UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the fiscal year ended
For the transition period from _______ to _______
Commission
File Number:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None |
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the Registrant is not required to file Reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 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.
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small Reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller Reporting company | ||
| 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 has filed a Report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial Reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit Report.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
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 Registrant’s
most recently completed second fiscal quarter was approximately $
Note.—If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.
JOWAY HEALTH INDUSTRIES GROUP INC.
Annual Report on Form 10-K
For the year ended December 31, 2021
TABLE OF CONTENTS
i
Special Note Regarding Forward-Looking Statements
In addition to historical information, this Report contains predictions, estimates and other forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this Report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in this Report in greater detail under the heading “Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date hereof. You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
ii
PART I
Item 1. BUSINESS.
Overview
We are incorporated in the state of Nevada. Prior to the consummation of the Merger as of December 31, 2020, as more specifically described below, Joway Health Industries Group Inc. (the “Company” or “Joway Health”), through its operating entities in China, was engaged in the manufacture, distribution and sales of tourmaline-related healthcare products.
As a result of the consummation of the Merger on December 31, 2020, we became a shell company and as of the date of this Annual Report, we have no full time employees. Starting from January 1, 2021, we no longer have any assets or any business operations. The Report of our independent registered public accountants on our financial statements for the year ended December 31, 2021 states that these conditions, among others, raise substantial doubt about our ability to continue as a going concern.
On November 20, 2020, Joway Health entered into a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and a wholly-owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Parent”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Parent (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving corporation as a wholly-owned subsidiary of Parent. The special committee of the Board of Directors of the Company unanimously approved the Merger Agreement and the transactions contemplated thereby.
Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”) and as a result of the Merger, the ordinary shares of common stock of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are held by the Company, were cancelled and extinguished in consideration for $119,070 in cash (the “Merger Consideration”). The Company distributed the Merger Consideration to its shareholders (other than to Parent) in an amount equal to such shareholder’s proportionate share of the Merger Consideration based on such shareholders’ percentage of the outstanding common stock of the Company. In addition, the Company received a fairness opinion from an investment banker opining that the Merger Consideration was fair, from a financial point of view, to the shareholders of the Company.
As of December 31, 2020, the Effective Time of the Merger, the 10,000 ordinary shares of common stock of Dynamic Elite issued and outstanding immediately which were held by the Company, were cancelled for $119,070 in cash as Merger Consideration, or $0.45 per share. In January 2021, the Company had received $119,070 from Crystal Globe and distributed proportionately to the Company’s minority shareholders, other than Crystal Globe, which represented 2,646,000 shares of our common stock. Since the remaining 17,408,000 shares of our common stock was owned by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares was offset and Crystal Globe did not receive any cash payment in connection with the Merger.
Change in Control
On February 3, 2022, the Company consummated the transactions contemplated by the Stock Purchase Agreement dated as of January 31, 2022 (the “Purchase Agreement”), by and among the Company, Crystal Globe and JHP Holdings, Inc., a Nevada corporation (the “Buyer”), pursuant to which the Buyer purchased 16,644,820 shares of common stock of the Company from Crystal Globe. The shares represent 83% of the issued and outstanding shares of the Company on a fully diluted basis. The purchase price for the shares paid by the Buyer was $100,000. Pursuant to the Purchase Agreement, each of Crystal Globe, the Buyer and Company made customary representations and warranties to each other. The parties agreed to certain customary post-closing covenants, including those relating to confidentiality, publicity and litigation support. The Company and Crystal Globe also agreed to certain indemnification provisions as they pertain to the Buyer for breaches or inaccuracies in their respective representations and warranties or covenants.
In connection with the acquisition of the 83% by the Buyer, Jinghe Zhang, the sole officer and director of the Company, resigned and the Buyer appointed Ramon Lata as the sole officer and director of the Company. The executive officers of the Company are currently located at 600 South 3rd Street, Las Vegas, Nevada 89101.
1
Shell Company Status
As a result of the consummation of the Merger, as of December 31, 2020, the Company became a shell company, as that term is defined in Rule 12b-2 of the Exchange Act of 1934, as amended (the “Exchange Act”). Going forward, our main business operations consist of seeking a business combination with a private entity whose business would present an opportunity for its shareholders.
Our objectives discussed below are extremely general and are not intended to restrict discretion of our Board of Directors to search for and enter into potential business opportunities or to reject any such opportunities.
We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. Further, we may acquire or combine with a venture that is in its preliminary or early stages of development, one that is already in operation, or one that is in a more mature stage of its corporate existence. Accordingly, business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities difficult and complex.
We believe that there are numerous companies seeking the perceived benefits of a publicly registered corporation. These benefits are commonly thought to include the following:
| ● | the ability to use registered securities to acquire assets or businesses; | |
| ● | increased visibility in the marketplace; | |
| ● | greater ease of borrowing from financial institutions; | |
| ● | improved stock trading efficiency | |
| ● | greater shareholder liquidity; | |
| ● | greater ease in subsequently raising capital; | |
| ● | ability to compensate key employees through stock options and other equity awards; | |
| ● | enhanced corporate image; and | |
| ● | a presence in the United States capital markets. |
It is anticipated that any securities issued in any such reorganization would be issued in reliance upon exemption from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of a transaction, we may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. The issuance of substantial additional securities and their potential sale into any trading market which may develop in our securities may have a depressive effect on that market.
With respect to any merger or acquisition, negotiations with target company management are expected to focus on the percentage of our company that the target company shareholders would acquire in exchange for all of their shareholdings in the target company. Depending upon, among other things, the target company’s assets and liabilities, our existing shareholders will in all likelihood hold a substantially lesser percentage ownership interest in our company following any merger or acquisition. The percentage ownership of our existing shareholders may be subject to significant reduction in the event we acquire a target company with substantial assets. Any merger or acquisition effected by us can be expected to have a significant dilutive effect on the percentage of shares held by our shareholders at such time.
2
We will participate in a business opportunity only after the negotiation and execution of appropriate agreements. Although the terms of such agreements cannot be predicted, generally such agreements will require certain representations and warranties of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by the parties prior to and after such closing, will outline the manner of bearing costs, including costs associated with our attorneys and accountants, and will include miscellaneous other terms.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in our loss of the related costs incurred.
Competition
We expect to encounter substantial competition in our efforts to identify and consummate a transaction with a business opportunity. The primary competition will be from other companies organized and funded for similar purposes, small venture capital partnerships and corporations, small business investment companies and wealthy individuals, all of which may have substantially greater financial and other resources than we do. In view of our limited financial resources and limited management availability, we may be at a competitive disadvantage compared to our competitors.
Employees
We presently have no employees apart from Ramon Lata, our sole officer and director. Mr. Lata is engaged in outside business activities and anticipates that he will devote to our business limited time until the acquisition of a successful business opportunity has been identified. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination.
We intend to hire additional management and other support personnel when we have reached a point in our proposed growth that would allow for such employment. In the interim, we will rely upon consultants to assist us in identifying and investigating acquisition opportunities.
Reports to Security Holders
We file annual, quarterly and current reports and other information with the SEC. You may read and copy any reports, statement or other information that we file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (202) 551-8090 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at the Internet site maintained by the SEC at http://www.sec.gov.
