Registration No. 333-269219
The Company’s common stock is quoted
on the OTC Markets Group, Inc.’s “Pink” tier under the symbol “EUBG.” On February 2, 2023, the last
reported sale price per share of our common stock was $0.2195 for a total volume of 7,650 shares. We urge prospective purchasers of
our common stock to obtain current information about the market prices for our common stock. The shares of our common stock will be
offered and sold by the selling stockholders at a fixed price of $0.30 per share until our common stock is quoted on OTC Market
Group, Inc.’s “OTCQB” or “OTCQX” tiers, and thereafter the shares may be sold at prevailing market
prices or privately negotiated prices or in transactions that are not in the public market. Although we intend to pursue an
application for listing on the OTCQB tier, we cannot assure you that our common stock will, in fact, be quoted on the OTCQB
tier.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-1 that we filed with the SEC using a continuous offering process.
You
should read this prospectus and the information and documents incorporated by reference carefully. Such documents contain important information
you should consider when making your investment decision. See “Where You Can Find Additional Information” in this prospectus.
You
should rely only on the information provided in this prospectus or documents incorporated by reference into this prospectus. We have
not authorized anyone to provide you with different information. This prospectus covers offers and sales of our common stock only in
jurisdictions in which such offers and sales are permitted. The information contained in this prospectus is accurate only as of the date
of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. You should not assume that
the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus, or
that the information contained in any document incorporated by reference is accurate as of any date other than the date of the document
incorporated by reference, regardless of the time of delivery of this prospectus or any sale of a security.
Entrepreneur
Universe Bright Group, a Nevada corporation (“EUBG” or the “Company”), is not a Chinese operating company but
a Nevada holding company. As a holding company with no material operations of our own, EUBG conducts all of its operations through its
subsidiaries in Hong Kong and in the People’s Republic of China (“PRC” or “China”). Therefore our shareholders
will not directly hold any equity interests in our Chinese operating subsidiaries. Unless otherwise mentioned or unless the context requires
otherwise, when used in this prospectus, the terms “we,” “us,” and “our” refer to EUBG and its consolidated
subsidiaries, or any one or more of them as the context may require, “HK subsidiary” refers to Entrepreneurship World Technology
Holding Group Company Limited, our wholly-owned subsidiary and a Hong Kong limited company, and “PRC subsidiary” refers to
Xi’an Yunchuang Space Information Technology Co., Ltd., f/k/a Entrepreneurship World Consultants Limited, a wholly-foreign owned
Chinese subsidiary of HK subsidiary. EUBG is a holding company for its operating subsidiaries. We have not authorized anyone to
provide you with different information. No dealer, salesperson or other person is authorized to give any information or to represent
anything not contained in this prospectus.
We
currently do not, and we do not plan to use variable interest entities (“VIE”) to execute our business plan or to conduct
our China-based operations. We do not have any contractual arrangements between the holding company, the HK subsidiary, and the PRC subsidiary.
EUBG is a Nevada holding company and does not have any substantive operations other than directly or indirectly holding the equity interest
in our operating subsidiaries in Hong Kong and China. Therefore our shareholders will not directly hold any equity interests in our Chinese
operating subsidiaries. Our holding company structure involves unique risks to investors. Chinese regulatory authorities could disallow
our corporate structure, which would likely result in a material change in our operations and/or the value of the Company’s common
stock, including that it could cause the value of such securities to significantly decline or become worthless. See “Risk Factors — Risks
associated with doing business in China” for detailed discussions.
To
the extent you make any investment in our Company, it will be in EUBG, our holding company in Nevada, and not in our operating subsidiaries
in Hong Kong or in China. Because substantially all of our operations are conducted in China through our PRC subsidiary, the Chinese
government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our PRC
operations at any time, which could result in a material change in our operations and/or the value of the Company’s common stock.
The Chinese government could also significantly limit or completely hinder our ability to list and/or remain listed on a U.S. or other
foreign exchange, and to offer future securities to investors and cause the value of such securities to significantly decline or be worthless.
See “Risk Factors — Risks associated with doing business in China - The recent state government interference
into business activities on U.S. listed Chinese companies may negatively impact our existing and future operations in China. The Chinese
government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly
and adversely impact the value of the Company’s common stock, including potentially causing the value of the Company’s common
stock to decline or be worthless.”
There
are significant legal and operational risks associated with being in and conducting a substantial portion of our operations in mainland
China. PRC laws and regulations governing our current business operations and corporate structure are sometimes vague and uncertain,
and we face the risk that changes in the PRC laws, regulations and policies, including how those laws, regulations and policies will
be interpreted or implemented could have a significant impact upon the business we may be able to conduct in the PRC which would likely
result in a material change in our operations and/or the value of the Company’s common stock, including that it could cause the
value of such securities to significantly decline or become worthless. Furthermore, these risks may significantly limit or completely
hinder our ability to offer or continue to offer our securities to investors in the future. See “Risk Factors — Risks
associated with doing business in China” for detailed discussions.
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. In addition, 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 VIE structure, adopting new measures to extend the scope
of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. As confirmed by our PRC legal counsel, King & Wood
Mallesons, the business of our PRC subsidiary until now are not subject to cybersecurity review with the Cyberspace Administration of
China, or the “CAC,” under the Measures for Cybersecurity Review (2021) which became effective on February 15, 2022 and replace
the Measures for Cybersecurity Review promulgated on April 13, 2020, on the basis that (i) we currently do not have over one million
users’ personal information and do not anticipate that we will be collecting over one million users’ personal information
in the foreseeable future, which we understand might otherwise subject us to the Measures for Cybersecurity Review (2021); (ii) our PRC
subsidiary’s business operations do not involve any Critical Information Infrastructure, and neither we nor the PRC subsidiary
has received any notification from applicable PRC governmental authorities indicating that any of the PRC subsidiary’s products
or services is determined as the Critical Information Infrastructure; and (iii) neither we nor the PRC subsidiary has received any notification
from applicable PRC governmental authorities indicating that we or our PRC subsidiary shall file for a cybersecurity review. We are also
not subject to network data security review by the CAC if the Draft Regulations on the Network Data Security Administration (Draft for
Comments) (the “Draft Regulation”) are enacted as proposed, since we currently do not have over one million users’
personal information and do not collect data that affects or may affect national security and we do not anticipate that we will be collecting
over one million users’ personal information or data that affects or may affect national security in the foreseeable future, which
we understand might otherwise subject us to the Draft Regulation. In addition, as of the date of this prospectus, neither we nor our
PRC subsidiary has been subject to any anti-monopoly investigation, penalty of litigation initiated by government authorities or third
parties. Furthermore, we will continue to monitor for updates of applicable PRC anti-monopoly laws and regulations. Currently, these
statements and regulatory actions have had no impact on our daily business operations, the ability to accept foreign investments and
list our securities on a U.S. or other foreign exchange, and there are no new relevant laws or regulations in effect in the PRC explicitly
requiring us to seek approval from the China Securities Regulatory Commission for our registration. However, since these statements and
regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what
existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the
potential impact such modified or new laws and regulations will have on our daily business operations, the ability to accept foreign
investments and list our securities on a U.S. or other foreign exchange. See “Summary of Risk Factors – Risk Related to Doing
Business in the PRC” and “Risk Factors — Risks associated with doing business in China - The recent state
government interference into business activities on U.S. listed Chinese companies may negatively impact our existing and future operations
in China. The Chinese government may intervene in or influence our operations at any time, which could result in a material change in
our operations and significantly and adversely impact the value of the Company’s common stock, including potentially causing the
value of the Company’s common stock to decline or be worthless; - Uncertainties exist with respect to the enactment timetable,
interpretation and implementation of the laws and regulations with respect to online platform business operation.”
As
of the date of this prospectus, our operating subsidiaries have not been involved in any investigations on cybersecurity review initiated
by the CAC based on the Measures for Cybersecurity Review (2021) and the Draft Regulation, and we have not received any inquiry, notice,
warning, sanctions in such respect or any regulatory objections to this registration. Because these statements and regulatory actions
are new, however, it is highly uncertain how soon legislative or administrative regulation making bodies in China will respond to them,
or what existing or new laws or regulations will be modified or promulgated, if any, or the potential impact such modified or new laws
and regulations will have on our daily business operations or our ability to accept foreign investments and list on a U.S. exchange.
If we are subject to such a probe or if we are required to comply with stepped-up supervisory requirements, valuable time from our management
and money may be expended in complying and/or responding to the probe and requirements, thus diverting valuable resources and attention
away from our operations. This may, in turn, negatively impact our operations.
According
to our PRC legal counsel, King & Wood Mallesons, except as disclosed in the “Risk Factor” section - Risks relating to
PRC laws and regulations with respect to foreign exchange”, we and our subsidiaries are not required to obtain permission or approval
from any of the PRC authorities including CSRC or CAC to issue the Company’s common stock to foreign investors, nor have we, or
our subsidiaries, applied for or received any denial for the Registration. However, recently, 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 was 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. Effective measures, such as promoting the construction of relevant regulatory systems will
be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection
requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirement
in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of interpretation and enforcement
of the rules and regulations in the PRC, which can change quickly with little advance notice, and any future actions of the PRC authorities.
We cannot assure you that relevant PRC government agencies would reach the same conclusion as we do or as advised by our PRC legal counsel.
However, (i) if we inadvertently concluded that such permissions or approvals are not required, or (ii) if the CSRC, the Cyberspace Administration
of China or other regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals to issue the Company’s
common stock to foreign investors, and we are unable to obtain a waiver of such approval requirements, if and when procedures are established
to obtain such a waiver, then we may not be able to list on a U.S. exchange. In addition, any uncertainties and/or negative publicity
regarding such an approval requirement could have a material adverse effect on the trading price of our securities. It is uncertain when
and whether we will be required to obtain permission from the China Securities Regulatory Commission to list on U.S. exchanges, and even
if such permission is obtained, whether it will be denied or rescinded.
The
PRC laws and regulations and government policy changes rapidly on digital training. For our digital training related services, we worked
with Beida Jade Bird Vocational Education (“Jade Bird”) which was an authorized licensee of China National Personal Talent
Training Network (“CNPTTN”), a PRC regulatory agency for the talent training. Jade Bird was in charge of its training
courses, and the Company was authorised by Jade Bird as its sole training related administrator of the training courses, limited to coordinate
the digital training related services to individual clients who were interested in conducting live-broadcasting business through social
medias. The Company provided training related services, to these individual clients who subscribed courses, in arranging the examination,
following up certificate issuance processes, addressing clients’ concerns, etc. On March 22, 2022, the PRC subsidiary learned that
Jade Bird suspended its service after receiving a notice from CNPTTN and that until further notice CNPTTN has suspended all recruitment
services using its CNPTTN’s name. As a result of CNPTTN’s suspension, the PRC subsidiary has also suspended its digital training
related services with Jade Bird from March 22, 2022 until further notice. In the future, laws and regulations and the CNPTTN may require
our PRC Subsidiary to meet additional requirements or obtain additional approvals, licenses or permits to conduct KOL training related
business. If our PRC Subsidiary is unable to meet the relevant requirements or obtain the relevant approvals, licenses or permits, our
PRC Subsidiary may not be able to continue to conduct the KOL training related business. As of the date of this prospectus, there is
no further notice from CNPTTN and the service is still being suspended. As advised by our PRC legal counsel, other than the above, we
and our subsidiaries are currently not required to obtain permission from any of the PRC authorities to operate its principal business.
We cannot assure you that relevant PRC government agencies would reach the same conclusion as we do or as advised by our PRC legal counsel.
If (i) we and our PRC legal counsel inadvertently concluded that such permissions or approvals are not required, or (ii) the relevant
regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals to operate our business, and we are unable
to obtain approval or a waiver of such approval requirements, any uncertainties and/or negative publicity regarding such an approval
requirement could have a material adverse effect on our business operation and the trading price of our securities.
Although
we concluded that we and our subsidiaries are currently not required to obtain permission from any of the PRC central or local government
and that we have not received any denial to list on the U.S. exchange or to conduct our business operations, if (x) we inadvertently
conclude that such approvals are not required when they are, (y) we do not receive or maintain such permissions or approvals if and when
required, or (z) changes in applicable laws, regulations, or interpretations relating to our business or industry which would require
us to obtain approvals in the future, our operations, financial conditions, and results of operations could be adversely affected, directly
or indirectly, and the value of the Company’s common stock could significantly decline or become worthless. See “Risk
Factors —Risks related to our business and industry - Our PRC subsidiary may be required to obtain and maintain additional
approvals, licenses or permits applicable to our business, which could have a material adverse impact on our business, financial conditions
and results of operations” and “Risk Factors — Risks associated with doing business in China - The recent
state government interference into business activities on U.S. listed Chinese companies may negatively impact our existing and future
operations in China. The Chinese government may intervene in or influence our operations at any time, which could result in a material
change in our operations and significantly and adversely impact the value of the Company’s common stock, including potentially
causing the value of the Company’s common stock to decline or be worthless; - Uncertainties exist with respect to the enactment
timetable, interpretation and implementation of the laws and regulations with respect to online platform business operation;”–
The PRC legal system is evolving, and the resulting uncertainties could adversely affect us; – The approval of the China Securities
Regulatory Commission or other PRC regulatory agencies may be required in connection with this registration under PRC law.”
On
July 7, 2022, the CAC promulgated the Measures for the Security Assessment for Cross-border Transfer of Data (the “Security
Assessment measures”), which will come into effect on September 1, 2022. The Security Assessment measures stipulates that data
processors which provide data cross-border and have one of the following circumstances, should apply the security assessment to the national
network information department through the provincial branches of network information department: (A) data processors to provide important
data cross-border; (B) operators of critical information infrastructure and data processors handling personal information of more than
1 million people to provide personal information cross-border;(C) data processors which provide cross-border a cumulative total of 100,000
people’s personal information or 10,000 people’s sensitive personal information since January 1 of the previous year; (D)
other situations requiring application for the security assessment regarding providing data cross-border as stipulated by the state Internet
information department. As of the date of this prospectus, the PRC subsidiary has not provided any important data or personal data to
any offshore institutions or individuals, so the PRC subsidiary do not need to apply for a security assessment at this stage. However,
if we need to provide data to offshore institutions or individuals in the future and fall into the situations which should apply for
the security assessment, we might not pass the security assessment.
On
December 16, 2021, Public Company Accounting Oversight Board (PCAOB) issued a report on its determinations that PCAOB is unable to inspect
or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative
Region of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The PCAOB
made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under
the Holding Foreign Companies Accountable Act (HFCAA). The report further listed in its Appendix A and Appendix B, Registered Public
Accounting Firms Subject to the Mainland China Determination and Registered Public Accounting Firms Subject to the Hong Kong Determination,
respectively. The audit report included in this registration statement for the year ended December 31, 2021 and 2020 was issued by Centurion
ZD CPA & Co. (“CZD CPA”), an audit firm headquartered in Hong Kong, a jurisdiction that the PCAOB has determined that
the PCAOB is unable to conduct inspections or investigate auditors. CZD CPA is among those listed by the PCAOB Hong Kong Determination,
a determination announced by the PCAOB on December 16, 2021 that the PCAOB is unable to inspect or investigate completely registered
public accounting firms headquartered in Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position
taken by one or more authorities in Hong Kong. The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating
audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such
PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness
of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject
to the PCAOB inspections. In addition, under the HFCAA (as amended by the Consolidated Appropriation Act, 2023), our securities may be
prohibited from trading on the U.S. stock exchanges or in the over the counter trading market in the U.S. if our auditor is not inspected
by the PCAOB for two consecutive years, and this ultimately could result in the Company’s common stock being delisted. On June
22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which was enacted
under the Consolidated Appropriations Act, 2023, as further described below.
On
April 22, 2022, the SEC provisionally identified EUBG as a company that has retained a registered public accounting firm to issue
an audit report where that registered public accounting firm has a branch or office that (i) is located in a foreign jurisdiction
and (ii) the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction under
the HFCAA (a “Commission-Identified Issuer”). On May 12, 2022, that provisional identification became conclusive and we are
now subject to the requirements under the HFCAA, including the prohibition on the trading of such issuer’s securities on a national
securities exchange or through any other method is within the SEC’s jurisdiction to regulate, including “over-the-counter”
trading. This identification of EUBG as a Commission-Identified Issuer does not mean that we will be immediately prohibited from trading
our securities on the OTC Pink Sheets. However, we may be prohibited from trading our securities, including trading in the “over-the-counter”
market, if we continue to be unavailable for PCAOB inspection or investigation for two consecutive years under the HFCAA as amended by
the Consolidated Appropriations Act, 2023. In addition, after the first year of identification, we will be subject to new submission
and disclosure requirements in our subsequent annual reports.
On
December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA (i) to reduce the number of
consecutive years that would trigger delisting from three years to two years, and (ii) so that any foreign jurisdiction could be the
reason why the PCAOB does not to have complete access to inspect or investigate a company’s auditors. As it was originally enacted,
the HFCAA applied only if the PCAOB’s inability to inspect or investigate because of a position taken by an authority in the foreign
jurisdiction where the relevant public accounting firm is located. As a result of the Consolidated Appropriations Act, 2023, the HFCAA
now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by
an authority in any foreign jurisdiction. The denying jurisdiction does not need to be where the accounting firm is located.
On
September 7, 2022, the Company dismissed CZD CPA and appointed Prager Metis CPAs, LLC (“PragerMetis”) as the Company’s
independent auditor for the fiscal year end December 31, 2022. Our current auditors, PragerMetis, is located at Hackensack, New Jersey,
and has been inspected by the PCAOB.
EUBG
is permitted to transfer cash as a loan and/or capital contribution to the HK subsidiary for its operations and the HK subsidiary is
permitted to transfer cash as a loan and/or capital contribution to the PRC subsidiary for capital investment and company operations.
For instance, the PRC subsidiary will use the cash for their daily business operations. However, under existing PRC regulations, any
loans made to our PRC subsidiaries shall not exceed a statutory limit, and shall be filed with SAFE or its local bureau. Additionally,
any capital contributions the HK subsidiary make to the PRC subsidiary shall be filed with the local commerce department. The PRC subsidiary
is the main operating company to earn revenue. The HK subsidiary is also permitted under the laws of Hong Kong SAR to provide funding
to EUBG through dividend distribution without restrictions on the amount of the funds. Current PRC laws require that dividends be paid
only out of the profit for the year calculated according to PRC accounting principles, which differ from the generally accepted accounting
principles in other jurisdictions. In addition, PRC laws also require a foreign-invested enterprise to set aside at least 10% of its
after-tax profits, if any, to fund its statutory reserves, until the aggregate amount reaches 50% of its registered capital. In addition,
a wholly foreign-owned enterprise may, at its discretion, allocate a portion of its after-tax profits based on PRC accounting principles
to enterprise expansion funds, staff welfare, and bonus funds. Those reserve funds are not available for distribution as cash dividends.
The PRC government’s control of foreign currency conversion may limit our foreign exchange transactions. Under existing PRC foreign
exchange regulations, payments of current account items can be made in foreign currencies without prior approval from SAFE. However,
approval from SAFE, or registration with SAFE or other appropriate departments is required where RMB shall be converted into foreign
currency and be remitted out of the PRC. Failure to comply with the above regulations may result in liability under PRC laws for evasion
of foreign exchange controls.
As
of the date of this prospectus, our PRC subsidiary has distributed $7.1 million (net of withholding tax at $791,662 charged at a rate
of 10% of the declared dividend) to its holding parent, which is our HK subsidiary. However, we cannot ensure that we will be able to
comply with the above regulations in all respects in the future. If we fail to comply with the above regulations, our ability to transfer
cash and distribute earnings may be negatively affected, which could materially and adversely affect our liquidity and our ability to
fund and expand our business. Since EUBG, the Nevada holding company, is not the direct parent company of the PRC subsidiary, EUBG and
the PRC subsidiary cannot make transfers to the other. We intend to keep any future earnings to finance the expansion of our business
conducted by our subsidiaries, and we do not anticipate that any cash dividends will be paid in the foreseeable future from the HK subsidiary
to EUBG, the Nevada holding company, and/or from EUBG to its shareholders. As of the date of this prospectus, other than the above stated
$7.1 million cash dividends transferred from our PRC subsidiary to our HK subsidiary for operational costs, no cash transfer or transfer
of other assets (including dividends and distribution) have occurred among EUBG, our Nevada holding company, and either of its subsidiaries,
our HK subsidiary or our PRC subsidiary. See “Risk Factors — Risks associated with doing business in China”
for a detailed discussion of the Chinese legal restrictions on the payment of dividends, our ability to transfer cash within the Company
and the potential for holders of the Company’s common stock to be subject to Chinese taxes on dividends paid by us in the event
we are deemed a Chinese resident enterprise for Chinese tax purposes.
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. To the extent that the cash and assets of our
business are in our PRC subsidiary and/or Hong Kong subsidiary, such cash or assets may not be available to fund our operations or for
other use outside of the PRC and/or Hong Kong due to the potential intervention by the PRC government to impose restrictions and limitations
over our ability or our subsidiaries’ ability to transfer cash or assets. Any such intervention in or influence on our business
operations or action to exert more oversight and control over the cash or assets of our subsidiaries, once taken by the PRC government,
could adversely affect our business, financial condition and results of operations and the value of our common stock, or 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. See “Risk Factors — Risks associated with
doing business in China - The recent state government interference into business activities on U.S. listed Chinese companies may negatively
impact our existing and future operations in China. The Chinese government may intervene in or influence our operations at any time,
which could result in a material change in our operations and significantly and adversely impact the value of the Company’s common
stock, including potentially causing the value of the Company’s common stock to decline or be worthless.”
On
September 1, 2021, our PRC subsidiary adopted a written Monetary and Cash Fund Management System (“Cash Management Policy”)
for its operations in China and Hong Kong. The Cash Management Policy covers cash, bank deposits and other monetary funds owned by the
PRC subsidiary and Hong Kong subsidiary and includes procedures on receiving funds, depositing funds, transferring funds and proper documentation
and recording of cash. We adopted the Cash Management Policy in order to provide a process and guidance on collecting, accounting for,
and safeguarding all cash and cash equivalents of our PRC subsidiary and Hong Kong subsidiary, including 1) checking the latest regulation
requirements between China and Hong Kong; and 2) seeking approval from EUBG’s chief executive officer in order to transfer funds
from our PRC subsidiary to our HK subsidiary. EUBG does not have a cash management policy.
PROSPECTUS SUMMARY
The following summary
highlights selected information contained elsewhere in this prospectus. Because it is only a summary, it does not contain all of the
information that may be important to you and your investment decision. You should read the entire prospectus, the registration statement
of which this prospectus is a part, and the information incorporated by reference herein in their entirety, including the “Risk
Factors” section and our financial statements and the related notes incorporated by reference into this prospectus, before making
an investment decision. Unless otherwise mentioned or unless the context requires otherwise, when used in this prospectus, the terms
“we,” “us,” and “our” refer to EUBG and its consolidated subsidiaries, or any one or more of them
as the context may require, “HK subsidiary” refers to Entrepreneurship World Technology Holding Group Company Limited, our
wholly-owned subsidiary and a Hong Kong limited company, and “PRC subsidiary” refers to Xi’an Yunchuang Space Information
Technology Co., Ltd., f/k/a Entrepreneurship World Consultants Limited, a wholly-foreign owned Chinese subsidiary of HK subsidiary. EUBG
is a holding company for its operating subsidiaries.
Business Overview
EUBG is not a Chinese
operating company but a Nevada holding company. As a holding company with no material operations of our own, EUBG conducts all of its
operations through its subsidiary in China. Our current principal business activities are providing consulting services and sourcing
and marketing services in China through our PRC subsidiary with support from our HK subsidiary. Our PRC subsidiary provides services
aimed at connecting businesses with e-commerce platforms.
Our integrated service
platform focuses on strategic marketing and consulting, which include digital marketing consulting and KOL Training Related Services.
The establishment of our platform is to serve the digital marketing strategy needs of the start-up business companies and small-size
companies. Our PRC subsidiary offers our digital marketing on e-commerce solution plan to these companies in order for them to provide
products to their customers. Our mission is to help start-up companies and small-size companies and guide these companies’ founders
in utilizing our digital marketing consulting plan to reach their business goals. Our marketing consultation on e-commerce solution plan
aim to bring online traffic and attention from the markets for our customers to conduct their e-commerce and build their brands. Our
customers are mainly private companies which need digital marketing services for branding or engaging in e-commerce. Our KOL Training
Related Services aims to help our customers become a certified livestream sales talents as the market demand for livestream salespersons
continues to grow with the changing retail and E-Commerce environment and the arrival of 5G era.
