UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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| (Mark One) | ||
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended |
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
Commission File Number:
_____________________
(Exact name of registrant as specified in its charter)
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(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(g) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| OTC |
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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 ☐
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 smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “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. Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 $
As of April 17, 2023, there were shares outstanding of the registrant’s common stock.
TABLE OF CONTENTS
| i |
Investing in our common stock is highly speculative and involves a significant degree of risk. See “Item 1A: Risk Factors” for a discussion of information that should be considered before making a decision to purchase our common stock.
Investors are cautioned that you are purchasing the interests of China De Xiao Quan Care Group Co., Ltd., which is a Nevada corporation without conducting operations and will be referred to hereinafter as the “Company”, or “we” or “our” or “CDXQ”. Our business operations are conducted in China.
We are a Nevada company, and our operations are conducted in China. Because all of our operations are conducted in China the Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our common stocks. Further, this structure involves unique risks to investor.
Recent statements by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments in China based issuers. Any future action by the Chinese government expanding the categories of industries and companies whose foreign securities offerings are subject to government review could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless.
Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. We are not directly subject to these regulatory actions or statements, as we do not have a variable interest entity structure (“VIE”) and our business does not involve the collection of user data, implicate cybersecurity, or involve any other type of restricted industry. As of the date of this amended filing, no effective laws or regulations in the PRC explicitly require us to seek any approval from the China Securities Regulatory Commission (the “CSRC”), the Cyberspace Administration of China (the “CAC”) or any other PRC governmental authorities for our overseas listing plan, nor has our company received any inquiry, notice, warning or sanctions regarding our planned overseas listing from the CSRC, CAC or any other PRC governmental authorities. In addition, these new laws and guidelines have not impacted the Company’s ability to conduct its business and accept foreign investments. The Company’s China operations, which is non-flame smoking devices, along with computer software development, and elder care services, believes the new data security or anti-monopoly laws and regulations in China do not apply to the Company. However, any change in foreign investment regulations, and other policies in China or related enforcement actions by China government could result in a material change in our operations and the value of our common stock and could significantly limit or completely hinder our ability to offer our common stock to investors or cause the value of our common stock to significantly decline or be worthless. See Item 1A. Risk Factors for detailed information on the risks of investing in our company with operations in China.
Holding Foreign Companies Accountable Act (“HFCAA”)
Pursuant to the Holding Foreign Companies Accountable Act (“HFCAA”), the Public Company Accounting Oversight Board (the “PCAOB”) issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. Our registered public accounting firm, Simon & Edward, LLP, is based in the U.S. and is registered with PCAOB and was not identified in this report as a firm subject to the PCAOB’s determination. Notwithstanding the foregoing, if the PCAOB is not able to fully conduct inspections of our auditor’s work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA.
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Holding Foreign Companies Accountable Act, as amended by the Consolidated Appropriations Act, 2023
On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions. As a result, the Commission will not provisionally or conclusively identify an issuer as a Commission-Identified Issuer if it files an annual report with an audit report issued by a registered public accounting firm headquartered in either jurisdiction on or after December 15, 2022, until such time as the PCAOB issues a new determination.
On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023, which, among other things, amended the HFCAA to reduce the number of consecutive years an issuer can be identified as a Commission-Identified Issuer before the Commission must impose an initial trading prohibition on the issuer’s securities from three years to two years. Therefore, once an issuer is identified as a Commission-Identified Issuer for two consecutive years, the Commission is required under the HCFAA to prohibit the trading of the issuer’s securities on a national securities exchange and in the over-the-counter market.
As noted above, on December 15, 2022, the PCAOB vacated its previous determinations that it is unable to inspect and investigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong. Accordingly, until such time as the PCAOB issues any new determination, there are no issuers at risk of having their securities subject to a trading prohibition under the HFCAA.
The following diagram and notes show the nature of the flow of funds within our organization.
The total issued and outstanding Preferred A Stock (500,000 shares) is owned by the following shareholders:
Chunsheng Qin purchased 475,000 shares
Yangtenglie Quin purchased 15,000 shares
Fugui Xie purchased 10,000 shares
Our Preferred A shareholders have over 94.34% of the voting shares and will carry the necessary votes to determine the outcome for all of the Company’s corporate actions.
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Our Public Shareholders own 33% of our issued and outstanding Common Stock.
China De Xiao Quan Care Group Co., Ltd, the public entity domiciled in Nevada and operates under the same name for our Operations is China. As of the time of this filing, we don’t have any subsidiaries and do not operate under a Variable Interest Entity structure.
The current structure of cash flows within our organization, and as summary of the applicable regulations, is as follows:
China De Xiao Quan Care Group Col, Ltd is not a Chinese operating company but a Nevada company with operations conducted in Nanjing, China. There have been no transfers, dividends, or distributions, to date, between the holding company, its operations in China, or its investors.
To the extent cash in the business is in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds may not be available to fund operations or for other use outside of the PRC/Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of us or our subsidiaries, by the PRC government to transfer cash.
Upon execution of an agreement based on the LOI with China Care Holding Group Inc. (“CCHG”) our direct holding structure and the cross-border transfer of funds within our corporate group will be legal and compliant with the laws and regulations of the PRC.
The Company intends to distribute dividends, the Company will transfer the dividends from CCHG to the Company in accordance with the laws and regulations of the PRC, and then the dividends will be distributed from the Company to all shareholders respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries or regions. We will be able to have such transfers through banks in China under current account items, such as profit distributions and trade and service-related foreign exchange transactions, which can be made in foreign currencies without prior approval from State Administration of Foreign Exchange (the “SAFE”) by complying with certain procedural requirements with the banks. However, approval from or registration with appropriate government authorities will be required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
PRC laws and regulations allow an offshore holding company to provide funding to its wholly owned subsidiary in China only through loans or capital contributions, subject to the filing or approval of government authorities and limits on the amount of capital contributions and loans. For an increase of its registered capital, a company would need to file such change of registered capital with the China’s Ministry of Commerce (“MOFCOM”) or its local counterparts. If the Company provides funding to its future subsidiary through loans, the total amount of such loans may not exceed the difference between the entity’s total investment as approved by the foreign investment authorities and its registered capital. Such loans must be registered with SAFE or its local branches.
Our future PRC subsidiary’s ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit PRC subsidiaries to transfer profits to holding companies only out of its after-tax accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.
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PART I
| Item 1. | Business |
(a) Business Development
The Company was organized under the laws of the State of Nevada on March 8, 2012, under Gankit Corporation. The Company was development stage company as an e-commerce business focused on selling a diverse set of products through its website Gankit.com.
