessary for a fair presentation of the financial position and
the results of operations for the interim periods presented. The year-end
condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by GAAP. The
results of operations for the interim period are not necessarily
indicative of the results expected for the full year. These unaudited,
condensed consolidated financial statements, footnote disclosures and
other information should be read in conjunction with the financial
statements and the notes thereto included in the Companys Annual Report
on Form 10-K for the year ended December 31, 2018.
Organization Omphalos Corp.
was incorporated as TOP Group Holdings, Inc. under the laws of Delaware in
March 2003 and later changed its name to Soyodo Group Holdings, Inc. (the
"Soyodo") in August 2005. 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) 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 equipment 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 a Certificate of Merger with the Secretary of State of
Delaware and Nevada. Omphalos, Corp wasincorporated on April 15, 2008
under the laws of the state of Nevada. The main purpose of the merger is
to change the companys name to Omphalos, Corp.
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 a significant net loss in the past two years and had an
accumulated deficit of $2,385,772and $2,220,140 as of September 30, 2019
and December 31, 2018, 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.
|
F-5
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 in 2019; (3) The Company plans to continue
actively seeking additional funding opportunities to improve and expand upon its
product lines.
Use of 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 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 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.
Inventory Inventory is
carried at the lower of cost or market. 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 $399,605and $436,409 at September 30,
2019 and December 31, 2018, 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:
Furniture and fixtures
|
3 years
|
Machinery and equipment
|
3 to 5 years
|
Leasehold improvements
|
55 years
|
F-6
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 $94,170 and $121,865 at September 30, 2019 and
December 31, 2018, respectively. Depreciation expense was $790 and $2,030 for
the nine months ended September 30, 2019 and 2018, respectively. Depreciation
expense was $67 and $659 for the three months ended September 30, 2019 and 2018,
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
warranted by events and circumstances. 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.
Intangible Assets
Include cost of patent applications that are deferred and charged to operations
over their useful lives. The accumulated amortization is $38,663 and $36,778 at
September 30, 2019 and December 31, 2018, respectively. Amortization of
intangible assets was $2,413 and $2,505 for the nine months ended September 30,
2019 and 2018, respectively. Amortization of intangible assets was $800 and $814
for the three months ended September 30, 2019 and 2018, respectively.
Revenue Recognition
During the fiscal year 2018, the Company has adopted FASB 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.
F-7
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 Nine Months
Ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Laser Machines
|
$
|
128,831
|
|
|
443,230
|
|
Machine Parts
|
|
50,479
|
|
|
61,089
|
|
Total
|
$
|
179,310
|
|
|
504,319
|
|
Revenue by Geography
|
|
For the Nine Months
Ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Asia Pacific
|
$
|
179,310
|
|
|
504,319
|
|
Total
|
$
|
179,310
|
|
|
504,319
|
|
Leases The Company
adopted FASB Accounting Standards Codification, Topic 842, Leases ("ASC 842")
using the modified retrospective approach, electing the practical expedient that
allows the Company not to restate its comparative periods prior to the adoption
of the standard on January 1, 2019. As such, the disclosures required under ASC
842 are not presented for periods before the date of adoption. For the
comparative periods prior to adoption, the Company presented the disclosures
which were required under ASC 840.
F-8
The Company applied the following
practical expedients in the transition to the new standard and allowed under ASC
842:
Practical
Expedient
|
Description
|
Reassessment of expired or existing contracts
|
The Company elected not to reassess, at the
application date, whether any expired or existing contracts contained
leases, the lease classification for any expired or existing leases, and
the accounting for initial direct costs for any existing leases.
|
Use of hindsight
|
The Company elected to use hindsight in
determining the lease term (that is, when considering options to extend or
terminate the lease and to purchase the underlying asset) and in assessing
impairment of right-to-use assets.
|
Reassessment of existing or expired land easements
|
The Company elected not to evaluate existing or
expired land easements that were not previously accounted for as leases
under ASC 840, as allowed under the transition practical expedient. Going
forward, new or modified land easements will be evaluated under ASU No.
2016-02.
|
Separation of lease and non- lease components
|
Lease agreements that contain both lease and
non-lease components are generally accounted for separately.
|
Short-term lease recognition exemption
|
The Company also elected the short-term lease
recognition exemption and will not recognize ROU assets or lease
liabilities for leases with a term less than 12
months.
|
The new leasing standard requires
recognition of leases on the consolidated balance sheets as right-of-use ("ROU")
assets and lease liabilities. ROU assets represent the Companys right to use
underlying assets for the lease terms and lease liabilities represent the
Companys obligation to make lease payments arising from the leases. Operating
lease ROU assets and operating lease liabilities are recognized based on the
present value and future minimum lease payments over the lease term at
commencement date. The Companys future minimum based payments used to determine
the Companys lease liabilities mainly include minimum based rent payments. As
most of Companys leases do not provide an implicit rate, the Company uses its
estimated incremental borrowing rate based on the information available at
commencement date in determining the present value of lease payments.
The Company recognized lease
liabilities, with corresponding ROU assets, based on the present value of unpaid
lease payments for existing operating leases longer than twelve months as of
January 1, 2019. The ROU assets were adjusted per ASC 842 transition guidance
for existing lease-related balances of accrued and prepaid rent, unamortized
lease incentives provided by lessors, and restructuring liabilities.