History of the Company
EUBG
was incorporated in the State of Nevada on April 21, 1999 under the name LE GOURMET CO, INC. Since its inception, the Company had the
following name changes: On March 17, 2003, to Estelle Reyna, Inc.; on September 11, 2003 to Karma Media, Inc.; on July 8, 2005 to Pitboss
Entertainment, Inc.; on March 3, 2006 to US Energy Holdings, Inc.; on December 20, 2006 to Lonestar Group Holdings Company; on November
9, 2007 to Guardian Angel Group, Inc.; on May 18, 2011 to REE International, Inc.; and on March 23, 2020, the Company filed a Certificate
of Amendment to the Nevada Secretary of State amending Article I of its Articles of Incorporation changing the Company’s name to
Entrepreneur Universe Bright Group, with an effective date of April 3, 2020.
On
May 15, 2019, MXD Inc., a private company incorporated in the State of Colorado, entered into certain Sale and Purchase Agreements (the
“Stock Purchase Agreements”), with Tethys Fountain Limited, New Finance Consultants Limited, Jia Wang, Jianyong Li, Haijun
Jiang, Xuebin Wu and Fanfan Chen (collectively, the “Purchasers”), to transfer all its 1,590,605,141 shares of common stock
of the Company to the Purchasers in exchange for an aggregate purchase price of $135,000. Upon the closing of the Stock Purchase Agreements,
the Purchasers collectively owned 93.5% of the issued and outstanding shares of the Company’s common stock, and Tethys Fountain
Limited became the controlling shareholder of the Company.
On
May 20, 2019, and as authorized by the Company’s board of directors, the Company began its current business as a marketing consulting
company. Our main service is marketing consultancy, which includes digital marketing consulting and KOL (Key Opinion Leaders) Training
Related Services.
Our Strategy
We, through our PRC
subsidiary, has extensive experience with the “Chuangyetianxia” Platform that allow us to provide marketing consulting services
to our customers leveraging the Platform to quickly increase customer traffic to our client’s products and services. We consider
Xi’an CNT a related party as it is substantially owned and controlled by the wife and relatives of Mr. Tao Guolin, our chairman,
executive officer and majority shareholder.
We also cooperate with
third party live-broadcasting training agencies to coordinate, recruit and enroll KOL students in various training programs in professional
anchor quality.
Our business objective
is to generate revenues based on providing our digital marketing consultation and to maintain and grow ultimate user group for our clients.
Our target market is
the start-up and small-size companies mainly situation in China which needs to upgrade their traditional marketing plan to digital marketing
and establishing their brand names and exploit products market in the digital world and specified target audiences.
We seek to leverage
our marketing management’s experience to expand our consumer base, starting with start-ups and small-size corporate clients. Our
customers are from different market sectors including but not limited to online education, biotechnology, health care products, and agriculture
technology products.
Corporate
Structure
EUBG
is a holding company for its operating subsidiaries. The operations of the Company’s PRC subsidiary, Xi’an Yunchuang Space
Information Technology Co., Ltd. (formerly Entrepreneurship World Consultants Limited) in Xi’an, China are the primary operations
of EUBG. Our PRC subsidiary is wholly-owned by the Company’s HK subsidiary, Entrepreneurship World Technology Holding Group Company
Limited, a Hong Kong limited company. The HK Subsidiary was incorporated by the Company on May 15, 2019 with HK$10,000 as its registered
capital as a holding company. The PRC subsidiary was incorporated on October 18, 2019 with HK$1,000,000 as its registered capital. On
May 7, 2020, we incorporated Xian Yunchuang Space Information Technology Co., Ltd, BaiYin Branch (formerly Entrepreneurship World Consultants
Limited, BaiYin Branch), with RMB900,000 as its registered capital, as an branch office of the PRC subsidiary in Baiyin City, Gansu Province,
China.
While
the Company’s major shareholders, headquarters, and operations are located in China, EUBG currently does not, and EUBG does not
plan to use variable interest entities to execute our business plan or to conduct our China-based operations. EUBG is a Nevada holding
company and does not have any substantive operations other than indirectly holding the equity interest in our operating subsidiaries
in Hong Kong and China. Therefore, our shareholders will not directly hold any equity interests in our Chinese operating subsidiaries.
Our holding company structure involves unique risks to investors. Chinese regulatory authorities could disallow our corporate structure,
which would likely result in a material change in our operations and/or the value of the Company’s common stock, including that
it could cause the value of such securities to significantly decline or become worthless.
Summary
of Risk Factors
Investing in our common stock involves significant
risks. You should carefully consider all of the information in this prospectus before making an investment in the Company’s common
stock. Below please find a summary of the principal risks we face, organized under relevant headings. Importantly, this summary does
not address all of the risks that we face. These risks are discussed more fully in the section titled “Risk Factors” beginning
on page 17 of this prospectus.
Risks Related to Our Business and Industry
|
● | We have a limited operating history and
are subject to the risks encountered by development-stage companies. See “Risk Factors — Risks
Related to Our Business and Industry — We have a limited operating history and are
subject to the risks encountered by development-stage companies.” |
|
● | Our historical financial results may not
be indicative of our future performance. See “Risk Factors — Risks
Related to Our Business and Industry — Our historical financial results may not be
indicative of our future performance. |
|
● | If we cannot manage our growth effectively
and efficiently, our results of operations or profitability could be adversely affected.
See “Risk Factors — Risks Related to Our Business and Industry
— If we cannot manage our growth effectively and efficiently, our results of operations
or profitability could be adversely affected.” |
|
● | We may not be successful in implementing
important new strategic initiatives, which may have an adverse impact on our business and
financial results. See “Risk Factors — Risks Related to Our Business
and Industry — We may not be successful in implementing important new strategic initiatives,
which may have an adverse impact on our business and financial results.” |
|
● | Increasing competition within our industries
could have an impact on our business prospects. See “Risk Factors —
Risks Related to Our Business and Industry — Increasing competition within our industries
could have an impact on our business prospects.” |
|
● | Our PRC subsidiary may be required to
obtain and maintain additional approvals, licenses or permits applicable to our business,
which could have a material adverse impact on our business, financial conditions and results
of operations. See “Risk Factors — Risks Related to Our Business
and Industry — Our PRC subsidiary may be required to obtain and maintain additional
approvals, licenses or permits applicable to our business, which could have a material adverse
impact on our business, financial conditions and results of operations.” |
|
● | If our operating subsidiaries fail to
hire, train or retain qualified managerial and other employees, our business and results
of operations could be materially and adversely affected. See “Risk Factors —
Risks Related to Our Business and Industry — If our operating subsidiaries fail to
hire, train or retain qualified managerial and other employees, our business and results
of operations could be materially and adversely affected.” |
Risks Related to Doing Business in the PRC
|
● | The Chinese government may intervene in
or influence our operations at any time, or may exert more control over offering conducted
overseas and/or foreign investment in China-based issuers, which could result in a material
change in our operations and significantly and adversely impact the value of the Company’s
common stock we are registering for sale, including potentially making those common stock
worthless; The Chinese government exerts substantial influence over the manner in which we
must conduct our business activities. See “Risk Factors — Risks
Associated with doing business in China — The recent state government interference
into business activities on U.S. listed Chinese companies may negatively impact our existing
and future operations in China. The Chinese government may intervene in or influence our
operations at any time, which could result in a material change in our operations and significantly
and adversely impact the value of the Company’s common stock, including potentially
causing the value of the Company’s common stock to decline or be worthless. |
|
● | The uncertainties in the Chinese legal
system could materially and adversely affect us. See “Risk Factors — Risks
Associated with doing business in China — Uncertainties with respect to the PRC legal
system, including uncertainties regarding the enforcement of laws, and sudden or unexpected
changes in laws and regulations in China could adversely affect us and limit the legal protections
available to you and us.” |
|
● | The PRC legal system is evolving, and
the resulting uncertainties could adversely affect us. See “Risk Factors — Risks
Associated with doing business in China — The PRC legal system is evolving, and the
resulting uncertainties could adversely affect us.” |
|
● | A severe or prolonged downturn in the
global or Chinese economy could materially and adversely affect our business and our financial
condition. See “Risk Factors — Risks Associated with doing business
in China — The A severe or prolonged downturn in the global or Chinese economy could
materially and adversely affect our business and our financial condition. |
|
● | Changes in the policies of the PRC government
could have a significant impact upon our ability to operate profitably in the PRC. See “Risk
Factors — Risks Associated with doing business in China — Changes
in the policies of the PRC government could have a significant impact upon our ability to
operate profitably in the PRC.” |
|
● | Changes in the political or economic climate
in the PRC may impair our ability to operate profitably, if at all. See “Risk Factors — Risks
Associated with doing business in China — Because our business is dependent upon government
policies that encourage a market-based economy, change in the political or economic climate
in the PRC may impair our ability to operate profitably, if at all.” |
|
● | Changes in China’s economic, political
or social conditions or government policies may have a material adverse effect on our business
and operations. See “Risk Factors — Risks Associated with doing
business in China —Changes in China’s economic, political or social conditions
or government policies may have a material adverse effect on our business and operations.” |
|
● | Prior court decisions under the civil
law system have limited precedential value. See “Risk Factors — Risks
Associated with doing business in China — 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. Therefore
our susceptibility to such laws is unknown. |
|
● | Chinese law prohibits or restricts companies
belonging to foreign countries from operating some certain businesses. See “Risk Factors — Risks
Associated with doing business in China — Chinese law prohibits or restricts companies
belonging to foreign countries from operating some certain businesses.” |
| ● | We may
be liable for improper collection, use or appropriation of personal information provided
by our customers. See “Risk Factors — Risks Associated with doing
business in China — Our PRC subsidiary may be liable for improper collection, use or
appropriation of personal information provided by our customers.” |
| ● | We may
be subject to various internet-related laws to which uncertainties exist with respect to
the enactment timetable, interpretation and implementation of the laws and regulations with
respect to online platform business operation. See “Risk Factors — Risks
Associated with doing business in China — Uncertainties exist with respect to the enactment
timetable, interpretation and implementation of the laws and regulations with respect to
online platform business operation.” |
| ● | The approval
of the China Securities Regulatory Commission or other PRC regulatory agencies may be required
in connection with this registration under PRC law. See “Risk Factors — Risks
Associated with doing business in China — The approval of the China Securities Regulatory
Commission or other PRC regulatory agencies may be required in connection with this registration
under PRC law.” |
| ● | PRC laws
and regulations governing our current business operations are sometimes vague and uncertain
and any changes in such laws and regulations may impair our ability to operate profitably.
See “Risk Factors — Risks Associated with doing business in China
— PRC laws and regulations governing our current business operations are sometimes
vague and uncertain and any changes in such laws and regulations may impair our ability to
operate profitably.” |
| ● | We may
be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income
Tax Law, and we may therefore be subject to PRC income tax on our global income. See “Risk
Factors — Risks Associated with doing business in China — Under
the PRC Enterprise Income Tax Law, or the EIT Law, our PRC subsidiary may be classified as
a “resident enterprise” of China, which could result in unfavorable tax consequences
to us and our non-PRC shareholders.” |
| ● | Uncertainties
under the EIT Law relating to the withholding tax liabilities may of our PRC subsidiary,
and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify
to enjoy certain treaty benefits. See “Risk Factors — Risks Associated
with doing business in China — There are significant uncertainties under the EIT Law
relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable
by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty
benefits.” |
| ● | Restrictions
placed on offshore holding companies and currency exchange may limit our ability to make
loans or additional capital contributions to our PRC subsidiary, which could materially and
adversely affect our liquidity and our ability to fund and expand our business. See “Risk
Factors — Risks Associated with doing business in China — PRC regulation
of loans to and direct investment in PRC entities by offshore holding companies and governmental
control of currency conversion may delay or prevent us from making loans or additional capital
contributions to our PRC subsidiary, which could materially and adversely affect our liquidity
and our ability to fund and expand our business.” |
| ● | Fluctuations
in exchange rates could have a material and adverse effect on our results of operations and
the value of your investment. See “Risk Factors — Risks Associated
with doing business in China — Government control in currency conversion may adversely
affect our financial condition, our ability to remit dividends, and the value of your investment.” |
| ● | If we become
directly subject to the scrutiny, criticism and negative publicity involving U.S.-listed
Chinese companies, we may have to expend significant resources to investigate and resolve
the matter which could harm our business operations, stock price and reputation. See “Risk
Factors — Risks Associated with doing business in China — If we
become directly subject to the scrutiny, criticism and negative publicity involving U.S.-listed
Chinese companies, we may have to expend significant resources to investigate and resolve
the matter which could harm our business operations, stock price and reputation.” |
| ● | You may
face difficulties in effecting service of legal process, enforcing foreign judgments or bringing
actions in China against us or our management named in this registration statement based
on foreign laws. See “Risk Factors — Risks Associated with doing
business in China — You may face difficulties in effecting service of legal process,
enforcing foreign judgments or bringing actions in China against us or our management named
in this registration statement based on foreign laws. |
| ● | The audit
report included in this prospectus was prepared by an auditor who is not inspected by the
U.S. Public Company Accounting Oversight Board, or the PCAOB, and as such, you are deprived
of the benefits of such inspection, and the Company’s common stock may be delisted
under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect the
Company’s auditors. See “Risk Factors — Risks Associated
with doing business in China — The audit report included in this prospectus is prepared
by an auditor who is not inspected by the Public Company Accounting Oversight Board and as
such, the Company’s investors are deprived of the benefits of such inspection. The
Company could be delisted if it is unable to timely meet the PCAOB inspection requirements
established by the Holding Foreign Companies Accountable Act.” |
Risks Related to the Market for the Company’s
Common Stock
| ● | Our CEO
owns a significant percentage of the Company’s common stock and will be able to exert
significant control over matters subject to shareholder approval. See “Risk Factors
– Risks Related to the Market for the Company’s Common Stock - Our CEO owns a
significant percentage of the Company’s common stock and will be able to exert significant
control over matters subject to shareholder approval.” |
| ● | An active,
liquid trading market for the Company’s common stock may not develop or be sustained.
If and when an active market develops the price of the Company’s common stock may be
volatile. See “Risk Factors – Risks Related to the Market for the Company’s
Common Stock - Since the Company’s common stock is traded on the OTC Pink Sheets, an
active, liquid trading market for the Company’s common stock may not develop or be
sustained. If and when an active market develops the price of the Company’s common
stock may be volatile.” |
| ● | We may
authorize and issue shares of new classes of stock that could be superior to or adversely
affect you as a holder of the Company’s common stock. See “Risk Factors –
Risks Related to the Market for the Company’s Common Stock - The Company’s Board
of Directors may authorize and issue shares of new classes of stock that could be superior
to or adversely affect you as a holder of the Company’s common stock.” |
| ● | There is
a limited public market for the Company’s common stock. See “Risk Factors –
Risks Related to the Market for the Company’s Common Stock - There is a limited public
market for the Company’s common stock.” |
| ● | We may,
in the future, issue additional common shares, which would reduce investors’ percent
of ownership and may dilute the Company’s share value. See “Risk Factors –
Risks Related to the Market for the Company’s Common Stock - We may, in the future,
issue additional common shares, which would reduce investors’ percent of ownership
and may dilute the Company’s share value.” |
| ● | The trading
price of the Company’s common stock is likely to be volatile, which could result in
substantial losses to investors. See “Risk Factors – Risks Related to the Market
for the Company’s Common Stock - The trading price of the Company’s common stock
is likely to be volatile, which could result in substantial losses to investors. |
| ● | We are
subject to the penny stock rules, which will make shares of the Company’s common stock
more difficult to sell. See “Risk Factors – Risks Related to the Market for the
Company’s Common Stock - We are subject to the penny stock rules, which will make shares
of the Company’s common stock more difficult to sell.” |
| ● | Shares
of the Company’s common stock that have not been registered under federal securities
laws are subject to resale restrictions imposed by Rule 144, including those set forth in
Rule 144(i) which apply to a former “shell company.” See “Risk Factors
– Risks Related to the Market for the Company’s Common Stock - Shares of the
Company’s common stock that have not been registered under federal securities laws
are subject to resale restrictions imposed by Rule 144, including those set forth in Rule
144(i) which apply to a former “shell company.” |
| ● | There is
no assurance that we will be able to pay dividends to the Company’s shareholders, which
means that you could receive little or no return on your investment.” See “Risk
Factors – Risks Related to the Market for the Company’s Common Stock - There
is no assurance that we will be able to pay dividends to the Company’s shareholders,
which means that you could receive little or no return on your investment. |
Corporate
Information
EUBG’s
principal executive office is located at Plaza Building 2, No. 170, Weiyang Road, Xi’an, Chin and our telephone number is +86-029
- 86100263. Our website is https://www.eubggroup.com/. Information contained on our website is not part of this prospectus, and our website
address is included in this prospectus as inactive textual references only.
Implications of Being an Emerging Growth Company
As a public company with less than $1,070,000,000
in revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart our Business Startups
Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of certain reduced reporting requirements and
is relieved of certain other significant requirements that are otherwise generally applicable to public companies, and can avail itself
to various exemptions such as an exemption from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14(a) and (b) of the Securities
Exchange Act of 1934.
In particular, as an emerging growth company,
we:
| ● | is not
required to obtain an attestation and report from its auditors on our management’s
assessment of the Company’s internal control over financial reporting pursuant to the
Sarbanes-Oxley Act of 2002; |
| ● | is not
required to provide a detailed narrative disclosure discussing its compensation principles,
objectives and elements and analyzing how those elements fit with our principles and objectives
(commonly referred to as “compensation discussion and analysis”); |
| ● | is not
required to obtain a non-binding advisory vote from its stockholders on executive compensation
or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency”
and “say-on-golden-parachute” votes); |
| ● | is exempt
from certain executive compensation disclosure provisions requiring a pay-for-performance
graph and CEO pay ratio disclosure; |
| ● | may present
only two years of audited financial statements and only two years of related Management’s
Discussion & Analysis of Financial Condition and Results of Operations (“MD&A”);
and |
| ● | is eligible
to claim longer phase-in periods for the adoption of new or revised financial accounting
standards under §107 of the JOBS Act. |
We intend to take advantage of all of these reduced
reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting
standards under §107 of the JOBS Act. The Company’s election to use the phase-in periods may make it difficult to compare
its financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in
periods under §107 of the JOBS Act.
Certain of these reduced reporting requirements
and exemptions were already available to us due to the fact that it also qualifies as a “smaller reporting company” under
SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s
assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not
required to provide a pay-for-performance graph or Chief Executive Officer pay ratio disclosure; and may present only two years of audited
financial statements and related MD&A disclosure.
Under the JOBS Act, we may take advantage of
the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant
to a registration statement declared effective under the Securities Act of 1933, as amended (the “Securities Act”), or such
earlier time that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would
cease to be an “emerging growth company” if we have more than $1,070,000,000 in annual revenues, have more than $700 million
in market value of its Common stock held by non-affiliates, or issue more than $1.0 billion in principal amount of non-convertible debt
over a three-year period. We would cease to be an emerging growth company on the last day of the fiscal year following the date of the
fifth anniversary of thefirst sale of common equity securities under an effective registration statement under the Securities Act or
a fiscal year in which we have $1 billion in gross revenues. Further, under current SEC rules, we will continue to qualify as a “smaller
reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less
than $250 million as of the last business day of our most recently completed second fiscal quarter.
Common Stock Offered by Selling
Stockholders: |
This
prospectus relates to the possible resale, from time to time, by the selling stockholders identified herein of up to an aggregate
of 140,000,000 shares of the EUBG’s common stock, par value $0.0001 per share (the “Shares”). |
Offering
Price: |
The
Shares will be offered and sold by the selling stockholders at a fixed price of $0.30 per share until our common stock
is quoted on OTC Market Group, Inc.’s “OTCQB” or “OTCQX” tiers, and thereafter the Shares may be sold
at prevailing market prices or privately negotiated prices or in transactions that are not in the public market. |
Common
Stock Outstanding After the Offering: |
1,701,181,423 shares
of common stock. |
Use
of Proceeds: |
We
will not receive any proceeds from the sale of Shares by the selling stockholders; however, we will receive the proceeds from any
cash exercise of the warrants. |
Risk
Factors: |
An
investment in our securities involves a high degree of risk and could result in a loss of your entire investment. Prior to making
an investment decision, you should carefully consider all of the information in this prospectus and, in particular, you should evaluate
the risk factors set forth under the caption “Risk Factors” beginning on page 17. |
Market
for our Shares: |
Our
common stock is quoted on the OTC Markets, Inc. Pink tier under the symbol “EUBG.” |
The number of shares of common stock shown above
to be outstanding after this offering is based on 1,701,181,423 shares of common stock outstanding as of January 27, 2023.
ABOUT ENTREPRENEUR UNIVERSE
BRIGHT GROUP
History of Our Company
Entrepreneur Universe Bright Group (“EUBG”
or the “Company”) was incorporated in the State of Nevada on April 21, 1999 under the name LE GOURMET CO, INC. Since its
inception, the Company had the following name changes: On March 17, 2003, to Estelle Reyna, Inc.; on September 11, 2003 to Karma Media,
Inc.; on July 8, 2005 to Pitboss Entertainment, Inc.; on March 3, 2006 to US Energy Holdings, Inc.; on December 20, 2006 to Lonestar
Group Holdings Company; on November 9, 2007 to Guardian Angel Group, Inc.; and on May 18, 2011 to REE International, Inc.; and on March
23, 2020, the Company filed a Certificate of Amendment to the Nevada Secretary of State amending Article I of its Articles of Incorporation
changing the Company’s name to Entrepreneur Universe Bright Group, with an effective date of April 3, 2020.
Lonestar Group Holdings Company was a voluntary
filer and filed a Form 15 with the Securities and Exchange Commission (“SEC”) on August 20, 2007.
In July 2018, XTC Inc. (“XTC”), one
of EUBG’s shareholders, petitioned the Eight Judicial District Court in Clark County, Nevada (the “Court”), for appointment
as custodian of the Company. On September 4, 2018, the Court granted XTC custodianship of the Company with the right to appoint officers
and directors, negotiate and compromise debt, execute contracts, issue stock and authorize new classes of stock (the “Custodianship”).
Since the Form 15 filing on August 20, 2007 and
prior to the Custodianship, the Company’s management believes that it was inactive with no business operations. In December 2018,
XTC filed a Certificate of Revival for a revival of its charter, effective December 13, 2018, with the Nevada Secretary of State. XTC
acted together with MXD Inc. (“MXD”) to revive the Company and to get current. MXD is a private company incorporated in the
State of Colorado. As the president of XTC is also the president of MXD, the Company considered that the XTC and MXD are under common
control.
XTC and MXD performed the following actions in
its capacity as custodian:
|
● |
Funded all expenses of
the Company including paying off all outstanding liabilities discovered; |
|
● |
Brought the Company back
in compliance with the Nevada Secretary of State, resident agent, transfer agent, OTC Markets Group; |
|
● |
Brought in and paid for
accounting professionals as well as securities counsel. |
On December 18, 2018, the Company formed REE
International, Inc. Colorado (“REE-CO”). On December 21, 2018, the Company entered into an Agreement for Divestiture of Assets
to Subsidiary with REE-CO, where all of the Company’s assets, liabilities, and business were transferred to REE-CO. in exchange
for 1,000 shares of REE-CO, and the Company became the parent company of REE-CO. Since then, the Company has no assets, liabilities and
business.
On December 28, 2018, the Company entered into
a Sale and Purchase Agreement (the “SPA”) with XTC to transfer 1,000 common shares of REE-CO to XTC at nil cash consideration
(with XTC assuming all of the obligations and liabilities of REE-CO). Pursuant to the SPA, all the assets and liabilities previously
reported in the Company’s financial statements were acquired by XTC and all the continuing obligations assumed were taken up by
XTC. Since the closing of the SPA, REE-CO ceased to be a subsidiary of the Company on the same date., and the Company no longer had any
assets, liabilities and business.