On May 12, 2014, the control block of stock, 20,000,000 shares of restricted common stock were purchased resulting in a change of control. The Company then ceased to operate its e-commerce website and abandoned that business model, and re-focused on the development, branding, and distribution of non-flame smoking devices. The Company changed its name at this time to Nhale, Inc.
Business operations for Nhale Inc. was abandoned by former management and a custodianship action, as described in the subsequent paragraph, was commenced in 2020. The Company filed its last 10-Q in 2016, this financial report included liabilities and debts. As of the date of this filing, these liabilities and debts have not been addressed.
On November 24. 2020, the Eighth District Court of Clark County, Nevada granted the Application for Appointment of Custodian as a result of the absence of a functioning board of directors and the revocation of the Company’s charter. The order appointed Small Cap Compliance, LLC (“SCC”, the “Custodian”) custodian with the right to appoint officers and directors, negotiate and compromise debt, execute contracts, issue stock, and authorize new classes of stock. Rhonda Keaveney is the sole member and control person for Small Cap Compliance, LLC.
The court awarded custodianship to SCC based on the absence of a functioning board of directors, revocation of the company’s charter, and abandonment of the business. At this time, Rhonda Keaveney was appointed sole officer and director.
Upon appointment as the Custodian of CDXQ and under its duties stipulated by the Nevada court, SCC took initiative to organize the business of the issuer. As Custodian, the duties were to conduct daily business, hold shareholder meetings, appoint officers and directors, reinstate the company with the Nevada Secretary of State. SCC also had authority to enter into contracts and find a suitable merger candidate. SCC was compensated for its role as custodian in the amount of 500,000 shares of Convertible Series A Preferred Stock. SCC did not receive any additional compensation, in the form of cash or stock, for custodian services. The custodianship was discharged on April 7 2021.
On January 20, 2021, SCC entered into a Stock Purchase Agreement with Bridgeview Capital Partners, LLC, whereby Bridgeview Capital Partners, LLC purchased 500,000 shares of Convertible Series A Preferred Stock for $37,000. These shares represent the controlling block of stock. Ms. Keaveney resigned her position of sole officer and director and appointed Michael Dobbs as as CEO, Treasurer, Secretary, and Director of the Company.
Bridgeview Capital Partners, LLC is controlled by Michael Dobbs and Sean Lanci.
Bridgeview Capital Partners, LLC entered into a Stock Purchas Agreement with Yang Chong Yi whereby Yang Chong Yi purchased 500,000 shares of Convertible Series A Preferred Stock. Michael Dobbs resigned as sole officer and director and appointed Yang Chong Yi as its CEO, Treasurer, Secretary, and Director of the Company.
Nhale, Inc. filed an amendment to its Articles of Incorporation and changed its name to China De Xiao Quan Care Group Co., LTD on Sept. 22, 2022, trading symbol CDXQ. FINRA announced the name and symbol change on November 28, 2022.
| 1 |
Since October of 2022, the Company’s operations consist of a research and development, branding and distribution of non-flame smoking devices, along with computer software development, sales and service for the brand, and elder care services, development, and management.
The Company implemented a new business model in 2022, statements made relating to our business plan are forward looking statements and we have limited history of performance.
The analysis will be undertaken by or under the supervision of our management. In our continued efforts to implement our business plan, we intend to consider the following factors:
| · | Potential for growth, indicated by anticipated market expansion or new technology; | |
| · | Competitive position as compared to other businesses of similar size and experience within our contemplated segment as well as within the industry as a whole; | |
| · | Strength and diversity of management, and the accessibility of required management expertise, personnel, services, professional assistance and other required items; | |
| · | Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities or convertible debt, through joint ventures or similar arrangements or from other sources; | |
| · | The extent to which the business opportunity can be advanced in our contemplated marketplace; and | |
| · | Other relevant factors |
In applying the foregoing criteria, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Due to our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired. Additionally, we will be competing against other entities that may have greater financial, technical, and managerial capabilities for identifying and completing our business plan.
We are unable to predict when we will, if ever, be profitable. We anticipate that business opportunities would be made available to us through personal contacts of our directors, officers and principal stockholders, professional advisors, broker-dealers, venture capitalists, members of the financial community and others who may present unsolicited proposals. In certain cases, we may agree to pay a finder’s fee or to otherwise compensate the persons who introduce the Company to business opportunities in which we participate.
We expect that our due diligence will encompass, among other things, meetings with incumbent management of the target business and inspection of its facilities, as necessary, as well as a review of financial and other information, which is made available to the Company. This due diligence review will be conducted either by our management or by third parties we may engage. We anticipate that we may rely on the issuance of our common stock in lieu of cash payments for services or expenses related to any analysis.
We may incur time and costs required to select and evaluate our business structure and complete our business plan, which cannot presently be determined with any degree of certainty. Any costs incurred with respect to the indemnification and evaluation of a prospective business that is not ultimately completed may result in a loss to the Company. These fees may include legal costs, accounting costs, finder’s fees, consultant’s fees and other related expenses. We have no present arrangements for any of these types of fees.
| 2 |
As of the time of this filing, the Company is in the business of research and development, branding and distribution of non-flame smoking devices, along with computer software development, sales and service for the brand, and elder care services, development, and management.
Our elderly care system incorporates integrated control of community elderly care; standardization of home elderly care services; traceable tracking of financial income and expenditure; big data monitoring of health management; big data support of user portrait; convenient and barrier-free operation mode.
On March 15, 2023, there was a change in control. Chongyi Yang sold the control block of Preferred A Stock to the persons as follows:
Chunsheng Qin purchased 475,000 shares
Yangtenglie Quin purchased 15,000 shares
Fugui Xie purchased 10,000 shares
The purchase price was $285,000 and Chunsheng Qin became the majority shareholder of CDXQ.
On March 27, 2023, China De Xiao Quan Care Group Co., Ltd. (“CDXQ”) entered into a Non-Binding Letter of Intent (the “LOI”) in which the Company would acquire all of the issued and outstanding securities of China Care Holding Group Inc., a Cayman corporation (“China Care”). Mr. Chunsheng Qin is the sole owner of China De Ziao Quan Care Group Co., Ltd.
The LOI contemplates the acquisition of China Care, by CDXQ. China Care, which owns and operates Jiangsu De Xiao Quan Technology Group, a pioneer in elderly caring industry, combining new generation of cloud intelligence with human-focused management. The company has self-developed an intelligent caring system based on big data analysis and artificial intelligence, strengthening better care and tracking management for the elderly. The LOI was entered into following arm’s length negotiations.
