10-Q/A 1 suic0625form10qa2.htm FORM 10-Q/A

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q/A

(Amendment #1)

 

☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from ______ to _______

 

Commission File Number 000-53737

 

SINO UNITED WORLDWIDE CONSOLIDATED LTD.

 

(Exact name of registrant as specified in its charter)

 

Nevada (State of incorporation)

 

136-20 38th Ave. Unit 3G

Flushing, NY 11354(Address of Principal Executive Offices)

_______________

 

718-395-8706 (Issuer Telephone number)

_______________

 

 

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☑ No ☐

 

Indicate by check mark whether the registrant is a larger accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer ☐ Accelerated filer ☐
Non-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 is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☑

 

At June 30, 2017, there were 58,985,937 shares of the registrant's common stock issued and outstanding.

 

   

 

 

EXPLANATORY NOTE

 

Sino United Worldwide Consolidated Ltd., formerly known as AJ Greentech Holdings Ltd., is filing this Amendment No. 1 on Form 10-Q/A for the period ended June 30, 2017, to amend and restate financial statements and other financial information on the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, as filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2017 (the “Original Filing”).

 

The purpose of this Amendment No. 1 on Form 10-Q/A is to amend the financial statements of the Company’s operating subsidiary that was not originally accounted for correctly in the initial filing of form 10Q.  For convenience and ease of reference, the Company is filing this Form 10-Q/A in its entirety with all applicable changes and unless otherwise stated, all information contained in this amendment is as of August 8, 2017, the filing date of the Original Filing. Except as stated herein, this Form 10-Q/A does not reflect events or transactions occurring after such filing date or modify or update those disclosures in the original Form 10-Q that may have been affected by events or transactions occurring subsequent to such filing date.

 

 

 

 

SINO UNITED WORLDWIDE CONSOLIDATED LTD.

FORM 10-Q

June 30, 2017

INDEX

 

PART I-- FINANCIAL INFORMATION

 

Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Control and Procedures 17

 

PART II-- OTHER INFORMATION

 

Item 1. Legal Proceedings 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Mine Safety Disclosures. 19
Item 5. Other Information. 19
Item 6. Exhibits 19
SIGNATURES 20

 

   

 

 

Sino United Worldwide Consolidated Ltd.

Index to the consolidated financial statements

 

Contents Page(s)
Unaudited Consolidated Balance Sheets at June 30, 2017(Restated) and December 31, 2016 F-2
Unaudited Consolidated Statements of Comprehensive Income(Loss) for the Three and Six Months Ended June 30, 2017(Restated) and 2016 F-3
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017(Restated) and 2016 F-4
Notes to the Consolidated Financial Statements(Restated) (Unaudited) F-5

 

 

 F-1 

 

 

Sino United Worldwide Consolidated Ltd.
Consolidated Balance Sheets
(Unaudited)
       
    

June 30,

2017

    

December 31,

2016

 
ASSETS   (Restated)      
Current Assets          
Cash  $224,163   $254,432 
Short-term investments   431,916    403,617 
Accounts receivable, net   1,815,247    1,331,409 
Inventories   5,329    81,058 
Other current assets   2,104    1,031 
Total Current Assets   2,478,759    2,071,547 
           
Property, plant and equipment, net   9,932    8,890 
Intangible Assets, net   123,967    146,142 
Other assets   15,453    14,412 
Total Assets  $2,628,111   $2,240,991 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current Liabilities          
Short-term loan  $502,914   $427,168 
Accounts payable   922,092    584,605 
Advances from customers   —      132,000 
Due to related parties   15,504    268,141 
Taxes payable   60,884    3,417 
Accrued expenses and other current liabilities   21,560    9,000 
Total Current Liabilities   1,522,954    1,424,331 
           
Long term debt   429,189    433,457 
Total Liabilities   1,952,143    1,857,788 
           
COMMITMENTS AND CONTINGENCIES          
           
Stockholders' Equity          
Common stock, $0.001 par value, 394,500,000 shares authorized; 58,985,937 and 58,985,937 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively   58,986    58,986 
Additional paid-in capital   593,947    593,947 
Accumulated deficit   (714,280)   (960,234)
Accumulated other comprehensive income   737,315    690,504 
Total Stockholders' Equity   675,968    383,203 
Total Liabilities and Stockholders’ Equity  $2,628,111   $2,240,991 
           
           
The accompanying notes are an integral part of these consolidated financial statements.