In consideration of the payments made to revive
the Company and get current by the XTC and MXD, the Company issued 1,000,000 shares of Series A Preferred Stock to MXD on December 11,
2018 and issued 50,000 shares of Series B Preferred Stock to XTC on February 27, 2019, respectively.
On March 5, 2019, the total authorized common
stock of the Company was increased to 1,800,000,000.
On April 24, 2019, XTC was discharged as custodian
of the Company. Prior to the Custodianship and immediately before May 15, 2019, the Company has abandoned all of its business operations.
On May 15, 2019, 1,590,605,141
shares of the common stock was issued to MXD as consideration for its services to revive the Company and get current. On the
same date, MXD and XTC agreed to voluntarily retire 1,000,000 Series A Preferred Stock and 50,000 shares of Series B Preferred Stock,
respectively (the “Issuance”).
Immediately after the Issuance, MXD entered into
certain Sale and Purchase Agreements, dated May 15, 2019 (the “Stock Purchase Agreements”), with Tethys Fountain Limited,
New Finance Consultants Limited, Jia Wang, Jianyong Li, Haijun Jiang, Xuebin Wu and Fanfan Chen (collectively, the “Purchasers”),
to transfer all its 1,590,605,141 shares of common stock of the Company to the Purchasers in exchange for an aggregate purchase price
of $135,000. Upon the closing of the Stock Purchase Agreements, the Purchasers collectively owned 93.5% of the issued and outstanding
shares of the Company’s common stock, and Tethys Fountain Limited became the controlling shareholder of the Company.
On May 20, 2019, and as authorized by the Company’s
board of directors, the Company began its current business as a marketing consulting company, as further described in the section entitled
“Business Overview” below.
Corporate Structure
EUBG is a holding company for its operating subsidiaries.
The operations of the Company’s PRC subsidiary, Xi’an Yunchuang Space Information Technology Co., Ltd. (formerly Entrepreneurship
World Consultants Limited) in Xi’an, China are the primary operations of EUBG. Our PRC subsidiary is wholly-owned by the Company’s
HK subsidiary, Entrepreneurship World Technology Holding Group Company Limited, a Hong Kong limited company. The HK Subsidiary was incorporated
by the Company on May 15, 2019 with HK$10,000 as its registered capital as a holding company. The PRC subsidiary was incorporated on
October 18, 2019 with HK$1,000,000 as its registered capital. On May 7, 2020, we incorporated Xian Yunchuang Space Information Technology
Co., Ltd, BaiYin Branch (formerly Entrepreneurship World Consultants Limited, BaiYin Branch), with RMB900,000 as its registered capital,
as an branch office of the PRC subsidiary in Baiyin City, Gansu Province, China.
While the Company’s major shareholders,
headquarters, and operations are located in China, EUBG currently does not, and EUBG does not plan to use variable interest entities
to execute our business plan or to conduct our China-based operations. EUBG is a Nevada holding company and does not have any substantive
operations other than indirectly holding the equity interest in our operating subsidiaries in Hong Kong and China. Therefore, our shareholders
will not directly hold any equity interests in our Chinese operating subsidiaries. Our holding company structure involves unique risks
to investors. Chinese regulatory authorities could disallow our corporate structure, which would likely result in a material change in
our operations and/or the value of the Company’s common stock, including that it could cause the value of such securities to significantly
decline or become worthless.
We face various legal and operational risks and
uncertainties related to being based in and having substantially all of our operations in China. The PRC government has significant authority
to exert influence on the ability of a China-based company, such as us, to conduct its business, accept foreign investments or list on
an U.S. or other foreign exchanges. For example, we face risks associated with regulatory approvals of offshore offerings, anti-monopoly
regulatory actions, oversight on cybersecurity and data privacy, as well as the lack of PCAOB inspection on our auditors. Such risks
could result in a material change in our operations and/or the value of the Company’s common stock or could significantly limit
or completely hinder the Company’s ability to offer or continue to offer Stocks and/or other securities to investors and cause
the value of such securities to significantly decline or be worthless. See “Risk Factors — Risks Associated
with doing business in China — “The recent state government interference into business activities on U.S. listed Chinese
companies may negatively impact our existing and future operations in China. The Chinese government may intervene in or influence our
operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of
the Company’s common stock, including potentially causing the value of the Company’s common stock to decline or be worthless;
— Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and sudden or
unexpected changes in laws and regulations in China could adversely affect us and limit the legal protections available to you and us;
— The PRC legal system is evolving, and the resulting uncertainties could adversely affect us; — 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. Therefore, the Company’s susceptibility to such laws is unknown; — The
approval of the China Securities Regulatory Commission or other PRC regulatory agencies may be required in connection with this registration
under PRC law.”
The PRC government has significant oversight
and discretion over the conduct of our business and may intervene with or influence our operations as the government deems appropriate
to further regulatory, political and societal goals. See “Risk Factors — Risks associated with doing business
in China — Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and sudden
or unexpected changes in laws and regulations in China could adversely affect us and limit the legal protections available to you and
us.” 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 overseas securities offerings and other capital markets activities
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. See “Risk Factors — Risks Associated with doing business
in China — The recent state government interference into business activities on U.S. listed Chinese companies may negatively impact
our existing and future operations in China. The Chinese government may intervene in or influence our operations at any time, which could
result in a material change in our operations and significantly and adversely impact the value of the Company’s common stock, including
potentially causing the value of the Company’s common stock to decline or be worthless; — Uncertainties with respect to the
PRC legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations
in China could adversely affect us and limit the legal protections available to you and us.”
According to our PRC legal counsel, King &
Wood Mallesons, except as disclosed in the “Risk Factor” section - Risks relating to PRC laws and regulations with respect
to foreign exchange, we, our subsidiaries are not required to obtain permission or approval from any of the PRC authorities including
CSRC or CAC to issue the Company’s common stock to foreign investors, nor have we, or our subsidiaries, applied for or received
any denial for the Registration. However, recently, 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 was 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.
Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents
of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions
and any related implementing rules to be enacted may subject us to compliance requirement in the future. Given the current regulatory
environment in the PRC, we are still subject to the uncertainty of interpretation and enforcement of the rules and regulations in the
PRC, which can change quickly with little advance notice, and any future actions of the PRC authorities. In addition, we
cannot assure you that relevant PRC government agencies would reach the same conclusion as we do or as advised by our PRC legal counsel.
If we are wrong with regards to our interpretation of the PRC laws and regulations, if we inadvertently conclude that such approval is
not required when it is, or if the CSRC, the Cyberspace Administration of China or other regulatory PRC agencies later promulgate new
rules requiring that we obtain their approvals to issue the Company’s common stock to foreign investors, 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 the Company’s securities.
It is uncertain when and whether we will be required to obtain permission from China Securities Regulatory Commission to list on U.S.
exchanges, and even if such permission is obtained, whether it will be denied or rescinded. As a result, our operations could be adversely
affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry. See “Risk Factors
– Risks associated with doing business in China – Uncertainties with respect to the PRC legal system, including uncertainties
regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China could adversely affect us and limit
the legal protections available to you and us; – The PRC legal system is evolving, and the resulting uncertainties could adversely
affect us; – The approval of the China Securities Regulatory Commission or other PRC regulatory agencies may be required in connection
with this registration under PRC law.”
The PRC laws and regulations and government policy
changes rapidly on digital training. For our digital training related services, we worked with Beida Jade Bird Vocational Education (“Jade
Bird”) which was an authorized licensee of China National Personal Talent Training Network (“CNPTTN”), a PRC regulatory
agency for the talent training. Jade Bird was in charge of its training courses, and the Company was authorised by Jade Bird as its sole
training related administrator of the training courses, limited to coordinate the digital training related services to individual clients
who were interested in conducting live-broadcasting business through social medias. The Company provided training related services, to
these individual clients who subscribed courses, in arranging the examination, following up certificate issuance processes, addressing
clients’ concerns, etc. On March 22, 2022, the PRC subsidiary learned that Jade Bird suspended its service after receiving a notice
from CNPTTN and that until further notice CNPTTN has suspended all recruitment services using its CNPTTN’s name. As a result of
CNPTTN’s suspension, the PRC subsidiary has also suspended its digital training related services with Jade Bird from March 22,
2022 until further notice. In the future, laws and regulations and the CNPTTN may require our PRC Subsidiary to meet additional requirements
or obtain additional approvals, licenses or permits to conduct KOL training related business. If our PRC Subsidiary is unable to meet
the relevant requirements or obtain the relevant approvals, licenses or permits, our PRC Subsidiary may not be able to continue to conduct
the KOL training related business. As of the date of this prospectus, there is no further notice from CNPTTN and the service is still
being suspended. As advised by our PRC legal counsel, other than the above, we and our subsidiaries are currently not required to obtain
permission from any of the PRC authorities to operate its principal business. We cannot assure you that relevant PRC government agencies
would reach the same conclusion as we do or as advised by our PRC legal counsel. If (i) we and our PRC legal counsel inadvertently concluded
that such permissions or approvals are not required, or (ii) the relevant regulatory PRC agencies later promulgate new rules requiring
that we obtain their approvals to operate our business, and we are unable to obtain approval or a waiver of such approval requirements,
any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on our business
operation and the trading price of our securities.
Although we concluded we and our subsidiaries
are currently not required to obtain permission from any of the PRC central or local government and has not received any denial to list
on the U.S. exchange or to conduct our business operation, if (x) we inadvertently conclude that such approvals are not required when
they are, (y) we do not receive or maintain such permissions or approvals if and when required, or (z) changes in applicable laws, regulations,
or interpretations relating to our business or industry which would require us to obtain approvals in the future, our operations, financial
conditions, and results of operations could be adversely affected, directly or indirectly, and the value of the Company’s common
stock could significantly decline or become worthless. See “Risk Factors —Risks related to our business and industry
- Our PRC subsidiary may be required to obtain and maintain additional approvals, licenses or permits applicable to our business, which
could have a material adverse impact on our business, financial conditions and results of operations” and “Risk Factors — Risks
associated with doing business in China - The recent state government interference into business activities on U.S. listed Chinese companies
may negatively impact our existing and future operations in China. The Chinese government may intervene in or influence our operations
at any time, which could result in a material change in our operations and significantly and adversely impact the value of the Company’s
common stock, including potentially causing the value of the Company’s common stock to decline or be worthless; - Uncertainties
exist with respect to the enactment timetable, interpretation and implementation of the laws and regulations with respect to online platform
business operation;”– The PRC legal system is evolving, and the resulting uncertainties could adversely affect us; –
The approval of the China Securities Regulatory Commission or other PRC regulatory agencies may be required in connection with this registration
under PRC law.”
EUBG is permitted to transfer cash as a loan
and/or capital contribution to the HK subsidiary for its operations and the HK subsidiary is permitted to transfer cash as a loan and/or
capital contribution to the PRC subsidiary for capital investment and company operations. For instance, the PRC subsidiary will use the
cash for their daily business operations. However, under existing PRC regulations, any loans made to our PRC subsidiaries shall not exceed
a statutory limit, and shall be filed with SAFE or its local bureau. Additionally, any capital contributions the HK subsidiary make to
the PRC subsidiary shall be filed with the local commerce department. The PRC subsidiary is the main operating company to earn revenue.
The HK subsidiary is also permitted under the laws of Hong Kong SAR to provide funding to EUBG through dividend distribution without
restrictions on the amount of the funds. Current PRC laws require that dividends be paid only out of the profit for the year calculated
according to PRC accounting principles, which differ from the generally accepted accounting principles in other jurisdictions. In addition,
PRC laws also require a foreign-invested enterprise to set aside at least 10% of its after-tax profits, if any, to fund its statutory
reserves, until the aggregate amount reaches 50% of its registered capital. In addition, a wholly foreign-owned enterprise may, at its
discretion, allocate a portion of its after-tax profits based on PRC accounting principles to enterprise expansion funds, staff welfare,
and bonus funds. Those reserve funds are not available for distribution as cash dividends. The PRC government’s control of foreign
currency conversion may limit our foreign exchange transactions. Under existing PRC foreign exchange regulations, payments of current
account items can be made in foreign currencies without prior approval from SAFE. However, approval from SAFE, or registration with SAFE
or other appropriate departments is required where RMB shall be converted into foreign currency and be remitted out of the PRC. Failure
to comply with the above regulations may result in liability under PRC laws for evasion of foreign exchange controls.
As of the date of this prospectus, our PRC subsidiary
has distributed $7.1 million (net of withholding tax at $791,662 charged at a rate of 10% of the declared dividend) to its holding parent,
which is our HK subsidiary. However, we cannot ensure that we will be able to comply with the above regulations in all respects in the
future. If we fail to comply with the above regulations, our ability to transfer cash and distribute earnings may be negatively affected,
which could materially and adversely affect our liquidity and our ability to fund and expand our business. Since EUBG, the Nevada holding
company, is not the direct parent company of the PRC subsidiary, EUBG and the PRC subsidiary cannot make transfers to the other. We intend
to keep any future earnings to finance the expansion of our business conducted by our subsidiaries, and we do not anticipate that any
cash dividends will be paid in the foreseeable future from the HK subsidiary to EUBG, the Nevada holding company, and/or from EUBG to
its shareholders. As of the date of this prospectus, other than the above stated $7.1 million cash dividends transferred from our PRC
subsidiary to our HK subsidiary for operational costs, no cash transfer or transfer of other assets (including dividends and distribution)
have occurred among EUBG, our Nevada holding company, and either of its subsidiaries, our HK subsidiary or our PRC subsidiary. See
“Summary of Risk Factors – Risks Related to Doing Business in the PRC” and “Risk Factors — Risks
associated with doing business in China” for a detailed discussion of the Chinese legal restrictions on the payment of dividends,
our ability to transfer cash within the Company and the potential for holders of the Company’s common stock to be subject to Chinese
taxes on dividends paid by us in the event we are deemed a Chinese resident enterprise for Chinese tax purposes. As of September 30,
2022, December 31 2021 and December 31, 2020, total undistributed profits of the Company’s PRC subsidiary were $$3,123,352, $3,579,288
and $6,269,752, respectively. We have recognized deferred tax liabilities of $312,335, $357,929 and $626,975, respectively, in respect
of the undistributed profits. For more details, please refer to consolidated financial statements and related notes included elsewhere
in this prospectus.
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. To the extent that the cash and assets of our business are in our PRC subsidiary and/or
Hong Kong subsidiary, such cash or assets may not be available to fund our operations or for other use outside of the PRC and/or Hong
Kong due to the potential intervention by the PRC government to impose restrictions and limitations over our ability or our subsidiaries’
ability to transfer cash or assets. Any such intervention in or influence on our business operations or action to exert more oversight
and control over the cash or assets of our subsidiaries, once taken by the PRC government, could adversely affect our business, financial
condition and results of operations and the value of our common stock, or 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. See “Risk Factors — Risks associated with doing business in China - The recent state government
interference into business activities on U.S. listed Chinese companies may negatively impact our existing and future operations in China.
The Chinese government may intervene in or influence our operations at any time, which could result in a material change in our operations
and significantly and adversely impact the value of the Company’s common stock, including potentially causing the value of the
Company’s common stock to decline or be worthless.”
On September 1, 2021, our PRC subsidiary and
Hong Kong subsidiary adopted a written Monetary and Cash Fund Management System (“Cash Management Policy”) for its operations
in China and Hong Kong. The Cash Management Policy covers cash, bank deposits and other monetary funds owned by the PRC subsidiary and
Hong Kong subsidiary and includes procedures on receiving funds, depositing funds, transferring funds and proper documentation and recording
of cash. We adopted the Cash Management Policy in order to provide a process and guidance on collecting,
accounting for, and safeguarding all cash and cash equivalents of our PRC subsidiary and Hong Kong subsidiary, including 1) checking
the latest regulation requirements between China and Hong Kong; and 2) seeking approval from EUBG’s chief executive officer in
order to transfer funds from our PRC subsidiary to our HK subsidiary. EUBG does not have a cash management policy.
On December 16, 2021,
Public Company Accounting Oversight Board (PCAOB) issued a report on its determinations that PCAOB is unable to inspect or investigate
completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region
of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The PCAOB made these
determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the HFCAA.
The report further listed in its Appendix A and Appendix B, Registered Public Accounting Firms Subject to the Mainland China Determination
and Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively. The audit report included in this registration
statement for the year ended December 31, 2021 and 2020 was issued by Centurion ZD CPA & Co. (“CZD CPA”), an audit firm
headquartered in Hong Kong, a jurisdiction that the PCAOB has determined that the PCAOB is unable to conduct inspections or investigate
auditors. CZD CPA is among those listed by the PCAOB Hong Kong Determination, a determination announced by the PCAOB on December 16,
2021 that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in Hong Kong, a Special
Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. The lack of access
to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based
in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct
inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures
or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections. In addition, under
the HFCAA (as amended by the Consolidated Appropriation Act, 2023), our securities may be prohibited from trading on the U.S. stock exchanges
or in the over the counter trading market in the U.S. if our auditor is not inspected by the PCAOB for two consecutive years, and this
ultimately could result in the Company’s common stock being delisted. On June 22, 2021, the U.S. Senate passed the Accelerating
Holding Foreign Companies Accountable Act (“AHFCAA”), which was enacted under the Consolidated Appropriations Act, 2023,
as further described below.
On April 22, 2022, the
SEC provisionally identified EUBG as a company that has retained a registered public accounting firm to issue an audit report where
that registered public accounting firm has a branch or office that (i) is located in a foreign jurisdiction and (ii) the PCAOB
is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction under the HFCAA (a “Commission-Identified
Issuer”). On May 12, 2022, that provisional identification became conclusive and we are now subject to the requirements under the
HFCAA, including the prohibition on the trading of such issuer’s securities on a national securities exchange or through any other
method is within the SEC’s jurisdiction to regulate, including “over-the-counter” trading. This identification of EUBG
as a Commission-Identified Issuer does not mean that we will be immediately prohibited from trading our securities on the OTC Pink Sheets.
However, we may be prohibited from trading our securities, including trading in the “over-the-counter” market, if we continue
to be unavailable for PCAOB inspection or investigation for two consecutive years under the HFCAA as amended by the Consolidated Appropriations
Act, 2023. In addition, after the first year of identification, we will be subject to new submission and disclosure requirements in our
subsequent annual reports.
On December 29, 2022,
the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA (i) to reduce the number of consecutive years
that would trigger delisting from three years to two years, and (ii) so that any foreign jurisdiction could be the reason why the PCAOB
does not to have complete access to inspect or investigate a company’s auditors. As it was originally enacted, the HFCAA applied
only if the PCAOB’s inability to inspect or investigate because of a position taken by an authority in the foreign jurisdiction
where the relevant public accounting firm is located. As a result of the Consolidated Appropriations Act, 2023, the HFCAA now also applies
if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any
foreign jurisdiction. The denying jurisdiction does not need to be where the accounting firm is located.
On September 7, 2022,
the Company dismissed CZD CPA and appointed Prager Metis CPAs, LLC (“PragerMetis”) as the Company’s independent auditor
for the fiscal year end December 31, 2022. Our current auditors, PragerMetis, is located at Hackensack, New Jersey, and has been inspected
by the PCAOB.
Our offices are located at Suite 907, Saigao
City Plaza Building 2, No. 170, Weiyang Road, Xi’an, China, and our telephone number is +86-029-86100263. We maintain a website
at https://www.eubggroup.com/, however, our website or any information contained therein on our website do not constitute a part of this
registration statement.
Cash Transfer within our Organization
EUBG is permitted to transfer cash as a loan
and/or capital contribution to the HK subsidiary for its operations and the HK subsidiary is permitted to transfer cash as a loan and/or
capital contribution to the PRC subsidiary for capital investment and company operations. For instance, the PRC subsidiary will use the
cash to pay for their daily business operations. The PRC subsidiary in China is the main operating company to earn revenue. However,
under existing PRC regulations, any loans made to our PRC subsidiaries shall not exceed a statutory limit, and shall be filed with SAFE
or its local bureau. Additionally, any capital contributions the HK subsidiary make to the PRC subsidiary shall be filed with the local
commerce department.
Current investments in Chinese companies, which
are governed by the Foreign Investment Law, and the dividends and distributions from our PRC subsidiary are subject to regulations and
restrictions on dividends and payment to parties outside of China are subject to restrictions. The principal regulations governing the
distribution of dividends paid by WFOEs include the Company Law of PRC, and the Foreign Investment Law. According to the Foreign Investment
Law of the People’s Republic of China and its implementing rules, which jointly established the legal framework for the administration
of foreign-invested companies, a foreign investor may, in accordance with other applicable laws, freely transfer into or out of China
its contributions, profits, capital earnings, income from asset disposal, intellectual property rights, royalties acquired, compensation
or indemnity legally obtained, and income from liquidation, made or derived within the territory of China in RMB or any foreign currency,
and any entity or individual shall not illegally restrict such transfer in terms of the currency, amount and frequency. Under these regulations,
our PRC subsidiary in China may pay dividends only out of its accumulated profits, if any, as determined in accordance with PRC accounting
standards and regulations. In addition, our PRC subsidiary in China is required to set aside at least 10% of its after-tax profits based
on PRC accounting standards each year to its general reserves until its cumulative total reserve funds reach 50% of its registered capital.
These reserve funds, however, may not be distributed as cash dividends. A PRC company is not permitted to distribute any profits until
any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable
profits from the current fiscal year. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal
in the PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is presently no foreign exchange control
or restrictions on capital flows into and out of Hong Kong. Hence, our Hong Kong subsidiary is able to transfer cash without any limitation
to the United States under normal circumstances.
Renminbi, or RMB, is not freely convertible into
other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiary to use their potential
future RMB revenues to pay dividends to us. The Chinese government imposes controls on the convertibility of RMB into foreign currencies
and, in certain cases, the remittance of currency out of China. Shortages in availability of foreign currency may then restrict the ability
of our PRC subsidiary to remit sufficient foreign currency to our offshore entities for those offshore entities to pay dividends or make
other payments or otherwise to satisfy our foreign-currency-denominated obligations. RMB is currently convertible under the “current
account,” which includes dividends and trade- and service-related foreign exchange transactions, but not under the “capital
account,” which includes foreign direct investment and foreign debt (which may be denominated in foreign currency or RMB), including
loans we may secure for our PRC subsidiary. Currently, our PRC subsidiary may purchase foreign currency for settlement of current account
transactions, including payment of dividends to us, without the approval of the State Administration of Foreign Exchange of China (SAFE)
by complying with certain procedural requirements. However, the relevant Chinese governmental authorities may limit or eliminate our
ability to purchase foreign currencies in the future for current account transactions. The Chinese government may continue to strengthen
its capital controls, and additional restrictions and substantial vetting processes may be instituted by SAFE for cross-border transactions
falling under both the current account and the capital account. Any existing and future restrictions on currency exchange may limit our
ability to utilize revenue generated in RMB to fund our business activities outside of China or pay dividends in foreign currencies to
holders of our securities. Foreign exchange transactions under the capital account remain subject to limitations and require approvals
from, or registration with, SAFE and other relevant Chinese governmental authorities. This could affect our ability to obtain foreign
currency through debt or equity financing for our subsidiaries. See the risk factors discussed in the “Risk Factors” section
of this Annual Report for a detailed discussion of the Chinese legal restrictions on the payment of dividends, our ability to transfer
cash within the Company and the potential for holders of the Company’s common stock to be subject to Chinese taxes on dividends
paid by us in the event we are deemed a Chinese resident enterprise for Chinese tax purposes.
To address persistent capital outflows and the
RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration
of Foreign Exchange, or SAFE, have implemented a series of capital control measures in the subsequent months, including stricter vetting
procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments.
The PRC government may continue to strengthen its capital controls and our PRC subsidiary’s dividends 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 our profits, if any. Furthermore, if the PRC subsidiary
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 and
its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies
to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments
of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between Mainland
China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise
to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our
transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust
the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends
received by our Hong Kong subsidiary from our PRC subsidiary. This withholding tax will reduce the amount of dividends we may receive
from our PRC subsidiary.
Current PRC regulations permit our PRC subsidiary
to pay dividends to HK subsidiary only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards
and regulations. However, we cannot ensure that we will be able to comply with the PRC regulations in all respects in the future. If
we fail to comply with the PRC regulations, our ability to transfer cash and distribute earnings may be negatively affected, which could
materially and adversely affect our liquidity and our ability to fund and expand our business.