The LOI proposes that CDXQ would acquire 51% of the issued and outstanding stock of China Care in exchange for the newly issued CDXQ stock issuance to the shareholders of 70 million shares of newly issued unregistered shares of common stock, par value $0.0001 per share, with no expiration date on the conversion.
Completion of the transaction is subject to, among other matters, the completion of due diligence, the negotiation of a definitive agreement providing for the transaction and employment agreements, satisfaction of the conditions negotiated therein and approval of the transaction by CDXQ’s board of directors, and all applicable state and federal law. No assurance can be given that the parties will be able to negotiate and execute a definitive agreement or that the transactions herein contemplated will close. CDXQ will file notice of such agreement with the Securities and Exchange Commission on form 8-K when and if any such agreement is reached.
On March 31, 2023, Chongyi Yang resigned his position of officer and director and appointed Chunsheng Qin as President, CEO, Treasurer, Secretary and Director.
Our Industry
In 2021, 18.9% of China's population was over the age of 60, around 267.36 million people. And there are 20.56 million of the population over the age of 65, accounting for 14.2 per cent. This means that there were 2.37 working-aged persons for every one retired person. In 2050, the ratio is expected to drastically drop to 1.82 working persons for every one retired person. Furthermore, currently, 180 million Chinese seniors suffer from chronic diseases, and over 15 million are facing dementia such as Alzheimer's disease. The current care system is unable to sustain these drastic demographic and economic shifts.
To address this issue, the government is looking to increase private capital and investments in the industry, hoping to provide seniors with better quality and more accessible services and options.
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Under China's 14th Five Year Plan (2021-2025), the development of an efficient long-term care (LTC) system is a government priority. The plan specifies major goals and tasks for the five years, including expanding the supply of elderly care services, improving the health support mechanism for the elderly, and advancing the innovative and integrated development of service models.
It lists nine major indicators, such as the number of elderly care beds of the ratio of nursing care beds in elderly care institutions, to mobilize society to actively respond to population ageing. China will step up institutional innovation and boost policy support and financial investment to enable the elderly to share in China's development achievements. Moreover, it is stated that China would also plan to establish about 10 industrial parks dedicated to the silver economy and build a string of cities into models.
Competition
China De Xiao Quan Care Group Co., Ltd is in direct competition within our industry with entities that possess significantly greater experience and resources. Moreover, the Company also competes with numerous other companies similar to it for such opportunities. We believe that acquiring China Care Holding Group Inc., will greatly increase our competitive edge in the elder care services industry.
Effect of Existing or Probable Governmental Regulations on the Business
We are subject to the Exchange Act and the Sarbanes-Oxley Act of 2002. Under the Exchange Act, and are required to file with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The Sarbanes-Oxley Act creates a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and to strengthen auditor independence. It also (1) requires steps be taken to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; (2) establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; (3) creates guidelines for audit committee members’ appointment, and compensation and oversight of the work of public companies’ auditors; (4) prohibits certain insider trading during pension fund blackout periods; and (5) establishes a federal crime of securities fraud, among other provisions.
We are also subject to Section 14(a) of the Exchange Act, which requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to our stockholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14A. Preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are provided to our stockholders.
Employees
The Company had 1 officer during this reporting period. Dr. Chongyi Yang serves as Chief Executive Officer, Treasurer, and Secretary. Mr. Yang resigned on March 31, 2023 and appointed Chunsheng Qin as sole officer and director.
Management of the Company expects to use consultants, attorneys and accountants as necessary, and it is not expected that the Company will have any full-time or other employees, except as may be the result of completing a transaction.
Intellectual Property
As of the date of this report, we do not own any patents, trademarks, licenses, franchises, concessions, and royalty agreements, or other intellectual property contracts.
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Available Information
Our Periodic Reports including Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports, and amendments to those reports, and other forms that we file with or furnish to the Securities and Exchange Commission (SEC) are available to review on the SEC’s EDGAR website.
Corporate Governance
In accordance with and pursuant to relevant related rules and regulations of the SEC, the Board of Directors of the Company has established and periodically update our corporate governance guide, which is applicable to all directors, officers and employees of the Company. We have not yet established an audit committee of our board of directors.
| Item 1A. | Risk Factors |
Risks Relating to Our Business
Our business plan involves a number of very significant risks. Our future business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks. You could lose all or part of your investment due to any of these risks. You should invest in our common stock only if you can afford to lose your entire investment.
We conduct substantially all of our operations in China, and substantially all of our assets are located in China. In addition, a majority of our current officers reside within China and are PRC nationals. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside the PRC.
In addition, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with many other countries and regions. Therefore, recognition and enforcement in the PRC of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.
Enforceability of Civil Liabilities
Our business operations are primarily conducted in China, and substantially all of our assets are located in China. Our sole officer and director, Chunseng Qin, resides in mainland China and most of his assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon this officer and director, to bring an action against us or this individual in the United States, or to enforce judgement against us or him that are obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
The recognition and enforcement of foreign judgments are subject to compliance with the PRC Civil Procedures Law and relevant civil procedure requirements in PRC. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in China will not enforce a foreign judgment against the Company or its directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.
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There is uncertainty as to whether the courts of China would:
| · | recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or | |
| · | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
Furthermore, under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against a company in China for disputes if they can establish sufficient nexus to China for a PRC court to have jurisdiction and meet other procedural requirements. It will be, however, difficult for U.S. shareholders to originate actions against us in China in accordance with PRC laws because we are incorporated under the laws of the United States and it will be difficult for U.S. shareholders, by virtue only of holding the Company’s common shares, to establish a connection to China for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law.
Holding Foreign Companies Accountable Act (“HFCAA”)
Pursuant to the Holding Foreign Companies Accountable Act (“HFCAA”), the Public Company Accounting Oversight Board (the “PCAOB”) issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. Our registered public accounting firm, Simon & Edward, LLP, is based in the U.S. and is registered with PCAOB and was not identified in this report as a firm subject to the PCAOB’s determination. Notwithstanding the foregoing, if the PCAOB is not able to fully conduct inspections of our auditor’s work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA.
Holding Foreign Companies Accountable Act, as amended by the Consolidated Appropriations Act, 2023
On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions. As a result, the Commission will not provisionally or conclusively identify an issuer as a Commission-Identified Issuer if it files an annual report with an audit report issued by a registered public accounting firm headquartered in either jurisdiction on or after December 15, 2022, until such time as the PCAOB issues a new determination.