 

 F-2 

 

 

Sino United Worldwide Consolidated Ltd.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
             
  

For the

Three Months Ended

 

For the

Six Months Ended

   June 30,  June 30,
   2017 (Restated)  2016  2017 (Restated)  2016
Revenue  $1,132,506   $490,119   $1,966,993   $1,102,123 
Cost of revenue   874,425    394,869    1,414,628    906,784 
Gross profit   258,081    95,250    552,365    195,339 
                     
Operating expenses                    
General and administrative   133,144    141,919    231,442    178,666 
Total operating expenses   133,144    141,919    231,442    178,666 
                     
Income (loss) from operations   124,937    (46,669)   320,923    16,673 
                     
Other income (expense):                    
Interest income (expense), net   (8,035)   (7,855)   (14,914)   (15,469)
Loss from sales of short-term investment   (294)   —      (294)   —   
Total other income (expense)   (8,329)   (7,855)   (15,208)   (15,469)
                     
Income (loss) before income tax   116,608    (54,524)   305,715    1,204 
Income tax provision   24,743    —      59,761    —   
Net income (loss)   91,865    (54,524)   245,954    1,204 
                     
Other comprehensive income (loss)                    
Foreign currency translation adjustment   7,910    (1,275)   46,811    14,524 
Comprehensive income (loss)  $99,775   $(55,799)  $292,765   $15,728 
                     
Earnings (loss) per share - Basic and Diluted  $0.00   $(0.00)  $0.00   $0.00 
Weighted average shares outstanding - Basic and Diluted   58,985,937    58,464,274    58,985,937    58,453,722 
                     
                     
The accompanying notes are an integral part of these consolidated financial statements.

 

 F-3 

 

 

Sino United Worldwide Consolidated Ltd.
Consolidated Statements of Cash Flows
(Unaudited)
       
   For the Six Months Ended
   June 30,
   2017 (Restated)  2016
CASH FLOW FROM OPERATING ACTIVITIES          
Net income  $245,954   $1,204 
Adjustment to reconcile net income to net cash provided by (used in) operating activities:          
Depreciation and amortization   25,929    —   
Loss from sales of short-term investment   288    —   
Change in operating assets and liabilities:          
Accounts receivable   (380,237)   (253,815)
Inventories   80,095    —   
Other current assets   6,001    (19,936)
Accounts payable   289,690    217,093 
Advances from customers   (132,000)   14,636 
Taxes payable   56,163    (22,005)
Accrued expenses and other current liabilities   5,358    (54,652)
Net cash provided by (used in) operating activities   197,241    (117,475)
           
CASH FLOW FROM INVESTING ACTIVITIES          
Cash proceeds from sales of short-term investment   635    22,197 
Acquisition of office equipment   (1,270)   —   
Net cash provided by (used in) investing activities   (635)   22,197 
           
CASH FLOW FROM FINANCING ACTIVITIES          
Proceeds from bank loans   260,889    51,121 
Repayment of bank loans   (251,926)   (191,220)
Repayment of related party loan   (253,297)   —   
Proceeds from issuance of common stock   —      143,000 
Capital contribution   —      100 
Net cash provided by (used in) financing activities   (244,334)   3,001 
           
Effect of exchange rate changes on cash   17,459    14,409 
DECREASE IN CASH   (30,269)   (77,868)
Cash - beginning of period   254,432    291,832 
Cash - ending of period  $224,163   $213,964 
           
Supplement disclosure information          
Cash paid for interest  $16,301   $15,514 
Cash paid for income taxes  $2,735   $—   
           
           
The accompanying notes are an integral part of these consolidated financial statements.

 

 F-4 

 

  

Sino United Worldwide Consolidated Ltd.

June 30, 2017

Notes to the Consolidated Financial Statements

(Unaudited)

 

Note 1 – Organization and Basis of presentation

 

Organization

 

Sino United Worldwide Consolidated Ltd. is a Nevada corporation incorporated on August 30, 2006, under the name Gateway Certifications, Inc. On November 16, 2009, our corporate name was changed to American Jianye Greentech Holdings, Ltd., and on February 13, 2014, our corporate name was changed to AJ Greentech Holdings, Ltd., and on July 12, 2017, our corporate name was further changed to Sino United Worldwide Consolidated Ltd.

 

From November 2009 until October 2013, through our China subsidiaries, we were engaged in design, marketing and distributing of alcohol base clean fuel that are designed to use less fossil fuel and have less pollution than traditional fuel.

 

On October 31, 2013, pursuant to agreements with one of our former directors, we transferred the stock in our China subsidiaries to the former director in exchange for cancellation of debt totaling $240,000. As a result of the transfer of the subsidiaries, we were no longer engaged in the China clean fuel business. We transferred the stock of the China subsidiaries because we felt that, it is not in our best interest to continue China clean fuel business as a result of our decreasing revenue, continued losses and inability to raise capital for our business.

 

On October 31, 2013, Chu Li An acquired, for nominal consideration, 8,000,000 shares of common stock from the director who acquired the subsidiaries and 12,778,399 shares of common stock from The Chairman, who was also a director. On November 1, 2013, Chu Li An and the Company entered into a loan agreement pursuant to which the Chu Li An agreed to lend us $100,000 initially with future loan amount up to $1,000,000, for which we will issue our 6% demand promissory note in the principal amount of $100,000. As of June 30, 2017, the note has not been issued.