As of the date of this prospectus, our PRC subsidiary
distributed $7.1 million (net of withholding tax at $791,662 charged at a rate of 10% of the declared dividend) to its holding parent,
the HK subsidiary. As long as meeting the above-mentioned requirements, there is no restriction or limitation to transfer dividends from
our PRC subsidiary to its Hong Kong parent company, and there is no restriction or limitation to transfer dividends from our Hong Kong
subsidiary to its US parent holding company. Since EUBG, the Nevada holding company, is not the direct parent company of the PRC subsidiary,
EUBG and the PRC subsidiary cannot make transfer to the other. We intend to keep any future earnings to finance the expansion of our
business to our subsidiaries, and we do not anticipate that any cash dividends will be paid in the foreseeable future from the HK subsidiary
to EUBG, and/or from EUBG to its shareholders. As of the date of this prospectus, other than the above stated $7.1 million cash dividends
transferred from our PRC subsidiary to our HK subsidiary for operation costs, no cash transfer or transfer of other assets (including
dividends and distribution) have occurred among our EUBG, our Nevada holding company and its subsidiaries, either the HK subsidiary or
the PRC subsidiary. For more details for the withholding tax paid, see our audited consolidated financial statement for the year ended
December 31, 2021.
Business Overview
EUBG is not a Chinese operating company but a
Nevada holding company. As a holding company with no material operations of our own, EUBG conducts all of its operations through its
subsidiary in China. Our current principal business activities are providing consulting services and sourcing and marketing services
in China through our PRC subsidiary with support from our HK subsidiary. Our PRC subsidiary provides services aimed at connecting businesses
with e-commerce platforms.
Our integrated service platform focuses on strategic
marketing and consulting, which include digital marketing consulting and KOL Training Related Services. The establishment of our platform
is to serve the digital marketing strategy needs of the start-up business companies and small-size companies. Our PRC subsidiary offers
our digital marketing on e-commerce solution plan to these companies in order for them to provide products to their customers. Our mission
is to help start-up companies and small-size companies and guide these companies’ founders in utilizing our digital marketing consulting
plan to reach their business goals. Our marketing consultation on e-commerce solution plan aim to bring online traffic and attention
from the markets for our customers to conduct their e-commerce and build their brands. Our customers are mainly private companies which
need digital marketing services for branding or engaging in e-commerce. Our KOL Training Related Services aims to help our customers
become a certified livestream sales talents as the market demand for livestream salespersons continues to grow with the changing retail
and E-Commerce environment and the arrival of 5G era.
As of January 27, 2023, we had twenty-five (25)
full-time employees. Full-time positions include CEO, CFO, President, V.P., Product Department, Sales Department, Customers Services
Department, Administrative staffs, and Financial department. We anticipate adding approximately five additional employees in 2023 to
our Customer Services Department and Sales and Marketing Department.
Except for the seven (7) trademarks owned by
the PRC subsidiary, we do not own or control any intellectual property rights, such as patents, franchise or concessions, except the
trademarks owned by the PRC Subsidiary.
We do not need any government approvals of principal
services.
Our main service is marketing consultancy, which
includes digital marketing consulting and KOL (Key Opinion Leaders) Training Related Services.
A. Digital Marketing Consulting:
Our PRC subsidiary provides a full range of services
(include consultancy, sourcing and marketing services) to assist our clients and customers in selling their products. With our professional
knowledge and practical experience, we use various marketing methods (e.g. KOL) to increase brand awareness in the local market and ultimately
drive sales. Our PRC subsidiary works outward from a client’s brand strategy and existing online assets to define the optimal digital
footprint for the brand.
Currently, our PRC subsidiary provides substantially
all of our marketing consulting services in conjunction with an e-commerce mobile application (“APP”) namely “Chuangyetianxia”.
Chuangyetianxia is developed by our related company (as described below in the Transactions with Related Parties), Xi’an Chuangyetianxia
Network Technology Co., Ltd. (“Xi’an CNT”), a limited liability company established in the Peoples’ Republic
of China (“PRC” or “China”).
Chuangyetianxia is an APP platform (“Platform”)
which offers a range of capabilities that connects sellers with buyers, for example wholesale companies and the end customers. It offers
users an interface to the supplier’s services/product catalogues.
Through our PRC subsidiary’s prior working
relationship with Xi’an CNT and our extensive experience with the Platform, we are able to provide our customers with customized
service and seamless integration of our customers’ APP to the Platform and assisting them in achieving a specific business objective
(e.g. end customer placed an order to buy a product or enroll a course). We are entitled to a fixed rate on revenue generated by our
client that are related to the scope of respective consultancy services upon client acceptance on the services provided.
In addition, our PRC subsidiary also provides
agency-based sourcing and digital marketing services to connect marketplace operators and merchants. Agency-based sourcing services represents
product procurement on behalf of the Platform. We recognize revenues from agency-based sourcing at a fixed rate on the value of goods
that are sourced and delivered to the ultimate customers by the merchants. Digital marketing services are provided to the Platform to
promote designated products or services through social medial influencers engaged by us. We are entitled to a fixed rate on the revenue
generated by the Platform that are related to the designated products or services.
For the nine months ended September 30, 2022
and 2021, and the years ended December 31, 2021 and 2020, we derived services revenues of $2,207,029, $4,268,054, $4,152,617 and $8,592,970,
respectively, through the APP platform, represented 77.4%, 95.3%, 73.7% and 93.5% of our total revenue.
In the future, our PRC subsidiary plans to expand
our marketing consulting services to include, but is not limited to: Diagnosing marketing strategy options, assisting in establishing
complete marketing system, positioning branding, branding image design and broadcasting, online and off-line sales channel setup, products
development plans, marketing model setup, choosing e-commerce platform, proposing digital marketing projects, enhancing e-commerce traffic,
and acting as sales agent for our clients, and business marketing training (marketing strategy, sales techniques, customer services,
management knowledges, e-commerce traffic generating, and KOL training etc.)
B.
KOL (Key Opinion Leaders) Training Related Services
The core advantage of Influencer Marketing (Influencer
Marketing) is the precise market positioning and exposure to tens of thousands of target audiences in a short period of time. According
to recent survey data conducted by ChiefMarketer, 75% of marketers adopt the strategy of online influencer marketing, and 43% of them
plan to increase their investment in this area in 2019 (Source: ChiefMarketer, https://www.chiefmarketer.com/majority-marketers-use-influencers-survey/).
Enterprises choose to cooperate with the brand and have a level of follower influence. The influencer then introduces and recommends
those companies products to their followers through creative video content on a social media platform on a professional platform.
An influencer has an excellent ability to generate
content, and enjoys creativity, content creation, and sharing audience. If influencers know their followers well, care about their feelings,
and know what content to post, it is more effective for the followers. If the influencers and the client’s branding match accurately,
the communication and cooperation between the two parties would work smoothly.
The word “influencer” as it is used
in China is broad and applies to people who are bloggers, online content creators, vloggers and live streamers, as well as traditional
celebrities. China has its own terminology to refer to an influencer marketing practitioner: key opinion leader (KOL) or “wang-hong,”
which is the romanization of the Mandarin pronunciation for “online celebrity.”
Chinese users behave differently when it comes
to taking advice. Instead of depending on search engines, Chinese users value advice from sources such as their peers, friends, bloggers
and celebrities also known as KOL (Key Opinion Leaders). Much like influencers in the Western world, KOLs are very crucial in the overall
digital marketing approach in China. An industry of “wang-hong incubators” or “KOL academies” is thriving to
meet the flood of KOL aspirants. Currently, our PRC subsidiary cooperates with third party live-broadcasting training agencies to coordinate,
recruit and enroll KOL students in various training programs in professional anchor quality. Such programs are able to qualify the trainees
to obtain anchor licenses/permits before they broadcast on the internet.
Currently, our PRC subsidiary provides digital
training related services to clients who are interested to conduct live-broadcasting business through social medias. We require the clients
to pay a pre-established fee in exchange for the services. Revenues are recognized when promised services (e.g. preliminary consulting
work, setting up of an e-learning account and delivery of learning materials) are delivered to the clients.
In addition, our PRC subsidiary also cooperates
with third party live-broadcasting training agencies to coordinate, recruit and enroll KOL students in various training programs in professional
anchor quality. Such programs are able to qualify the trainees to obtain anchor licenses/permits before they broadcast on the internet.
In this business, the third party live-broadcasting training agencies take the primarily responsibilities for providing the training
programs to the KOL students. Our services are to these live-broadcasting training agencies, which include but not limit to, recruiting
and enrolling KOL students and coordinating the schedule of training course teachers on behalf of the live-broadcasting training agencies.
Our PRC subsidiary generated consultancy services income directly from the live-broadcasting agencies based on the number of successful
enrolled KOL students recruited by us.
The future plan of our KOL Training Related Services
will include: Individual KOL training – providing training sites, positioning KOLs individually according to their personality
and appearance, languages and body languages training, one-on-one contents operation training, IP packaging, and their channel operation
supporting. We also work with our clients to provide the training classes in training their own potential KOL candidates.
For the nine months ended September 30, 2022
and 2021; and the years ended December 31, 2021 and 2020, we generated $269,124, $883,876, $1,261,159 and $305,308, respectively, from
the KOL Training Related Services, represented 9.4%, 19.7%, 22.4% and 3.3% of our total revenue.
Properties
We, through our PRC subsidiary, lease 289.12
square meter of office space in China located at Suite 907, Saigao City Plaza Building 2, No. 170 Weiyang Road, Xi’an, China. Our
rent for the office space in Xi’an, China, is $55,567 per year, with a lease term of 3 years, which terminates in July 2024.
Legal Proceedings
We may from time to time be involved in various
claims and legal proceedings of a nature we believe are normal and incidental to our business. These matters may include product liability,
intellectual property, employment, personal injury cause by our employees, and other general claims. We are not presently a party to
any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless
of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and
other factors.
RISK FACTORS
An investment in our common stock involves
risks. Prior to making a decision about investing in our common stock, you should consider the risks and information below and elsewhere
in this prospectus, including our consolidated financial statements and the related notes thereto. Each of the referenced risks and uncertainties
could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment
in our securities. Additional risks not known to us or that we believe are immaterial may also adversely affect our business, operating
results and financial condition and the value of an investment in our securities.
Risks Related to Our Business and Industry.
We have a limited operating history and
are subject to the risks encountered by development-stage companies.
We, through our operating PRC subsidiary in China,
have been in business since October 2019 as a consulting company, which mainly focuses on includes digital marketing consulting and KOL
Training Related Services. We have only been profitable since the year ended December 31, 2019. As a development-stage company, our business
strategies and model are constantly being tested by the market and operating results, and we work to adjust our allocation of resources
accordingly. As such, our business may be subject to significant fluctuations in operating results in terms of amounts of revenues and
the percentages of the total revenue with respect to the business segments.
We are, and expect for the foreseeable future
to be, subject to all the risks and uncertainties, inherent in a development-stage business. As a result, we must establish many functions
necessary to operate a business, including expanding our managerial and administrative structure, assessing and implementing our marketing
program, implementing financial systems and controls and personnel recruitment. There are risks in light of the costs, uncertainties,
delays and difficulties frequently encountered by companies with a limited operating history. These risks and challenges are, among other
things:
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we operate in industries
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we may require additional
capital to develop and expand our operations which may not be available to us when we require it; |
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our marketing and growth
strategy may not be successful; |
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our business may be subject
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we may not be able to attract,
retain and motivate qualified professionals. |
Our future growth will depend substantially on
our ability to address these and the other risks described in this registration statement. If we do not successfully address these risks,
our business would be significantly harmed.
Our historical financial results may not
be indicative of our future performance.
Our business has achieved rapid growth in 2019
and 2020 since we launched our new business model of providing digital marketing consultation in 2019. Our revenue was $2,851,656 and
$4,479,415 for the nine months ended September 30, 2022 and 2021, respectively; $5,637,396 and $9,187,023 for the years ended December
31, 2021 and 2020, respectively. Our net income was $625,024 and $1,296,288 for the nine months ended September 30, 2022 and 2021, respectively;
$1,086,400 and $4,968,070 for the years ended December 31, 2021 and 2020, respectively. However, our historical growth rate and the limited
history of operation make it difficult to evaluate our future prospects. We may not be able to sustain our historically growth or may
not be able to grow our business at all.
If we cannot manage our growth effectively
and efficiently, our results of operations or profitability could be adversely affected.
We have been in business since October 2019 as
a consulting company. Our revenue for the year ended December 31, 2019 was only $918,931, and the revenue significantly increased to
$9,187,023 at the year end of 2020. It was because of our continuing expansion of our services and operations. For example, to complement
and expand our existing consulting services, our operating subsidiaries started to provide KOL Training Related Services in 2020 by cooperating
with other training agencies. Such plan has been adopted by the executive in 2020 and will continue to place, substantial demands on
our managerial, operational, technological and other resources. Our revenue for the nine months ended September 30, 2022 was $2,851,656
compared to $4,479,415 for the nine months ended September 30, 2021, representing a decrease of $1,627,759 or 36.3% as compared with
the prior period. The decrease was mainly due to our consultancy services income, generated from clients who engaged in online courses
business, dropped by $2,405,874 as compared with last period. This was because the end customers became more patience and cautious in
choosing online courses. We continued to seek for different business opportunities to stabilize our income streams. During the nine months
ended September 30, 2022, we generated $267,874 from our new digital training related services and $911,733 from our consultancy services
to a customer who engaged in live streaming business. However, these new income streams only compensated a part of the revenue reduction
in current period. As of the date of this filing, the digital training related services with Jade Bird remain suspended. Therefore, we
expected the new revenue will not be available to compensate the revenue reduction until further notice. Our revenue for the year ended
December 31, 2021 was $5,637,396 compared to $9,187,023 for the year ended December 31,2020. The revenue decreased because the outbreak
of new Delta virus in China increased the inherent risk of the business. Therefore, we suspended certain consulting services from April,
2021 to August, 2021 and realigned the resources to focus on our KOL Training Related Services. We have resumed these consulting businesses
from August 2021 in order to maintain diversified services for our customers. Our planned expansion will also place significant demands
on us to maintain the quality of our consulting services to ensure that our brand does not suffer as a result of any deviations, whether
actual or perceived, in the quality of our services. In order to manage and support our growth, we must continue to improve our existing
operational and administrative systems and our quality control, and recruit, train and retain additional qualified professionals as well
as other administrative and sales and marketing personnel. We may not be able to effectively and efficiently manage the growth of our
operations, recruit and retain qualified personnel and integrate new expansion into our operations. As a result, our quality of service
may deteriorate and our results of operations or profitability could be adversely affected.
We may not be successful in implementing
important new strategic initiatives, which may have an adverse impact on our business and financial results.
There is no assurance that we will be able to
implement important strategic initiatives in accordance with our expectations, which may result in an adverse impact on our business
and financial results. For example, our KOL training program in Influencer Marketing may not be able to train trainees to become KOLs
or we may have to suspend our KOL Training Related Services as a result of suspension of programs by our partners.
Our management may lack required experience,
knowledge, insight, or human and capital resources to carry out the effective implementation to expand into new spaces outside of our
current focuses. As such, we may not be able to realize our expected growth, and our business and financial results will be adversely
impacted.
Increasing competition within our industries
could have an impact on our business prospects.
The digital marketing consulting business and
KOL training academy business are industries where new competitors can easily enter into since there are no significant barriers to entry.
Our operating subsidiaries also face many competitors in the marketing consulting industry where a number of competitors have been in
business longer than us. Competing companies may have significantly greater financial and other resources than we have and may offer
services that are more attractive to prospective clients; increased competition would have a negative impact on both our revenues and
our profit margins.
Our PRC subsidiary
may be required to obtain and maintain additional approvals, licenses or permits applicable to our business, which could have a material
adverse impact on our business, financial conditions and results of operations.
Our business is subject
to governmental supervision and regulation by the relevant PRC governmental authorities, including the Ministry of Commerce, or MOFCOM,
and other governmental authorities in charge of the relevant categories of services offered by us.
The laws and regulations
and government policy changes rapidly on digital training. For our digital training related services, we worked with Beida Jade Bird
Vocational Education (“Jade Bird”) which was an authorized licensee of China National Personal Talent Training Network (“CNPTTN”),
a PRC regulatory agency for the talent training. Jade Bird was in charge of its training courses, and the Company was authorised by Jade
Bird as its sole training related administrator of the training courses, limited to coordinate the digital training related services
to individual clients who were interested in conducting live-broadcasting business through social medias. The Company provided training
related services, to these individual clients who subscribed courses, in arranging the examination, following up certificate issuance
processes, addressing clients’ concerns, etc. On March 22, 2022, the PRC subsidiary learned that Jade Bird suspended its service
after receiving a notice from CNPTTN that until further notice CNPTTN has suspended all recruitment services using its CNPTTN’s
name. As a result of CNPTTN’s suspension, the PRC subsidiary has also suspended its digital training related services with Jade
Bird from March 22, 2022 until further notice. In the future, laws and regulations and the CNPTTN may require our PRC Subsidiary to meet
additional requirements or obtain additional approvals, licenses or permits to conduct KOL training related business. If our PRC Subsidiary
is unable to meet the relevant requirements or obtain the relevant approvals, licenses or permits, our PRC Subsidiary may not be able
to continue to conduct the KOL training related business. As of the date of this prospectus, there is no further notice from CNPTTN and
the service is still being suspended.
If our operating subsidiaries fail to hire,
train or retain qualified managerial and other employees, our business and results of operations could be materially and adversely affected.
We place substantial reliance on the digital
marketing consulting service industry experience and knowledge of our senior management team as well as their relationships with other
industry participants. The loss of the services of one or more members of our senior management could hinder our ability to effectively
manage our business and implement our growth strategies. Finding suitable replacements for our current senior management could be difficult,
and competition for such personnel of similar experience is intense. If we fail to retain our senior management, our business and results
of operations could be materially and adversely affected.
Our personnel are critical to maintaining the
quality and consistency of our services, brand and reputation. It is important for us to attract qualified managerial and other employees
who have experience in consulting services and are committed to our service approach. There may be a limited supply of such qualified
individuals. We must hire and train qualified managerial and other employees on a timely basis to keep pace with our rapid growth while
maintaining consistent quality of services across our operations. We must also provide continuous training to our managerial and other
employees so that they are equipped with up-to-date knowledge of various aspects of our operations and can meet our demand for high-quality
services. If we fail to do so, the quality of our services may decrease, which in turn, may cause a negative perception of our brand
and adversely affect our business.
Risks associated with doing business in
China
The recent state government interference
into business activities on U.S. listed Chinese companies may negatively impact our existing and future operations in China. The Chinese
government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly
and adversely impact the value of the Company’s common stock, including potentially causing the value of the Company’s common
stock decline or be worthless.
The Chinese 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. To the extent that the cash and assets in our business are in our PRC subsidiary and/or
Hong Kong subsidiary, the funds or assets may not be available to fund operations or for other use outside of the PRC and/or Hong Kong
due to intervention in or the imposition of restrictions and limitations on the ability of us or our subsidiaries by the Chinese government
to transfer cash or assets. Any such intervention in or influence on our business operations or action to exert more oversight and control
over the cash or assets of our subsidiaries, once taken by the Chinese government, could adversely affect our business, financial condition
and results of operations and the value of our stock, or 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.
The Chinese 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 the marketing consulting industry that could require
us to seek permission from Chinese authorities to continue to operate our business, which may adversely affect our business, financial
condition and results of operations. Furthermore, recent statements made by the Chinese government have indicated an intent to increase
the government’s oversight and control over offerings of companies with significant operations in China that are to be conducted
in foreign markets, as well as foreign investment in China-based issuers like us. Any such action, if taken by the Chinese government,
could significantly limit or completely hinder our ability to offer or continue to offer common stocks to our investors and could cause
the value of the Company’s common stock to significantly decline or become worthless.
Recently, the Chinese government announced that
it would step up supervision of Chinese companies listed offshore. Under the new measures, China will improve regulation of cross-border
data flows and security, crack down on illegal activity in the securities market and punish fraudulent securities issuance, market manipulation
and insider trading, China will also check sources of funding for securities investment and control leverage ratios. The Cyberspace Administration
of China (“CAC”) has also opened a cybersecurity probe into several U.S.-listed tech giants focusing on anti-monopoly, financial
technology regulation and more recently, with the passage of the Data Security Law, how companies collect, store, process and transfer
data.
Though the Company is a Nevada corporation, we
through our PRC subsidiary, are headquartered and have operations in China. We currently do not, and we do not plan to use variable interest
entities to execute our business plan or to conduct our China-based operations. However, because our operations are in China and our
major shareholders are located in China, there is always a risk that the Chinese government may in the future seek to intervene or influence
operations of any company with any level of operations in China, including its ability to offer securities to investors, list its securities
on a U.S. or other foreign exchange, conduct its business or accept foreign investment. In light of China’s recent announcements,
there are risks and uncertainties which we cannot foresee for the time being, and rules and regulations in China can change quickly with
little or no advance notice. The Chinese government may intervene or influence our PRC subsidiary’s current and future operations
in China at any time, or may exert more control over offerings conducted overseas and/or foreign investment in issuers likes ourselves.
If any or all of the foregoing were to occur,
this could lead to a material change in the Company’s operations and/or the value of its common stock and/or significantly limit
or completely hinder its ability to offer or continue to offer securities to investors and cause the value of such securities to significantly
decline or be worthless.
The CSRC has released for public consultation
the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet
gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign
investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer the
Company’s common stock to investors and could cause the value of the Company’s common stock to significantly decline or become
worthless.
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 (Draft for Comments)
(the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings
by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures,” collectively with the Draft Administrative Provisions,
the “Draft Rules Regarding Overseas Listing”), both of which have a comment period that expired on January 23, 2022. The
Draft Rules Regarding Overseas Listing lay out the filing regulation arrangement for both direct and indirect overseas listing, and clarify
the determination criteria for indirect overseas listing in overseas markets.
The Draft Rules Regarding Overseas Listing stipulate
that the Chinese-based companies, or the issuer, shall fulfill the filing procedures within three working days after the issuer makes
an application for an initial public offering and listing in an overseas market. The required filing materials for an initial public
offering and listing should include at least the following: record-filing report and related undertakings; regulatory opinions, record-filing,
approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); security assessment opinion
issued by relevant regulatory authorities (if applicable); PRC legal opinion; and prospectus.
In addition, an overseas offering and listing
is prohibited under any of the following circumstances: (1) if the intended securities offering and listing is specifically prohibited
by national laws and regulations and relevant provisions; (2) if the intended securities offering and listing may constitute a threat
to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with law;
(3) if there are material ownership disputes over the equity, major assets, and core technology, etc. of the issuer; (4) if, in the past
three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement,
misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under
judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if, in the
past three years, directors, supervisors, or senior executives have been subject to administrative punishments for severe violations,
or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations;
(6) other circumstances as prescribed by the State Council. The Administration Provisions defines the legal liabilities of breaches such
as failure in fulfilling filing obligations or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million,
and in cases of severe violations, a parallel order to suspend relevant business or halt operation for rectification, revoke relevant
business permits or operational license.
The Draft Rules Regarding Overseas Listing, if
enacted, may subject us to additional compliance requirements in the future, and we cannot assure you that we will be able to get the
clearance of filing procedures under the Draft Rules Regarding Overseas Listing on a timely basis, or at all. Any failure of us to fully
comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer the Company’s
common stock, cause significant disruption to our business operations, and severely damage our reputation, which would materially and
adversely affect our financial condition and results of operations and cause the Company’s common stock to significantly decline
in value or become worthless.
Uncertainties with respect to the PRC legal
system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China
could adversely affect us and limit the legal protections available to you and us.
Our PRC subsidiary is incorporated under and
governed by the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference,
but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing
economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation and trade. As a significant
part of our business is conducted in China, our operations are principally governed by PRC laws and regulations. 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, 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 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, our PRC subsidiary 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 these policies and rules until
sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including
intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our
operations.
Furthermore, if China adopts more stringent standards
with respect to environmental protection or corporate social responsibilities, we may incur increased compliance costs or become subject
to additional restrictions in our operations. 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. Moreover, any litigation
in China may be protracted and result in substantial costs and diversion of our 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 intervention
in or influence on our business operations or action to exert more oversight and control over securities offerings and other capital
markets activities, once taken by the PRC government, could adversely affect our business, financial condition and results of operations
and the value of our Stocks, or 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.