On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023, which, among other things, amended the HFCAA to reduce the number of consecutive years an issuer can be identified as a Commission-Identified Issuer before the Commission must impose an initial trading prohibition on the issuer’s securities from three years to two years. Therefore, once an issuer is identified as a Commission-Identified Issuer for two consecutive years, the Commission is required under the HCFAA to prohibit the trading of the issuer’s securities on a national securities exchange and in the over-the-counter market.
As noted above, on December 15, 2022, the PCAOB vacated its previous determinations that it is unable to inspect and investigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong. Accordingly, until such time as the PCAOB issues any new determination, there are no issuers at risk of having their securities subject to a trading prohibition under the HFCAA.
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PRC laws and regulations governing our current business operations are sometimes vague and uncertain. Uncertainties with respect to the PRC legal system, including those regarding the enforcement of laws, and sudden or unexpected changes, with little advance notice, in laws and regulations in China could adversely affect us and limit the legal protections available to you and us.
There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement could be unpredictable, with little advance notice. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.
Our operations in China are governed by the laws of the PRC. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules involves uncertainties.
The PRC has promulgated a comprehensive system of laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation and trade. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties and sudden changes, sometimes with little advance notice. As a significant part of our business is conducted in China, our operations are principally governed by PRC laws and regulations, which may limit legal protections available to us. Uncertainties due to evolving laws and regulations could also impede the ability of a China-based company, such as our company, to obtain or maintain any permits or licenses required to conduct business in China. In the absence of required permits or licenses, governmental authorities could impose material sanctions or penalties on us. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other PRC government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.
The PRC government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.
| 7 |
Furthermore, if China adopts more stringent standards with respect to certain areas such as environmental protection or corporate social responsibilities, we may incur increased compliance costs or become subject to additional restrictions in our operations. Certain areas of the law, including intellectual property rights and confidentiality protections in China may also not be as effective as in the United States or other countries. In addition, we cannot predict the effects of future developments in the PRC legal system on our business operations, including the promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof. These uncertainties could limit the legal protections available to us and our investors, including you.
The PRC government may continue to strengthen its capital controls and the dividends of PRC subsidiaries and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from profits, if any. Furthermore, if a subsidiary in the PRC incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments.
In addition, the Enterprise Income Tax Law, or EIT, and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. Any limitation on the ability of PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
Risk of adverse Changes in China’s economic, political or social conditions or government policies
Substantially all of our assets and operations are located in the PRC. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in the PRC generally. The Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures, or other economic, political, or social developments in China may cause decreased economic activity in the PRC, which may adversely affect our business and operating results.
Permissions from the PRC Authorities to Issue Our Common Stock to Foreign Investors
As of the date of this filing, we (1) are not required to obtain permissions from any PRC authorities to issue our Common Stock to foreign investors, (2) are not subject to permission requirements from the China Securities Regulatory Commission (the “CSRC”), the Cyberspace Administration of China (the “CAC”) or any other entity that is required to approve of our PRC subsidiary’s operations, and (3) have not received or were denied such permissions by any PRC authorities. Nevertheless, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings, including this offering. As of the date of this prospectus, we have not received any inquiry, notice, warning, sanctions or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
| 8 |
On December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises, both of which had a comment period that expired on January 23, 2022, and if enacted, may subject us to additional compliance requirement in the future. According to Relevant Officials of the CSRC Answered Reporter Questions(“CSRC Answers”), after the Administration Provisions and Measures are implemented upon completion of public consultation and due legislative procedures, the CSRC will formulate and issue guidance for filing procedures to further specify the details of filing administration and ensure that market entities could refer to clear guidelines for filing, which means it still takes time to make the Administration Provisions and Measures into effect. As the Administration Provisions and Measures have not yet come into effect, we are currently unaffected. However, according to CSRC Answers, only new initial public offerings and refinancing by existent overseas listed Chinese companies will be required to go through the filing process; other existent overseas listed companies will be allowed sufficient transition period to complete their filing procedure, we will certainly go through the filing process in the future, perhaps because of refinancing or given by sufficient transition period to complete filing procedure as an existent overseas listed Chinese company.
However, it is uncertain when the Administration Provision and the Measures will take effect or if they will take effect as currently drafted. If it is determined in the future that the approval of the CSRC, the CAC or any other regulatory authority is required for this offering, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds from this offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our securities. The CSRC, the CAC, or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of our Common Stock. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC, the CAC or other regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of our securities.
| Item 1B. | Unresolved Staff Comments |
None.
| Item 2. | Properties |
We do not own any property but rent office space.
| Item 3. | Legal Proceedings |
There are not any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.
| Item 4. | Mine Safety Disclosures |
N/A
| 9 |
PART II
| Item 5. | Market Price and Dividends on the Registrant’s Common Equity and Related Stockholder Matters |
(a) Market information.
Our Common Stock is not trading on any stock exchange. It is listed, but not quoted, OTC Markets under the symbol CDXQ and there is no established public trading market for the class of common equity.
| Fiscal Year 2022 | HIGH | LOW | ||||||
| First Quarter (Jan.1, 2022 – March 31, 2022) | $ | .07 | $ | .01 | ||||
| Second Quarter (April 1, 2022– June 30, 2022) | .06 | .006 | ||||||
| Third Quarter (July 1, 2022 – Sept. 30, 2022) | .03 | .01 | ||||||
| Fourth Quarter (Oct. 1, 2022 – Dec. 31, 2022) | .06 | .01 | ||||||
| Fiscal Year 2021 | ||||||||
| First Quarter (Jan.1, 2022 – March 31, 2022) | $ | .06 | $ | .01 | ||||
| Second Quarter (April 1, 2022– June 30, 2022) | .08 | .01 | ||||||
| Third Quarter (July 1, 2022 – Sept. 30, 2022) | .06 | .02 | ||||||
| Fourth Quarter (Oct. 1, 2022 – Dec. 31, 2022) | .03 | .001 | ||||||
Holders
(b) Holders.
As of March 31, 2022, there are approximately 4 holders of an aggregate of 30,000,000 shares of our Common Stock issued and outstanding.
(c) Dividends.
We have not declared any cash dividends on our Common Stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
(d) Securities authorized for issuance under equity compensation plans.
We have not adopted an equity compensation plan and no securities have been authorized or reserved for issuance under any equity compensation plan.
Description of Securities
The following description is a summary of the material terms of the provisions of our Articles of Incorporation and Bylaws. The Articles of Incorporation and Bylaws have been filed with the SEC as exhibits to our registration statement on Form 10.
Common Stock
We are authorized to issue 100,000,000 shares of Common Stock with $0.0001 par value per share. As of our fiscal year ended December 31, 2022, there were 30,000,000 shares of Common Stock issued and outstanding.
