UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
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)
| (State or Other Jurisdiction | (I.R.S. Employer | |
| of Incorporation or Organization) | Identification No.) |
RM 219,
(Address of Principal Executive Office)
+
(Registrant’s telephone number, including area code)
NA
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Not Applicable | Not Applicable | Not Applicable |
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
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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
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provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
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As of November 17, 2023, the registrant had shares of common stock outstanding.
LONGWEN GROUP CORP.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
| PAGE | ||
| Note about Forward-Looking Statements | 2 | |
| PART I - FINANCIAL INFORMATION | ||
| Item 1 | Financial Statements | 3 |
| Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 | 4 | |
| Consolidated Statements of Operations and Other Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2023 and 2022 | 5 | |
| Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2023 and 2022 | 6 | |
| Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and nine months ended September 30, 2023 and 2022 | 7 | |
| Notes to Unaudited Consolidated Financial Statements | 8 | |
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 17 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 21 |
| Item 4 | Controls and Procedures | 22 |
| PART II - OTHER INFORMATION | ||
| Item 1 | Legal Proceedings | 22 |
| Item 1A | Risk Factors | 22 |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 3 | Defaults Upon Senior Securities | 22 |
| Item 4 | Mine Safety Disclosures | 22 |
| Item 5 | Other Information | 22 |
| Item 6 | Exhibits | 23 |
| SIGNATURES | 24 | |
| EXHIBIT INDEX | 25 | |
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section entitled “Risk Factors”, beginning on page 4 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities & Exchange Commission (“SEC”) on March 29, 2023. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless expressly indicated or the context requires otherwise, the terms “Company,” “we,” “us,” and “our” in this document refer Longwen Group Corp., a Nevada corporation.
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LONGWEN GROUP CORP.
INDEX TO FINANCIAL STATEMENTS
| Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 | 4 |
| Consolidated Statements of Operations and Other Comprehensive Income (unaudited) for the three and nine months ended September 30, 2023 and 2022 | 5 |
| Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2023 and 2022 | 6 |
| Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and nine months ended September 30, 2023 and 2022 | 7 |
| Notes to Unaudited Consolidated Financial Statements | 8 - 15 |
| 3 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities, including $ | $ | $ | ||||||
| Loans from third parties | ||||||||
| Shareholder loans | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, par value, authorized, nil shares issued and outstanding | ||||||||
| Common stock, par value, authorized, and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Common stock issuable | ||||||||
| Deferred share-based compensation | ( | ) | ||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE INCOME
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Consulting service income | $ | $ | $ | $ | ||||||||||||
| Online product sales | ||||||||||||||||
| Offline product sales | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Online product sales | ||||||||||||||||
| Offline product sales | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross Profit (Loss) | ( | ) | ||||||||||||||
| Operating Expenses | ||||||||||||||||
| Professional expenses | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Share-based compensation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation gain (loss) | ( | ) | ||||||||||||||
| Total other comprehensive income (loss) | ( | ) | ||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | ) | |||||
| Weighted average shares outstanding: | ||||||||||||||||
| Weighted average shares outstanding: Basic and diluted | ||||||||||||||||
| Earnings per share: | ||||||||||||||||
| Earnings per share: Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | ) | |||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30 | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Share-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of equipment | ( | ) | ||||||
| Cash obtained from business acquisition | ||||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from shareholder loans | ||||||||
| Proceeds from loans due to third parties | ||||||||
| Repayments to shareholder loans | ( | ) | ||||||
| Repayments of loans due to third parties | ( | ) | ( | ) | ||||
| Proceeds from common stock issuance | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning balance | ||||||||
| Cash and cash equivalents, ending balance | $ | |||||||
| Supplemental Disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income tax paid | $ | $ | ||||||
| Supplemental Disclosures of Non-Cash Investing and Financing Activities: | ||||||||
| Acquisition of Hangzhou Longwen Enterprise Management with shareholder loan | $ | $ | ||||||
| Repayment of loans from third parties and interest by a related party on behalf of the Company | $ | $ | ||||||
| Common stocks issuable for deferred compensation | $ | $ | ||||||
| Acquisition of property by issuance of common stocks | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Common stock issuable | Additional Paid-in Capital | Deferred Share-based Compensation | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Other comprehensive income | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Common stock issuable | Additional Paid-in Capital | Deferred Share-based Compensation | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance December 31, 2022 | — | $ | 74,108,926 | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Shares issued for compensation | — | |||||||||||||||||||||||||||||||||||||||
| Shares issued for cash | — | |||||||||||||||||||||||||||||||||||||||
| Shares issuable for deferred compensation | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2023 | — | $ | 79,825,094 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Shareholders’ Equity | |||||||||||||||||||||||||
| Balance June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Issuance of common stocks for cash | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | ||||||||||||||||||||||||||||||
| Issuance of common stocks for property | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance September 30, 2022 | — | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Shareholders’ Equity | |||||||||||||||||||||||||
| Balance December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Issuance of common stock for cash | — | |||||||||||||||||||||||||||||||
| Issuance of common stocks for property | — | |||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance September 30, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
Longwen Group Corp. (the “Company”), was originally incorporated as Expertelligence, Inc in the State of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of various name changes, the Company amended its Articles of Incorporation (“Charter Amendment”) to affect the current name change of Longwen Group Corp with trading symbol of “LWLW”.