The PRC legal system is evolving, and the resulting uncertainties
could adversely affect us.
We conduct our business primarily through our
subsidiaries in China. Our operations in China are governed by PRC laws and regulations. The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
As the legislation in China and the PRC legal
system has continued to evolve rapidly over the past decades and the PRC government has made significant progress in promulgating laws
and regulations related to economic affairs and matters, for example, such laws and regulations have significantly enhanced the protections
afforded to various forms of foreign investments in China. However, many of these laws and regulations are relatively new and there is
a limited volume of published decisions and enactments. In particular, there exist substantial uncertainties surrounding the evolvement,
interpretation and enforcement of regulatory requirements of cybersecurity, data security, privacy protection as well as anti-monopoly,
and we may need to take certain corresponding measures to maintain our regulatory compliance, such as adjusting the relevant business
or transactions and introducing compliance experts and talents, which may incur additional related costs and adverse impact on our business.
As a result, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations
and rules involves uncertainties, which may limit legal protections available to us. Therefore, there are uncertainties involved in their
implementation and interpretation, and it may be difficult to evaluate the outcome of administrative and court proceedings and the level
of legal protection available to you and us. Such uncertainties, including uncertainty over the scope and effect of our contractual,
property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment
in China could materially and adversely affect our business and impede our ability to continue our operations.
A severe or prolonged downturn in the global
or Chinese economy could materially and adversely affect our business and our financial condition.
Although the Chinese economy has grown steadily
in the past decade, there is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted
by the People’s Bank of China and financial authorities of some of the world’s leading economies, including the United States
and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa, which have resulted in volatility
in oil and other markets. There have also been concerns on the relationship among China and other Asian countries, which may result in
or intensify potential conflicts in relation to territorial disputes. Economic conditions in China are sensitive to global economic conditions,
as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any
severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations
and financial condition.
We face risks
related to health epidemics such as the COVID-19 coronavirus outbreak originated in Wuhan city at the end of 2019, and other outbreaks,
which has significantly disrupted our operations and may continue to adversely affect our business, financial condition and results of
operations.
Our business has been
significantly disrupted and may continue to be materially and adversely affected by health epidemics such as the COVID-19 coronavirus
outbreak originated in Wuhan city at the end of 2019 and other outbreaks affecting the PRC. Our business operations depend on China’s
overall economy and demand for our services, which could be disrupted by health epidemics. As of April 2020, the outbreak in China has
been generally stabilized, however large-scale offline activities are not yet permitted by the government in some cities as of the date
of this prospectus. However, revenues from our consulting services are expected to increase due to our extra efforts in promoting our
marketing consulting business, as well as providing more live video streaming programs during the lock-down. A new Delta COVID-19 had
been found in certain cities in PRC in the second quarter of 2021, such coronavirus may cause another outbreak which increased the inherent
risk and disruption to businesses. Therefore, we suspended certain consulting services from April 2021 to August 2021 and realigned the
resources to focus on our KOL Training Related Services. We have resumed these consulting businesses from August 2021 in order to maintain
diversified services for our customers. We expect the aforementioned negative impact on our business to gradually mitigate in the coming
seasons when the outbreak becomes more stabilized in China and other regions in the world. However, there remains much uncertainty as
to what extent the impact could have on our long-term business outlook as a prolonged outbreak could significantly affect the Chinese
economy and decrease the demand for our services, which could lead to more disruptions to our operations and adversely affect our financial
condition and results of operations.
Changes in the policies of the PRC government
could have a significant impact upon our ability to operate profitably in the PRC.
Currently, substantially all of our businesses
are conducted in the PRC. Accordingly, economic, political and legal developments in the PRC will continue to significantly affect our
business, financial condition, results of operations and prospects. Policies of the PRC government can have significant effects on economic
conditions in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the PRC may be adversely
affected by changes in policies by the PRC government, including changes in laws, regulations or their interpretation that may affect
our ability to operate as currently contemplated.
Because our business is dependent upon
government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability
to operate profitably, if at all.
Although the PRC government has been pursuing
a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic
growth in the PRC. Because of the nature of our business, our PRC subsidiary is dependent upon the PRC government pursuing policies that
encourage private ownership of businesses. We cannot assure you that the PRC government will continue to pursue policies favoring a market-oriented
economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political
disruption, or other circumstances affecting political, economic and social life in the PRC.
Changes in China’s economic, political
or social conditions or government policies may have a material adverse effect on our business and operations.
Substantially all of our assets and operations
are located in China. Accordingly, our business, financial condition, results of operations and prospects have been and will be influenced
to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies
of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control
of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization
of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition,
the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese
government also exercises significant control over China’s economic growth through allocating resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant
growth over past three decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes
in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material
adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results,
lead to a reduction in demand for our products and adversely affect our competitive position. The Chinese government has implemented
various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese
economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected
by government control over capital investments or changes in tax regulations. 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 may cause decreased economic
activity in China, which may adversely affect our business and operating results.
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. Therefore our susceptibility to such laws is unknown.
In 1979, the PRC government began to promulgate
a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of legislation over the
past three decades has significantly enhanced the protections afforded to various forms of foreign investment in China. However, China
has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently cover all aspects
of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies. In particular,
because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and the nonbinding
nature of such decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how
to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent
and unpredictable. In addition, 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 which may have a retroactive effect. As a result, we may not be aware of our violation of
these policies and rules until after the occurrence of the violation.
Any administrative and court proceedings in China
may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court
authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to
evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal
systems. These uncertainties may impede our ability to enforce the contracts we have entered and could materially and adversely affect
our business, financial condition and results of operations.
Chinese law prohibits or restricts companies
belonging to foreign countries from operating some certain businesses.
According to Chinese law, some businesses are
not allowed to be operated by the companies whose ownership is not a Chinese company. We are a US company registered in Nevada. Each
company in our organization chart is a subsidiary. The legality and effectiveness of this control method are accorded with Chinese laws
and regulations. On December 27, 2020, China’s National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM)
issued the 2020 edition of the Catalogue of Encouraged Industries for Foreign Investment (“FI encouraged catalogue”). According
to the FI encouraged catalogue, Article 8, Section 425, foreign investment on the business of consulting services is encouraged, effective
on January 27, 2021. However, we are uncertain that the laws will remain to allow foreign owned Chinese companies to engage in consultancy
services business.
We may be subject to liability for placing
advertisements with content that is deemed inappropriate or misleading under PRC laws.
According to Chinese law, if any advertisement
issued by our PRC subsidiary infringes the rights and interests of a third party, our PRC subsidiary shall bear the liability for compensation,
which may cause us financial loss.
Our PRC subsidiary may be liable for improper
collection, use or appropriation of personal information provided by our customers.
Though our business involves only digital marketing
consulting, not an internet platform, but we may still have the opportunity in collecting and retaining large volumes of internal and
customer data, including personal information as our various information technology systems enter, process, summarize and report such
data. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection
of our customer, employee and company data is critical to our business. Our customers and employees expect that we will adequately protect
their personal information. Our PRC subsidiary is required by applicable laws to keep strictly confidential the personal information
that we collect, and to take adequate security measures to safeguard such information.
According to the applicable PRC laws and regulations
in relation to cybersecurity and data security, data processing includes, in a broad sense, among others, the collection or access, processing,
transmission and related data activities. Based on applicable PRC laws and regulations, there is no exact or clear definition of “data
processing”.
The PRC Criminal Law, as amended by its Amendment
7 (effective on February 28, 2009), and Amendment 9 (effective on November 1, 2015), Amendment 10 (effective on November 4, 2017) and
Amendment 11 (effective on March 1, 2021), prohibits institutions, companies and their employees from selling or otherwise illegally
disclosing a citizen’s personal information obtained during the course of performing duties or providing services or obtaining
such information through theft or other illegal ways. The Civil Code of the PRC (issued by the PRC National People’s Congress on
May 28, 2020 and effective from January 1, 2021) provides main legal basis for privacy and personal information infringement claims under
the Chinese civil laws. PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have
been increasingly focused on regulation in the areas of data security and data protection. The PRC regulatory requirements regarding
cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including the Cyberspace Administration of China,
the Ministry of Public Security and the SAMR, have enforced data privacy and protection laws and regulations with varying and evolving
standards and interpretations. The PRC governmental authorities have promulgated, among others, the Cyber Security Law of the PRC (《中华人民共和国网络安全法》),
Personal Information Protection Law of the People’s Republic of China(《中华人民共和国个人信息保护法》),
Data Security Law of the People’s Republic of China(《中华人民共和国数据安全法》)
and Measures for Cybersecurity Review (2021)(《网络安全审查办法(2021)》)
to ensure cyber security, data and personal information protection. Recently, the CAC had further proposed the Measures for the Security
Assessment for Cross-border Transfer of Data(《数据出境安全评估办法》)and
the Administration Regulations on Cyber Data Security (Draft for Comments) (《网络数据安全管理条例(征求意见稿)》)
(the “Draft Regulation”) for public comments, which provided guidance on the cross-border data transmission and potential
cybersecurity review scope.
We attach great importance to data security,
cyber security and personal information protection, and the evolvement of applicable PRC laws and regulations therewith, and we are in
compliance with laws and regulations with respect to data security, cyber security and personal information protection in all material
aspects. As of the date of this prospectus, our PRC subsidiary, the main operating entity of ours, has implemented comprehensive internal
policies and measures on protection of cyber security, data privacy and personal information to make sure its compliance with relevant
PRC laws and regulations. The main internal policies and measures are as follows: (i) for customer data processing, our PRC
subsidiary deploys the access control mechanism on the server side, adopts the principle of minimum authorization for the staff
who may contact end users’ personal data; (ii) our PRC subsidiary’s operating systems and database systems have password
complexity requirements; (iii) our PRC subsidiary has established Information Security Committee and appoints the CEO, Mr.
Tao Guolin to be the head of the committee; (iv) our PRC subsidiary has formulated a cybersecurity contingency plan and will
conduct training and safety drills every year in preparation for any emergency cybersecurity incidents; (v) our PRC subsidiary has
established data privacy policies to ensure that its collection of data is conducted in accordance with applicable laws and regulations
and that the collection is for legitimate purposes as set out in its agreements.
We are in compliance with PRC laws and regulations
with respect to data security in all material aspects, on the basis that: as of the date of this prospectus, (i) we have implemented
comprehensive internal policies and measures on protection of cyber security, data privacy and personal information as listed above;
(ii) there had been no material incident of data or personal information leakage, infringement of data protection and privacy laws and
regulations or investigation or other legal proceeding, pending or threatened against us initiated by competent government authorities
or third parties, that will materially and adversely affect our business; (iii) we have not received any investigation, notice, warning,
penalty or sanction from applicable government authorities (including the CAC) with regard to our business operations concerning any
issues related to cybersecurity and data security; (iv) we have not been involved in any suits, judicial review, enquiry, or other legal
proceedings initiated by applicable governmental authorities in relation to any violation of applicable regulations or policies that
have been issued by the CAC.
While we take various measures to comply with
all applicable data privacy and protection laws and regulations, there is no guarantee that our current security measures and those of
our third-party service providers may always be adequate for the protection of our customer, employee or company data; and like all companies,
we have experienced data incidents from time to time. In addition, given the size of our customer base and the types and volume of personal
data on our system, we may be a particularly attractive target for computer hackers, foreign governments or cyber terrorists. Unauthorized
access to our proprietary internal and customer data may be obtained through break-ins, sabotage, breach of our secure network by an
unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks
of our third-party service providers, or other misconduct. Because the techniques used by computer programmers who may attempt to penetrate
and sabotage our proprietary internal and customer data change frequently and may not be recognized until launched against a target,
we may be unable to anticipate these techniques. Unauthorized access to our proprietary internal and customer data may also be obtained
through inadequate use of security controls. Any of such incidents may harm our reputation and adversely affect our business and results
of operations. In addition, we may be subject to negative publicity about our security and privacy policies, systems, or measurements
from time to time.
Any failure to prevent or mitigate security breaches,
cyber-attacks or other unauthorized access to our systems or disclosure of our customers’ data, including their personal information,
could result in loss or misuse of such data, interruptions to our service system, diminished customer experience, loss of customer confidence
and trust, impairment of our technology infrastructure, and harm our reputation and business, resulting in significant legal and financial
exposure and potential lawsuits and could cause the value of such securities to significantly decline or be worthless. In addition, any
violation of the provisions and requirements under relevant laws and regulations with respect to cyber security, data security and personal
information protection may subject us to rectifications, warnings, fines, confiscation of illegal gains, suspension of the related business,
revocation of licenses, cancellation of qualifications being entered into the relevant credit record or even criminal liabilities.
In April 2020, the Chinese government promulgated
the Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators
of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may
affect national security. On December 28, 2021, the CAC published the Measures for Cybersecurity Review (2021), which became effective
on February 15, 2022 and replace the Measures for Cybersecurity Review promulgated on April 13, 2020. The Measures for Cyber Security
Review (2021) specifies that the procurement of network products and services by operator of critical information infrastructure and
the activities of data process carried out by Internet platform operator that raise or may raise “national security” concerns
are subject to strict cyber security review by Cybersecurity Review Office established by the CAC. Before critical information infrastructure
operator purchases internet products and services, it should assess the potential risk of national security that may be caused by the
use of such products and services. If such use of products and services may give raise to national security concerns, it should apply
for a cybersecurity review by the Cybersecurity Review Office and a report of analysis of the potential effect on national security shall
be submitted when the application is made. In addition, Internet platform operators that possess the personal data of over one million
users must apply for a review by the Cybersecurity Review Office, if they plan to list their companies in foreign countries. The CAC
may voluntarily conduct cyber security review if any network products and services and activities of data process affects or may affect
national security. It may take approximately 70 business days in maximum for the general cybersecurity review upon the delivery of their
applications, which may be subject to extensions for a special review.
On July 7, 2022, the CAC promulgated the Measures
for the Security Assessment for Cross-border Transfer of Data (the “Security Assessment measures”), which will come
into effect on September 1, 2022. The Security Assessment measures stipulates that data processors which provide data cross-border and
have one of the following circumstances, should apply the security assessment to the national network information department through
the provincial branches of network information department: (A) data processors to provide important data cross-border; (B) operators
of critical information infrastructure and data processors handling personal information of more than 1 million people to provide personal
information cross-border;(C) data processors which provide cross-border a cumulative total of 100,000 people’s personal information
or 10,000 people’s sensitive personal information since January 1 of the previous year; (D) other situations requiring application
for the security assessment regarding providing data cross-border as stipulated by the state Internet information department. As of the
date of this prospectus, the PRC subsidiary has not provided any important data or personal data to any offshore institutions or individuals,
so the PRC subsidiary do not need to apply for a security assessment at this stage. However, if we need to provide data to offshore institutions
or individuals in the future and fall into the situations which should apply for the security assessment, we might not pass the security
assessment.
As confirmed by our PRC legal counsel, we believe
that, at this stage, we are not subject to cybersecurity review with the CAC under the Measures for Cybersecurity Review (2021) which
became effective on February 15, 2022, on the basis that (i) our PRC subsidiary currently does not have over one million users’
personal information and does not anticipate that it will be collecting over one million users’ personal information in the foreseeable
future, which we understand might otherwise subject us to the Measures for Cybersecurity Review (2021); (ii) our PRC subsidiary’s
business operations do not involve any Critical Information Infrastructure, and neither we nor the PRC subsidiary has received any notification
from applicable PRC governmental authorities indicating that any of the PRC subsidiary’s products or services is determined as
the Critical Information Infrastructure; and (iii) neither we nor the PRC subsidiary has received any notification from applicable PRC
governmental authorities indicating that we or our PRC subsidiary shall file for a cybersecurity review.
We are also not subject to the network data security
review by the CAC if the Draft Regulation is enacted as proposed, since we currently do not have over one million users’ personal
information and do not collect data that affects or may affect national security and we do not anticipate that we will be collecting
over one million users’ personal information or data that affects or may affect national security in the foreseeable future, which
we understand might otherwise subject us to the Draft Regulation.
However, as there remains significant uncertainty
in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we cannot assure you that the PRC regulators
will reach the same conclusion as we and our PRC legal counsel. If in the future, the PRC regulators require us or our PRC subsidiary
to apply for a cybersecurity review, we cannot assure you that we are able to pass such review. In addition, we could become subject
to enhanced cybersecurity review or investigations launched by PRC regulators in the future. Any failure or delay in the completion of
the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties,
including suspension our business, website closure, removal of our app from the relevant app stores, and revocation of prerequisite licenses,
as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial
condition or results of operations and cause the value of such securities to significantly decline or be worthless.
As for the Draft Regulation issued by CAC recently,
as advised by the PRC legal counsel, since the relevant government authorities are still seeking comments on the Draft Regulation from
the public as of the date of this prospectus, the Draft Regulation (especially its operative provision) and its anticipated adoption
or effective date are subject to further changes with substantial uncertainty. We will continue to pay close attention to the legislative
and regulatory developments in data security and comply with the latest regulatory requirements.
Uncertainties exist with respect to the
enactment timetable, interpretation and implementation of the laws and regulations with respect to online platform business operation.
Our business is digital marketing consultation,
not an online platform. But since our PRC subsidiary assists our customers to applying customers’ apps to other app platform, we
may be subject to various internet-related laws and regulations. These internet-related laws and regulations are relatively new and evolving,
and their enactment timetable, interpretation and implementation involve significant uncertainties.
For example, On February 7, 2021, the State Administration
for Market Regulation, or the SAMR, promulgated Guidelines to Anti-Monopoly in the Field of Platform Economy, or the Anti-Monopoly Guidelines
for Platform Economy. The Anti-Monopoly Guidelines for Platform Economy provides operational standards and guidelines for identifying
certain internet platforms’ abuse of market dominant position which are prohibited to restrict unfair competition and safeguard
users’ interests, including without limitation, prohibiting personalized pricing using big data and analytics, selling products
below cost without reasonable causes, actions or arrangements seen as exclusivity arrangements, using technology means to block competitors’
interface, using bundle services to sell services or products. In addition, internet platforms’ compulsory collection of user data
may be viewed as abuse of dominant market position that may have the effect to eliminate or restrict competition. As of the date of this
prospectus, neither we nor our PRC subsidiary have been subject to any anti-monopoly investigation, penalty of litigation initiated by
government authorities or third parties. Furthermore, we will continue to attach attention to the updates of applicable PRC laws and
regulations in relation to antimonopoly.
On August 31, 2018, the Standing Committee of
the National People’s Congress promulgated the E-commerce Law, which came into effect on January 1, 2019. The E-commerce Law imposes
a series of requirements on e-commerce operators including e-commerce platform operators, merchants operating on the platform and the
individuals and entities carrying out business online. The governance measures our PRC subsidiary adopted in response to the enhanced
regulatory requirements may fail to meet these requirements and may lead to penalties or our loss of merchants to those platforms, or
to complaints or claims made against us by customers on our platforms.
In addition, we may be subject to complex and
evolving laws and regulations regarding privacy and data protection. For more details, please see “Risk Factors —
Risks Related to Our Business and Industry — Our PRC subsidiary may be liable for improper collection, use or appropriation of
personal information provided by our customers.”
Currently, these statements and regulatory actions
have had no impact on our daily business operation, the ability to accept foreign investments and list our securities on an U.S. or other
foreign exchange, and there are no new relevant laws or regulations in effect in the PRC explicitly require us to seek approval from
the China Securities Regulatory Commission for our registration. However, since these statements and regulatory actions are new, it is
highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations
or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new
laws and regulations will have on our daily business operation, the ability to accept foreign investments and list our securities on
an U.S. or other foreign exchange.
As there are uncertainties regarding the enactment
timetable, interpretation and implementation of the existing and future internet-related laws and regulations, we cannot assure you that
our business operations will comply with such regulations in all respects and we may be ordered to terminate certain of our business
operations that are deemed illegal by the regulatory authorities and become subject to fines and/or other sanctions which could materially
and adversely affect our business, financial condition, and results of operations.
The approval of the China Securities Regulatory
Commission or other PRC regulatory agencies may be required in connection with this registration under PRC law.
The Regulations on Mergers of Domestic Enterprises
by Foreign Investors, or the M&A Rules, purport to require offshore special purpose vehicles that are controlled by PRC companies
or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions
of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange.
The interpretation and application of the regulations remain unclear. If CSRC approval is required, it is uncertain how long it will
take for us to obtain such approval, and any failure to obtain or a delay in obtaining CSRC approval for this registration may subject
us to sanctions imposed by the CSRC and other PRC regulatory agencies.
As advised by our PRC legal counsel, based on
its understanding of the PRC Laws and our corporate structure up to the date of this Registration, it is of the opinion that we are not
required to apply for the CSRC approval prescribed under the M&A Rules in connection with the Registration. However, there remains
uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas registration which is identical
or similar to the Registration, and the opinions summarized above will be subject to any new PRC laws, rules and regulations or detailed
implementations and interpretations in any form relating to an overseas listing of SPVs like the Company. We cannot assure you that relevant
PRC government agencies, including the CSRC, would reach the same conclusion as our PRC legal counsel. If it is determined that CSRC
approval is required, or if we inadvertently conclude that such approval is not required when it is, we may face sanctions by the CSRC
or other PRC regulatory agencies for failure to obtain or delay in obtaining CSRC approval for the sale of securities. These sanctions
may include fines and penalties on our operations in China, limitations on our operating privileges in China, delays in or restrictions
on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of
dividends by our subsidiaries in China, or other actions that could have a material and adverse effect on our business financial condition,
results of operations, reputation and prospects, as well as the trading price of our securities. In addition, if the CSRC or other regulatory
agencies later promulgate new rules or explanations requiring that we obtain their approvals for sale of our securities, we may be unable
to obtain a waiver of such approval requirements.
Furthermore, on July 6, 2021, the General Office
of the Communist Party of China Central Committee and the General Office of the State Council jointly promulgated the Opinions on Strictly
Cracking Down on Illegal Securities Activities in Accordance with the Law, pursuant to which PRC regulators are required to accelerate
rulemaking related to overseas issuance and listing of securities, and improvement to the laws and regulations related to data security,
cross-border data flow, and management of confidential information. Numerous regulations, guidelines and other measures have been or
are expected to be adopted under the umbrella of or in addition to the Cybersecurity Law and Data Security Law, including (i) the draft
Measures for the Security Assessment for Cross-border Transfer of Personal Information published by the Cyberspace Administration of
China, or CAC, in 2019, which may, upon enactment, require security review before transferring personal information out of China, and
(ii) Measures for Cybersecurity Review (2021) which provides that, among others, an application for cyber security review shall be made
by an issuer who is a critical information infrastructure operator or a data processing operator as defined therein before such issuer’s
listing in a foreign country if the issuer possesses personal information of more than one million users, and that the relevant governmental
authorities in the PRC may initiate cybersecurity review if such governmental authorities determine an operator’s cyber products
or services, data processing or potential listing in a foreign country affect or may affect national security. As there are still uncertainties
regarding the interpretation and implementation of such regulatory guidance, we cannot assure you that we will be able to comply with
new regulatory requirements relating to our future overseas capital raising activities and our PRC subsidiary may become subject to more
stringent requirements with respect to matters including data privacy, and cross-border investigation and enforcement of legal claims.
Notwithstanding the foregoing, as of the date
of this prospectus, except as disclosed in the “Risk Factor” section - Risks relating to PRC laws and regulations with respect
to foreign exchange”, there are no PRC laws and regulations in force explicitly requiring that our PRC subsidiary obtaining any
permission from PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, sanction
or any regulatory objection to this registration from the CSRC, the CAC or any other PRC authorities that have jurisdiction over our
operations. Our PRC legal counsel has advised us that, based on the above and its understanding of the current PRC laws and regulations,
as of the date of this prospectus, we are not required to submit an application to the CSRC, the CAC for the approval of this registration.