 

On November 18, 2013, we entered into agreement pursuant to which we issued to Chu Li An and her BVI company, our sole director and chief executive officer, 180,000,000 shares of common stock, in consideration of the cancellation of debt due to Chu Li An in the amount of $180,000.

 

On November 30, 2013, the Company entered into an agreement to acquire all of the issued and outstanding stock of Jin Chih International, Ltd., a Taiwan corporation, from its sole owner Chu Li An for five million shares of the Company’s common stock. As of June 30, 2017, the stock has not been issued.

 

As a result of the above transactions, we carry out the electronic products and general cargo trading and related consulting service business through our subsidiary named Jin Chih International, Ltd in Taiwan. We still plan to focus on providing greentech products outside of China in future. Even though the company has disposed China branches, the company's new management will continue to expand the current green energy and technology business in the United States and globally, at the same time to explore many other green and renewable energy such as solar, wind power, sea power by signing licensing agreement or joint venture with other research institutes .

 

Basis of presentation

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of June 30, 2017 and the results of operations and cash flows for the periods ended June 30, 2017 and 2016. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2017. The balance sheet on December 31, 2016 has been derived from the audited financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2016 as included in our Annual Report on Form 10-K. 

 

Certain amounts have been reclassified to conform to current year presentation.

 

 F-5 

 

NOTE 2 – Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

 

Segment Information

 

ASC 280 requires companies to report information about operating segment in interim and annual financial statements. It also requires segment disclosures about products and services geographic and major customers. The Company has determined that it does not have any separately reportable operating segments.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

 

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

 

Inventories

 

The Company values inventories, consisting of raw materials, packaging material and finished goods, at the lower of cost or net realizable value. Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost method for finished goods. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated net realizable value. Factors utilized in the determination of estimated net realizable value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.

 

The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Other significant estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.

 

Revenue Recognition

 

The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.

 

The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed acknowledgement of receipt from the customers or a signed bill of lading from the third party trucking company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

 

 F-6 

 

The Company markets and distributes electronic products and general cargo for automobile use and follows Section 605-45-45 (formerly EITF 99-19) (“ASC Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition to report revenue gross as a principal for its sales since the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does not act as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on its sales. The management of the Company determined that the Company should report revenue based on the gross amount billed to a customer when considering each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14 as specified (1) The entity is the primary obligor in the arrangement — The Company signs a product sales agreement with its customer and represents in writing that the Company is responsible for fulfillment, including the acceptability of the product(s) or service(s) ordered or purchased by the customer; (2) The entity has general inventory risk (before customer order is placed or upon customer return); (3) The entity has latitude in establishing price — The Company has reasonable latitude, within economic constraints, to establish the exchange price with a customer for the product or service; (4) The entity changes the product or performs part of the service— The Company developed a method for blending the raw materials in its manufacturing process, through its proprietary technology, catalysts can be mixed with fuel and alcohols to become a finished product to be sold after pumping and piping; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer; (6) The entity is involved in the determination of product or service specifications — The Company determines the nature, type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has physical loss inventory risk of purchased inventories after customer order; and (8) The entity has credit risk — The Company is responsible for collecting the sales price from its customer but must pay the amount owed to its supplier after the supplier performs, regardless of whether the sales price is fully collected.

 

Net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on all of the Company’s products at the rate of 5% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

 

Fair Value of Financial Instruments

 

The fair values of the Company’s accrued expenses and other current liabilities approximate their carrying values due to the relatively short maturities of these instruments. The carrying value of the Company’s short and long term debt approximates fair value based on management’s best estimate of the interest rates that would be available for similar debt obligations having similar terms at the balance sheet date.

 

Impairment of Long-Lived Assets

 

The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, Property, Plant and Equipment. The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

 

The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

 

The Company adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

 

 F-7 

 

Net Income (Loss) per Share

 

The Company calculates its basic and diluted earnings per share in accordance with ASC 260. Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and options and convertible securities.

 

Translation Adjustment

 

The Company’s financial statements are presented in the U.S. dollar ($), which is the Company’s reporting and functional currency. The functional currency of the Company’s subsidiaries is TWD. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of comprehensive income. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of comprehensive income.

 

In accordance with ASC 830, Foreign Currency Matters, the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from TWD into U.S. dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for the financial statements in accordance with ASC 830, Foreign Currency Matters, are as follows:

 

Average Rate for the six months ended on: June 30, 2017 June 30, 2016
Taiwan dollar (TWD) 1 1
United States dollar ($) 0.0326 0.0308
     
Exchange Rate at June 30, 2017 June 30, 2016
Taiwan dollar (TWD) 1 1
United States dollar ($) 0.0332 0.0310

 

Comprehensive Income (Loss)

 

Comprehensive income (loss) includes accumulated foreign currency translation gains and losses with respect to the spun-off entities and the operating entity in Taiwan.