Item 1A. RISK FACTORS
AS A SMALLER REPORTING COMPANY, WE ARE NOT REQUIRED TO PROVIDE A STATEMENT OF RISK FACTORS. NONETHELESS, WE ARE VOLUNTARILY PROVIDING RISK FACTORS HEREIN. THIS ANNUAL REPORT CONTAINS CERTAIN STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY. YOU ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS ANNUAL REPORT, INCLUDING THE MATTERS SET FORTH BELOW, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE DECIDING TO INVEST IN OUR COMPANY. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS FOR GROWTH WOULD LIKELY SUFFER. AS A RESULT, YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT IN OUR COMPANY.
3
We are a shell company and may never be able to effectuate our business plan.
As a result of the Merger, the Company ceased operations and is now seeking a business combination with a private entity whose business would present an opportunity for its shareholders. We intend to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for our shareholders. As a shell company with limited resources we may not be able to successfully effectuate our business plan. There can be no assurance that we will ever achieve any revenues or profitability. The revenue and income potential of our proposed business and operations is unproven as the lack of operating history makes it difficult to evaluate the future prospects of our business. We require financing to acquire businesses and implement our business plan. We cannot assure you that we will be successful in obtaining financing or acquiring businesses, or in operating those acquired businesses in a profitable manner.
We expect losses in the future because we have no revenue.
As we have no current revenue, we are expecting losses over the next twelve (12) months because we do not yet have any revenues to offset the expenses associated with our business plan. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.
If our business plans are not successful, we may not be able to continue operations as a going concern and our stockholders may lose their entire investment in us.
Since inception, we have had no revenue. On December 31, 2021, we had an accumulated deficit of approximately $7.4 million. These factors raise substantial doubt about our ability to continue as a going concern. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination. If we cannot continue as a going concern, our stockholders may lose their entire investment in us.
We do not have any agreement for a business combination or other transaction.
We have no arrangement, agreement or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. We cannot assure you that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. Management has not identified any particular industry or specific business within an industry for evaluation. We cannot guarantee that we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that future funds allocated to the purchase of our shares will not be invested in a company with active business operations.
Future success is highly dependent on the ability of management to locate and attract a suitable acquisition.
The success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the identified target company. While business combinations with entities having established operating histories are preferred, there can be no assurance that we will be successful in locating candidates meeting such criteria. The decision to enter into a business combination will likely be made without detailed feasibility studies, independent analysis, market surveys or similar information which, if we had more funds available to it, would be desirable. In the event we complete a business combination, the success of our operations will be dependent upon management of the target company and numerous other factors beyond our control. We cannot assure you that we will identify a target company and consummate a business combination.
There is competition for those private companies suitable for a merger or combination transaction of the type contemplated by management.
We are in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do. Consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
4
We have not conducted market research to identify business opportunities, which may affect our ability to identify a business to merge with or acquire.
We have neither conducted nor have others made available to us results of market research concerning prospective business opportunities. Therefore, we have no assurances that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination or other transactions for formal evaluation by us, such that it may be expected that any such target business or transaction will present such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available. There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our stockholders.
Management intends to devote only a limited amount of time to seeking a target company, which may adversely impact our ability to identify a suitable acquisition candidate.
While seeking a business combination, our sole officer and director anticipates devoting limited time to our affairs in total. Our sole officer has not entered into a written employment agreement with us and is not expected to do so in the foreseeable future. This limited commitment may adversely impact our ability to identify and consummate a successful business combination.
We are dependent on the services of our sole officer to obtain capital required to implement our business plan and for identifying, investigating, negotiating and integrating potential acquisition opportunities. The loss of services of our sole officer could have a substantial adverse effect on us. The expansion of our business will be largely contingent on our ability to attract and retain highly qualified corporate and operations level management team. We cannot assure you that we will find suitable management personnel or will have financial resources to attract or retain such people if found.
The time and cost of preparing a private company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private companies.
Target companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require reporting companies to provide certain information about significant acquisitions, including audited consolidated financial statements for the company acquired.
The time and additional costs that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.
Any potential acquisition or merger with a foreign company may subject us to additional risks.
If we enter into a business combination with a foreign concern, we will be subject to risks inherent in business operations outside of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.
We will need to raise additional capital to execute our business plan. If our operations do not produce the necessary cash flow, or if we cannot obtain needed funds, we may be forced to reduce or cease our activities with consequent loss to investors.
We have a need for cash in order to pay obligations currently due in a timely manner, and to finance our business operations. Our continued operations will depend upon the sustainability of cash flow from our ability to raise additional funds, as required, through equity or debt financing. There is no assurance that we will be able to obtain additional funding when it is needed, or that such funding, if available, will be obtainable on terms acceptable to us. If we cannot obtain needed funds, we may be forced to reduce or cease our activities with consequent loss to investors. In addition, should we incur significant presently unforeseen expenses or delays, we may not be able to accomplish our goals.
5
If we fail to develop and maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, as a result, current and potential shareholders could lose confidence in our financial reports, which could harm our business and the trading price of our Common Stock.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting. We plan to comply with Section 404 by strengthening, assessing and testing our system of internal controls to provide the basis for our report. The process of strengthening our internal controls and complying with Section 404 is expensive and time consuming, and requires significant management attention, especially given that we have not yet undertaken any efforts to comply with the requirements of Section 404. We cannot be certain that the measures we will undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we discover a material weakness in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for listing on the OTC Markets, one of the national securities exchanges, and the inability of registered broker-dealers to make a market in our Common Stock, which would further reduce our stock price.
Our principal stockholder owns a substantial interest in our voting stock and investors will not have any voice in our management, which could result in decisions adverse to our general shareholders.
Ramon Lata beneficially owns 83% of our outstanding Common Stock. As a result, he has and will have the ability to control substantially all matters submitted to our stockholders for approval including: (a) election of our Board; (b) removal of any of our directors; (c) amendments of our Articles of Incorporation or bylaws; (d) adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us, or (e) other significant corporate transactions.
Our failure to adopt certain corporate governance procedures may prevent us from obtaining a listing on a national securities exchange.
Ramon Lata is our sole officer and director. We have no directors that are “independent” as that term is defined in the rules of any national securities exchange. As a result, we do not have an audit, compensation or nominating and corporate governance committee. The functions of such committees would perform are performed by the Board as a whole. Consequently, there is a potential conflict of interest in Board decisions that may adversely affect our ability to become a listed security on a national securities exchange and as a result adversely affect the liquidity of our Common Stock.
Trading in our shares of Common Stock is limited, and will not improve unless we increase our sales, become profitable and secure more active market makers.
Our Common Stock is currently quoted on Pink tier of OTC Markets Group Inc., an over-the-counter quotation system, under the symbol “GTVI.” However, there is currently no trading market for our Common Stock and there is no assurance that a regular trading market will ever develop. The trading price of our securities could be subject to wide fluctuations, in response to quarterly variations in our operating results, announcements by us or others, developments affecting us, and other events or factors. In addition, the stock market has experienced extreme price and volume fluctuations in recent years. These fluctuations have had a substantial effect on the market prices for many companies, often unrelated to the operating performance of such companies, and may adversely affect the market prices of the securities Such risks could have an adverse effect on the stock’s future liquidity.