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Each share of Common Stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. Accordingly, the holders of our Common Stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.
Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.
Holders of our Common Stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution or windup, the holders of our Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities. There are not any provisions in our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.
Our stock transfer agent is Securities Transfer Corporation., located at 2901 N. Dallas Parkway, Suite 380, Plano, TX 75093.
Preferred Stock
Our Articles of Incorporation, as amended, authorizes the issuances of up to 1,000,000 shares of Preferred Stock with the following designations, rights and preferences:
One (1) share of the as Convertible Series A Preferred Stock shall be converted into one thousand (1,000) shares of common stock of the Corporation and entitled to one thousand (1,000) votes of common stock for every one (1) share of as Convertible Series A Preferred Stock owned. The holders of the Convertible Series A Preferred Stock shall not be entitled to receive dividends.
From time to time its Board of Directors may amend the Preferred class of stock. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights, which could adversely affect the voting power or, other rights of the holders of the Common Stock. In the event of issuance, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.
At this time there are 1,000,000 shares of Preferred Stock authorized as Convertible Series A Preferred Stock and 500,000 are issued and outstanding.
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Promissory Notes
During 2013 - 2016 the Company borrowed an aggregate amount of $1,240,000 through 24 promissory notes maturing various within 2015 to 2018. As at December 31, 2022 and 2021, there were 23 promissory notes with an aggregated amount of $1,190,000 in default.
| December 31, | ||||||||||||||||||||||
| Notes Payable | 2022 | 2021 | ||||||||||||||||||||
| Issue Date | Maturity Date | Nominal Amount | Interest Rate | Interest rate in default | Interest Accrued | |||||||||||||||||
| June 2, 2016 | June 2, 2018 | $ | 10,000.00 | 15% | 24% | $ | 13,250 | 10,850 | ||||||||||||||
| June 17, 2015 | June 17, 2018 | 20,000.00 | 15% | 24% | 26,425 | 21,625 | ||||||||||||||||
| August 16, 2016 | August 16, 2018 | 50,000.00 | 15% | 24% | 65,313 | 53,313 | ||||||||||||||||
| November 30, 2016 | November 30, 2018 | 25,000.00 | 15% | 24% | 32,000 | 26,000 | ||||||||||||||||
| April 5, 2013 | December 31, 2015 | 50,000.00 | 15% | 15% | 45,625 | 38,125 | ||||||||||||||||
| June 21, 2013 | December 31, 2015 | 150,000.00 | 15% | 18% | 164,250 | 137,250 | ||||||||||||||||
| November 17, 2013 | May 31, 2016 | 400,000.00 | 15% | 25% | 608,333 | 508,333 | ||||||||||||||||
| November 17, 2013 | April 12, 2017 | 400,000.00 | 15% | 25% | 593,333 | 493,333 | ||||||||||||||||
| July 31, 2015 | July 31, 2017 | 50,000.00 | 15% | 25% | 72,708 | 60,208 | ||||||||||||||||
| April 27, 2016 | April 27, 2018 | 35,000.00 | 15% | 25% | 48,271 | 39,521 | ||||||||||||||||
| Total | $ | 1,190,000.00 | $ | 1,669,508 | 1,388,558 | |||||||||||||||||
| Notes & Interest accrued forgiven | (600,000.00 | ) | (818,208 | ) | ||||||||||||||||||
| Balances as of December 31, 2022 | $ | 590,000.00 | $ | 851,300 | ||||||||||||||||||
For debts in default taken out in Nevada, the statutes of limitations on debt collection for written contracts are 6 years. The Company engages an attorney, who issued an opinion of debt forgiveness on April 13, 2023 to clear out the debts in default more than six years in accordance with the law of State of Nevada above. Based on the attorney letter, for all the notes payable in default for more than 6 years as of December 31, 2022 and subsequent as of April 12, 2023, the Company recognized gain on debt forgiveness totaling $1,418,208 and 1,004,444, respectively. As of December 31, 2022 and 2021, the Company held $590,000 and $1,190,000 notes payable with $851,300 and $1,388,558 accrued interest outstanding, respectively.
Weighted average interest rate of default was 12.0%-25.0% for the years ended December 31, 2022 and 2021. The Company accrued interest expenses of $280,950 and $280,950 for the years of 2022 and 2021, respectively.
| Item 6. | [Reserved] |
N/A
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
INTRODUCTION
This section provides management’s discussion of the financial condition, changes in financial condition and results of operations of China De Xiao Quan Care Group Co., Ltd. with specific information on results of operations and liquidity and capital resources. It includes management’s interpretation of our financial results, the factors affecting these results, the major factors expected to affect future operating results and future investment and financing plans. This discussion should be read in conjunction with our consolidated financial statements and notes thereto.
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Cautionary Statement for the Purposes of the Safe Harbor under the Private Securities Litigation Reform Act of 1995
The statements contained in this Annual Report on Form 10-K may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Report are forward-looking statements made in good faith by us and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this Report, or any other of our documents or oral presentations, the words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “objective”, “plan”, “projection”, “seek”, “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements relating to our strategy, operations, markets, services, and other factors all of which are difficult to predict and many of which are beyond our control. Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. Further, we undertake no obligation to update or revise any of our forward-looking statements whether as a result of new information, future events or otherwise.
Results of Operations for China De Xiao Quan Care Group Co., LTD — Comparison of the Years ended December 31, 2022 and 2021
Revenue
We had no revenues from operations during either 2022 or 2021.
Selling and General & Administrative Expense
Selling and General & Administrative Expenses were $0 for the year ended December 31, 2022, compared to $0 for the year ended December 31, 2021, an decrease of $0.
Other Income(expense)
Other Income was 1,137,258, a net of gain on debt forgiveness of 1,418,208 and interest expense of 280,950 for the year ended December 31, 2022, compared to an expense of 370,950 for the year ended December 31, 2021.
During the year ended December 31, 2022, we incurred $0 in non-cash stock compensation expense from the issuance of Common Stock for payment of debt on behalf of the company. During year ended December 31, 2021, there were $90,000 in non-cash compensation expense from the issuance of Preferred A Stock for payment of debt on behalf of the company.
Net Profit/Loss
We had a net profit of $1,137,258 for the year ended December 31, 2022, compared to a net loss of $370,950 for the year ended December 31, 2021.