 

Recently Issued Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

 

Note 3 – Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

 

The Company did not generate income and cash from its operation for the years ended December 31, 2016, 2015 and 2014 and has accumulated deficit as of June 30, 2017. There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company’s working capital requirements. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company plans to rely on the advances and loans from related parties, the proceeds from funds generated from private placements, public offering and/or bank financing to support the Company’s working capital requirements. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may not be able continue its operations.

 

Note 4 – Accounts Receivable  

 

Accounts receivable at June 30, 2017 and December 31, 2016 consisted of the following:

 

  

June 30, 2017

(Restated)

  December 31, 2016
Accounts receivable  $1,909,182   $1,418,999 
Allowance for doubtful accounts   93,935    87,590 
Total:  $1,815,247   $1,331,409 

 

 F-8 

 

Note 5 – Intangible Assets

 

On January 1, 2016, the Company purchased the DMS Technology from Xinyahang Gufen Youxian Gongsi, Taiwan, (“Xinyahang”) for $128,176 and 500,000 shares of Common Stock of AJGH (OTCQB). Also on October 1, 2016, the Company entered into two-year agreement with Xinyahang to provide design service for the DMS System. The design price was approximately $53,000(TWD 1,619,047).

 

Intangible Assets, stated at cost, less accumulated amortization, at June 30, 2017 and December 31, 2016 consisted of the following:

 

   June 30, 2017  December 31, 2016
Intangible assets  $181,968   $178,348 
Less: Accumulated amortization   (58,001)   (32,206)
Total:  $123,967   $146,142 

 

For the six months ended June 30, 2017 and 2016, the Company recorded amortization expense of $25,103 and $0 respectively.

 

For the three months ended June 30, 2017 and 2016, the Company recorded amortization expense of $12,182 and $0, respectively. 

 

Note 6 – Property, Plant and Equipment 

 

Property, plant and equipment, stated at cost, less accumulated depreciation at June 30, 2017 and December 31, 2016 consisted of the following:

 

  

June 30, 2017

(Restated)

  December 31, 2016
Office equipments  $11,411   $9,435 
Less: Accumulated depreciation   1,479    545 
Total:  $9,932   $8,890 

 

For the six months ended June 30, 2017 and 2016, the Company recorded depreciation expense of $826 and $545 respectively.

 

For the three months ended June 30, 2017 and 2016, the Company recorded depreciation expense of $360 and $545, respectively. 

 

Note 7 – Other Assets

 

   June 30, 2017  December 31, 2016
Rent deposit  $15,453   $14,412 
Total:  $15,453   $14,412 

 

 F-9 

 

Note 8 – Borrowing

 

  

June 30,

2017

  Term 

Int.

Rate/Year

          
Cathay United Bank  $43,092    

Jun. 19, 2017 to

Nov. 18, 2017

    3.11%
Long term debt: amount payable within 1 year
First Commercial Bank Ltd.   41,996    

Jul. 1, 2017 to

Jun. 30, 2018

    5.07%
Taiwan Business Bank Ltd.   53,152    

Jun. 26, 2017 to

Jun. 25, 2018

    3.60%
Bank of Panshin   88,612    

Jun. 9, 2017 to

Jun. 8, 2018

    3.75%
Sunny Bank Ltd.   67,453    

Jun. 22, 2017 to

Jan. 21, 2018

    3.49%
Sunny Bank Ltd.   208,609    

Jun. 6, 2017 to

Jun. 5, 2018

    3.49%
Total:  $502,914           
                
                
                
    December 31, 2016    Term    

Int.

Rate/Year

 
                
Cathay United Bank  $59,791    

Dec. 19, 2016 to

Nov. 18, 2017

    3.11%
Long term debt: amount payable within 1 year
First Commercial Bank Ltd.   45,047    

Dec. 31, 2016 to

Dec. 30, 2017

    5.07%
Taiwan Business Bank Ltd.   56,260    

Dec. 26, 2016 to

Dec. 25, 2017

    3.60%
Bank of Panshin   45,829    

Dec. 11, 2016 to

Dec. 10, 2017

    3.67%
Sunny Bank Ltd.   107,309    

Dec. 22, 2016 to

Dec. 21, 2017

    3.49%
Sunny Bank Ltd.   112,932    

Dec. 6, 2016 to

Dec. 5, 2017

    3.49%

Total

  $427,168           

 

The long term debt should be repaid as equal principal by month. The long term debt -the term less than 1 year represented the amount should be repaid within 1 year. 

  

NOTE 9 – Related Party Transactions

 

The total amount advance from related parties consisted of the advance from shareholders for the investment, working capital and the expense. The balance was $15,504(Restated) and $268,141 as of June 30, 2017 and December 31, 2016, respectively.

 

 F-10 

 

NOTE 10 – Long Term Debt

 

  

June 30,

2017

  Term 

Int.