We may, in the future, issue additional common shares and preferred shares, convertible into common shares, which would reduce investors’ percent of ownership and may dilute our share value.
Our Articles of Incorporation authorizes the issuance of 201,000,000 shares of capital stock, consisting of 200,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. The future issuance of Common Stock or shares of preferred stock convertible into Common Stock, may result in substantial dilution in the percentage of our Common Stock held by our then existing shareholders. We may value any Common Stock issued in the future on an arbitrary basis. The issuance of Common Stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our Common Stock.
6
We do not have a class of our securities registered under Section 12 of the Exchange Act. Until we do, or we become subject to Section 15(d) of the Exchange Act, we will be a “voluntary filer.”
We are not currently required under Section 13 or Section 15(d) of the Exchange Act to file periodic reports with the SEC. We have in the past voluntarily elected to file some or all of these reports to ensure that sufficient information about us is publicly available to our stockholders and potential investors. Until we become subject to the reporting requirements under the Exchange Act, we are a “voluntary filer” and we are currently considered a non-reporting issuer under the Exchange Act. We will not be required to file reports under Section 13(a) or 15(d) of the Exchange Act until the earlier to occur of: (i) our registration of a class of securities under Section 12 of the Exchange Act, which would be required if we list a class of securities on a national securities exchange or if we meet the size requirements set forth in Section 12(g) of the Exchange Act, or which we may voluntarily elect to undertake at an earlier date; or (ii) the effectiveness of a registration statement under the Securities Act relating to our Common Stock. Until we become subject to the reporting requirements under either Section 13(a) or 15(d) of the Exchange Act, we are not subject to the SEC’s proxy rules, and large holders of our capital stock will not be subject to beneficial ownership reporting requirements under Sections 13 or 16 of the Exchange Act and their related rules. As a result, our stockholders and potential investors may not have available to them as much or as robust information as they may have if and when we become subject to those requirements. In addition, if we do not register under Section 12 of the Exchange Act, and remain a “voluntary filer”, we could cease filing annual, quarterly or current reports under the Exchange Act.
Our common shares are subject to the “penny stock” rules of the SEC, and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person; and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common shares and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because we do not intend to pay any cash dividends on our Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. We cannot assure you that you will be able to sell shares when you desire to do so.
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Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES.
We do not currently own or rent any property.
Item 3. LEGAL PROCEEDINGS.
We have no knowledge of any material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
8
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
There is a limited public market for our common shares. Our Common Stock has been trading on the Over-the-Counter (“OTC”) Markets under the symbol “GTVI” since September 11, 2009. It is currently on the OTC Pink Markets. quoted on the OTC Markets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
The OTC Markets is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter, or the OTC, equity securities, and may not necessarily represent actual transactions.
OTC securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
Holders of Our Common Stock
As of December 31, 2021, we had 430 shareholders of record of our common stock. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.
Dividends
In January 2022, we distributed a special dividend of $119,070 to our minority shareholders who represented 2,646,000 shares of our common stock. The special dividend distribution was made due to the Merger Agreement we made with Dynamic Elite and Crystal Globe on November 20, 2020. Other than the special distribution on January 2022, we do not pay dividends on our common stock and do not anticipate paying such dividends in the foreseeable future. The declaration of any future cash dividends is at the discretion of our Board and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Stock Option Grants
To date, we have not granted any stock options.
Registration Rights
We have not granted registration rights to any person.
Recent Sales of Unregistered Securities
None.
Securities Authorized for Issuance under Equity Compensation Plans
In 2021 and 2020, we have not granted any securities authorized for issuance under equity compensation plans.
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Rule 10b-18 Transactions
During the year ended December 31, 2021, neither the Company nor any affiliated purchaser of the Company, purchased any equity securities of the Company that are registered pursuant to Section 12 of the Exchange Act.
Penny Stock Regulations
Our shares of common stock are subject to the “penny stock” rules of the Securities Exchange Act of 1934 and various rules under this Act. In general terms, “penny stock” is defined as any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, issued by a registered investment company, and excluded from the definition on the basis of price (at least $5.00 per share), or based on the issuer’s net tangible assets or revenues. In the last case, the issuer must meet one of the following requirements: (i) net tangible assets must exceed $3,000,000 if the issuer has been in continuous operation for at least three years; or (ii) net tangible assets must exceed $5,000,000 if the issuer has been in operation for less than three years; or (iii) the issuer’s average revenues for each of the past three years must exceed $6,000,000.
Trading in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock, to the extent it is penny stock, and may affect the ability of shareholders to sell their shares.
Item 6. [RESERVED].
We are a smaller reporting company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
The following discussion should be read in conjunction with our financial statements and notes to those financial statements, included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk factors” and elsewhere in this prospectus.
FORWARD-LOOKING STATEMENTS:
Certain statements made in this Report may constitute “forward-looking statements on our current expectations and projections about future events.” These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases you can identify forward-looking statements by some words such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements are made as of the date of this Report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this Report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements.
Overview
As a result of the Merger, we are now seeking a business combination with a private entity whose business would present an opportunity for our shareholders. No specific assets or businesses have been definitively identified and there is no certainty that any such assets or business will be identified or that any transactions will be consummated. We may seek investors to purchase our stock to provide us with working capital to fund our operations. Thereafter, we will seek to establish or acquire businesses or assets with additional funds raised either via the issuance of shares or debt. There can be no assurance that additional capital will be available to us at all or on acceptable terms. We may seek to raise the required capital by other means. We may have to issue debt or equity or enter into a strategic arrangement with a third party. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds will have a severe negative impact on our ability to remain a viable company.
We do not expect to generate any revenues over the next 12 months, unless we are able to enter into a business combination with an operating company. Our principal business objective for the next 12 months will be to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for our shareholders. During the next 12 months we anticipate incurring costs related to filing of Exchange Act reports, and possible costs relating to consummating an acquisition or combination. We believe we will be able to meet these costs through use of funds in our treasury and additional amounts, as necessary, to be loaned by or invested in us by our stockholders, management or other investors.
We intend to contract out certain technical and administrative functions on an as-needed basis in order to conduct our operating activities. Our management team will select and hire these contractors and manage and evaluate their work performance.
We have no revenues and limited cash on hand. We have sustained losses since inception. We have never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.
As of January 1, 2021, we become a shell company and have limited operating activities since then. The Report of our independent registered public accountants on our financial statements for the year ended December 31, 2021 states that these conditions, among others, raise substantial doubt about our ability to continue as a going concern.
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Results of Operations
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenues. During the years ended December 31, 2021 and 2020, we did not realize any revenues from operations.
Operating expenses. For the year ended December 31, 2021, our total operating expenses was $121,788, decreased by $100,819, or 45%, from $222,607 for the year ended December 31, 2020. This decrease was mainly due to disposal of operations in 2020 and becoming a shell company since January 1, 2021.
Loss from operations. As a result of the foregoing, our loss from operations was $121,788 for the year ended December 31, 2021, compared to $222,607 for the year ended December 31, 2020. This was mainly due to the less operating activities since January 1, 2021. We become a shell company after we disposed all of our operating entities in 2020.