However, our PRC legal counsel has further advised us there remains significant uncertainty as to the enactment, interpretation and implementation
of regulatory requirements related to overseas securities registration and other capital markets activities. If it is determined in the
future that CSRC, the CAC or other approval were required for this registration, our PRC subsidiary 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
registration 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 the Stocks. The CSRC, the CAC or other PRC regulatory agencies also may
take actions requiring us, or making it advisable for us, to halt this registration before settlement and delivery of the Stocks. 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 agencies later promulgate new rules requiring
that our PRC subsidiary obtaining their approvals for this registration, 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 our business and operating results.
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 any
other PRC governmental authorities.
Our PRC subsidiary may be subject to additional
contributions of social insurance and housing fund and late payments and fines imposed by relevant governmental authorities. Non-compliance
with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.
In accordance with the PRC Social Insurance Law
and the Regulations on the Administration of Housing Fund and other relevant laws and regulations, China establishes a social insurance
system and other employee benefits including basic pension insurance, basic medical insurance, work-related injury insurance, unemployment
insurance, maternity insurance, housing fund, and a handicapped employment security fund, or collectively the Employee Benefits. An employer
shall pay the Employee Benefits for its employees in accordance with the rates provided under relevant regulations and shall withhold
the social insurance and other Employee Benefits that should be assumed by the employees. For example, an employer that has not made
social insurance contributions at a rate and based on an amount prescribed by the law, or at all, may be ordered to rectify the non-compliance
and pay the required contributions within a stipulated deadline and be subject to a late fee of up to 0.05% or 0.2% per day, as the case
may be. If the employer still fails to rectify the failure to make social insurance contributions within the stipulated deadline, it
may be subject to a fine ranging from one to three times of the amount overdue.
As the interpretation and implementation of labor-related
laws and regulations are still evolving, we cannot assure you that our employment practice does not and will not violate labor-related
laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated
relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial
condition and results of operations could be materially and adversely affected.
Our PRC subsidiary failed to deposit adequate
contributions to the housing fund for all of its employees and may be reported by its employees to the People’s court for enforcement.
Our PRC subsidiary failed to deposit adequate
contributions to the housing funds for all of its employees, but has not received any notice of warning or been subject to penalties
or other disciplinary action from the relevant governmental authorities for non-compliance on labor-related laws and regulations. As
a remediation, our PRC subsidiary started to deposit the adequate contributions to the housing funds from July 2021 onwards. Before July
2021, our PRC subsidiary failed to deposit adequate contributions of housing provident fund for all employees in accordance with Article
15 of the regulations on the administration of housing provident fund. As of the date of this prospectus, our PRC subsidiary did not
receive any warning and punishment notice from the authority. As advised by the PRC legal counsel, according to Article 38 of the Regulations
on the Administration of Housing Provident Funds, if an employer fails to make the housing provident fund contributions on time or at
a rate and based on an amount prescribed by the law, or at all, may be ordered by the housing provident fund management center to rectify
the non-compliance and pay the required contributions within a stipulated deadline. If the employer still fails to rectify the failure
to make housing provident fund contributions within the stipulated deadline, the housing provident fund management center may apply to
the people’s court for enforcement. The maximum amount that the housing provident fund management center may apply for enforcement
could be the total accumulated amount of the company’s unpaid housing fund.
PRC laws and regulations governing our
current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to
operate profitably.
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 may involve substantial uncertainty.
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.
Because our business is conducted in RMB
and the price of the Company’s common stock is quoted in United States dollars, changes in currency conversion rates may affect
the value of the Company.
Our business is conducted in the PRC, our books
and records are maintained in RMB, which is the lawful currency of the PRC, and the financial statements that we file with the SEC and
provide to our shareholders are presented in United States dollar. Changes in the exchange rate between the RMB and United States dollar
affect the value of our assets and the results of our operations in United States dollar. The value of the RMB against the United States
dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions
and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely
affect our cash flows, revenue and financial condition.
Under the PRC Enterprise Income Tax Law,
or the EIT Law, our PRC subsidiary may be classified as a “resident enterprise” of China, which could result in unfavorable
tax consequences to us and our non-PRC shareholders.
The EIT Law and its implementing rules provide
that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident
enterprises” under PRC tax laws. The implementing rules promulgated under the EIT Law define the term “de facto management
bodies” as a management body which substantially manages, or has control over the business, personnel, finance and assets of an
enterprise. In April 2009, the State Administration of Taxation, or SAT, issued the Circular on Issues Concerning the Identification
of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational
Management, known as SAT Circular 82, which has been revised by the Decision of the State Administration of Taxation on Issuing the Lists
of Invalid and Abolished Tax Departmental Rules and Taxation Normative Documents on December 29, 2017 and by the Decision of the State
Council on Cancellation and Delegation of a Batch of Administrative Examination and Approval Items on November 8, 2013. Circular 82 has
provided certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled enterprise
that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises
or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the
SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident
status of all offshore enterprises. According to SAT Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded
as a PRC tax resident by virtue of having a “de facto management body” in China and will be subject to PRC enterprise income
tax on its worldwide income only if all of the following criteria are met: (i) the places where senior management and senior management
departments that are responsible for daily production, operation and management of the enterprise perform their duties are mainly located
within the territory of China; (ii) financial decisions (such as money borrowing, lending, financing and financial risk management) and
personnel decisions (such as appointment, dismissal, salary and wages) are made or need to be made by organizations or persons located
within the territory of China; (iii) main property, accounting books, corporate seal, the board of directors and files of the minutes
of shareholders’ meetings of the enterprise are located or preserved within the territory of China; and (iv) one half (or more)
of the directors or senior management staff having the right to vote habitually reside within the territory of China.
If our PRC subsidiary is deemed as a PRC “resident
enterprise” by PRC tax authorities, we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate
of 25%, although dividends distributed to us from our existing PRC subsidiary and any other PRC subsidiaries which our PRC subsidiary
may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient”
status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income.
Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition,
if we were considered a PRC “resident enterprise”, any dividends our PRC subsidiary pays to our non-PRC investors, and the
gains realized from the transfer of the Company’s common stock may be considered income derived from sources within the PRC and
be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject
to the provisions of any applicable tax treaty). It is unclear whether holders of the Company’s common stock would be able to claim
the benefits of any tax treaties between their country of tax residence and the PRC in the event that our PRC subsidiary is treated as
a PRC resident enterprise. This could have a material and adverse effect on the value of the price of the Company’s common stock.
There are significant uncertainties under
the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore
subsidiaries may not qualify to enjoy certain treaty benefits.
Under the EIT Law and its implementation rules,
the profits of a foreign invested enterprise generated through operations, which are distributed to its immediate holding company outside
the PRC, will be subject to a withholding tax rate of 10%. Pursuant to the Arrangement between the Mainland China and the Hong
Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement,
a withholding tax rate of 10% may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least
12 consecutive months prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other
conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws.
However, based on the Circular on Certain
Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81, which became effective on
February 20, 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income
tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.
According to Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which became effective
as of April 1, 2018, when determining an applicant’s status as the “beneficial owner” regarding tax treatments in connection
with dividends, interests, or royalties in the tax treaties, several factors will be taken into account. Such factors include whether
the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the
tax treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low rate. This circular further
requires any applicant who intends to be proved of being the “beneficial owner” to file relevant documents with the relevant
tax authorities. Our PRC subsidiary is wholly owned by our Hong Kong subsidiary. However, we cannot assure you that our determination
regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority or we will
be able to complete the necessary filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under
the Double Tax Avoidance Arrangement with respect to dividends to be paid by our PRC subsidiary to our HK subsidiary, in which case,
we would be subject to the higher withdrawing tax rate of 10% on dividends received.
PRC regulation of loans to and direct investment
in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans
or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability
to fund and expand our business.
We are an offshore holding company conducting
our operations in China through our PRC subsidiary. We may make loans to our PRC subsidiary, or we may make additional capital contributions
to our PRC subsidiary. Any capital contributions or loans that we, as an offshore entity, make to our PRC subsidiary, are subject to
PRC regulations. For example, loans to our PRC subsidiary cannot exceed statutory limits and are subject to foreign exchange loan registrations.
Our capital contributions to our PRC subsidiary must be registered with the MOFCOM or its local counterpart.
In light of the various requirements imposed
by of PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will
be able to complete the necessary government registrations or obtain the necessary government approvals or filings on a timely basis,
if at all, with respect to future loans by us to our PRC subsidiary or with respect to future capital contributions by us to our PRC
subsidiary. If we fail to complete such registrations or obtain such approvals on a timely basis or at all, our ability to capitalize
or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability
to fund and expand our business.
Government control in currency conversion
may adversely affect our financial condition, our ability to remit dividends, and the value of your investment.
The PRC government imposes controls on the convertibility
of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all
of our revenues in Renminbi. Under our current corporate structure, our holding companies may rely on dividend payments from our PRC
subsidiaries to fund any cash and financing requirements we may have.
Under existing PRC foreign exchange regulations,
Renminbi cannot be freely converted into any foreign currency, and conversion and remittance of foreign currencies are subject to PRC
foreign exchange regulations. It cannot be guaranteed that under a certain exchange rate, we will have sufficient foreign exchange to
meet our foreign exchange requirements. Under the current PRC foreign exchange control system, foreign exchange transactions under the
current account conducted by us, including the payment of dividends, do not require advance approval from SAFE, but we are required to
present documentary evidence of such transactions and conduct such transactions at designated foreign exchange banks within China that
have the licenses to carry out foreign exchange business. Foreign exchange transactions under the capital account conducted by us, however,
must be approved in advance by SAFE.
Under existing foreign exchange regulations,
we will be able to pay dividends in foreign currencies without prior approval from SAFE by complying with certain procedural requirements.
However, we cannot assure you that these foreign exchange policies regarding payment of dividends in foreign currencies will continue
in the future.
In fact, in light of the flood of capital outflows
of China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies and stepped
up scrutiny of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting process
are put in place by SAFE to regulate cross-border transactions falling under the capital account. If any of our shareholders regulated
by such policies fails to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be
subject to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future
to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient
foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders,
including holders of the Company’s common stock. Our capital expenditure plans and our business, operating results and financial
condition may be materially and adversely affected.
If we become directly subject to the scrutiny,
criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate
and resolve the matter which could harm our business operations, stock price and reputation.
U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial
commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial
and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance
policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative
publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become
virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal
and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity
will have on us, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations
are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company.
This situation will be costly and time consuming and distract our management from growing our business. If such allegations are not proven
to be groundless, we and our business operations will be severely affected.
The disclosures in the Company’s
reports and other filings with the SEC and the Company’s other public pronouncements are not subject to the scrutiny of any regulatory
bodies in the PRC.
The Company is regulated by the SEC and our reports
and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the
Securities Act and the Exchange Act. The Company’s SEC reports and other disclosures and public pronouncements are not subject
to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in the Company’s SEC reports and other filings
are not subject to the review by the China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the
capital markets in China. Accordingly, reader should review the Company’s SEC reports, filings and our other public pronouncements
with the understanding that no local regulator has done any review of the Company, its SEC reports, other filings or any of our other
public pronouncements.
Risks relating to PRC laws and regulations
with respect to foreign exchange
The Regulation on Foreign Exchange Administration
of the People’s Republic of China (the “Regulation on Foreign Exchange Administration”) was promulgated by the
State Council of the PRC and came into effect on August 5, 2008. According to Regulation on Foreign Exchange Administration, a PRC individual
that makes direct investment or trades negotiable securities or derivative products overseas shall handle the registration formalities
at the foreign exchange administrative department of the State Council. If the relevant provisions require such individual to obtain
a pre-approval from or complete a filing with the competent department, he or she shall do so before handling the registration formalities.
Where any evasion of foreign exchange control is committed, such as transferring foreign exchange within the territory of the PRC to
the overseas in violation of PRC laws and regulations or transferring capital within the territory of the PRC to the overseas by fraudulent
means, competent foreign exchange administrative authority shall order the return of the foreign exchange within a prescribed time limit,
and impose a fine of no more than 30% of the amount of foreign exchange evading government control; or if the circumstances are serious,
impose a fine of no more than 100% but no less than 30% of the amount of foreign exchange evading government control; and if the activity
constitutes a crime, the violator shall be subject to criminal liabilities according to relevant laws and regulations. In addition, where
any individual, in violation of the foreign exchange provisions, changes the designated use of foreign exchange, the foreign exchange
administrative authority shall order such individual to correct such illegal act, confiscate the illegal proceeds and impose a fine of
no more than 30% of the amount of violation; or if the circumstances are serious, it may impose a fine of no more than 100% but no less
than 30% of the amount of violation.
In July 2014, SAFE promulgated the Circular on
Issues Concerning Foreign Exchange Administration Over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents
Via Special Purpose Vehicles, or Circular 37, which replaced Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’
Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or Circular 75. Circular 37 requires PRC residents
to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, referred
to in Circular 37 as a “special purpose vehicle” for the purpose of holding domestic or offshore assets or interests. Circular
37 further requires amendment to a PRC resident’s registration in the event of any significant changes with respect to the special
purpose vehicle, such as an increase or decrease in the capital contributed by PRC individuals, share transfer or exchange, merger, division
or other material event. Under these regulations, PRC residents’ failure to comply with specified registration procedures may result
in restrictions being imposed on the foreign exchange activities of the relevant PRC entity, including the payment of dividends and other
distributions to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRC entity, including
restrictions on its ability to contribute additional capital to its PRC subsidiaries. Further, failure to comply with the SAFE registration
requirements could result in penalties under PRC law for evasion of foreign exchange regulations.
Guolin Tao and Ying Sun, each, a “Beneficial
Owner,” and together, the “Beneficial Owners”, who are our major beneficial owners and are PRC individuals and PRC
residents, have not completed the relevant foreign exchange registrations as required by PRC laws and regulations. We have also requested
our shareholders who are PRC individuals or PRC residents to make the necessary applications, filings, and amendments as required under
PRC laws and regulations. However, there is uncertainty concerning under what circumstances residents of other countries and regions
can be classified as a PRC resident. The PRC government authorities may interpret our beneficial owners’ status differently or
their status may change in the future. Moreover, we may not be fully informed of the identities of our beneficial owners and we cannot
assure you that all of our PRC individual or PRC resident beneficial owners will comply with PRC laws and regulations with respect to
foreign exchange.
Although the current PRC laws and regulations
mainly provide for corresponding penalties for PRC individual who is actually in violation of the PRC laws and regulations, we cannot
exclude the possibility that any failure of our beneficial owners who are PRC individuals or PRC residents to make any required registrations
may subject us to fines and legal sanctions, and prevent us from being able to make distributions or pay dividends, as a result of which
our business operations and our ability to distribute profits to you could be materially adversely affected.
Increases in labor costs in the PRC may
adversely affect our business and our profitability.
China’s economy has experienced increases
in labor costs in recent years, which is expected to continue to grow. The average wage level for our employees will also need to be
increased in order to keep them. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless
we are able to pass on these increased labor costs to our customers by increasing prices for our products or services, our profitability
and results of operations may be materially and adversely affected.
In addition, our PRC subsidiary has been subject
to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee
benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing
insurance to designated government agencies for the benefits of our employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract
Law, that became effective in January 2008 and its implementing rules that became effective in September 2008 and its amendments that
became effective in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying
remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. In the event that our
PRC subsidiary decides to terminate some of our employees or otherwise change our employment or labor practices, the Labor Contract Law
and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely
affect our business and results of operations.
As the interpretation and implementation of labor-related
laws and regulations are still evolving, we cannot assure that our employment practice does not and will not violate labor-related laws
and regulations in China, which may subject us to labor disputes or government investigations. If our PRC subsidiary is deemed to have
violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business,
financial condition and results of operations could be materially and adversely affected.
We may be involved from time to time in
legal proceedings and commercial or contractual disputes, which could have a material adverse effect on our business, results of operations
and financial condition.
From time to time, we may be involved in legal
proceedings and commercial disputes. Such proceedings or disputes are typically claims that arise in the ordinary course of business,
including, without limitation, commercial or contractual disputes, and other disputes with customers and suppliers, intellectual property
matters, tax matters and employment matters. There can be no assurance that such proceedings and claims, should they arise, will not
have a material adverse effect on our business, results of operations and financial condition.
The directors and executive officers of
the subsidiaries, as well as our employees who execute other strategic initiatives may have potential conflicts of interests with the
Company.
If any of the directors and executive officers
of the Company’s subsidiaries, as well as our employees who execute other strategic initiatives, have a conflict of interests with
the Company, they may bring an opportunity elsewhere. Thereby, we would lose out on the business.
Under PRC law, legal documents for corporate
transactions, including agreements and contracts are executed using the chop or seal of the signing entity or with the signature of a
legal representative whose designation is registered and filed with relevant PRC industry and commerce authorities.
To ensure the use of our seals and seals, our
PRC subsidiary has established internal control procedures and rules for the use of these seals and seals. If a seal and seal are to
be used, the responsible person will submit an application through our office automation system, and the application will be verified
and approved by an authorized employee in accordance with our internal control procedures and rules. In addition, in order to maintain
the physical security of the seals, we usually store them in a secure location that only authorized employees can access. Although we
monitor these authorized employees, these procedures may not be sufficient to prevent all abuse or negligence. Our employees are at risk
of abuse of authority. For example, any employee who acquires, abuses or misappropriates our seals and seals or other controlling intangible
assets for any reason, we may suffer from disruption of normal business operations, and we may have to take a company or legal action,
this can cost a lot of time and money.
Future inflation in China may inhibit our
ability to conduct business in China.
In recent years, the Chinese economy has experienced
periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been
significant. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed
to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government
to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm
the market for our products and our company.
Claims against the Company or its management
may be hard to initiate and to enforce. Even if successful, claims against the Company or its management may be nearly impossible to
collect upon.
While the Company’s service of process
provider, National Registered Agent, Inc., is located at 701 Carson Street, Suite 200, Carson City, NV 89701, USA, there is no guarantee
that service of process can be successfully completed against the Company’s operating subsidiaries or its management, as they are
based in China. Even with successful service of process to National Registered Agent, you may be unable to enforce a court judgment against
the Company’s operating subsidiaries or its management, as they have no property in the United States, to which such judgment could
be attached.
You may face difficulties in effecting
service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in this registration
statement based on foreign laws.
We, through our PRC subsidiary, conduct our business
in China, and our assets are located in China. In addition, all of our senior executive officers are PRC nationals and they have lived
in China for a significant portion of time. As a result, it may be difficult or impossible for you to bring an action against us or against
our management named in this registration statement in the United States in the event that you believe that your rights have been infringed
under the U.S. federal securities laws or otherwise as it may be difficult for our shareholders to effect service of process upon us
or those persons inside China. Furthermore, China 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 China 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. Even if you are successful in bringing an action of this kind, the laws of China may render you unable to enforce
a judgment against our assets or the assets of our directors and officers.
Furthermore, as a matter of law or practicality,
it is generally difficult to pursue shareholder claims including securities law class actions and fraud claims in China, which are contrarily
common in the United States. For example, you may experience significant legal and practical obstacles to obtaining necessary information
for shareholder investigations or litigations outside China or with respect to foreign entities. Although the local authorities in China
may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement
cross-border supervision and administration, so far no such cooperation has been established with the United States securities regulatory
authorities. In addition, Article 177 of the PRC Securities Law which became effective in March 2020 promulgated that no overseas securities
regulator is allowed to conduct investigation or evidence collection activities directly in the PRC. Therefore, without approval from
the competent PRC securities regulators and relevant authorities, no organization or individual may provide documents and materials relating
to the securities activities to overseas entities. While detailed interpretation of or implementation rules under Article 177 has yet
to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities
within China may further increase the difficulties you face in protecting your interests.
Restrictions on currency exchange under
PRC laws may limit our ability to convert cash derived from our operating activities into foreign currencies and may materially and adversely
affect the value of the Company’s common stock.
The PRC government imposes controls on the convertibility
of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We, through our PRC subsidiary, receive
our revenue in Renminbi. Under our current corporate structure, our income is primarily derived from dividend payments from Entrepreneurship
World Consultants, the EWC WFOE. Shortages in the availability of foreign currency may restrict the ability of EWC WFOE to remit sufficient
foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations, if any.
Under existing PRC foreign exchange regulations, conversion of Renminbi is permitted, without prior approval from the SAFE, for current
account transactions, including profit distributions, interest payments and expenditures from trade-related transactions, as long as
certain procedural requirements are complied with. However, any existing and future restrictions on currency exchange in China may limit
our ability to convert cash derived from our operating activities into foreign currencies to fund expenditures denominated in foreign
currencies. If the foreign exchange restrictions in China prevent us from obtaining U.S. dollars or other foreign currencies as required,
our PRC subsidiary may not be able to pay dividends in U.S. dollars or other foreign currencies to our Shareholders.
The audit report included in this prospectus
is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and as such, the Company’s investors
are deprived of the benefits of such inspection. The Company could be delisted if it is unable to timely meet the PCAOB inspection
requirements established by the Holding Foreign Companies Accountable Act.
As a public company with securities quoted on
the OTC Pink Sheets, the Company will be required to have our financial statements audited by an independent registered public accounting
firm registered with the PCAOB. A requirement of being registered with the PCAOB is that if requested by the SEC or PCAOB, such accounting
firm is required to make its audits and related audit work papers be subject to regular inspections to assess its compliance with the
applicable professional standards. Since the Company’s auditor is located in Hong Kong and China, a jurisdiction where the PCAOB
has been unable to conduct inspections without the approval of the Chinese authorities due to various state secrecy laws and the revised
Securities Law, the PCAOB currently does not have free access to inspect the work of the Company’s auditor. This lack of access
to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the Company’s
auditor based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit
procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections.
On December 18, 2020, the Holding Foreign Companies
Accountable Act, or HFCAA, was enacted. In essence, the act requires the SEC to prohibit securities of any foreign companies from being
listed on U.S. securities exchanges or traded “over-the-counter” if a company retains a foreign accounting firm that cannot
be inspected by the PCAOB for two consecutive years, beginning in 2021. The Company’s independent registered public accounting
firm is located in and organized under the laws of Hong Kong and China, a jurisdiction where the PCAOB is currently unable to conduct
inspections without the approval of the Chinese authorities, and therefore the Company’s auditors are not currently inspected by
the PCAOB.
On March 24, 2021, the SEC adopted interim final
amendments, which will become effective 30 days after publication in the Federal Register, relating to the implementation of certain
disclosure and documentation requirements of the HFCAA (as amended by the Consolidated Appropriation Act, 2023). The interim final amendments
will apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public
accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely
because of a position taken by an authority in that jurisdiction. Before any registrant will be required to comply with the interim final
amendments, the SEC must implement a process for identifying such registrants. As of the date of this prospectus, the SEC is seeking
public comment on this identification process. Consistent with the HFCAA (as amended by the Consolidated Appropriation Act, 2023), the
amendments will require any identified registrant to submit documentation to the SEC establishing that the registrant is not owned or
controlled by a government entity in that jurisdiction, and will also require, among other things, disclosure in the registrant’s
annual report regarding the audit arrangements of, and government influence on, such registrant.
On June 22, 2021, the U.S. Senate passed the
Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which has been enacted under the Consolidated Appropriations
Act, 2023, on December 29, 2022, as further described below.
On November 5, 2021, the SEC approved PCAOB Rule
6100, Board Determination Under the Holding Foreign Companies Accountability Act, effective immediately. The rule establishes “a
framework for the PCAOB’s determinations under the HFCAA (as amended by the Consolidated Appropriation Act, 2023) that the PCAOB
is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position
taken by an authority in that jurisdiction.”
On December 2, 2021, SEC has announced the adoption
of amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants
the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located
in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (Commission-Identified Issuers). The final amendments
require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by
a governmental entity in the public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified
Issuer that is a “foreign issuer,” as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual
report for itself and any of its consolidated foreign operating entities. Further, the adopting release provides notice regarding the
procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified
Issuers, as required by the HFCAA (as amended by the Consolidated Appropriation Act, 2023). The SEC will identify Commission-Identified
Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will be required to comply with the submission
and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified
Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission
or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022.
On December 16, 2021,
Public Company Accounting Oversight Board (PCAOB) issued a report on its determinations that PCAOB is unable to inspect or investigate
completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region
of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The PCAOB made these
determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the Holding
Foreign Companies Accountable Act (HFCAA). The report further listed in its Appendix A and Appendix B, Registered Public Accounting Firms
Subject to the Mainland China Determination and Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively.