Rate/Year

Taiwan Business Bank Ltd.  $119,592    

 Jun. 26, 2018 to 

Sep. 25, 2020

    3.60%
Bank of Panshin   169,840    

Jun. 9, 2018 to 

May 8, 2020

    3.67%
Sunny Bank Ltd.   34,768    

Jun. 6, 2018 to

Aug. 5, 2019

    3.49%
First Commercial Bank Ltd.   104,989    

Jul. 1, 2018 to

Jan. 30, 2021

    5.07%
Total  $429,189           

 

  

December 31,

2016

  Term 

Int.

Rate/Year

Taiwan Business Bank Ltd.  $129,620    

Dec. 26, 2017 to 

Sep. 25, 2020

    3.60%
Sunny Bank Ltd.   8,507    

Dec. 22, 2017 to

Jan. 21, 2018

    3.49%
Bank of Panshin   21,107    

Dec. 11, 2017 to 

Jun. 10, 2018

    3.67%
Sunny Bank Ltd.   164,023    

Dec. 6, 2017 to

Aug. 5, 2019

    3.49%
First Commercial Bank Ltd.   110,200    

Dec. 31, 2017 to

Jan. 30, 2021

    5.07%
Total  $433,457           

 

NOTE 11 – Taxes Payable

 

   June 30, 2017  December 31, 2016
   (Restated)   
Income tax payable  $60,884   $3,204 
Value added tax payable   —      213 
Total:  $60,884   $3,417 

 

NOTE 12 – Income Taxes

 

The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has experienced operating losses for U.S. federal income tax purposes since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. The operating subsidiary is organized and located in the Taiwan and does not conduct any business in the United States. Taxation on profits earned in the Taiwan has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the Taiwan where the Company operates after taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operations.

 

In accordance with the relevant tax laws in the Taiwan, the Company statutory rate were 17% and 17% for the six months ended June 30, 2017 and 2016, respectively.

 

The components of the income tax expense are as follows:

 

  

The six

months ended

June 30, 2017

(Restated)

 

The six months

ended

June 30, 2016

Current provision  $59,761   $—   
Deferred provision   —      —   
Total:  $59,761   $—   

 

 F-11 

 

NOTE 13 – Common Stock

 

On April 7, 2014, the shareholder, Chu Li An contributed $165,500 capital to the Company.

 

On June 30, 2015, the Company made a reverse split of its common stock at the rate of 1 for 1500.

 

On July 10, 2015, the Company issued 50,000,000 shares with a par value of $0.001 per share for cash. The cash was finally offset with debt cancel due to shareholder.

 

On July 10, 2015, the Company issued 800,000 shares with a par value of $0.001 per share in exchange for consulting services.

 

On August 6, 2015, the Company issued 5,000,000 shares with a par value of $0.001 per share and 2,500,000 shares with a par value of $0.01 per share for cash. The cash was finally offset with debt cancel due to shareholder.

 

On April 4, 2016, the Company issued 5,000 shares to two investors with a par value of $4.00 per share for cash.

 

On May 10, 2016, the Company issued 3,333 shares to director Chu Li An, in exchange for cancellation of debt.

 

On May 10, 2016, the Company issued 2,000 shares to an investor with a par value of $4.00 per share for cash.

 

On May 10, 2016, the Company issued 3,000 shares to an investor with a par value of $5.00 per share for cash.

 

On May 10, 2016, the Company issued 21,000 shares to an investor with a par value of $4.76 per share for cash.

 

On June 28, 2016, the Company issued 1,250 shares to an investor with a par value of $2.40 per share for cash.

 

On July 12, 2016, the Company issued 500,000 shares to a Xinyahang Electronics Co. Ltd. Taiwan, as part of the payment for technology transfer and purchase of DMS platform technology.

 

On July 12, 2016, the Company issued total 1600 shares to six investors with a par value of $10.00 per share for cash.

 

On July 12, 2016, the Company issued 700 shares to an investor with a par value of $12.00 per share for cash.

 

On July 15, 2016, the Company issued 2,000 shares to consultant Kuo, Yu-chieh to offset for consulting fees payable, no cash payment received.

 

On August 8, 2016, the Company issued 200 shares to an investor with a par value of $14.00 per share for cash.

 

On September 6, 2016, the Company issued 2400 shares to an investor with a par value of $14.00 per share for cash.

 

On October 31, 2016, the Company issued 400 shares to three investors with a par value of $14.00 per share for Cash.

 

The Company’s capitalization is 394,500,000 common shares with a par value of $0.001 per share. There are a total of 58,985,937 common shares issued and outstanding at June 30, 2017 and December 31, 2016. No preferred shares have been authorized or issued.