On or about April 5, 2016, the Company affected a
On June 9, 2021, Anthony Lombardo (“Lombardo”) filed an Application for Appointment of Custodian (“Application”) with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Company’s non-response and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary custodian of the Company. Subsequently after Lombardo’s custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (“Joseph”) as CEO, CFO and Secretary and resigned from all positions in the Company.
On October 25, 2021, Mr. Xizhen Ye (“Ye”), the ex-officer and director of the Company prior to Lombardo’s custodianship, and Longwen Cayman, filed a motion to dissolve custodianship (“Motion”) with the Eighth Judicial District Court of Nevada State. Pursuant to the Settlement Agreement entered on January 12, 2022, by Longwen Cayman, Mr. Ye, Lombardo, Joseph and Deanna Johnson regarding Lombardo’s custodianship, Mr. Ye and Mr. Lizhong Lu were reinstated as the officer and directors of the Company, and common stocks of the Company was transferred from Joseph to Mr. Ye on February 9, 2022. Further on February 17, 2022, the Eighth Judicial District Court officially terminated Lombardo’s custodianship over the Company.
On February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Longwen Enterprise Management Co., Ltd. (“Hangzhou Longwen”), a wholly foreign-owned enterprise (“WOFE”) in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Longwen became the Company’s wholly owned subsidiary in the PRC. Hangzhou Longwen was originally registered on January 4, 2012 and has minimum operations since its inception. The Company recognize goodwill of $993 upon consummated the acquisition. During 2022, Hangzhou Longwen entered consulting service agreements with various customers to assist in their various business, including but not limit to financial report preparation, business negotiation and business website maintenance and/or publicity, and etc.
On October 11, 2022,
the Company and its subsidiary, Hangzhou Longwen entered into an Acquisition Agreement with a third-party individual to acquire 100%
ownership of Hangzhou Yusu Trading Co., Ltd. (“Hangzhou Yusu”), a limited liability company in Hangzhou, the People’s
Republic of China (the “PRC”), for a total cash consideration of RMB
On March 3, 2023, Hangzhou Longwen established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc.
| 8 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries as described in Note 1. All significant intercompany transactions and balances have been eliminated in the consolidation.
Basis of Presentation
The unaudited consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions.
Foreign Currency Transactions
The Company’s consolidated financial statements are presented in U.S. dollars ($), which is the Company’s reporting and functional currency. The functional currencies of the Company’s subsidiaries including Hangzhou Longwen, Hangzhou Yushu and Huzhou Wohong, are RMB. The resulting translation adjustments are reported under other comprehensive loss in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 220 (“ASC 220”), “Reporting Comprehensive Income”. Gains and losses resulting from the translation of foreign currency transactions are reflected in the consolidated statements of operations and other comprehensive income. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency using the rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the consolidated statements of operations and other comprehensive income.
The Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollars are recorded in shareholders’ equity as part of accumulated other comprehensive loss. The exchange rate used for financial statements are as follows:
|
Average Rate for the three months ended September 30, |
Average Rate for the nine months ended September 30, | |||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| China yuan (RMB) | RMB | 7.2437 | RMB | 6.8506 | RMB | 7.0326 | RMB | 6.6001 | ||||
| United States dollar ($) | $ | 1.0000 | $ | 1.0000 | $ | 1.0000 | $ | 1.0000 | ||||
| Exchange Rate at | ||||||||
|
September 30, 2023 |
December 31, 2022 | |||||||
| China yuan (RMB) | RMB | 7.3010 | RMB | 6.8972 | ||||
| United States dollar ($) | $ | 1.0000 | $ | 1.0000 | ||||
| 9 |
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Inventories
Inventories consist of finished products and are stated at the lower of cost or net realizable value. Cost is calculated by applying the weighted -average method and physically applied first-in-first-out method (FIFO) in inventory stock in and out. The Company regularly reviews inventory quantities on hand and writes down to its net realizable value any inventory that it believes to be impaired. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases.