Liquidity and Capital Resources
As of December 31, 2022, we had $0 of cash, $1,930,344 in liabilities, and an accumulated deficit of $2,133,594. We used zero of cash in operations for the year ended December 31,2022 and received net proceeds from financing of $0.
| 13 |
The financial statements accompanying this Report have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of our business. As reflected in the accompanying financial statements, we have not yet generated any revenue, had a net profit of $1,137,258 and have an accumulated stockholders’ deficit of $2,133,594 as of December 31, 2022. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional funds and implement our business plan. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
As of December 31, 2022, we were not subject to any market or interest rate risk.
| Item 8. | Financial Statements and Supplementary Data. |
This information appears following Item 15 of this Report and is included herein by reference.
| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
N/A
| Item 9A. |
Controls and Procedures. |
Management’s Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over our financial reporting. Our internal control system was designed to provide reasonable assurance to management regarding the preparation and fair presentation of published financial statements.
Our management, consisting of our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our company have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks that internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.
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Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management's Assessment Regarding Internal Control Over Financial Reporting
At the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision of and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Disclosure controls and procedures were not effective due primarily to a material weakness in the segregation of duties in the Company’s internal control of financial reporting as discussed below.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company (including its consolidated subsidiaries) and all related information appearing in our Annual Report on Form 10-K. Our internal control over financial reporting is designed 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
Management conducted an evaluation of the design and operation of our internal control over financial reporting as of the end of the period covered by this report, based on the criteria in a framework developed by the Company’s management pursuant to and in compliance with the criteria established. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, walkthroughs of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management has concluded that our internal control over financial reporting was not effective, because management identified a material weakness in the Company’s internal control over financial reporting related to the segregation of duties as described below.
While the Company does adhere to internal controls and processes that were designed, it is difficult with a very limited staff to maintain appropriate segregation of duties in the initiating and recording of transactions, thereby creating a segregation of duties weakness. Due to: (i) the significance of segregation of duties to the preparation of reliable financial statements; (ii) the significance of potential misstatement that could have resulted due to the deficient controls; and (iii) the absence of sufficient other mitigating controls, we determined that this control deficiency resulted in more than a remote likelihood that a material misstatement or lack of disclosure within the annual or interim financial statements may not be prevented or detected.
Management’s Remediation Initiatives
Management has evaluated, and continues to evaluate, avenues for mitigating our internal controls weaknesses, but mitigating controls to completely mitigate internal control weaknesses have been deemed to be impractical and prohibitively costly, due to the size of our organization at the current time. Management expects to continue to use reasonable care in following and seeking improvements to effective internal control processes that have been and continue to be in use at the Company.
| 15 |
Changes in internal controls over financial reporting
There were no changes in the Company’s internal control over financial reporting that occurred prior to the Company’s most recent financial quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 9B. | Other Information. |
| N/A | |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
N/A
| 16 |
PART III
| Item 10. | Directors, Executive Officers and Corporate Governance |
Our Officers and directors and additional information concerning them are as follows:
| Name | Age | Position | ||
| Dr. Chongyi Yang until 3/31/2023 | 61 | President, CEO, Secretary, Treasurer, Director | ||
| Qin Chunsheng, present | 65 | President, CEO, Secretary, Treasurer, Director |
Officer Bios
Dr. Yang Chong Yi, Chief Executive Officer to 3/31/2023
Dr. Yang Chong Yi is experienced in both governmental and private sectors, specializing in investment banking, and merger and acquisitions. Dr. Yang has held the following positions:
| · | Deputy Chief in the Bureau of Commodity Price in Shanghai Development and Reform Center | |
| · | Associate Director in Hongkong First Eastern Investment Group | |
| · | General Manager in Shanghai First Food Investment Management Company | |
| · | Managing Director of a state-owned private equity fund |
Dr. Yang also has experience consulting businesses in preparation for IPOs on listings on NASDAQ in addition to consulting commercial complex projects in the cities of New York and Los Angeles.
Dr. Yang Chong Yi is the author of “Winning at Quitting” and “The Economics of Popularity” and Visiting Professor at Shanghai Lixin Institute of Finance and Accounting, a Distinguished Research Institution at the Economic Development Research Center of the Shanghai Municipal Government. Lastly, Dr. Yang is Executive Secretary of the Financial and Economic Committee (Shanghai) of the US-China International Chamber of Commerce.
Qin Chunsheng, Current Chief Executive Officer
Qin Chunsheng, was born on April 15, 1958 in Nanjing, Jiangsu Province, China. He has worked as a farmer and a soldier in many fields and has rich economic work experience. He is good at planning and organizing large-scale economic activities, and has many unique modes and techniques for the operation of large-scale projects. Qin Chunsheng is the chairman of the Health and Elderly Care Professional Committee of the China Population and Culture Promotion Association. He is also an EMBA from Lincoln University in the United States and a graduate student of leading figures in the elderly care industry at Peking University in China.
The "Dexiaoquan Intelligent Elderly Care Platform" created by Qin Chunsheng has been recognized by the national brand power, promoted by the Ministry of Commerce as a trustworthy enterprise, and won the top ten innovation leaders in the 2020 brand power (elderly care industry), the 2021 China Excellent Private Entrepreneurs, the 2021 China Business Model Innovation Award, the most influential leading brand for public satisfaction in elderly care services in China, model enterprise for intelligent health elderly care, 2022 Brand influence, and Top 10 innovative brands for smart health and elderly care; In 2023, he was awarded the top ten ingenious figures for intelligent elderly care.
| 17 |
Qin Chunsheng is the founder of China Dexiaoquan Health Care Group Co., Ltd., and the chairman and CEO of the board of directors. He has developed more than 200 software works and patent certificates for the management system of elderly care institutions. He is a pioneer in the elderly care industry, an organizer of market resources, a leader in model innovation, a defender of transaction rules, and a guardian of market order, promoting the elderly care industry in China to a new era.
| Item 11. | Executive Compensation |
For each of the fiscal years ended December 31, 2022, and 2021 there was no direct compensation awarded to, earned by, or paid by us to any of our executive officers.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
(a) Security ownership of certain beneficial owners.
The following table sets forth, as of December 31, 2022, the number of shares of common stock owned of record and beneficially by our executive officer, director and persons who beneficially own more than 5% of the outstanding shares of our common stock.
| Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Percentage of Class |
|||
| Riverside Heights LLC | 20,000,000 Restricted Common Shares | 66% | |||
| Adam Harden | |||||
| 302 Pinesap Drive | |||||
| Houston, TX 77079 | |||||
| Dr. Chongyi Yang | 500,000 Preferred A Shares | 100% | |||
| 19F, No.38 West Nanjing Road | |||||
| Jing’An District, Shanghai | |||||
| China 200041 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
N/A
| Item 14. | Principal Accounting Fees and Services |
Simon & Edward, LLP served as the Company’s independent auditor for the year ended December 31, 2022.