 

 F-12 

 

NOTE 14 – Foreign Operations

 

Operations

 

Substantially all of the Company’s operations are carried out and all of its assets are located in the Taiwan. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the Taiwan. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, monetary policies, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

 

Dividends and Reserves

 

Under the laws of the Taiwan, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years’ losses, if any; (ii) allocations to the “Statutory Surplus Reserve” of at least 10% of net income after tax, as determined under Taiwan accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital; (iii) allocations of 5-10% of income after tax, as determined under Taiwan accounting rules and regulations, to the Company’s “Statutory Common Welfare Fund”, which is established for the purpose of providing employee facilities and other collective benefits to employees in PRC; and (iv) allocations to any discretionary surplus reserve, if approved by stockholders.

 

As of June 30, 2017, the Company had no Statutory Surplus Reserve and the Statutory Common Welfare Fund established and segregated in retained earnings.

 

NOTE 15 - Commitment and Contingencies

 

The Company had bank loans. Based on the contract agreement, the future minimum repayments required for the coming years are as follows:

 

  Periods ending June 30,
 2018   $502,914 
 2019    218,528 
 2020    176,375 
 2021    34,286 
 Total:   $932,103 

 

The Company did not have other significant capital commitments or significant guarantees as of June 30, 2017.

 

NOTE 16 – Subsequent Events

 

The company is under negotiations with Nanjing City, China government to provide the government with securities management hardware and all related software and other management services. The initial orders shall be for 300,000 units, and could add up to 10,000,000 units for long-term.

 

We have also initiated our new mobile UBI apps and its field testing has begun. So far, the testing is progressing very positively, generating the quality of accelerometer data needed for accurate scoring. We have also begun establishing connections with various insurance companies, vehicle fleet companies, and motorists for further testing and introduction of our new mobile UBI apps.

 

Effective July 17, 2017, the Board of Directors (the “Board”) of the Company appointed Mr. Ong Tee Keat as Chairman of the Board of Directors.

 

The Company has evaluated the existence of significant events subsequent to the balance sheet date through the date the financial statements were issued and has determined that there were no other subsequent events or transactions which would require recognition or disclosure in the financial statements.

 

NOTE 17 – Restatement

The management of the Company has concluded that the consolidated financial statements as of June 30, 2017 and for the three and six months ended June 30, 2017 should be restated.  The conclusion was reached by management because they determined that certain revenues were not recognized correctly in the three and six months ended June 30, 2017, certain transactions occurred during the month ended March 31, 2017 were omitted and certain expenses were not recorded correctly for the three months ended June 30, 2017.

 

In January 2017, the Company entered into a license and distribution agreement with Wealthy Link Technology Corporation (“Wealthy Link”) to authorize Wealthy Link to distribute and license the Company’s products. In the three months ended March 31, 2017, the Company recorded revenue of $3.5 million as per invoices issued, not services performed.

 

 F-13 

 

The following table summarizes the effect of the restatement on items in the consolidated financial statements as of June 30, 2017 and for the three and six months ended June 30, 2017:

 

   As of June 30, 2017
   As Previously Reported  Adjustments  As Restated
Consolidated Balance Sheet amounts
Cash  $96,823   $127,340   $224,163 
Accounts receivable, net   4,607,182    (2,791,935)   1,815,247 
Other current assets   469,365    (467,261)   2,104 
Property, plant and equipment, net   8,216    1,716    9,932 
Accounts payable   1,430,329    (508,237)   922,092 
Due to related parties   135,261    (119,757)   15,504 
Taxes payable   16,806    44,078    60,884 
Accrued expenses and other current liabilities   —      21,560    21,560 
Accumulated deficit   2,040,887    (2,755,167)   (714,280)
Accumulated other comprehensive income   549,932    187,383    737,315 

 

Consolidated Statements of Comprehensive Income (Loss) amounts
   As Previously Reported  Adjustment  As Restated  As Previously Reported  Adjustment  As Restated
   Three Months Ended June 30, 2017  Six Months Ended June 30, 2017
Revenue   1,221,013    (88,507)   1,132,506    5,043,278    (3,076,285)   1,966,993 
Cost of revenue   1,160,265    (285,840)   874,425    1,791,038    (376,410)   1,414,628 
Gross profit   60,748    197,333    258,081    3,252,240    (2,699,875)   552,365 
Total operating expenses   115,691    17,453    133,144    235,609    (4,167)   231,442 
Total other income (expense)   (8,185)   (144)   (8,329)   (15,511)   303    (15,208)
Income (Loss) before income tax   (63,128)   179,736    116,608    3,001,120    (2,695,405)   305,715 
Income tax provision   —      24,743    24,743    —      59,761    59,761 
Net income (loss)   (63,128)   154,993    91,865    3,001,120    (2,755,166)   245,954 
Comprehensive income (loss)   (129,535)   229,310    99,775    2,860,548    (2,567,783)   292,765 
                               
Consolidated Statements of Cash flows amounts
Net cash provided by (used in) operating activities                  72,663    124,578    197,241 
Net cash provided by (used in) investing activities                  (28,299)   27,664    (635)
Net cash used in financing activities                  (61,402)   (182,932)   (244,334)
Effect of exchange rate changes on cash                  (140,572)   158,031    17,459 
Net change in cash                  (157,610)   127,341    (30,269)

 

 F-14 

 

Item 2. Management's Discussion and Analysis Of Financial Condition And Plan Of Operation.