Property and equipment
Depreciation on property and equipment is recognized on a straight-line basis over the estimated useful lives of the assets, for which the remaining term of the legal title for the office space and 3 years for office equipment.
Intangible Assets
Intangible assets with definite use life are amortized on a straight-line basis over the estimate useful lives of the assets.
Revenue Recognition
The Company recognizes revenue when a customer obtains control of promised products or services, in an amount that reflects the consideration expected to be received in exchange for those products or services. The Company follows the five-step model prescribed under Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies each performance obligation. Revenues are presented net of any sales or value added taxes collected from customers and remitted to the government.
The Company’s consulting service income consists of the delivery of focused insights and recommendations that assist customers with their challenges in developing and executing strategies around their trade business and financial reporting processes. The consulting services provided are fixed-fee arrangements that are generally in one-year term. The Company has concluded that each contract represents a single performance obligation as each is a single promise to deliver a customized engagement and deliverable. For the majority of these services, either practically or contractually, the work performed and delivered to the customer has no alternative use to the Company. Additionally, the Company maintains an enforceable right to payment at all times throughout the contract.
The Company’s online product sales consist of selling products to end customers through online channel, such as apps embedded in Wechat. Revenue is recognized at a point in time when the products are delivered to and accepted by end customers.
The Company’s aquaculture product sales consist of selling aquacultural products to customers through offline channel. Revenue is recognized at a point in time when the products are delivered to and accepted by end customers. The Company concludes the presentation of revenue generated from selling of aquaculture products is at a gross basis as the Company acts as a principal by controlling sales transactions provided to their customers.
Concentration
During the three months ended September 30, 2023, the Company generated 45%, 24% and 18% of revenues from the top 3 customers, respectively. During the nine months ended September 30, 2023, the Company generated 47%, 13% and 13% of revenues from the top 3 customers, respectively. The Company’s cost of revenues consisted of 88% and 92% purchases from one top vendor for the three and nine months ended September 30, 2023, respectively. The Company’s revenue and cost of revenues were not material during the three and nine months ended September 30, 2022.
| 10 |
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company accounts for stock options and other equity-based compensation issued in accordance with ASC 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees’ requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the 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 income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Related Parties
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
Fair Value Measurements
Fair value accounting establishes a framework for measuring fair value and expands disclosure about fair value measurements. Fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
| · | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| · | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments. |
| · | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
As of September 30, 2023 and December 31, 2022, the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis. The carrying value of the Company’s cash, accounts receivable, net, loans from third parties, shareholder loans and accounts payable and accrued liabilities approximates the fair value due to the short-term maturity.
Segment Reporting
Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. We identify our operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. During the three and nine months ended September 30, 2023 and 2022, the Company determined that we have one reportable segment as we manage the business from the geography location.
| 11 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Accounting Standards Recently Adopted
In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts, rather than the “incurred loss” model. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. The Company adopted ASU No. 2016-13 on January 1, 2023, which had no impact on the beginning balance of the Company’s balance as there was no receivable balances as of January 1, 2023.
Accounting Standards Issued but Not Yet Adopted
There were updates recently issued. The management does not believe that accounting pronouncements recently issued but not yet adopted will have a material impact on its financial position results of operations or cash flows.