Income taxes. Our income tax expenses did not incur for the years ended December 31, 2021 and 2020.
Net loss. For the year ended December 31, 2021, our net loss was $121,788 compared to $222,859 for the year ended December 31, 2020. The increased loss was primarily due to the increased operating expenses.
Liquidity and Capital Resources
As of December 31, 2021, we had current assets of $0, we had liabilities of $107,052, and our working capital deficit was $107,052. We anticipate that our current liquidity is not sufficient to meet the obligations associated with being a company that is fully reporting with the SEC.
To date, we have managed to keep our monthly cash flow requirement low for two reasons. First, our sole officer does not draw a salary at this time. Second, we have been able to keep our operating expenses to a minimum by operating in space provided at no expense by our sole officer and director.
We currently have no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.
Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplates our continuation as a going concern. We have not yet generated any revenue and have incurred losses to date of approximately $7.4 million. In addition, our current liabilities exceed our current assets by $107,052. These factors raise substantial doubt about our ability to continue operating as a going concern. Our ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund our commitments and ongoing losses, and ultimately generate profitable operations.
Cash Flows
Operating Activities
For the year ended December 31, 2021, net cash used in operating activities was $70,079, related to our net loss of $121,788, reduced by an increase in other payables of $51,709.
For the year ended December 31, 2020, net cash used in operating activities was $564,761, related to our net loss from continuing operations of $222,859 and a cash outflow from our discontinued operations of $382,246, increased by a prepaid legal expense of $15,000 and an increase in other payables of $25,344.
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Investing Activities
For the year ended December 31, 2021, we reported cash inflow of $119,070 from investing activities due to disposal of our operating subsidiaries. For the year ended December 31, 2020, we had $79,446 cash outflow from our investing activities from our discontinued operations.
Financing Activities
For the year ended December 31, 2021, we reported a cash outflow of $48,991 from our financing activities which was mainly due to distribution of $119,070 as a special dividend to our minority shareholders and a financial support of $70,079 received from our related party. For the year ended December 31, 2020, we had $607,077 cash inflow from our financing activities which include $182,515 financial support received from our related party and $424,562 cash inflow from our discontinued operations.
Recent Accounting Pronouncements
For a description of our recent accounting pronouncements, see “Note 2 - Summary of Significant Accounting Policies” of this Annual Report on Form 10-K.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
The financial statements have been prepared in conformity GAAP, which contemplates our continuation as a going concern. The Company has no revenue since January 1, 2020 and has incurred losses to date of approximately $7.4 million. In addition, the Company’s current liabilities exceed its current assets by $107,052. To date, the Company has primarily funded its operations through advances from former stockholders, the sale of Common Stock and the loan from Hometown. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. These factors raise substantial doubt about the Company’s ability to continue operating as a going concern. The Company’s ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund its commitments and ongoing losses, and ultimately generate profitable operations.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
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Contractual Obligations
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Off Balance Sheet Items
Under SEC regulations, we are required to disclose off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:
| ● | any obligation under certain guarantee contracts, | |
| ● | any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets, | |
| ● | any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in shareholder equity in our statement of financial position, and | |
| ● | any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us. |
We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.
Critical Accounting Policies
Management’s discussion and analysis of its financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates under different assumptions or conditions. We believe that the following reflect the more critical accounting policies that currently affect our financial condition and results of operations.
Basis of Consolidation
The accompanying financial statements include Joway Health and its wholly owned subsidiaries and controlled VIEs for the periods prior to the consummation of the Merger as of December 31, 2020. All significant inter-company accounts and transactions have been eliminated in the consolidation.
Pursuant to Accounting Standards Codification Topic 810 “Consolidation” (“ASC 810”), the Company is required to include the financial statements of its variable interest entities (“VIEs”) in its financial statements. ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.
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Based on the various Contractual Agreements prior to the consummation of the Merger as of December 31, 2020, we believe we are able to exercise control over the VIEs, and to obtain the full economic benefits. We believe that the terms of the exclusive option agreement are currently exercisable and legally enforceable under PRC laws and regulations. We also believe that the minimum amount of consideration permitted by the applicable PRC law to exercise the option does not represent a financial barrier or disincentive for us to exercise our rights under the exclusive option agreement. A simple majority vote of our board of directors is required to pass a resolution to exercise our rights under the exclusive option agreement, for which consent of the shareholder of VIEs is not required. Therefore, we believe this gives us the power to direct the activities that most significantly impact VIEs’ economic performance. We believe that our ability to exercise effective control, together with the consulting service agreements and the equity pledge agreements, give us the rights to receive substantially all of the economic benefits from VIEs in consideration for the services provided by its wholly owned subsidiaries in China. Accordingly, as the primary beneficiary of VIEs and in accordance with U.S. GAAP, Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading, as VIEs of Junhe Consulting, has been consolidated in the Company’s financial statements. Sales from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading are included in our total sales, their incomes or losses from operations are consolidated with ours, and our net income or loss includes net income or loss from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading.
Going Concern
We incurred net loss of approximately $122,000 for the year ended December 31, 2021. We had accumulated deficit of approximately $7.4 million as of December 31, 2021. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The continuation of us as a going concern through the next twelve months is dependent upon the continued financial support from its stockholders or external financing. We believe our sole officer and director will provide the additional cash to meet with our obligations as they become due. While we believe in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be neither no assurances to that effect, nor no assurance that we will be successful in securing sufficient funds to sustain the operations.
These conditions raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. We believe that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.
Revenue Recognition
The Company recognizes revenue when control of promised goods or services is transferred to the company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Prior to the Merger Agreement as of December 31, 2020, with respect to sales of product to both franchisee and non-franchisee customers, the Company transfers control, invoices the customer and recognizes revenue upon shipment to the customer. Sales prices are based on fixed price lists that are different depending on whether the price list is for franchisee customers or for non-franchisee customers. Sales, value add and other taxes collected concurrent with revenue-producing activities are excluded from revenue.
After the consummation of the Merger as of December 31, 2020, the Company did not report any revenue for the year ended December 31, 2021.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted the standard in 2021. Adoption of the standard did not have a significant impact on the Company’s statement of earnings in 2021.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The audited financial statements of Joway Health Industries Group Inc. as of December 31, 2021 and 2020 are appended to this Annual Report beginning on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Item 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our senior management, consisting of Ramon Lata, President, Treasurer and Secretary (Principal Executive Officer and Principal Financial Officer), as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our senior management, consisting of Ramon Lata, President, Secretary and Treasurer (Principal Executive Officer and Principal Financial Officer) of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, Mr. Ramon Lata, President, Treasurer and Secretary (Principal Executive Officer and Principal Financial Officer) concluded that our disclosure controls and procedures were not effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
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 or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
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As of December 31, 2021, our management, consisting solely of Ramon Lata, President, Treasurer and Secretary (Principal Executive Officer and Principal Financial Officer), assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013 and SEC guidance on conducting such assessments. Based on that evaluation, we believe that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and a lack of independent directors on our Board, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by Mr. Lata, President, Treasurer and Secretary (Principal Executive Officer and Principal Financial Officer) in connection with the review of our financial statements as of December 31, 2021.
Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of independent directors on our Board results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
Assuming we are able to secure additional working capital, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us.