 

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "management believes" and similar language. The forward-looking statements are based on the current expectations of the Company and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. Actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.

 

Investors are also advised to refer to the information in our previous filings with the Securities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.

 

Overview

 

From November 2009 until October, 2013, through our China subsidiary, we were engaged in design, marketing and distributing of alcohol base clean fuel which are designed to use less fossil fuel and have less pollution than traditional fuel.

 

On October 31, 2013, pursuant to agreements with one of our former directors, we transferred the stock in our China subsidiaries to the former director in exchange for cancellation of debt totaling $240,000. As a result of the transfer of the subsidiaries, we were no longer engaged in the China clean fuel business. We transferred the stock of the China subsidiaries because we felt that, it's not our best interest to continue China clean fuel business as a result of our decreasing revenue, continued losses and inability to raise capital for our business.

 

On November 30, 2013, the company entered into an agreement to acquire all of the issued and outstanding stock of Jin Chih International, Ltd., a Taiwan corporation, from its sole owner Chu Li An for five million shares of the Company’s common stock. As of June 30, 2017, the stock has not been issued.

 

As a result of the above transactions, we carry out the electronic products and general cargo trading and related consulting service business through our subsidiary named Jin Chih International, Ltd in Taiwan. We still plan to focus on providing greentech products outside of China in future. Even though the company has disposed China branches, the company's new management will continue to expand the current green energy and technology business in the United States and globally, at the same time to explore many other green and renewable energy such as solar, wind power, sea power by signing licensing agreement or joint venture with other research institutes.

 

Results of Operations

 

Three and Six Months Ended June 30, 2017 and 2016

 

Revenue

 

For the three and six months ended June 30, 2017, we derived our revenues of $1,132,506 and $1,966,993 compared to $490,119 and $1,102,123 for the three and six months ended June 30, 2016, representing an increase of $642,387 and $864,870. Our sales of $1,012,506 and $1,514,993 for the three and six months ended June 30, 2017 came from the electronic products and general cargo trading business operated by the Taiwan subsidiary.

 

On January 5, 2017, the Company entered into license and distribution agreement with Wealthy Link Technology Corp. for the sale of its licensed product for total of 6,457 units adopting the B2C and B2B business models, resulting to sales revenues of $120,000 and $452,000 for the three and six months ended June 30, 2017.

 

Cost of revenue and gross profit

The Company recorded cost of revenue of $874,425 and $1,414,628 for the three and six months ended June 30, 2017, comparing to $394,869 and $906,784 for the three and six months ended June 30, 2016. The Company had a gross profit of $258,081 and $552,365 for the three and six months ended June 30, 2017, comparing to $95,250 and $195,339 for the three and six months ended June 30, 2016.

 

 15 

 

Selling, general and administrative expenses

Selling, general and administrative expenses primarily consist of provision for doubtful debts, payroll, local taxes, investor relation expenses and professional fees. Selling, general and administrative expenses for the three and six months ended June 30, 2017 were $133,144 and $231,442 comparing to $141,919 and $178,666 for the last period.

Income tax expense

We are subject to U.S. federal income tax, and our subsidiary incorporated in the Taiwan is subject to enterprise income taxes in the Taiwan. The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has experienced operating losses for U.S. federal income tax purposes since inception. Taxation on profits earned in the Taiwan has been calculated on the estimated assessable profits for the periods at the rates of 17% in the Taiwan after taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operation.

For the three months ended June 30, 2017 and 2016, the Company recorded income tax provision of $24,743 and $0, respectively. For the six months ended June 30, 2017 and 2016, the Company recorded income tax provision of $59,761 and $0, respectively.

Net income

As a result of the forgoing, the Company generated net income of $91,865 and $245,954 for the three and six months ended June 30, 2017, comparing to net loss of $54,524 and net income of $1,204 for the three and six months ended June 30, 2016.

Foreign currency translation adjustment

The functional currency of our subsidiaries operating in the Taiwan is the Taiwan Dollars (“TWD”). The financial statements of our subsidiaries are translated to U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of comprehensive income (loss). As a result of these translations, which are a non-cash adjustment, we reported foreign currency translation gain of $7,910 and $46,811 for the three and six months ended June 30, 2017, comparing to foreign currency translation loss of $1,275 and foreign currency translation gain of $14,524 for the three and six months ended June 30, 2016.

Liquidity and Capital Resources

We have funded our operations to date primarily through the operations and related party loan, bank loan and capital contributions. The Company has accumulated deficit as of June 30, 2017. In addition, the Company did not generate income and cash from its operation for the years ended December 31, 2016, 2015 and 2014. There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company’s working capital requirements. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company plans to rely on the advances and loans from related parties, the proceeds from funds generated from private placements, public offering and/or bank financing to support the Company’s working capital requirements. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may not be able continue its operations.