NOTE 3 – GOING CONCERN
The Company’s consolidated financial statements
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 business. During the nine months ended September 30, 2023, the Company incurred a net loss of $
The Company’s future success is dependent upon its ability to acquire and achieve business with profitable operations, generate cash from operating activities and obtain additional financing. The Company intends to raise funds from the issuance of equity and/or debt securities, but there is no assurance that additional funds from the issuance of equity will be available for the Company to finance its operations on acceptable terms, or at all. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 – EQUIPMENT, NET
As of September 30, 2023 and December 31, 2022, equipment consisted of the following:
|
September 30, 2023 |
December 31, 2022 | |||||||
| Equipment | $ | $ | ||||||
| Property | ||||||||
| Less: accumulated depreciation | ( |
) | ( |
) | ||||
| Total property and equipment, net | $ | $ | ||||||
On September
28, 2022, the Company consummated an office suite purchase agreement with a third party. Pursuant to the agreement, the Company issued common
stocks of the Company to purchase a 118-square-meter office suite located in Hangzhou City, Zhejiang Province, China. The cost of the
office suite was measured at the fair value of the issued common stocks on the closing date of $
Depreciation expenses were $
| 12 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – LOANS FROM THIRD PARTIES
The Company’s loans from third parties consisted of the following as of September 30, 2023 and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Loan from a third-party lender; the loan bears a fixed interest at $ | $ | $ | ||||||
| Loan from a third-party lender; unsecure, bearing an interest rate of | ||||||||
| Loan from two third-party lenders; unsecure, non-interest-bearing, and due on December 30, 2023 | ||||||||
| Total loans | ||||||||
| Less: current portion | (82,181 | ) | (12,250 | ) | ||||
| Total non-current portion | $ | — | $ | — | ||||
On December 31, 2019, the Company entered into a loan
agreement of $12,250 with a third-party individual with three-year term. The borrowing bears interest of $
During the three months ended March 31, 2023, the
Company borrowed $
During the three months ended March 31, 2023, the
Company borrowed $
| 13 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – INCOME TAX
As of September 30, 2023 and December 31, 2022, the
Company has incurred an accumulated net loss of approximately $
Significant components of the deferred tax assets and liabilities for income taxes as of September 30, 2023 and December 31, 2022 consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Deferred tax assets | ||||||||
| Net operating loss carry-forward | $ | $ | ||||||
| Total | $ | 826,721 | $ | 630,975 | ||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets - noncurrent | $ | $ | ||||||
Reconciliation of income tax provision and the accounting profit multiplied by U.S. federal income tax rate for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Loss at | $ | (39,716 | ) | $ | (8,462 | ) | $ | (195,746 | ) | $ | (41,279 | ) | ||||
| Increase (decrease) in income taxes resulting from: | ||||||||||||||||
| Net operating loss carry forward | — | — | — | |||||||||||||
| Change in valuation allowance | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
NOTE 7 – STOCKHOLDERS’ EQUITY
Common Stocks
As of September 30, 2023 and December 31, 2022, the Company had and shares of common stock issued and outstanding, respectively.
During the nine months ended September 30, 2022, the Company sold and shares of common stock to forty-five non-U.S. investors at and per
share, respectively. Total $
During the nine months ended September 30, 2023, the Company sold 336,168 shares of common stock to forty-nine non-U.S. investors at $0.10 and $0.20 per share, respectively. Total $67,234 subscription was received. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
On September 28, 2022, the
Company and its subsidiary, Hangzhou Longwen closed an Assets Sales and Purchase Agreement with a third-party seller to acquire an office
suite located in Hangzhou, China by issuing shares of common stock of the Company, per share with a total value of $
| 14 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – STOCKHOLDERS’ EQUITY (continued)
2022 Equity Incentive Plan
On November 7, 2022, the Board adopted an equity incentive plan to increase stockholder value and to advance the interests of the Company by furnishing a variety of economic incentives (“Incentives”) designed to attract, retain and motivate employees, certain key consultants and directors of the Company (the “2022 Equity Incentive Plan”). Under the 2022 Equity Incentive Plan, the Company can issue up to shares of common stock of the Company. Incentives may be granted in any one or a combination of: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; and (e) performance shares. Such incentives may be subject to vesting conditions determined by the Board of Directors at grant. The maximum term of options or other stock-based award granted is ten years or such lesser time as determined by the Board of Directors at the time of grant.
On November 10, 2022, the Company granted total
shares of common stock of the Company to four individual consultants, under the 2022 Equity Incentive Plan, vesting immediately upon grant.
The fair value of the shares granted totaled $
On January 19, 2023, the Company granted total
shares of common stock of the Company to six employees and one consultant pursuant to the Company’s 2022 Equity Incentive Plan.