BFBorgers CPA PC (“BFB”) served as the Company’s independent auditor for the year ended December 31, 2021.
| 18 |
The following table presents fees billed for professional audit services rendered by Simon & Edward, LLP in connection with its audits of the Company’s annual financial statements for the year ended December 31, 2022. The fees billed to the CHJI by Simon & Edward, LLP and BFB during 2021 were the following:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Audit Fees | $ | 12,000 | $ | 12,000 | ||||
| Audit Related Fees (auditor admin. Fees) | – | – | ||||||
| Tax Fees | – | – | ||||||
| All Other Fees | – | – | ||||||
| Total Fees | $ | 12,000 | $ | 12,000 | ||||
As used in the table above, the following terms have the meanings set forth below.
Audit Fees
The fees for professional services rendered in connection with the audit of the Company’s annual financial statements, for the review of the financial statements included in our Quarterly Reports on Form 10 and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.
Audit-Related Fees
The fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.
Tax Fees
The fees for professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees
The fees for products and services provided, other than for the services reported under the headings “Audit Fees,” “Audit Related Fees” and “Tax Fees.” The Company has adopted a policy regarding the services of its independent auditors under which our independent accounting firm is not allowed to perform any service which may have the effect of jeopardizing the registered public accountant’s independence. Without limiting the foregoing, the independent accounting firm shall not be retained to perform the following:
| · | Bookkeeping or other services related to the accounting records or financial statements |
| · | Financial information systems design and implementation |
| · | Appraisal or valuation services, fairness opinions or contribution-in-kind reports |
| · | Actuarial services |
| · | Internal audit outsourcing services |
| · | Management functions |
| · | Broker-dealer, investment adviser or investment banking services |
| · | Legal services |
| · | Expert services unrelated to the audit |
| 19 |
PART IV
| Item 15. | Exhibits, Financial Statement Schedules. |
| Item 16. | Form 10-K Summary |
N/A
| 20 |
CHINA DE XIAO QUAN CARE GROUP CO., LTD
CONSOLIDATED FINANCIAL STATEMENTS
(Audited)
| 21 |
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
China De Xiao Quan Care Group Co., LTD
New York, NY
Opinion on the Financial Statements
We have audited the accompanying balance sheets of China De xiao Quan Care Group Co., LTD. (the “Company”) as of December 31, 2022 and 2021, the related statements of operations, stockholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, 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 described in Note 3 to the financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
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.
Critical Audit Matter
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
We have served as the Company's auditor since 2022.
April 17, 2023
| 22 |
CHINA DE XIAO QUAN CARE GROUP CO., LTD
BALANCE SHEETS
| As at | ||||||||
| Dec. 31, 2022 | Dec. 31, 2021 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Total current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Payables and accrued interests | $ | $ | ||||||
| Notes payable in default | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Common stock, $ par value; million shares authorized, issued and outstanding at Dec. 31, 2022 and 2021 | $ | $ | ||||||
| Convertible Series A Preferred Stock, $ par value; shares designated, issued and outstanding at Dec. 31, 2022 and 2021 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' DEFICIT | $ | ( | ) | $ | ( | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
| 23 |
CHINA DE XIAO QUAN CARE GROUP CO., LTD
STATEMENTS OF OPERATIONS
| For the years ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| OTHER INCOME/(EXPENSE) | ||||||||
| Interest expense | $ | ( | ) | $ | ( | ) | ||
| Compensation expense | ( | ) | ||||||
| Gain on debt forgiveness | ||||||||
| Total other income (expense), net | ( | ) | ||||||
| Net Profit (loss) | $ | $ | ( | ) | ||||
| Earnings per share - basic | $ | $ | ( | ) | ||||
| Earnings per share - diluted | $ | $ | ( | ) | ||||
| Weighted average number of common shares – basic | ||||||||
| Weighted average number of common shares – dilutive | ||||||||
The accompanying notes are an integral part of these financial statements
| 24 |
CHINA DE XIAO QUAN CARE GROUP CO., LTD
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
| Series A Preferred Stock | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Issue of Preferred shares | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net income | – | – | ||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements
| 25 |
CHINA DE XIAO QUAN CARE GROUP CO., LTD
STATEMENTS OF CASH FLOWS
| For the years ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Compensation expenses for convertible Series A Preferred Stock | ||||||||
| Gain on debt forgiveness | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Payables and accrued interests | ||||||||
| Cash used in operating activities | ||||||||
| Net change in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
| 26 |
CHINA DE XIAO QUAN CARE GROUP CO., LTD
Notes to Financial Statements
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
China Dexiaoquan Care Group Co., Ltd. (“CDXQ” or the “Company”) was incorporated as GankIt Corporation in the state of Nevada on March 8, 2012, with a fiscal year end of May 31, which was subsequently changed to December 31 by unanimous consent of Directors in 2019.
Until May 12, 2014, we were an e-commerce business focused on selling a diverse set of products through a website that could either be won through a bidding process or purchased at a discount to the suggested retail price.
On May 12, 2014, Riverview Heights, LLC purchased 20,000,000 shares of common stock of the 30,000,000 total issued and outstanding shares common stock of Company, thus becoming the Majority Shareholder (hereafter the “Majority Shareholder”).
On January 20, 2021, Bridgeview Capital Partners, LLC as the custodian received 500,000 shares of Convertible Preferred Series A Stock of the 500,000 total issued and outstanding Convertible Preferred Series A Stock of the Company as for services rendered and debts paid by the Custodian.
On February 3,2021, Bridgeview Capital Partners, LLC and Mr. Chongyi Yang reached agreement to sell shares of Convertible Preferred Series A Stock to Mr. Chongyi Yang. The deal has been done before March 31st, 2021.
On September, 2022, the Company changed the name as China Dexiaoquan Care Group Co., Ltd. and the code from NHLE to CDXQ correspondingly.
The Company is focused on from the development, branding and distribution of non-flame smoking devices to the development, sales and service of computer software, network software; elder care services, development, and management, and related commodity sales etc. The Company is not actively trading during the current reporting period.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements of China Dexiaoquan Care Group Co., Ltd. (“CDXQ” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on the Company’s historical results as well as management’s future expectations. Actual results could differ from those estimates.
| 27 |
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1: | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2: | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3: | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
The carrying amount of the Company’s financial assets and liabilities, such as accounts payable and accrued expenses approximate their fair value because of the short maturity of those instruments.
Income taxes
The Company follow ASC 740-10-30, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.