As of June 30, 2017, we had a working capital of $955,805. Our current assets on June 30, 2017 were $2,478,759 primarily consisting of cash of $224,163, short-term investments of $431,916 and account receivable of $1,815,247. Our current liabilities were primarily composed of short-term loan of $502,914, accounts payable of $922,092, due to related parties of $15,504 and accrued expenses and other current liabilities of $82,444.

Cash Flow from Operating Activities

Net cash provided by operating activities was $197,241 during the six months ended June 30, 2017, which consisted of our net income of $245,954, depreciation and amortization of $25,929, a change of accounts receivable of $380,237, a change of inventories of $80,095, a change of accounts payable of $289,690, a change of advances from customers of $132,000, a change of taxes payable of $56,163 and a change of accrued expenses and other current liabilities of $5,358.

Net cash used in operating activities was $117,475 during the six months ended June 30, 2016, which primarily consisted of our net income of $1,204, a change of accounts receivable of $253,815, a change of other current assets of $19,936, a change of accounts payable of $217,093, a change of advances from customers of $14,636, a change of taxes payable of $22,005 and a change of accrued expenses and other current liabilities of $54,652.

Cash Flow from Investing Activities

Net cash used in investing activities totaled $635 for the six months June 30, 2017, which was primarily related to cash paid for acquisition of office equipment of $1,270 offset by cash proceeds from sale of short-term investment of $635.

Net cash provided by investing activities totaled $22,197 for the six months ended June 30, 2016, which was primarily related to proceeds received from sale of short-term investment of $22,197.

Cash Flow from Financing Activities

Net cash used in financing activities was $244,334 during the six months ended June 30, 2017, which primarily consisted of proceeds from bank loans of $260,889, offset by repayment of bank loans of $251,926 and repayment of related party loan of $253,297.

Net cash provided by financing activities was $3,001 during the six months ended June 30, 2016, which primarily consisted of proceeds from bank loans of $51,121 and proceeds from issuance of common stock of $143,000 offset by repayment of bank loans of $191,220.

 16 

 

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Inflation

We do not believe our business and operations have been materially affected by inflation

Critical Accounting Policies and Estimates

 

Refer to note 2 in the accompanying consolidated financial statements.

 

Impact of Accounting Pronouncements

 

There were no recent accounting pronouncements that have had a material effect on the Company’s financial position or results of operations.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2017. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2017, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

 

In light of the material weaknesses described below, we performed additional analysis to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that, as of June 30, 2017, our disclosure controls and procedures were not effective at the reasonable assurance level:

 

  1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ending June 30, 2017. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

  2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

 17 

 

Management's Report on Internal Control over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified some material weaknesses in our internal control over financial reporting.

 

We lack sufficient personnel with the appropriate level of knowledge, experience and training in the application of accounting operations of our company. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews.

 

Management is currently reviewing its staffing and systems in order to remedy the weaknesses identified in this assessment. However, because of the above condition, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of June 30, 2017. Additionally, the Registrant’s management has concluded that the Registrant has a material weakness associated with its U.S. GAAP expertise.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

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:

 

We intend to our personnel resources and technical accounting expertise within the accounting function. First, we intend to create a position to segregate duties consistent with control objectives of having separate individuals perform (i) the initiation of transactions, (ii) the recording of transactions and (iii) the custody of assets. Second, we intend to create a senior position to focus on financial reporting and standardizing and documenting our accounting procedures with the goal of increasing the effectiveness of the internal controls in preventing and detecting misstatements of accounting information. Third, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who 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 when funds are available to us. We anticipate the costs of implementing these remediation initiatives will be approximately $37,500 to $50,000 a year in increased salaries, legal and accounting expenses.

 

Management believes that the appointment of one or more outside 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 outside directors on our Board.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

To the best knowledge of the officers and directors, the Company was not a party to any legal proceeding or litigation as of June 30, 2017.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit No. Description
31.1 Chief Executive Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2 Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101 The following materials from Sino United Worldwide Consolidated Ltd.’s Quarterly Report on Form 10-Q for the period ended June 30, 2017 are formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheet; (ii) the Condensed Consolidated Statement of Operations;, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements. This Exhibit 101 is deemed not filed for purposes of Sections 11 or 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  SINO UNITED WORLDWIDE CONSOLIDATED LTD.
   
   
   
Date: June 29, 2018 By: /s/ Yanru Zhou        
  Yanru Zhou
  Chief Executive Officer
   
   
  SINO UNITED WORLDWIDE CONSOLIDATED LTD.
   
   
   
Date: June 29, 2018 By: /s/ Yanru Zhou        
  Yanru Zhou
  Chief Financial Officer

 

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