We also plan to appoint one or more outside directors to our Board who shall be appointed to an audit committee resulting in a fully functioning audit committee which will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management.
Management believes that the appointment of one or more independent directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of independent directors on our Board.
We anticipate that these initiatives will be implemented in conjunction with the acquisition of a business.
Changes in Internal Control over Financial Reporting
On February 3, 2022, the Company consummated the transactions contemplated by the Stock Purchase Agreement dated as of January 31, 2022 (the “Purchase Agreement”), by and among the Company, Crystal Globe and JHP Holdings, Inc., a Nevada corporation (the “Buyer”), pursuant to which the Buyer purchased 16,644,820 shares of common stock of the Company from Crystal Globe. The shares represent 83% of the issued and outstanding shares of the Company on a fully diluted basis. The purchase price for the shares paid by the Buyer was $100,000. Pursuant to the Purchase Agreement, each of Crystal Globe, the Buyer and Company made customary representations and warranties to each other. The parties agreed to certain customary post-closing covenants, including those relating to confidentiality, publicity and litigation support. The Company and Crystal Globe also agreed to certain indemnification provisions as they pertain to the Buyer for breaches or inaccuracies in their respective representations and warranties or covenants.
In connection with the acquisition of the 83% by the Buyer, Jinghe Zhang, the sole officer and director of the Company, resigned and the Buyer appointed Ramon Lata as the new sole officer and director of the Company. The executive officers of the Company are currently located at 600 South 3rd Street, Las Vegas, Nevada 89101.
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Item 9B. OTHER INFORMATION.
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our Board of Directors
The Board of Directors is presently composed of one member, Ramon Lata, who was appointed effective as of February 3, 2022. Mr. Lata was also appointed as the President, Treasurer and Secretary of the Company.
Since December 2021, Ramon Lata has been a vice president at Wilhelmina International, a model and talent agency. Mr. Lata was a vice president at Factor Chosen LLC from April 2015 until September 2017, when it was acquired by MP Management. From September 2017 until November 2019, Mr. Lata was a vice president at Select Model LA., until it was acquired by MP Management.
Our directors hold their position until the next annual meeting of shareholders and until their successors are elected and qualified by our shareholders, or until earlier death, retirement, resignation or removal.
Involvement in Certain Legal Proceedings
To our knowledge, during the last ten years, none of our directors and executive officers (including those of our subsidiaries) has:
| ● | Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time. | |
| ● | Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses. | |
| ● | Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. | |
| ● | Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. | |
| ● | Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Audit Committee
We do not presently have an audit committee. Our Board of Directors currently acts as our audit committee.
Compensation Committee
We do not presently have a compensation committee. Our Board of Directors currently acts as our compensation committee.
Nominating Committee
We do not presently have a nominating committee. Our Board of Directors currently acts as our nominating committee.
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Code of Ethics
On May 11, 2012, our Board of Directors approved a renewed Code of Ethics which is applicable to our officers and senior executives, which include our Chief Financial Officer, Treasurer and Chief Accounting Officer. This Code embodies our commitment to conduct business in accordance with the highest ethical standards and applicable laws, rules and regulations. We will provide any person a copy of our Code of Ethics, without charge, upon written request to the Company’s Secretary. Requests should be addressed in writing to Joway Health Group Industries Group Inc., attn: Ramon Lata, 600 South 3rd Street, Las Vegas, Nevada 89101.
Our Executive Officers
Ramon Lata, who was appointed effective as of February 3, 2022, is our sole officer.
Item 11. EXECUTIVE COMPENSATION.
Executive Officer Compensation
The following is a summary of the compensation we paid to our Chief Executive Officer for the fiscal years ended December 31, 2021 and 2020. This includes all compensation, including any compensation paid to our Chief Executive Officers by any of our subsidiaries. No executive officer received compensation in excess of $100,000 in 2021 or 2020.
Summary Compensation Table
| Name and principal position | Year | Salary ($) | Bonus ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||||||
| Jinghe Zhang President, Chief Executive Officer | 2020 | $ | 21,500 | (1) | — | — | — | — | — | — | $ | 21,500 | ||||||||||||||||||||||
| 2021 | $ | — | — | — | — | — | — | $ | ||||||||||||||||||||||||||
Jinghe Zhang was the principal executive officer of the Company until February 3, 2022, when Crystal Globe Limited sold 83% of the issued and outstanding shares to JHP Holdings, Inc.
| (1) | The amount of $21,500 in the table above represents the compensation received by Mr. Zhang for the entire year of 2021. |
Mr. Ramon Lata, our current principal executive officer and principal financial and accounting officer, is serving in such capacity without compensation.
Option Plan
There were no stock options and no common shares set aside for any stock option plan as of December 31, 2021.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
There were no stock options exercised during the fiscal year ended December 31, 2021, by the executive officer named in the Executive Compensation Table.
Long-Term Incentive Plan (“LTIP”) Awards Table
There were no awards made to a named executive officer in the last completed fiscal year under any LTIP.
20
Director Compensation
The following is a summary of the compensation we paid to our directors for the fiscal year ended December 31, 2021.
Director Compensation
| Name | Fees
earned or paid in cash ($) |
Stock
awards ($) |
Option
awards ($) |
Non-equity
incentive plan compensation ($) |
Nonqualified
deferred compensation earnings ($) |
All
other compensation ($) |
Total ($) |
|||||||||||||||||||||
| Jinghe Zhang | $ | — | — | — | — | — | $ | |||||||||||||||||||||
| Haibo Fan | $ | — | — | — | — | — | $ | |||||||||||||||||||||
| Jun Pang | $ | — | — | — | — | — | $ | |||||||||||||||||||||
As of April 29, 2021, Jun Pang and Haibo Fan resigned as independent directors of the Company.
Mr. Ramon Lata, our current sole director, is serving in such capacity without compensation.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information regarding beneficial ownership of our common stock as of March 29, 2022 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise indicated, the address of each listed stockholder is c/o Joway Health Industries Group, Inc., 600 South 3rd Street, Las Vegas, Nevada 89101.
In determining beneficial ownership of our common stock as of a given date, the number of shares shown includes shares of common stock which may be acquired on exercise of warrants or options or conversion of convertible securities within 60 days of that date. In determining the percent of common stock owned by a person or entity on March 29, 2022, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on March 29, 2022, and (ii) the total number of shares that the beneficial owner may acquire upon conversion of the preferred and on exercise of the warrants and options, subject to limitations on conversion and exercise. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares.