The fair value of the shares totaled of $
On June 29, 2023, the Company granted a total of
shares of common stock of the Company to two employees pursuant to the Company’s 2022 Equity Incentive Plan. The fair value of the
shares totaled of $
As of September 30, 2023, the Company’s common shares issuable under the 2022 Equity Incentive Plan totaled . The following table represents the restricted stock award activities during the nine months ended September 30, 2023.
| Non-vested Restricted Stock Awards | Weighted Average Grant Date Fair Value | |||||||
| Non-vested at January 1, 2023 | — | $ — | ||||||
| Granted | 550,000 | 0.20 | ||||||
| Vested | (180,000 | ) | 0.20 | |||||
| Forfeited | — | — | ||||||
| Non-vested at September 30, 2023 | 370,000 | 0.20 | ||||||
| 15 |
LONGWEN GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2022,
the Company borrowed total $
During the three months ended March 31, 2023, the
wife of President of the Company, repaid commercial loan and accrued interest in the total amount of $
During the nine months ended September 30, 2023, the
Company purchased inventory in the total amount of $39,118 from Hangzhou Longwen Culture Media Ltd. (“HZLWCM”), an entity
under the control by the daughter of the President of the Company. As of September 30, 2023, the amount payable to HZLWCM totaled $
NOTE 9 – COMMITMENTS
During the year ended December 31, 2022, the Company entered into leases with third parties for office spaces and a parking spot in Hangzhou, PRC, all with a lease term of 12 months. The remaining minimum lease payments under the three leases as of September 30, 2023 was approximately $nil.
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated all other subsequent events through the date these consolidated financial statements were issued and determine that there were no other subsequent events or transactions that require recognition or disclosures in the consolidated financial statements.
| 16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward-looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Quarterly Report on Form 10-Q. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guarantee, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Overview
Longwen Group Corp. (the “Company”), was originally incorporated as Expertelligence, Inc in the State of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of various name changes, the Company amended its Articles of Incorporation (“Charter Amendment”) to affect the current name change of Longwen Group Corp with trading symbol of “LWLW”.
The Company underwent a change of control on January 21, 2016, at which time Harold Minsky resigned in all officer positions. G. Reed Petersen and White Rim Cattle Company LLC each purchased 25,000,000 shares of common stock of the Company from Harold Minsky. Mr. Petersen is the Member Manager of White Rim Cattle Company, LLC and thus can be considered a control person of all 50,000,000 shares of stock of the Company. Pursuant to a Board of Directors meeting, Mr. Petersen was elected to and accepted all the officer positions previously held by Harold Minsky.
On or about April 5, 2016, the Company affected a 1 for 750 share reverse split of its issued and outstanding common stock. On such date, the Company’s common stock was reduced from 95,164,140 to 127,061 shares outstanding.
Effective November 29, 2016, G. Reed Peterson sold 66,667 shares of common stock of the Company to Longwen Group Corporation (Cayman Island), a Cayman Island company (“Longwen Cayman”). All of the shares held by Longwen Cayman are restricted securities. As a result of the transactions, Mr. Petersen no longer owns any of the Company’s capital stock or securities and he and his affiliates waived all loans and other amounts due to the Company. In addition, on such date, Mr. Petersen resigned in all officer capacities from the Company, and Mr. Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the Company and President and Chief Executive Officer and Chief Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of Board.
From August 2018 to June 2021, the Company continued to seek for new business opportunities in order to increase its value of the common stock. However, due to the impact of the Covid-19 pandemic, the progress was delayed and the business goal was not successfully achieved.
| 17 |
On June 9, 2021, Anthony Lombardo (“Lombardo”) filed an Application for Appointment of Custodian (“Application”) with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Company’s non-response and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary custodian of the Company. Subsequently after Lombardo’s custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (“Joseph”) as CEO, CFO and Secretary and resigned from all positions in the Company, On October 25, 2021, Mr. Xizhen Ye (“Ye”), who was the officer and director of the Company prior to Lombardo’s custodianship, and Longwen Group Corporation, a Cayman Island corporation, filed a Motion to Dissolve Custodianship (“Motion”) with the Eighth Judicial District Court of Nevada State. On January 12, 2022, in accordance with a Settlement Agreement regarding Lombardo’s custodianship, Mr. Ye was reinstated his positions as the officer and director of the Company, along with the reinstatement of the other Company’s director, Lizhong Lu, who was also in place prior to Lombardo’s custodianship. On February 9, 2022, pursuant to the Settlement Agreement, Joseph transferred 65,000,000 common stocks of the Company owned by him to Mr. Ye. On February 17, 2022, the Eighth Judicial District Court formally dismissed Lombardo’s custodianship for the Company.