The audit report included in this registration statement for the year ended December 31, 2021 and 2020 was issued by Centurion ZD CPA
& Co. (“CZD CPA”), an audit firm headquartered in Hong Kong, a jurisdiction that the PCAOB has determined that the PCAOB
is unable to conduct inspections or investigate auditors. CZD CPA is among those listed by the PCAOB Hong Kong Determination, a determination
announced by the PCAOB on December 16, 2021 that the PCAOB is unable to inspect or investigate completely registered public accounting
firms headquartered in Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more
authorities in Hong Kong. The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality
control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections.
The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these
accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the
PCAOB inspections. In addition, under the HFCAA (as amended by the Consolidated Appropriation Act, 2023), our securities may be prohibited
from trading on the U.S. stock exchanges or in the over the counter trading market in the U.S. if our auditor is not inspected by the
PCAOB for two consecutive years, and this ultimately could result in the Company’s common stock being delisted. On June 22, 2021,
the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which was enacted under the
Consolidated Appropriations Act, 2023, as further described below.
On April 22, 2022, the
SEC provisionally identified EUBG as a company that has retained a registered public accounting firm to issue an audit report where
that registered public accounting firm has a branch or office that (i) is located in a foreign jurisdiction and (ii) the PCAOB
is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction under the HFCAA (a “Commission-Identified
Issuer”). On May 12, 2022, that provisional identification became conclusive and we are now subject to the requirements under the
HFCAA, including the prohibition on the trading of such issuer’s securities on a national securities exchange or through any other
method is within the SEC’s jurisdiction to regulate, including “over-the-counter” trading. This identification of EUBG
as a Commission-Identified Issuer does not mean that we will be immediately prohibited from trading our securities on the OTC Pink Sheets.
However, we may be prohibited from trading our securities, including trading in the “over-the-counter” market, if we continue
to be unavailable for PCAOB inspection or investigation for two consecutive years under the HFCAA as amended by the Consolidated Appropriations
Act, 2023. In addition, after the first year of identification, we will be subject to new submission and disclosure requirements in our
subsequent annual reports.
On December 29, 2022,
the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA (i) to reduce the number of consecutive years
that would trigger delisting from three years to two years, and (ii) so that any foreign jurisdiction could be the reason why the PCAOB
does not to have complete access to inspect or investigate a company’s auditors. As it was originally enacted, the HFCAA applied
only if the PCAOB’s inability to inspect or investigate because of a position taken by an authority in the foreign jurisdiction
where the relevant public accounting firm is located. As a result of the Consolidated Appropriations Act, 2023, the HFCAA now also applies
if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any
foreign jurisdiction. The denying jurisdiction does not need to be where the accounting firm is located.
On September 7, 2022,
the Company dismissed CZD CPA and appointed Prager Metis CPAs, LLC (“PragerMetis”) as the Company’s independent auditor
for the fiscal year end December 31, 2022. Our current auditors, PragerMetis, is located at Hackensack, New Jersey, and has been inspected
by the PCAOB.
Risks Related to the Market for the Company’s Common Stock
Our CEO owns a significant percentage of
the Company’s common stock and will be able to exert significant control over matters subject to shareholder approval.
Our CEO and majority shareholder, Mr. Guolin
Tao, has beneficial ownership of 1,030,916,276 shares of common stock of the Company. These shares represent ownership of approximately
60.60% of the Company’s common stock as of July 12, 2022. Mr. Guolin Tao may be able to determine all matters requiring shareholder
approval. For example, Mr. Guolin Tao may be able to control elections of directors, amendments of our organizational documents, or approval
of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited transaction proposals
or offers for the Company’s common stock that you may believe are in your best interest as one of our shareholders.
Since the Company’s common stock
is traded on the OTC Pink Sheets, an active, liquid trading market for the Company’s common stock may not develop or be sustained.
If and when an active market develops the price of the Company’s common stock may be volatile.
Presently, the Company’s common stock is
traded on the Over-The-Counter (“OTC”) Pink Sheets. Presently there is limited trading in the Company’s stock and in
the absence of an active trading market investors may have difficulty buying and selling or obtaining market quotations, market visibility
for shares of the Company’s common stock may be limited, and a lack of visibility for shares of the Company’s common stock
may have a depressive effect on the market price for shares of its common stock.
The lack of an active market impairs your ability
to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also
reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations
by selling shares.
Trading in stocks quoted on the OTC Pink Sheets
is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations
or business prospects. The securities market has from time to time experienced significant price and volume fluctuations that are not
related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the
market price of shares of the Company’s common stock. Moreover, the OTC Pink Sheets is not a stock exchange, and trading of securities
is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a national stock exchange like the
NYSE. Accordingly, stockholders may have difficulty reselling any shares of common stock.
The Company’s Board of Directors
may authorize and issue shares of new classes of stock that could be superior to or adversely affect you as a holder of the Company’s
common stock
The Company’s board of directors has the
power to authorize and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences,
limitations and special rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights
without further shareholder approval which could adversely affect the rights of the holders of the Company’s common stock. In addition,
the Company’s board could authorize the issuance of a series of preferred stock that has greater voting power than the Company’s
common stock or that is convertible into the Company’s common stock, which could decrease the relative voting power of the Company’s
common stock or result in dilution to the Company’s existing common stockholders.
Any of these actions could significantly adversely
affect the investment made by holders of the Company’s common stock. Holders of common stock could potentially not receive dividends
that they might otherwise have received. In addition, holders of the Company’s common stock could receive less proceeds in connection
with any future sale of the Company, whether in liquidation or on any other basis.
There is a limited public market for the Company’s common
stock.
There is currently a limited public market for
the common stock. Holders of the Company’s common stock may, therefore, have difficulty selling their common stock, should they
decide to do so. In addition, there can be no assurances that such markets will continue or that any shares of common stock will be able
to be sold without incurring a loss. Any such market price of the common stock may not necessarily bear any relationship to our book
value, assets, past operating results, financial condition or any other established criteria of value, and may not be indicative of the
market price for the common stock in the future. Further, the market price for the common stock may be volatile depending on a number
of factors, including business performance, industry dynamics, news announcements or changes in general.
We may, in the future, issue additional
common shares, which would reduce investors’ percent of ownership and may dilute the Company’s share
value.
The Company’s Articles of Incorporation
authorizes the issuance of 1,800,000,000 shares of common stock. As of date of this prospectus, we have 1,701,181,423 shares of common
stock issued and outstanding. The future issuance of common stock will result in substantial dilution in the percentage of the Company’s
common stock held by the Company’s then existing shareholders. We may value any common stock issued in the future on an arbitrary
basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the
value of the shares held by the Company’s investors and might have an adverse effect on any trading market for the Company’s
common stock.
There is a limited market for the Company’s
common stock, which may make it difficult for holders of the Company’s common stock to sell their stock.
The Company’s common stock currently trades
on the OTC Pink Sheets under the symbol “EUBG” and currently there is minimal trading in the Company’s common stock.
There can be no assurance as to the liquidity of any markets that may develop for the Company’s common stock, the ability of holders
of the Company’s common stock to sell the Company’s common stock, or the prices at which holders may be able to sell the
Company’s common stock. Further, many brokerage firms will not process transactions involving low price stocks, especially those
that come within the definition of a “penny stock.” If we cease to be quoted, holders of the Company’s common stock
may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of the Company’s common stock,
and the market value of the Company’s common stock would likely decline.
The trading price of the Company’s
common stock is likely to be volatile, which could result in substantial losses to investors.
The trading price of the Company’s common
stock is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market
and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located
outside of the United States. In addition to market and industry factors, the price and trading volume for the Company’s common
stock may be highly volatile for factors specific to our own operations, including the following:
|
● |
variations
in our revenues, earnings and cash flow; |
|
● |
announcements
of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; |
|
● |
announcements
of new offerings, solutions and expansions by us or our competitors; |
|
● |
changes
in financial estimates by securities analysts; |
|
● |
detrimental
adverse publicity about us, our brand, our services or our industry; |
|
● |
additions
or departures of key personnel; |
|
● |
sales
of additional equity securities; and |
|
● |
potential
litigation or regulatory investigations. |
Any of these factors may result in large and
sudden changes in the volume and price at which the Company’s common stock will trade.
In the past, shareholders of public companies
have often brought securities class action suits against those companies following periods of instability in the market price of their
securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and
other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our
results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise
capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which
could have a material adverse effect on our financial condition and results of operations.
Lack of market and state blue sky laws
may make shares of the Company’s common stock more difficult to sell.
Investors may have difficulty in reselling their
shares due to the lack of market or state Blue Sky laws. The holders of the Company’s shares of common stock and persons who desire
to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions
upon the ability of investors to resell the Company’s shares. Accordingly, even if we are successful in having the shares available
for trading on the OTC, investors should consider any secondary market for the Company’s securities to be a limited one. We intend
to seek coverage and publication of information regarding our Company in an accepted publication which permits a “manual exemption.”
This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the
security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to
be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer’s
balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal
year of operations. We may not be able to secure a listing containing all of this information. Furthermore, the manual exemption is a
non-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor’s, Moody’s Investor Service, Fitch’s Investment
Service, and Best’s Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that
they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions
and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota,
Tennessee, Vermont, and Wisconsin.
Accordingly, the Company’s shares of Common
Stock should be considered totally illiquid, which inhibits investors’ ability to resell their shares.
We are subject to the penny stock rules,
which will make shares of the Company’s common stock more difficult to sell.
We will be subject to penny stock regulations
and restrictions and you may have difficulty selling shares of the Company’s common stock. The SEC has adopted regulations which
generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exemptions. We anticipate that the Company’s common stock will
become a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”.
This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established
customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and
have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of
broker-dealers to sell the Company’s securities and may affect the ability of purchasers to sell any of the Company’s securities
in the secondary market.
For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating
to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price
information for the penny stock held in the account and information on the limited market in penny stock.
We do not anticipate that the Company’s
common stock will qualify for exemption from the Penny Stock Rule. In any event, even if the Company’s common stock were exempt
from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the Commission the authority
to restrict any person from participating in a distribution of penny stock, if the Commission finds that such a restriction would be
in the public interest.
Shares of the Company’s common stock
that have not been registered under federal securities laws are subject to resale restrictions imposed by Rule 144, including those set
forth in Rule 144(i) which apply to a former “shell company.”
We were deemed a “shell company”
under applicable SEC rules and regulations because we had no or nominal operations and either no or nominal assets, assets consisting
solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. Pursuant
to Rule 144 promulgated under the Securities Act, sales of the securities of a former shell company, such as us, under that rule are
not permitted unless at the time of a proposed sale, we have filed Form 10 information with the SEC, we are subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section
13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports. Additionally, our previous
status as a shell company could also limit our use of our securities to pay for any acquisitions we may seek to pursue in the future.
The lack of liquidity of the Company’s securities as a result of the inability to sell under Rule 144 for a longer period of time
than a non-former shell company could cause the market price of the Company’s securities to decline. There can be no assurance
that we will ever meet these conditions and any purchases of the Company’s shares are subject to these restrictions on resale.
We currently do not have an audit or compensation
committee
Because we do not have an audit or compensation
committee, stockholders will have to rely on the Company’s entire Board of Directors, none of which are independent, to perform
these functions. Since we do not have an audit or compensation committee comprised of independent directors, these functions are performed
by the Company’s Board of Directors as a whole. Thus, there is a potential conflict in that Board members who are also part of
management will participate in discussions concerning management compensation and audit issues that may affect management decisions.
We are subject to compliance with Security
laws exposure
We are subject to compliance with securities
laws, which exposes us to potential liabilities, including potential rescission rights. We may offer to sell the Company’s shares
of the Company’s common stock to investors pursuant to certain exemptions from the registration requirements of the Securities
Act, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability
of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We may
not seek any legal opinion to the effect that any such offering would be exempt from registration under any federal or state law. Instead,
we may elect to relay upon the operative facts as the basis for such exemption, including information provided by investor themselves.
If any such offering did not qualify for such
exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor
should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities
may be offered without registration in reliance on the partial preemption from the registration or qualification provisions of such state
statutes under the National Securities Markets Improvement Act of 1996. If investors were successful in seeking rescission, we would
face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for
the exemptions upon which we have relied, we may become subject to significant fines and penalties imposed by the Commission and state
securities agencies.
There is no assurance that we will be able
to pay dividends to the Company’s shareholders, which means that you could receive little or no return on your investment.
Because we do not intend to pay any cash dividends
on shares of the Company’s common stock, the Company’s stockholders will not be able to receive a return on their shares
unless they sell them. We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate
paying any cash dividends on shares of the Company’s common stock in the foreseeable future. Unless we pay dividends, the Company’s
stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will
be able to sell shares of the Company’s common stock when desired.
Compliance with the Sarbanes-Oxley Act
of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act of 2002
requires that we evaluate and report on our system of internal controls and may require us to have such system audited by an independent
registered public accounting firm. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny,
civil or criminal penalties and/or shareholder litigation. Any inability to provide reliable financial reports could harm our business.
Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate
controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting
obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could
have a negative effect on the trading price of the Company’s securities.
We are an “emerging growth company”
and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Company’s
securities less attractive to investors.
We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an “emerging growth company”
for up to five years. However, if the Company’s non-convertible debt issued within a three-year period exceeds $1.0 billion or
revenues exceed $1.07 billion, or the market value of the Company’s common stock that are held by non-affiliates exceeds $700 million
on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following
fiscal year. As an emerging growth company, we are not being required to comply with the auditor attestation requirements of section
404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations regarding executive compensation in the Company’s periodic
reports and proxy statements, and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we have
elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies
until those standards apply to private companies. As such, our financial statements may not be comparable to companies that comply with
public company effective dates. We cannot predict if investors will find the Company’s shares less attractive because we may rely
on these provisions. If some investors find the Company’s shares less attractive as a result, there may be a less active trading
market for the Company’s shares and the Company’s share price may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when
a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company,
will not adopt the new or revised standard until the time private companies are required to adopt the new or revised standard. This may
make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth
company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant
standards used.
INCORPORATION OF INFORMATION
BY REFERENCE
The SEC allows us to “incorporate by reference”
the information we file with it, which means that we can disclose important information to you by referring you to those documents. We
will incorporate by reference all reports and other documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act, except as to any portion of any report or document that is not deemed filed under such provisions, (i) after the
effective date the registration statement containing this prospectus and (ii) until the earlier of the date on which all the securities
registered hereunder have been sold or the registration statement of which this prospectus is a part has been withdrawn, shall be deemed
to be incorporated by reference in this prospectus and to be part hereof from the date of filing of such reports and other documents.
Any information that we subsequently file with the SEC that is incorporated by reference as described above will automatically update
and supersede any previous information that is part of this prospectus. Nothing in this prospectus shall be deemed to incorporate information
furnished but not filed with the SEC pursuant to Items 2.02, 7.02 or 9.01 of Form 8-K.
Upon written or oral request, we will provide
without charge to each person to whom a copy of the prospectus is delivered a copy of the documents incorporated by reference herein
(other than exhibits to such documents, unless such exhibits are specifically incorporated by reference herein). You may request a copy
of these filings, at no cost, by writing or telephoning us at the following address: Suite 907, Saigao City Plaza Building 2, No. 170,
Weiyang Road, Xi’an, China ; Attn: Guolin Tao, CEO; Email: newfinance@vip.sina.com; telephone number: +86-029-86100263. You can
also find such documents at our website: www.eubggroup.com.
MARKET INFORMATION AND
DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
The Company’s common stock is currently
quoted on the OTC market “Pink Sheets Current Information” under the symbol EUBG. Any over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
Holders
As of January 27, 2023, we had 160 holders of
record of the Company’s common stock. The number of record holders was determined from the records of our transfer agent and does
not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers or registered clearing
agencies.
Common and Preferred Stock
The Company’s authorized capital stock
consists of 1,800,000,000 shares of common stock, par value $0.0001 per share, and 1,100,000 shares of preferred stock, par value $0.0001
per share. As of January 27, 2023, there were 1,701,181,423 shares of the Company’s common stock issued and outstanding and 0 shares
of the Company’s preferred stock issued and outstanding.
Options and Warrants
None.
Debt Securities
None.
Dividends Policy
The Company has not declared any cash dividends
since inception and does not anticipate paying any cash dividends in the foreseeable future. The payment of cash dividends is within
the discretion of the Board of Directors and will depend on the Company’s earnings, capital requirements, financial condition,
and other relevant factors. There are no restrictions that currently limit the Company’s ability to pay cash, or other, dividends
on its common stock other than those generally imposed by applicable state law.
Equity Compensation Plans
The Company has no equity compensation plans.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s
discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto contained
in this prospectus. Some of the statements contained in the following discussion of our financial condition and results of operations
refer to future expectations or include other “forward-looking” information. Those statements are subject to known and unknown
risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated, including, but
not limited to, those discussed under the heading “Risk Factors” elsewhere in this prospectus, which are incorporated herein
by reference. See “Special Note regarding Forward-Looking Statements” included in this prospectus for a discussion of factors
to be considered when evaluating forward-looking information detailed below. These factors could cause our actual results to differ materially
from the forward-looking statements.
Impact of COVID-19
In early January of
2020, a novel coronavirus (“COVID-19”) outbreak took place in Wuhan, China. Subsequently, it has spread rapidly to Asia and
other parts of the world. The COVID-19 outbreak has resulted in widespread economic disruptions in China, as well as stringent government
measures by the Chinese government to contain its transmissions including quarantines, travel restrictions, and temporary closures of
non-essential businesses in China and elsewhere. The outbreak in China mainly occurred in the first quarter of 2020, and it gradually
stabilized and business activities started to resume under the guidance and support of the government since late second quarter of 2020.
As of December 31, 2020,
the COVID-19 outbreak in China appears to be generally under control and business activities have recovered on the whole. In addition,
we resumed contacting potential customers as of June 2020, and the aforementioned negative impact has been further mitigated since the
third quarter of 2020, when the outbreak became more stabilized in China and other regions in the world. However, sporadic cases continue
to be found during the first half year of 2021 in China. For example, a new Delta variant of COVID-19 had been found in certain cities
in China in the second quarter of 2021, which may cause another outbreak, thus increasing risks and possible further disruption to businesses.
Therefore, certain of our consulting services were suspended from April 2021 to August 2021. We have resumed these consulting businesses
from August 2021 in order to maintain diversified services for our customers.
As of December 31, 2021
and September 30, 2022, the COVID-19 pandemic continues to be dynamic, and near-term challenges across the economy remain. Although vaccines
are now being distributed and administered across many parts of the world, new variants of the virus have emerged and may continue to
emerge that have shown to be more contagious. We continue to adhere to applicable governmental and commercial restrictions and to work
to mitigate the impact of COVID-19 on our employees, customers, communities, liquidity and financial position. The extent to which the
COVID-19 outbreak may impact the company’s business, operations and financial results from this point forward will depend on numerous
evolving factors that the company cannot accurately predict. Those factors include the following: the duration and scope of the pandemic;
governmental, business and individuals’ actions in response to the pandemic in the future; and any other further development of
the COVID-19 outbreak.
Substantially all of
our revenues and operations are concentrated in China. Consequently, our results of operations and financial performances have been affected
since 2020 and into the third quarter of 2022. Due to the government measures taken to contain COVID-19, the offline activities of our
PRC subsidiary were restricted from late January to May 2020, resulting in cancellations or postponements of the marketing efforts of
our customers. In addition, due to widespread economic disruptions during the outbreak, demand for our consulting services by small and
medium-sized enterprises were also adversely affected. Specifically, as a result of government mandated closures of non-essential business
in China, many of our customers’ business were suspended while others permanently closed their businesses. From December 22, 2021
to January 24, 2022, Xi’an city, the PRC, went into lockdown following a coronavirus outbreak that officials attributed to the
delta variant. From April 16, 2022 to April 19, 2022, the city was under temporary controls of social activities after reporting more
than 40 infections in half month. This affected mainly our digital marketing consulting services in 2020, 2021 and early of 2022.
Overview
Prior to the Transaction on May 15, 2019, we
were inactive from 2007 to 2019, and did not have any active business activities. In May of 2019, the new major shareholders rejuvenated
marketing consultancy services and e-commerce business in China to the Company and its subsidiaries. EUBG is a holding company for its
operating subsidiaries. Our PRC subsidiary’s operations in China are the primary operations of the Company. While substantially
all of our operations are located in China, we currently do not, and we do not plan to use variable interest entities to execute our
business plan or to conduct our China-based operations. However, because our operations are in China and our major shareholders are located
in China, there is always a risk that the Chinese government may in the future seek to affect operations of any company with any level
of operations in China, including its ability to offer securities to investors, list its securities on a U.S. or other foreign exchange,
conduct its business or accept foreign investment. If any or all of the foregoing were to occur, it could, in turn, result in a material
change in the Company’s operations and/or the value of its common stock and/or significantly limit or completely hinder its ability
to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
Recent Developments
For our digital training related services, we
worked with Beida Jade Bird Vocational Education (“Jade Bird”) which was an authorized licensee of China National Personal
Talent Training Network (“CNPTTN”), a PRC regulatory agency for the talent training. Jade Bird was in charge of its training
courses, and the Company was authorised by Jade Bird as its sole training related administrator of the training courses, limited to coordinate
the digital training related services to individual clients who were interested in conducting live-broadcasting business through social
medias. The Company provided training related services, to these individual clients who subscribed courses, in arranging the examination,
following up certificate issuance processes, addressing clients’ concerns, etc. On March 22, 2022, the PRC subsidiary learned that
Jade Bird suspended its service after receiving a notice from CNPTTN that until further notice CNPTTN has suspended all recruitment services
using its CNPTTN’s name. As a result of CNPTTN’s suspension, the PRC subsidiary has also suspended its digital training related
services with Jade Bird from March 22, 2022 until further notice. For the nine months ended September 30, 2022 and 2021, the digital
training related services with Jade Bird represented 9% and 0% of our total revenue, or $267,874 and $0, respectively. For the three
months ended September 30, 2022 and 2021, the digital training related services with Jade Bird were nil. As of the date of this prospectus,
there is no further notice from CNPTTN and the service is still being suspended.
Results of operations
Results of Operations
for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021
The following table
represents our unaudited condensed consolidated statement of operations for the three months ended September 30, 2022 and 2021.
| |
Three months ended September
30, | |
| |
2022 | | |
2021 | |
Revenue | |
$ | 801,784 | | |
$ | 1,622,471 | |
Cost of revenue | |
| (140,009 | ) | |
| (870,967 | ) |
Gross profit | |
| 661,775 | | |
| 751,504 | |
Selling expenses | |
| (10,043 | ) | |
| (54,921 | ) |
General and administrative expenses | |
| (423,931 | ) | |
| (326,090 | ) |
Total other (expenses) income, net | |
| (124,016 | ) | |
| 38,847 | |
Income before income tax | |
| 103,785 | | |
| 409,340 | |
Income tax expense | |
| (135,784 | ) | |
| (201,789 | ) |
Net (loss) income | |
$ | (31,999 | ) | |
$ | 207,551 | |
Revenue and cost
of revenue
During the three months
ended September 30, 2022, we generated revenue of $801,784 compared to $1,622,471 for the three months ended September 30, 2021, representing
a decrease of $820,687 or 50.6% as compared with the prior period. For the three months ended September 30, 2022, our revenue from consultancy
services and sourcing and marketing services were $699,257 and $102,527, respectively; while revenue for the three months ended September
30, 2021 were $1,554,834 and $67,637, respectively; Cost of revenue was $140,009 for the three months ended September 30, 2022 compared
to $870,967 for the three months ended September 30, 2021. The decrease of cost of revenue for the three months ended September 30, 2022
was mainly due to our senior management no longer directly involved in performing the services but focused on management work. Therefore,
less direct senior management costs were incurred in the consultancy services and souring and marketing service.
Selling expenses
During the three months
ended September 30, 2022, we incurred $10,043 selling expenses compared to $54,921 for the three months ended September 30, 2021, representing
a decrease of $44,878 or 81.7% as compared with the prior period. The decrease of selling expenses was mainly due to the tightening of
entertainment policies during the period and no staff costs were incurred in selling activities.