The number of shares issued and outstanding as of March 29, 2022 was 20,054,000.
| Name and Address | Number
of Shares Common Stock Beneficially Owned | Percentage Ownership of Shares of Common Stock | ||||||
| Owner of More than 5% of Class | ||||||||
| JHP Holdings, Inc. (1) | 16,644,820 | 83 | % | |||||
| Director and Executive Officers | ||||||||
| Ramon Lata (2) | 16,644,820 | 83 | % | |||||
| All directors and executive officers (1 persons) | 16,644,820 | 83 | % | |||||
| (1) | JHP Holdings, Inc. holds a total of 16,644,820 shares of the Company’s common stock. As the shareholder and executive director of JHP Holdings, Mr. Lata is the beneficial owner of the shares of the Company held by JHP Holdings. |
| (2) | Reflects the 16,644,820 shares held by JHP Holdings, Inc. Mr. Lata is the sole shareholder and executive officer and director of JHP Holdings and as such has voting and dispositive control over the shares held by JHP Holdings. |
21
Item 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The following are transactions for the last two completed fiscal years and any currently proposed transaction, in which the registrant was or is to be a participant and the amount involved exceeds the less of $120,000 or one percent of the average of the registrant’s total assets at December 31, 2021 and 2020, and in which any of the following persons had or will have a direct or indirect material interest.
| ● | Any director or executive officer; | |
| ● | Any immediate family member of a director or executive officer, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such director, executive officer and any person (other than a tenant or employee) sharing the household of such director or executive officer; and | |
| ● | any person who was in any of the following categories when a transaction in which such person had a direct or indirect material interest occurred or existed: | |
| ● | any person who is known to the registrant to be the beneficial owner of more than five percent of any class of the registrant’s voting securities; or | |
| ● | Any immediate family member of any such security holder, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such security holder, and any person (other than a tenant or employee) sharing the household of such security holder. |
Transaction with Crystal Globe
On November 20, 2020, we entered into a Merger Agreement (the “Merger Agreement”) with Crystal Globe Limited, a British Virgin Islands company which is a majority shareholder of Joway and the other parties signatory thereto. See “Business-Recent Events- Entry into a Material Definitive Agreement”. Upon completion of the transactions contemplated by the Merger Agreement, Crystal Globe acquired all our business in consideration for $119,070 in cash (the “Merger Consideration”). The Company has distributed the Merger Consideration to its shareholders (other than Crystal Globe) in an amount equal to such shareholder’s proportionate share of the Merger Consideration based on such shareholders’ percentage of the outstanding common stock of the Company.
Transactions with Jinghe Zhang
During the years ended December 31, 2021 and 2020, we received financial supports of $66,235 and $182,515 from our former CEO and chairman, Mr. Jinghe Zhang. The loans due to him are for our daily operating activities without interest charge and due on demand.
On April 28, 2021, the Company entered into an agreement with Mr. Jinghe Zhang to release the Company from $295,928 of indebtedness owed to him. As of December 31, 2021 and 2020, the total unpaid principal balance due to Mr. Jinghe Zhang for advances was $3,999 and $233,693, respectively.
Transactions with Joway Shengshi
Joway Shengshi was one of the Company’s subsidiaries but has been sold via the Merger Agreement on December 31, 2020. Mr. Jinghe Zhang owns 99% of the equity interest in Joway Shengshi. For the years ended December 31, 2021 and 2020, we received $3,844 and $0 of advances from Joway Shengshi, respectively, for our daily operating activities.
On April 28, 2021, Joway Shengshi released the Company from $463,698 of indebtedness owed to it. As of December 31, 2021 and 2020, the total unpaid principal balance due to Joway Shengshi was $0.
22
Other Related Party Transactions
Except as disclosed above, no executive officer, director or any member of these individuals’ immediate families, any corporation or organization with whom any of these individuals is an affiliate or any trust or estate in which any of these individuals serve as a trustee or in a similar capacity or has a substantial beneficial interest in is or has been indebted to us at any time since the beginning of our last fiscal year.
Procedures for Approval of Related Party Transactions
Our Director Board is charged with reviewing and approving all potential related party transactions. All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
For each fiscal year of 2021 and 2020, we incurred aggregate fees and expenses of $10,000 and $79,000, respectively, from HHC for works completed for our annual audits and quarterly reviews.
Audit-Related Expenses
Audit-related expenses for 2021 and 2020 were $0, respectively.
Tax Fees
We incurred aggregate fees and expenses of $0 for each fiscal year of 2021 and 2020, respectively.
All Other Fees
We incurred other fees of $0 for each fiscal year of 2021 and 2020.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Since we did not have a formal audit committee, our board of directors served as our audit committee. We have not adopted pre-approval policies and procedures with respect to our accountants in 2020. All of the services provided and fees charged by our independent registered accounting firms in 2021 were approved by the board of directors.
Our Board of Directors has reviewed and discussed with HHC, our audited financial statements contained in this Annual Report on Form 10-K for the 2021 and 2020 fiscal years. The Board of Directors also has discussed with HHC, the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of our financial statements.
Our Board of Directors has received and reviewed the written disclosures and the letter from HHC required by Independence Standards Board Standard No.1 (Independence Discussions with Audit Committees), and has discussed with HHC its independence from our company.
Our Board of Directors has considered whether the provision of services other than audit services is compatible with maintaining auditor independence. Based on the review and discussions referred to above, the Board of Directors determined that the audited financial statements be included in our Annual Report on Form 10-K for our 2021 and 2020 fiscal years for filing with the SEC.
23
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Exhibit Number |
Description | |
| 3.1 | Articles of Incorporation(1) | |
| 3.2 | Bylaws(1) | |
| 4.2 | Description of Capital Stock | |
| 10.35 | Merger Agreement, dated as of November 20, 2020, by and among Crystal Globe Limited, Joway Health Industries Group Inc., Dynamic Elite International Limited and Joway Merger Subsidiary Limited (2) | |
10.36 |
||
| 14.1 | Code of Ethics(4) | |
| 21.1 | List of Subsidiaries* | |
| 31.1 | Certification of the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
| 32.1 | Certification of the Principal Executive Officer of Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| (1) | Incorporated by reference to the exhibits to our registration statement on Form SB-2 filed with the SEC on September 11, 2003. |
| (2) | Incorporated by reference to the exhibits to our Current Report on Form 8-K filed with the SEC on November 25, 2020. | |
| (3) | Incorporated by reference to the exhibits to our Current Report on Form 8-K filed with the SEC on February 10, 2022. |
| (4) | Incorporated by reference to the exhibits to our Annual Report on Form 10-K filed with the SEC on March 1, 2010. |
ITEM 16. FORM 10–K SUMMARY
None.
24
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 2022
| JOWAY HEALTH INDUSTRIES GROUP INC. | ||
| By: | /s/ Ramon Lata | |
| Ramon Lata | ||
President and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf of the registrant and in the capacities and on the dates indicated.
| /s/ Ramon Lata | President and Chief Executive Officer | March 29, 2022 | ||
| Ramon Lata | (Principal Executive Officer and Principal Financial and Accounting Officer) |
25
 |
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of
Joway Health Industries Group Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Joway Health Industries Group Inc. (the Company) as of December 31, 2021 and 2020, and the related statements of operations and other comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two year period ended December 31, 2021, and related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring significant losses and has accumulated deficiency in stockholders’ equity. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2013.
March 29, 2022
PCAOB ID #
F-1
JOWAY HEALTH INDUSTRIES GROUP INC.
BALANCE SHEETS
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Receivable from related party | $ | $ | ||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Special dividend payable | $ | $ | ||||||
| Other payables | ||||||||
| Due to related parties | ||||||||
| Total current liabilities | ||||||||
| COMMITMENTS | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock - par value $ | ||||||||
| Common stock - par value $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
F-2
JOWAY HEALTH INDUSTRIES GROUP INC.