On December 22, 2017, the President of the United
States signed into law the Tax Reform Act. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented.
| 28 |
For the years ended December 31, 2022 and 2021, there are outstanding common shares and potentially dilutive shares from convertible preferred stock. Each share of the Convertible Series A Preferred Stock shall be converted into shares of common stock of the Corporation and entitled to 1,000 votes of common stock for each share of Convertible Series A Preferred Stock owned. The holders of the Convertible Series A Preferred Stock shall not be entitled to receive dividends.
However, these shares have not been considered in the weighted average share calculation as their inclusion would be anti-dilutive due to the net loss position for the years then ended.
Related parties
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Recently issued accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The Company’s financial statements are prepared
using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization
of assets and liquidation of liabilities in the normal course of business. The Company has yet established any source of revenue to cover
its operating costs and has an accumulated deficit of $
In addition to operational expenses, as the Company executes its business plan, it is incurring expenses related to complying with its public reporting requirements. In order to finance these expenditures, the Company has raised capital in the form of debt, which will have to be repaid, as discussed in detail below. The Company has depended on loans from private investors and outside investors for most of its operating capital. The Company will need to raise capital in the next twelve months in order to remain in business.
Management anticipates that significant dilution will occur as a result of any future sales of the Company’s common stock and this will reduce the value of its outstanding shares. The Company cannot project the future level of dilution that will be experienced by investors as a result of its future financings, but it will significantly affect the value of its shares.
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
| 29 |
NOTE 4 – PAYABLES AND ACCRUED INTERESTS
| As of December 31, | 2022 | 2021 | ||||||
| Other payables | $ | $ | ||||||
| Accrued Interests | ||||||||
| Total | $ | $ | ||||||
NOTE 5 – NOTES PAYABLE
During 2013 - 2016 the Company borrowed an aggregate
amount of $1,240,000 through 24 promissory notes maturing various within 2015 to 2018. As at December 31, 2022 and 2021, there were 23
promissory notes with an aggregated amount of $
| December 31, | ||||||||||||||||||||||
| Notes Payable | 2022 | 2021 | ||||||||||||||||||||
| Issue Date | Maturity Date | Nominal Amount | Interest Rate | Interest rate in default | Interest Accrued | |||||||||||||||||
| $ | $ | |||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||
| Notes & Interest accrued forgiven | ( | ) | ( | ) | ||||||||||||||||||
| Balances as of December 31, 2022 | $ | $ | ||||||||||||||||||||
For debts in default taken out in Nevada, the statutes
of limitations on debt collection for written contracts are 6 years. The Company engages an attorney, who issued an opinion of debt forgiveness
on April 13, 2023 to clear out the debts in default more than six years in accordance with the law of State of Nevada above. Based on
the attorney letter, for all the notes payable in default for more than 6 years as of December 31, 2022 and subsequent as of April 12,
2023, the Company recognized gain on debt forgiveness totaling $
| 30 |
Weighted average interest rate of default was 12.0%-25.0%
for the years ended December 31, 2022 and 2021. The Company accrued interest expenses of $
NOTE 6 – COMMON STOCK AND PREFERRED STOCK
The Company has shares of common stock
authorized at par value of $, and shares of common stock were issued and outstanding at total par value of $
The Company has designated shares of Series
A convertible preferred stock at par value of $, and issued as at December 31, 2022 with total par value of $
Each share of the Convertible Series A Preferred Stock shall be converted into shares of common stock of the Corporation and entitled to 1,000 votes of common stock for each share of Convertible Series A Preferred Stock owned. The holders of the Convertible Series A Preferred Stock shall not be entitled to receive dividends.
NOTE 7 – INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting
Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used due to the new tax law recently enacted.
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases. Net operating loss carry-forwards and tax benefits arising therefore are as follows:
| Deferred tax assets | 2022 | 2021 | ||||||
| Net operating loss ("NOL") brought forward | $ | $ | ||||||
| Net (profit) loss for the period / year | ( | ) | ||||||
| NOL carried forward | ||||||||
| Tax benefit from NOL carried forward | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets | $ | $ | ||||||
NOTE 8 – COMMITMENTS AND CONTINGENCIES
As at the end of the reporting period, the company has no commitments and contingencies to disclose.
| 31 |
NOTE 9 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. Based on our evaluation, no other event has occurred requiring adjustment or disclosure, except the following:
On March 15, 2023, there was a change in control. Chongyi Yang sold the control block of Preferred A Stock to the persons as follows:
Chunsheng Qin purchased 475,000 shares
Yangtenglie Quin purchased 15,000 shares
Fugui Xie purchased 10,000 shares
The purchase price was $285,000 and Chunsheng Qin became the majority shareholder of CDXQ.
On March 27, 2023, China De Xiao Quan Care Group Co., Ltd (“CDXQ”) entered into a Non-Binding Letter of Intent (the “LOI”) in which the Company would acquire all of the issued and outstanding securities of China Care Holding Group Inc, a Cayman corporation (“China Care”).
The LOI contemplates the acquisition of China Care, by CDXQ. China Care, which owns and operates Jiangsu De Xiao Quan Technology Group, a pioneer in elderly caring industry, combining new generation of cloud intelligence with human-focused management. The company has self-developed an intelligent caring system based on big data analysis and artificial intelligence, strengthening better care and tracking management for the elderly. The LOI was entered into following arm’s length negotiations.
The LOI proposes that CDXQ would acquire 51% of the issued and outstanding stock of China Care in exchange for the newly issued CDXQ stock issuance to the shareholders of 70 million shares of newly issued unregistered shares of common stock, par value $0.0001 per share, with no expiration date on the conversion.
Completion of the transaction is subject to, among other matters, the completion of due diligence, the negotiation of a definitive agreement providing for the transaction and employment agreements, satisfaction of the conditions negotiated therein and approval of the transaction by CDXQ’s board of directors, and all applicable state and federal law. No assurance can be given that the parties will be able to negotiate and execute a definitive agreement or that the transactions herein contemplated will close. CDXQ will file notice of such agreement with the Securities and Exchange Commission on form 8-K when and if any such agreement is reached.
On March 31, 2023, Chongyi Yang resigned his position of officer and director and appointed Chunsheng Qin as President, CEO, Treasurer, Secretary and Director.
NOTE 10 – IMPACT OF THE COVID-19 PANDEMIC
As the Company is not actively trading in the current reporting period, there is no impact of the COVID-19 pandemic on financial statements as at and for the year ended December 31, 2022.
| 32 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CHINA DE XIAO QUAN CARE GROUP CO., LTD | ||
| By: | /s/ Dr. Chongyi Yang | |
| Dr. Chongyi Yang CEO | ||
Date: September 11, 2023
| 33 |