The adoption of ASC 842 had a
substantial impact on the Companys consolidated balance sheets. The most
significant impact was the recognition of the operating lease right-of-use
assets and the liability for operating leases. Accordingly, adoption of this
standard resulted in the recognition of operating lease right-of-use assets of
$85,704 and operating lease liabilities of $85,704 comprised of $33,019 of
current operating lease liabilities and $52,685 of non-current operating lease
liabilities on the condensed consolidated balance sheet as of January 1, 2019.
The adoption of ASC 842 did not result in a cumulative-effect adjustment to the
opening balance of accumulated deficit.
In addition, the adoption of the
standard did not have a material impact on the Company's results of operations
or cash flows. Operating lease cost is recognized as a single lease cost on a
straight-line basis over the lease term and is recorded in Selling, general and
administrative expenses. Variable lease payments for common area maintenance,
property taxes and other operating expenses are recognized as expense in the
period when the changes in facts and circumstances on which the variable lease
payments are based occur.
F-9
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 three and nine months ended September 30, 2019 and 2018.
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.
|
F-10
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.
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.
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.
Loss Per Share The
Company has adopted FASB 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
nine months ended September 30, 2019 and 2018, the Company did not have any
common equivalent shares.
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).
Foreign-currency Transactions
Foreign-currency transactions are recorded in New Taiwan dollar
("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 dollar, 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 (deficit).
F-11
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 financial statements, all assets and liabilities are translated
at the current exchange rate, stockholders equity (deficit) are translated at
the historical rates, and income statement items are translated at an average
exchange rate for the period.
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 The Company has implemented all new pronouncements that
are in effect and that may impact its consolidated financial statements and does
not believe that there are any other new accounting pronouncements that have
been issued that might have a material impact on its consolidated financial
statements or results of operations.
F-12
The Company has no finance leases. The
Companys leases primarily include office and warehouse facility spaces and copy
machine under various operating lease arrangements. The Companys operating
leases have remaining lease terms of up to three years.
Balance sheet information related to
the Companys leases is presented below:
|
|
September 30, 2019
|
|
Operating Leases
|
|
|
|
Operating lease ROU assets
|
$
|
62,346
|
|
|
|
|
|
Operating lease liability, current portion
|
|
33,104
|
|
Operating lease liability, less current
portion
|
|
29,242
|
|
Total operating lease liabilities
|
$
|
62,346
|
|
The following provides details of the
Company's lease expenses:
|
|
Nine Months Ended
|
|
|
|
September 30, 2019
|
|
Operating lease expenses, net
|
$
|
23,451
|
|
|
$
|
23,451
|
|
Other information related to leases is
presented below:
|
|
Nine Months Ended
|
|
|
|
September 30, 2019
|
|
Cash Paid For Amounts Included In
Measurement of Liabilities:
|
|
|
|
Operating cash flows from operating leases
|
|
23,451
|
|
|
|
|
|
Weighted Average Remaining Lease Term:
|
|
|
|
Operating leases
|
|
1.92 years
|
|
|
|
|
|
Weighted Average Discount Rate:
|
|
|
|
Operating leases
|
|
1.28%
|
|
The minimum future annual payments
under non-cancellable leases during the next five years and thereafter, at rates
now in force, are as follows:
|
|
Operating leases
|
|
2019 (excluding the nine months ended
September 30, 2019)
|
$
|
8,418
|
|
2020
|
|
30,774
|
|
2021
|
|
22,080
|
|
2022
|
|
1,877
|
|
2023
|
|
-
|
|
Total future minimum lease payments, undiscounted
|
|
63,149
|
|
Less: Imputed interest
|
|
(803
|
)
|
Present value of future minimum lease payments
|
$
|
62,346
|
|
F-13
3.
|
RELATED-PARTY
TRANSACTIONS
|
Operating Leases
The Company leases its facility from a
shareholder 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
$1,803. Rent expense under this lease agreement amounted to approximately
$16,227 and $16,851for the nine months ended September 30, 2019 and 2018,
respectively, and approximately $5,379and $5,471for the three months ended
September 30, 2019 and 2018, respectively.
Loan from related
party
On July 26, 2013, the Company entered
into a loan agreement bearing interest at a fixed rate at 3% per annum with its
shareholder to advance NT$5,000,000, equivalent $161,000 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 $161,000, 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 $161,000, 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 into 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
$161,000 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 $161,000, 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 $161,000,
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.
On July 5, 2015, the Company entered
into another loan agreement bearing interest at a fixed rate at 3% per annum
with its shareholder to advance NT$10,000,000, equivalent $322,000, 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 $322,000, 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
into another loan agreement bearing interest at a fixed rate at 3% per annum
with its shareholder to advance NT$10,000,000, equivalent $322,000, for working
capital purpose. The term of the loan started from July 1, 2016 with maturity
date on June 30, 2019. On July 1, 2019, the loan with the same amount of
NT$10,000,000, equivalent $322,000, and the same fixed interest rate of 3% per
annum was extended for another three years starting from July 1, 2019 with
maturity date on June 30, 2022.
As of September 30, 2019 and December
31, 2018, there were $966,000 and $980,074 advances outstanding, of which
$161,000and $490,037 was presented under current liabilities, respectively.
Interest expense was $21,735 and
$22,568 for the nine months ended September 30, 2019 and 2018, respectively.
Interest expense was $7,209 and $7,331 for the three months ended September 30,
2019 and 2018, 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.
F-14
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 September30, 2019 and December
31, 2018, there were $812,788 and $752,113 advances outstanding, respectively.
The outstanding balance bears no interest and is due upon request.
Management has evaluated subsequent
events through the date which the financial statements are available to be
issued. All subsequent events requiring recognition as of September 30, 2019
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."
******
F-15