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| REVENUES | $ | $ | ||||||
| COST OF REVENUES | ||||||||
| GROSS PROFIT | ||||||||
| General and administrative expenses | ||||||||
| OPERATING EXPENSES | ||||||||
| INCOME FROM OPERATIONS | ( | ) | ( | ) | ||||
| Other expenses | ( | ) | ||||||
| OTHER LOSS, NET | ( | ) | ||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| INCOME TAXES | ||||||||
| NET LOSS FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||
| Discontinued operations: | ||||||||
| Loss from operations of discontinued component, net of taxes | ( | ) | ||||||
| Loss from disposal of discontinued component, net of taxes | - | ( | ) | |||||
| NET LOSS | ( | ) | ( | ) | ||||
| OTHER COMPREHENSIVE LOSS: | ||||||||
| Foreign currency translation adjustments | ||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
| LOSS PER COMMON SHARE, BASIC AND DILUTED: | ||||||||
| Continuing operations - Basic & diluted | $ | ( | ) | $ | ( | ) | ||
| Discontinued operations - Basic & diluted | $ | $ | ( | ) | ||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED | ||||||||
The accompanying notes are an integral part of these financial statements
F-3
JOWAY HEALTH INDUSTRIES GROUP INC.
STATEMENT OF STOCKHOLDERS’ EQUITY
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Additional | other | ||||||||||||||||||||||||||
| Number of | Common | paid-in | Statutory | Accumulated | comprehensive | Total | ||||||||||||||||||||||
| shares | stock | capital | reserves | deficit | income | equity | ||||||||||||||||||||||
| BALANCE, December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Disposal of subsidiary | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation gain | - | |||||||||||||||||||||||||||
| BALANCE, December 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Forgiveness of related party debts | - | |||||||||||||||||||||||||||
| BALANCE, December 31, 2021 | $ | $ | $ | - | $ | ( | ) | $ | - | $ | ( | ) | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
F-4
JOWAY HEALTH INDUSTRIES GROUP INC.
STATEMENT OF CASH FLOWS
| For the Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid Expense | ||||||||
| Other payables | ||||||||
| Net cash used in operating activities from continuing component | ( | ) | ( | ) | ||||
| Net cash used in operating activities from discontinued component | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash received from disposal of subsidiaries | ||||||||
| Net cash provided by investing activities from continuing component | ||||||||
| Net cash used in investing activities from discontinued component | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Distribution of special dividend | ( | ) | ||||||
| Due to related parties | ||||||||
| Net cash provided by (used in) financing activities from continuing component | ( | ) | ||||||
| Net cash provided by financing activities from discontinued component | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH, beginning of year | ||||||||
| CASH, end of year | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES | ||||||||
| Receivable used to offset the selling price of disposal of Dynamic Elite and Subsidiaries | $ | $ | ||||||
| Uncollected consideration from Disposal of Dynamic Elite and Subsidiaries | $ | $ | ||||||
| Undistributed consideration to shareholders | $ | $ | ||||||
| Forgiveness of related party debts | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
F-5
JOWAY HEALTH INDUSTRIES GROUP INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 – ORGANIZATION
The financial statements include the financial statements of Joway Health Industries Group Inc. (referred to herein as “Joway Health”). Joway Health is hereinafter referred to as the “Company,” “we” and “us”.
Joway
Health (formerly G2 Ventures, Inc.) was originally incorporated under the laws of the State of Texas on March 21, 2003. On September
21, 2010, Joway Health entered into a Share Exchange Agreement (the “Share Exchange”) with the sole stockholder of Dynamic
Elite International Limited. As a result of the Share Exchange, Dynamic Elite became a wholly-owned subsidiary of Joway Health and the
stockholders of Dynamic Elite acquired approximately
Dynamic Elite International Limited (referred to herein as “Dynamic Elite”) was incorporated under the laws of the British Virgin Islands on June 2, 2010 as a limited liability company (a BVI company). Dynamic Elite engaged in manufacturing and distributing tourmaline products in China. Its wholly owned subsidiary, Tianjin Junhe Management Consulting Co., Ltd. was incorporated on September 15, 2010 in Tianjin, People’s Republic of China (“PRC”). Other than the equity interest in Junhe Consulting, Dynamic Elite does not own any assets or conduct any operations.
Tianjin Junhe Management Consulting Co., Ltd. (referred to herein as “Junhe Consulting”) conducted its business through Tianjin Joway Shengshi Group Co., Ltd.
Tianjin
Joway Shengshi Group Co., Ltd. (referred to herein as “Joway Shengshi”) was incorporated in PRC on May 17, 2007. Joway Shengshi
was owned
Shenyang
Joway Electronic Technology Co., Ltd. (referred to herein as “Joway Technology”) was originally named Liaoning Joway Technology
Engineering Co., Ltd. which was incorporated on March 28, 2007 in PRC. The name was changed on June 22, 2011. It engages in the distribution
of Tourmaline Activated Water Machines and the construction of Tourmaline Wellness Houses. Prior to July 25, 2010, Joway Shengshi owned
Tianjin
Joway Decoration Engineering Co., Ltd. (referred to herein as “Joway Decoration”) was incorporated on April 22, 2009 in PRC.
It engages in the distribution of Tourmaline Activated Water Machines, Tourmaline Wellness Room for family use and Tourmaline Wellness
House materials. Prior to July 9, 2010, Joway Shengshi owned
Tianjin
Oriental Shengtang Import & Export Trading Co., Ltd. (referred to herein as “Shengtang Trading”) was incorporated on
September 18, 2009 in the PRC. It engages in purchasing raw materials which it sells to other companies of the group. Prior to July 28,
2010, Joway Shengshi owned
F-6
Pursuant
to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”) and as a result of the Merger,
the ordinary shares of common stock of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are
held by the Company, were cancelled and extinguished in consideration for $
As
of December 31, 2020, the Effective Time of the Merger, the
On December 31, 2020, upon the Company completed the Merger Agreement with Crystal Globe, Joway Health became a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Going forward, the Company intends to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for the Company’s stockholders.
Note 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying financial statements, for the years
ended December 31, 2021 and 2020, we incurred net losses of $
The continuation of our company as a going concern through the next twelve months is dependent upon (1) the continued financial support from our stockholders or external financing. Management believes that our existing stockholders will provide the additional cash to meet our obligations as they become due, and (2) that it will be able to implement its business plan to expand our company’s operations and generate sufficient revenues to meet its obligations.
These conditions raise substantial doubt about our company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for our company to continue as a going concern.
F-7
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Prior to the consummation of the Merger as of December 31, 2020, the Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in United States Dollars (“USD”). All significant inter-company transactions and balances have been eliminated. The financial statements include all adjustments that, in the opinion of management, are necessary to make the financial statements not misleading.
After the consummation of the Merger as of December 31, 2020, the Company’s functional currency is USD.
Use of Estimates
The preparation of the financial statements is in conformity with generally accepted accounting principles in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ from those estimates.
Reclassification
Certain prior year balances were reclassified to conform to the current year’s presentation with consideration of reflecting all of the Company’s subsidiaries and VIEs as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any of the periods presented.