On February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Longwen Enterprise Management Co., Ltd. (“Hangzhou Longwen”), a wholly Foreign-Owned Enterprise (“WOFE”) in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Longwen became the Company’s wholly owned subsidiary in the PRC. Hangzhou Longwen was originally registered on January 4, 2012 and has minimum operations since its inception and the Company recognize $993 goodwill as a result of the business acquisition.
On October 11, 2022, the Company and its subsidiary, Hangzhou Longwen entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Yusu Trading Co., Ltd. (“Hangzhou Yushu”), a limited liability company in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated HZYS became Hangzhou Longwen’s wholly owned subsidiary in the PRC. Hangzhou Yushu was originally registered on April 20, 2020 and has minimum operations since its inception.
On March 3, 2023, Hangzhou Longwen established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“Huzhou Wohong”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc.
Results of operation for the three months ended September 30, 2023 and 2022
Revenue
During the three months ended on September 30, 2023, the Company generated $nil of revenue from its consulting services compared to $11,328 for the period of the same quarter of year 2022. As of June 30, 2023, the Company has terminated the consulting agreements with Linhai Dingji Auto Service Co., Ltd (China) (“Linhai Dingji”) and Yunnan Yusu Import and Export Trading Co., Ltd (China) (“Yunnan Yusu”) due to the Company’s business strategy adjustment. The managements of the Company have decided to be more focus on the aquaculture product sales segment from the year 2023.
On March 3, 2023, Hangzhou Longwen established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. During the three months ended on September 30, 2023, the Company generated $548,851 of revenue from its aquaculture product sales through HWF compared to $nil revenue for the three months ended September 30, 2022. We expect our newly added aquaculture product sales segment will become an important source of revenue for the Company in the year 2023.
| 18 |
| For the three months ended September 30, | ||||||||||||||||
| 2023 | 2022 | Increase (Decrease) | Percentage Change | |||||||||||||
| Consulting services | $ | — | $ | 11,328 | $ | (11,328 | ) | (100 | )% | |||||||
| Online product sales | — | — | — | — | % | |||||||||||
| Aquaculture product sales | 548,851 | — | 548,851 | 100 | % | |||||||||||
| $ | 548,851 | $ | 11,328 | $ | 537,523 | 4,745 | % | |||||||||
Cost of Revenues
For the three months ended September 30, 2023, our cost of revenues amounted to $550,116 as compared to $nil for the three months ended September 30, 2022, an increase of $550,116 or 100%. The increase was mainly due to the increased sales of the aquaculture product which was added to our sales segments in the first quarter of this year.
| For the three months ended September 30, | ||||||||||||||||
| 2023 | 2022 | Increase (Decrease) | Percentage Change | |||||||||||||
| Consulting services | $ | — | $ | — | $ | — | — | % | ||||||||
| Online product sales | — | — | — | — | % | |||||||||||
| Aquaculture product sales | 550,116 | — | 550,116 | 100 | % | |||||||||||
| $ | 550,116 | $ | — | $ | 550,116 | 100 | % | |||||||||
Operating Expense
For the three months ended September 30, 2023, our operating expense amounts to $187,580, as compared to $51,390 for the three months ended September 30, 2022, an increase of $136,190. The increase was mainly due to the increased office and professional expenses as two subsidiaries were set up after the second quarter of 2022.
During the three months ended September 30, 2023 and 2022, the Company incurred other general and administrative and professional expenses of $187,580 and $51,390, respectively. The professional expenses mainly included consulting expenses and financial advisor fees.
Net Loss
The net loss was $189,123 and $40,297 for the three months ended on September 30, 2023 and 2022, respectively. The increase in net loss in the current quarter was mainly due to the increase expenses of selling, general and administrative and professional.
| 19 |
Results of operation for the nine months ended September 30, 2023 and 2022
Revenue
During the nine months ended on September 30, 2023, the Company generated $15,004 of revenue from its consulting services compared to $19,307 of revenue for the period of the same quarter of year 2022. During the nine months ended on September 30, 2023, the Company generated $6,082 of revenue from its online product sales through HZYS compared to $nil revenue for the nine months ended September 30, 2022. In December 2022, the Company’ subsidiary, HZYS, worked with a third-party platform developer, formally launched our online store, Huanyumeiyuan Mall (the “HYMY”), through Tencent’s Wechat platform.