Basis of Consolidation
For the periods prior to the consummation of the Merger as of December 31, 2020, the Company consolidated financial statements including Dynamic Elite, its former wholly owned subsidiaries, and controlled VIEs. The financial statements of Dynamic Elite and controlled VIEs were included as part of the Company’s discontinued component. All significant inter-company accounts and transactions have been eliminated in the consolidation.
Foreign Currency Translation
The accompanying financial statements are presented in USD. The functional currency of the Company is RMB for the periods prior to the consummation of the Merger as of December 31, 2020. The financial statements are translated into USD from RMB at period-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Equity accounts are translated at their historical exchange rates when the equity transactions occurred. The resulting transaction adjustments are recorded as a component of stockholders’ equity. Gains and losses from foreign currency transactions are included in net income.
| December 31, | ||||
| 2020 | ||||
| Year ended RMB: USD Exchange rate | ||||
| Average yearly RMB: USD Exchange rate | ||||
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.
For the years ended December 31, 2021 and 2020 foreign currency translation
adjustments of $
F-8
Other Comprehensive Income
Other comprehensive income is defined as the change in equity during the period from transactions and other events, excluding the changes resulting from investments by owners and distributions to owners. Other comprehensive income is not included in the computation of income tax expense or benefit. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.
Concentrations of Credit Risk
Prior to the consummation of the Merger as of December 31, 2020, the Company’s operations were carried out in the PRC. Accordingly, the Company’s business, financial condition, and results of operations were influenced by the political, economic, and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC were subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable.
As a result of the consummation of the Merger, as of December 31, 2020, the Company became a shell company, as that term is defined in Rule 12b-2 of the Exchange Act of 1934, as amended (the “Exchange Act”). Going forward, our main business operations consist of seeking a business combination with a private entity whose business would present an opportunity for its shareholders.
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 (formerly Statement of Financial Accounting Standard (“SFAS”) No. 157 Fair Value Measurements) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as the following:
| ● | Level 1—defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
| ● | Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying amounts reported in the balance sheets for cash, accounts receivable, other receivable, accounts payable, other payable, and amounts due from related parties generally approximate their fair market values based on the short-term maturity of these instruments. ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Revenue Recognition
The Company recognizes revenue when control of promised goods or services is transferred to the company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Prior to the Merger Agreement, with respect to sales of product to both franchisee and non-franchisee customers, the Company transfers control, invoices the customer and recognizes revenue upon shipment to the customer. Sales prices are based on fixed price lists that are different depending on whether the price list is for franchisee customers or for non-franchisee customers. Sales, value add and other taxes collected concurrent with revenue-producing activities are excluded from revenue.
After the consummation of the Merger as of December 31, 2020, the Company did not report any revenue for the year ended December 31, 2021.
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Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes” (formerly SFAS No. 109 Accounting for Income Taxes), which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets is dependent upon future earnings, if any, of which the timing and amount are uncertain.
According
to ASC 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not
that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical
merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the
amount of benefit to be recognized in the financial statements.
Basic and Diluted Earnings per Share
The Company reports earnings per share in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding during the years ended December 31, 2021 and 2020.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted the standard in 2021. Adoption of the standard did not have a significant impact on the Company’s statement of earnings in 2021.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.
Deconsolidation
On November 20, 2020, Joway Health entered into a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and a wholly-owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Crystal Globe”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Crystal Globe (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving corporation as a wholly-owned subsidiary of Crystal Globe.
Crystal Globe, as the majority shareholder holding
approximately
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Pursuant
to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”) and as a result of the Merger,
the ordinary shares of common stock of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are
held by the Company, will be cancelled and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration
of $
In
January 2021, Joway Health had received $
The following is a reconciliation of the deconsolidation:
| Amount | ||||
| Selling price | $ | |||
| Disposed assets and liabilities: | ||||
| Cash | ||||
| Current assets | ||||
| Fixed assets | ||||
| Intangible assets | ||||
| Liabilities | ( | ) | ||
| Accumulated other comprehensive income | ( | ) | ||
| Loss from disposal of discontinued component, net of income tax | $ | ( | ) | |
Note 4 – RECEIVABLE FROM RELATED PARTY
Receivable from related party consist of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Crystal Globe | $ | $ | ||||||
The
receivable from Crystal Globe is related to the Merger Agreement which is part of the Merger Consideration for Joway Health’s minority
shareholders who hold
In
January 2021, Joway Health had received $
Note 5 – SPECIAL DIVIDEND PAYABLE
As
of September 30, 2021 and December 31, 2020, the Company reported $
On November 20, 2020, Joway Health entered into a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and a wholly-owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Crystal Globe”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Crystal Globe (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving corporation as a wholly-owned subsidiary of Crystal Globe.
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Crystal Globe, as the majority shareholder holding approximately
Pursuant
to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”) and as a result of the Merger,
the ordinary shares of common stock of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are
held by the Company, will be cancelled and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration
of $
As
a result of the Merger Agreement, Joway Health needs to distribute proportionately the Merger Consideration to the Company’s shareholders.
In January 2021,
Note 6 – OTHER PAYABLES
As of December 31, 2021 and 2020, the Company reported $
Note 7 – RELATED PARTY TRANSACTIONS
Payables due to related parties consist of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Jinghe Zhang | $ | $ | ||||||
| Joway Shengshi | ||||||||
| Total | $ | $ | ||||||
The amounts owed to related parties are non-interest bearing and have no specified repayment terms.
Transactions with Jinghe Zhang
During
the years ended December 31, 2021 and 2020, we received financial supports of $
On
April 28, 2021, the Company entered into an agreement with Mr. Jinghe Zhang to release the Company from $
Transactions with Joway Shengshi
Joway
Shengshi was one of the Company’s subsidiaries but has been sold via the Merger Agreement on December 31, 2020. Mr. Jinghe Zhang
owns
On
April 28, 2021, Joway Shengshi released the Company from $
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Disposal of all of Joway Health’s subsidiaries and VIEs
On
November 20, 2020,
Note 8 – INCOME TAXES
Upon the Company executed the Merger Agreement on December 31, 2020, no provision was made for federal income taxes since the Company has significant net operating losses.
The Company’s income tax returns since inception are subject to audit by regulatory authorities. Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company’s results of operations, cash flows or financial position. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations. FASB ASC Topic 740, Income Taxes provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. ASC Topic 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
We recognize tax liabilities in accordance with ASC Topic 740 and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.
Note 9 – SUBSEQUENT EVENTS
Change in Control
On
February 3, 2022, the Company consummated the transactions contemplated by the Stock Purchase Agreement dated as of January 31, 2022
(the “Purchase Agreement”), by and among the Company, Crystal Globe Limited, a company incorporated under the laws of British
Virgin Islands (the “Seller”), and JHP Holdings, Inc., a Nevada corporation (the “Buyer”), pursuant to which
the Buyer purchased
On February 2, 2022, Mr. Ramon Lata was appointed to the board of the directors upon the resignation of Jinghe Zhang, the sole officer and director of the Company. Mr. Lata was also appointed as the President, Treasurer and Secretary of the Company.
In connection with the resignation of Mr. Zhang, all obligations owed to Mr. Zhang from the Company were cancelled and there are no further debts or liabilities owed by the Company to any affiliate or former affiliate of the Company.
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