During the nine months ended on September 30, 2023, the Company generated $1,972,127 of revenue from its aquaculture product sales through HWF compared to $nil revenue for the nine months ended September 30, 2022.
| For the nine months ended September 30, | ||||||||||||||||
| 2023 | 2022 | Increase (Decrease) | Percentage Change | |||||||||||||
| Consulting services | $ | 15,004 | $ | 19,307 | $ | (4,303 | ) | (22) | % | |||||||
| Online product sales | 6,082 | — | 6,082 | 100 | % | |||||||||||
| Aquaculture product sales | 1,972,127 | — | 1,972,127 | 100 | % | |||||||||||
| $ | 1,993,213 | $ | 19,307 | $ | 1,973,906 | 10,224 | % | |||||||||
Cost of Revenues
For the nine months ended September 30, 2023, our cost of revenues amounted to $1,838,711 as compared to $nil for the nine months ended September 30, 2022, an increase of $1,838,711 or 100%. The increase was mainly due to the increased sales of our online product sales and the aquaculture product sales which added to our sales segments in the first quarter of this year.
Cost of revenue totaled $1,836,512 for aquaculture product sales for the nine months ended September 30, 2023 comparing to $nil for the same quarter in 2022. Our cost for online product sales was $2,199 for the nine months ended on September 30, 2023 compared to $nil for the same quarter in 2022.
| For the nine months ended September 30, | ||||||||||||||||
| 2023 | 2022 | Increase (Decrease) | Percentage Change | |||||||||||||
| Consulting services | $ | 2,199 | $ | — | $ | 2,199 | 100 | % | ||||||||
| Online product sales | — | — | — | — | % | |||||||||||
| Aquaculture product sales | 1,836,512 | — | 1,836,512 | 100 | % | |||||||||||
| $ | 1,838,711 | $ | — | $ | 1,838,711 | 100 | % | |||||||||
Operating Expense
For the nine months ended September 30, 2023, operating expense amounts to $1,081,096 as compared to $215,527 for the nine months ended September 30, 2022, an increase of $865,569. The increase was mainly due to $576,000 stock-based compensation due to the issuance of 5,380,000 common shares of the Company grant and increased expenses and fees due to the business development and expansion.
During the nine months ended September 30, 2023 and 2022, the Company incurred other general and administrative and professional expenses of $505,096 and $215,527 respectively. The professional expenses mainly included consulting expenses and financial advisor fees.
| 20 |
Net Loss
The net loss was $932,122 and $196,567 for the nine months ended on September 30, 2023 and 2022, respectively. The increase in net loss in the current quarter was mainly due to the increase expenses of selling, general and administrative, professional expenses and share issuance for employee compensation as a result of the Company’s sustained operations.
Liquidity and Capital Resources
As of September 30, 2023 and December 31, 2022, we had an accumulated deficit of $19,959,957 and $19,027,835, respectively. As of September 30, 2023, we had cash of $5,638 and a working capital deficit of $276,502. As of December 31, 2022, we had cash of $68,121 and a working capital deficit of $8,172. The increase in the working capital deficit was primarily due to cash used in operating activities.
Going Concern Assessment
The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated deficit and other adverse key financial ratios.
Management’s plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds from the majority shareholder and the President of the Company to eliminate inefficiencies in order to meet its anticipated cash requirements. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures and other requirements.
The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting policies are discussed in further detail in the notes to the unaudited financial statements appearing elsewhere in this 10-Q report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” we are not required to provide this information under this item pursuant to Regulation S-K.
| 21 |
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report on Form 10-Q, our President (principal executive officer) and our Chief Financial Officer performed an evaluation of the effectiveness of and the operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our President and Chief Financial Officer each concluded that as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures were not effective in timely alerting them to material information relating to Longwen Group Corp. required to be included in our Exchange Act filings.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
As a “smaller reporting company”, we are not required to provide this information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
| 22 |
Item 6. Exhibits
|
Exhibit Number |
Description of Exhibit | |
| 31.1* | Certification of Chief Executive Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 31.2* | Certification of Chief Financial Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
| 23 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LONGWEN GROUP CORP. | |
| Date: November 20, 2023 | /s/ Xizhen Ye |
| Xizhen Ye, Chief Executive Officer | |
| Date: November 20, 2023 | /s/ Xizhen Ye |
| Xizhen Ye, Chief Financial Officer | |
| 24 |
EXHIBIT INDEX
|
Exhibit Number |
Description of Exhibit | |
| 31.1* | Certification of Chief Executive Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 31.2* | Certification of Chief Financial Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
| 25 |