General and administrative
expenses
During the three months
ended September 30, 2022, we incurred $423,931 general and administrative expenses compared to $326,090 for the three months ended September
30, 2021, representing an increase of $97,841 or 30.0% as compared with the prior period. The increase for the three months ended September
30, 2022 was mainly due to more audit fees and professional fees charged by the professional parties. Our general and administrative
expenses consisted mainly of audit fees, professional fees, payroll expenses and consultancy fees.
Total other (expenses)
income, net
During the three months
ended September 30, 2022, we incurred net other expense of $124,016 compared to net other income of $38,847 for the three months ended
September 30, 2021. The difference of $162,863 was mainly due to exchange loss of $135,842 resulting from the exchange rate appreciation
of HKD against RMB for the three months ended September 30, 2022. Our net other (expense) income mainly consisted of bank interest income,
exchange rate differences and certain sundry incomes.
Income tax expense
During the three months
ended September 30, 2022, we incurred income tax expense of $135,784 compared to income tax expense of $201,789 for the three months
ended September 30, 2021, representing a difference of $66,005 or 32.7% as compared with the prior period. The income tax expenses were
charged in China and Hong Kong.
For the three months
ended September 30, 2022, our income tax expenses comprised of current tax expenses and deferred tax expense of $127,727 and $8,057,
respectively, compared to current tax expenses and deferred tax expense of $154,082 and $47,707 for the three months ended September
30, 2021.
Net (loss) income
As a result of the above,
we resulted a net loss of $31,999 and generated a net income of $207,551 for the three months ended September 30, 2022 and 2021, respectively.
Results of Operations for the nine months
ended September 30, 2022 as compared to the nine months ended September 30, 2021
The following table
represents our unaudited condensed consolidated statement of operations for the nine months ended September 30, 2022 and 2021.
| |
Nine months ended September 30, | |
| |
2022 | | |
2021 | |
Revenue | |
$ | 2,851,656 | | |
$ | 4,479,415 | |
Cost of revenue | |
| (565,820 | ) | |
| (1,289,739 | ) |
Gross profit | |
| 2,285,836 | | |
| 3,189,676 | |
Selling expenses | |
| (34,957 | ) | |
| (224,935 | ) |
General and administrative expenses | |
| (1,066,604 | ) | |
| (905,391 | ) |
Total other income, net | |
| 35,905 | | |
| 108,941 | |
Income before income tax | |
| 1,220,180 | | |
| 2,168,291 | |
Income tax expense | |
| (595,156 | ) | |
| (872,063 | ) |
Net income | |
$ | 625,024 | | |
$ | 1,296,228 | |
Revenue and cost
of revenue
During the nine months
ended September 30, 2022, we generated revenue of $2,851,656 compared to $4,479,415 for the nine months ended September 30, 2021, representing
a decrease of $1,627,759 or 36.3% as compared with the prior period. The decrease was mainly due to our consultancy services income,
generated from clients who engaged in online courses business, dropped by $2,405,874 as compared with last period. This was because the
end customers became more patience and cautious in choosing online courses. We continued to seek for different business opportunities
to stabilize our income streams. During the nine months ended September 30, 2022, we generated $267,874 from our new digital training
related services and $911,733 from our consultancy services to a customer who engaged in live streaming business. However, these new
income streams only compensated a part of the revenue reduction in current period. As of the date of this filing, the digital training
related services with Jade Bird remain suspended. Therefore, we expected the new revenue will not be available to compensate the revenue
reduction until further notice. Cost of revenue was $565,820 for the nine months ended September 30, 2022 compared to $1,289,739 for
the nine months ended September 30, 2021. For the nine months ended September 30, 2022, the cost of revenue mainly represented the staff
costs for our consulting services and the agency fees for our digital training related services.
Selling expenses
During the nine months
ended September 30, 2022, we incurred $34,957 selling expenses compared to $224,935 for the nine months ended September 30, 2021, representing
a decrease of $189,978 or 84.5% as compared with the prior period. The decrease of selling expenses was mainly due to the tightening
of entertainment policies during the period and the staff costs incurred in selling activities were dropped by $116,244 or 87.2% for
the nine months ended September 30, 2022.
General and administrative
expenses
During the nine months
ended September 30, 2022, we incurred $1,066,604 general and administrative expenses compared to $905,391 for the nine months ended September
30, 2021, representing an increase of $161,213 or 17.8% as compared with the prior period. The increase for the nine months ended September
30, 2022 was mainly due to more audit fees and professional fees charged by the professional parties. Our general and administrative
expenses consisted mainly of audit fees, professional fees, payroll expenses and consultancy fees.
Total other income,
net
During the nine months
ended September 30, 2022, we generated net other income of $35,905 compared to $108,941 for the nine months ended September 30, 2021.
The difference of $73,036 was mainly due to exchange loss of $107,920 resulting from the exchange rate appreciation of HKD against RMB
for the nine months ended September 30, 2022. Our net other income mainly consisted of bank interest income, exchange rate differences
and certain sundry incomes.
Income tax expense
During the nine months
ended September 30, 2022, we incurred income tax expense of $595,156 compared to $872,063 for the nine months ended September 30, 2021,
representing a decrease of $276,907 or 31.8% as compared with the prior period. The income tax expenses were charged in China and Hong
Kong.
For the nine months
ended September 30, 2022, our income tax expenses comprised of current tax expenses and deferred tax expenses of $463,206 and $131,950,
respectively, compared to current tax expenses and deferred tax expenses of $675,592 and $196,471 for the nine months ended September
30, 2021.
Net income
As a result of the above,
we generated a net income of $625,024 and $1,296,228 for the nine months ended September 30, 2022 and 2021, respectively.
Liquidity and Capital Resources
Working Capital
| |
September 30, 2022 | | |
December 31, 2021 | |
Cash and cash equivalents | |
$ | 6,330,431 | | |
$ | 7,649,129 | |
Total current assets | |
| 7,642,634 | | |
| 7,772,994 | |
Total assets | |
| 7,938,452 | | |
| 8,201,140 | |
Total liabilities | |
| 917,573 | | |
| 1,439,526 | |
Retained earnings (accumulated deficit) | |
| 267,621 | | |
| (357,403 | ) |
Total equity | |
$ | 7,020,879 | | |
$ | 6,761,614 | |
Cash flow
The following table
sets forth a summary of our cash flows for the periods indicated:
| |
Nine months ended September 30, | |
| |
2022 | | |
2021 | |
Net cash generated from operating activities | |
$ | 44,094 | | |
| 621,854 | |
Net cash (used in) generated from investing activities | |
| (1,070,140 | ) | |
| 3,279,315 | |
Net cash used in financing activities | |
| (3,490 | ) | |
| (60,869 | ) |
Effect of exchange rate changes on cash and cash equivalents | |
| (289,162 | ) | |
| 37,171 | |
Cash and cash equivalents, beginning of period | |
| 7,649,129 | | |
| 3,846,470 | |
Cash and cash equivalents, end of period | |
$ | 6,330,431 | | |
$ | 7,723,941 | |
Cash generated from
operating activities
Net cash generated from
operating activities for the nine months ended September 30, 2022 was $44,094, as compared to net cash generated from operating activities
of $621,854 for the nine months ended September 30, 2021, representing a decrease of $577,760 or 92.9% as compared with the prior period.
The decrease of operating cash flows was mainly resulted from a combination of below operating activities changes:
Net income was $625,024
for the nine months ended September 30, 2022, as compared to $1,296,228 for the nine months ended September 30, 2021. The decrease of
net income of $671,204 or 51.8% was mainly due to the reduction of certain performance-based arrangement consultancy services during
the period which directly reduced our operating cash inflow.
Cash outflow of deferred
tax was $33,117 for the nine months ended September 30, 2022, as compared to cash outflow of $319,660 for the nine months ended September
30, 2021. The difference was mainly due to our PRC subsidiary generated net profits of $1,435,498 and $1,666,990 respectively, for the
nine months ended September 30, 2022 and 2021; while the PRC subsidiary only distributed dividends of $1,514,848 to our Hong Kong subsidiary
in current period, representing a significant decrease of $3,081,688 as compared with prior period.
Cash outflow of trade
receivables was $244,432 for the nine months ended September 30, 2022, as compared to cash inflow of $95,800 for the nine months ended
September 30, 2021. The cash outflow of $244,432 for the nine months ended September 30, 2022 was due to certain consultancy services
income were not settled by the customers before the end of period.
Cash outflow of trade payables was $111,527 for
the nine months ended September 30, 2022 as compared to cash inflow of $431,690 for the nine months ended September 30, 2021. As the
Company launched the digital training related services in September 2021, most of the service vendors were not settled before September
30, 2021. It led to the cash inflow of $431,690 from trade payable for the nine months ended September 30, 2021. Cash outflow of $111,527
was resulted for the nine months ended September 30, 2022 because such service was suspended since March 2022 and all the account payables
were settled before September 30, 2022.
Cash outflow of other payables and accrued liabilities
was $159,123 for the nine months ended September 30, 2022, as compared to cash outflow of $284,226 for the nine months ended September
30, 2021. The cash outflow for the nine months ended September 30, 2022 and 2021 were due to the settlement of the accrued audit fee,
consultancy fee and professional fee during the periods. Larger cash outflow was resulted in the nine months ended September 30, 2021
because the Company filed a registration document during the period and settled the service fees with the professional parties.
Cash inflow of tax payables
was $106,699 for the nine months ended September 30, 2022, as compared to cash outflow of $445,713 for the nine months ended September
30, 2021. The cash inflow of $106,699 for the nine months ended September 30, 2022 was mainly due to the business reduction during the
period and we provided current income tax of $595,156 netting off with $369,878 income tax paid during the period. The cash outflow of
$445,713 for the nine months ended September 30, 2021 was mainly due to the current income tax provision of $675,592, netting off with
$1,115,659 income tax paid during the prior period.
Cash outflow of contract liabilities was $208,106
for the nine months ended September 30, 2022 because the digital training related services will Jade Bird was suspended since March 2022
and all the outstanding contract liabilities were refunded to the customers before September 30, 2022.
As we are continually
to explore new business opportunities and new customers, we expect to generate more cash inflows in the coming years. We continue to
monitor our level of operating expenses in order to maintain a positive cash flow position.
Cash (used in) generated
from investing activities
Net cash used in investing
activities for the nine months ended September 30, 2022 was $1,070,140 as compared net cash of $3,279,315 generated from investing activities
for the nine months ended September 30, 2021. The net cash used in investing activities for the nine months ended September 30, 2022
were mainly due to loan receivables of $1,060,394 provided to two unrelated parties during the period; while the net cash generated from
investing activities for the nine months ended September 30, 2021 was mainly due to the redemption of debt products of $5,872,017 offset
by the acquisition of debt products of $2,781,482.
Cash used in financing
activities
For the nine months
ended September 30, 2022, net cash used in financing activities of $3,490 represented the repayment for the amount due to a director;
while the net cash used in of $60,869 for the nine months ended September 30, 2021 was mainly due to the repayment of borrowings of $128,751
offsetting by the advance from a director of $67,882 during the period.
Comparison of Results of Operations of the Years ended December
31, 2021 and 2020
The following table sets forth key components
of our results of operations for the years ended December 31, 2021 and 2020:
| |
2021 | | |
2020 | |
Revenue | |
$ | 5,637,396 | | |
$ | 9,187,023 | |
Cost of revenue | |
| (1,827,082 | ) | |
| (661,462 | ) |
Gross profit | |
| 3,810,314 | | |
| 8,525,561 | |
Selling expenses | |
| (253,958 | ) | |
| (188,900 | ) |
General and administrative expenses | |
| (1,668,432 | ) | |
| (935,302 | ) |
Total other income, net | |
| 187,392 | | |
| 71,556 | |
Income before income tax | |
| 2,075,316 | | |
| 7,472,915 | |
Income tax expense | |
| (988,916 | ) | |
| (2,504,845 | ) |
Net income | |
$ | 1,086,400 | | |
$ | 4,968,070 | |
Revenue and cost of revenue
During the year ended December 31, 2021, we generated
revenue of $5,637,396 compared to $9,187,023 for the year ended December 31, 2020, representing a decrease of $3,549,627 or 38.6% as
compared with the prior year. The decrease in revenue was due to the realignment of our resources to focus on our KOL Training Related
Services business, which resulted in the suspension of certain consulting services from April 2021 to August 2021. We resumed these consulting
services from August 2021 to maintain diversified services to our customers. Cost of revenue was $1,827,082 for the year ended December
31, 2021 compared to $661,462 for year ended December 31, 2020. The cost of revenue for the year ended December 31, 2021 increased because
we started the digital training related services during the year and incurred agency fees of $579,959 and direct operation costs of $391,125
for the services. For the year ended December 31, 2020, the cost of revenue mainly represented the staff costs for our consulting services.
Selling expenses
During the year ended December 31, 2021, we incurred
$253,958 selling expenses compared to $188,900 for the year ended December 31, 2020, representing an increase of $65,058 or 34.4% as
compared with the prior year. The increase of selling expenses was mainly due to more staff costs incurred in marketing our KOL Training
Related Services for the year ended December 31, 2021.
General and administrative expenses
During the year ended December 31, 2021, we incurred
$1,668,432 general and administrative expenses compared to $935,302 for the year ended December 31, 2020, representing an increase of
$733,130 or 78.4% as compared with the prior year. Our general and administrative expenses consisted mainly of audit fees, professional
fees, payroll expenses and consultancy fees.
For the year ended December 31, 2021, we incurred
audit fees, professional fees and consultancy fees of $346,664, $270,400 and $226,807, respectively, to assist us in complying with the
relevant reporting requirements. For the year ended December 31, 2020, we incurred audit fees, professional fees and consultancy fees
of $204,942, $100,808 and $77,176, respectively because we engaged our new company lawyer and consultants during the year.
In addition, we incurred social insurance of
$124,386 for the year ended December 31, 2021. There was only $4,911 incurred for the year ended December 31, 2020 because the PRC government
waived employer obligations on social security contributions for a specified period of time to ease the burden of enterprises arising
from COVID-19 in 2020 and our PRC subsidiary failed to deposit adequate contributions to the housing funds for the year ended December
31, 2020.
Total other income, net
During the year ended December 31, 2021, we generated
net other income of $187,392 compared to $71,556 for the year ended December 31, 2020, representing an increase of $115,836 or 161.9%
as compared with the prior year. Our other income mainly consisted of bank interest income, exchange rate differences and certain sundry
incomes.
Income tax expense
During the year ended December 31, 2021, we incurred
income tax expense of $988,916 compared to $2,504,845 for the year ended December 31, 2020, representing a decrease of $1,515,929 or
60.5% as compared with the prior year. The income tax expense consisted of income taxes charged in China and Hong Kong.
For the year ended December 31, 2021, our income
tax expenses comprised of current tax and deferred tax expenses of $767,877 and $221,039, respectively, compared to $1,952,840 and $552,005
for the year ended December 31, 2020. The decrease of the current tax and deferred tax was mainly resulted from a lower profit caused
by the realignment of our resources to focus on our KOL Training Related Services business.
Net income
As a result of the above, we generated a net
income of $1,086,400 and $4,968,070 for the year ended December 31, 2021 and 2020, respectively.
Liquidity and Capital Resources
Working Capital
| |
December 31, | |
| |
2021 | | |
2020 | |
Cash and cash equivalents | |
$ | 7,649,129 | | |
$ | 3,846,470 | |
Total current assets | |
| 7,772,994 | | |
| 7,343,796 | |
Total assets | |
| 8,201,140 | | |
| 7,725,020 | |
Total liabilities | |
| 1,439,526 | | |
| 2,153,999 | |
Accumulated deficit | |
| (357,403 | ) | |
| (1,443,803 | ) |
Total equity | |
| 6,761,614 | | |
| 5,571,021 | |
Cash flow
The following table sets forth a summary of our
cash flows for the periods indicated:
| |
Years ended December 31, | |
| |
2021 | | |
2020 | |
Net cash generated from operating activities | |
$ | 451,663 | | |
$ | 6,484,220 | |
Net cash generated from (used in) investing activities | |
| 3,289,189 | | |
| (3,414,622 | ) |
Net cash (used in) generated from financing activities | |
| (7,566 | ) | |
| 170,198 | |
Effect of exchange rate changes on cash and cash equivalents | |
| 69,373 | | |
| 206,796 | |
Cash and cash equivalents, beginning of year | |
| 3,846,470 | | |
| 399,878 | |
Cash and cash equivalents, end of year | |
$ | 7,649,129 | | |
$ | 3,846,470 | |
Cash generated from operating activities
Net cash generated from operating activities
for the year ended December 31, 2021 was $451,663, as compared to net cash generated from operating activities of $6,484,220 for the
year ended December 31, 2020, representing a decrease of $6,032,557 or 93.0% as compared with the prior year. The decrease of operating
cash flows was mainly resulted from a combination of below operating activities changes:
Net income was $1,086,400 for the year ended
December 31, 2021, as compared to $4,968,070 for the year ended December 31, 2020. The decrease of net income of $3,881,670 or 78.1%
was mainly due to the suspension of certain consulting services from April, 2021 to August, 2021 which directly reduced our operating
cash inflow; while we had incurred more general and administrative expenses due to our business growth which increased our operating
cash outflow.
Cash outflow of deferred tax was $293,366 for
the year ended December 31, 2021, as compared to cash inflow of $552,005 for the year ended December 31, 2020. The cash outflow of $293,366
for the year ended December 31, 2021 was due to our PRC subsidiary distributed dividends to our Hong Kong subsidiary during the period,
while the cash inflow of $552,005 for the year ended December 31, 2020 was mainly resulted from the recognition of withholding tax arising
from the undistributed profits of our PRC subsidiary.
Cash inflow of trade payables was $115,561 for
the year ended December 31, 2021, as compared to cash outflow of $57,954 for the year ended December 31, 2020. The cash inflow of $115,561
for the year ended December 31, 2021 was due to the late settlement of the account payables with some service vendors during the year.
Cash outflow of other payables and accrued liabilities
was $220,493 for the year ended December 31, 2021, as compared to cash inflow of $395,583 for the year ended December 31, 2020. The cash
outflow of $220,493 for the year ended December 31, 2021 was due to the settlement of the accrued audit fee, consultancy fee and professional
fee during the period; while the cash inflow of $395,583 for the year ended December 31, 2020 was mainly resulted from our business growth
and we accrued more value-added tax payables during the period.
Cash outflow of tax payables was $563,979 for
the year ended December 31, 2021, as compared to cash inflow of $415,984 for the year ended December 31, 2020. The cash outflow of $563,979
for the year ended December 31, 2021 was due to the suspension of certain consulting services from April, 2021 to August, 2021 and we
provided current tax of $767,877 during the year. Such amount was net off with $1,326,242 income tax paid during the period. The cash
inflow of $415,984 for the year ended December 31, 2020 was mainly resulted from our business growth and we provided current income tax
of $1,952,840 during the year. Such amount was net off with $1,536,857 income tax paid during the year.
Cash inflow of amount due from a related company
was $235,930 for the year ended December 31, 2020 because all the outstanding amount had been settled by the related company during the
year. We did not conduct any business with related parties during the year ended December 31, 2021, so no amount due from a related party
was recorded in the year.
As we had realigned our resources to focus on
our KOL Training Related Services, we expect to generate more cash inflows in the coming years. We continue to monitor our level of operating
expenses in order to maintain a positive cash flow position. Therefore, we do not consider the decrease of net cash generated from operating
activities for the year ended December 31, 2021 as an identified trend to our operating cash flow.
Cash generated from (used in) investing activities
Net cash generated from investing activities
for the year ended December 31, 2021 was $3,289,189 as compared $3,414,622 used in investing activities for the year ended December 31,
2020. The net cash generated from investing activities for the year ended December 31, 2021 were mainly due to the acquisition of debt
products of $2,789,855 and the redemption of debt products of $5,889,695; while the net cash used in investing activities for the year
ended December 31, 2020 were mainly due to the acquisition of debt products of $2,897,689 and there was no redemption during the year.
Cash (used in) generated from financing activities
Net cash used in financing activities for the
year ended December 31, 2021 was $7,566, as compared to $170,198 generated from financing activities for the year ended December 31,
2020. The net cash used in financing activities for the year ended December 31, 2021 was mainly due to the repayment of borrowings of
$128,656 offsetting against advance from a director of $121,090; while the net cash generated from financing activities for the year
ended December 31, 2020 was mainly due to the proceed from borrowing of $128,927 and advance from a director of $41,271.
Future Capital Requirements
We believe that our ability to generate cash
from operations are adequate to fund working capital, capital spending and other cash needs for at least the next 12 months. Our ability
to generate adequate cash from operations in the future, however, will depend on, among other things, our ability to successfully implement
our business strategies while continuing to tightly control our expenses, and to manage the impact of changes to the PRC regulatory environment.
We can give no assurance that we will be able to successfully implement those strategies and cost control initiatives, or successfully
adjust to any changes to PRC laws and regulations impacting our business. In addition, changes in our operating plans, lower than anticipated
sales, increased expenses, interest rate increases, acquisitions or other events may cause us to seek additional debt or equity financing
in future periods. We can give no assurance that financing will be available on acceptable terms or at all. Additional equity financing
could be dilutive to holders of the Company’s common stock; debt financing, if available, could impose additional cash payment
obligations and additional covenants and operating restrictions.
We had the following
contractual obligations and commercial commitments as of September 30, 2022:
Contractual Obligations | |
Total | | |
Less than 1 year | | |
1-3 years | | |
3-5 years | | |
More than 5 years | |
Lease | |
| 97,243 | | |
| 55,567 | | |
| 41,476 | | |
| - | | |
| - | |
TOTAL | |
$ | 97,243 | | |
$ | 55,567 | | |
$ | 41,476 | | |
$ | - | | |
$ | - | |
Off-Balance Sheet
Arrangements
As of September 30,
2022 and December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a) (4) (ii) of Regulation S-K promulgated
under the Securities Act of 1934.
Critical Accounting
Policies
The preparation of condensed
financial statements in conformity with accounting principles generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments
and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements.
These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting
policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s
difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance
to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s
current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in
the preparation of our financial statements.
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“U.S.
GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial
reporting. The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries.
All significant inter-company transactions and balances have been eliminated in consolidation.
The interim condensed consolidated financial
information as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 have been prepared without audit,
pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in consolidated
financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The
interim condensed consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto,
included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, previously filed with the SEC
on April 15, 2022.
During the nine months ended September 30, 2022,
the Company experienced (and continues to experience) adverse impacts of novel coronavirus (COVID-19) and the related public health orders.
The Company expects that the impact of the COVID-19 outbreak on China and world economies will continue to have a material adverse impact
on the demand for the Company’s business. Because of the significant uncertainties surrounding the COVID-19 pandemic, the extent
of the business interruption and the related financial impact cannot be reasonably estimated at this time.
Use of Estimates
The preparation of these financial statements
in conformity with U.S. GAAP requires management of the Company to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, the Company evaluates its estimates
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 for 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. Identified below are the accounting
policies that reflect the Company’s most significant estimates and judgments, and those that the Company believes are the most
critical to fully understanding and evaluating its condensed consolidated financial statements.
The COVID-19 pandemic has created and
may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns,
depress demand for the Company’s business, and adversely impact its results of operations. During the nine months ended September
30, 2022, the Company faced increasing uncertainties around its estimates of revenue collectability and accounts receivable credit losses.
The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact
associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information emerges, and
such changes are recognized or disclosed in its condensed consolidated financial statements.
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
In its two most recent fiscal years, the Company
has had no disagreements with its independent accountants.
Quantitative and Qualitative Disclosures about
Market Risk.
The Company is a smaller reporting company as
defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
DIRECTORS AND EXECUTIVE
OFFICERS
The following information sets forth the names, ages, and positions
of the Company’s current directors and executive officers.
Name |
|
Age |
|
Position(s) |
Guolin Tao |
|
46 |
|
Chairman
of the Board of Directors, Chief Executive Officer, and Chief Financial Officer (principal executive officer and principal financial
officer) |
Jianyong Li |
|
39 |
|
Director |
Lijun Yuan |
|
57 |
|
Director |
Set forth below is a brief description of the
background and business experience of each of the Company’s current executive officers and directors.
GUOLIN TAO – Chairman of the Board, Chief Executive Officer,
and Chief Financial Officer
Mr. Tao has more than 20 years of professional
experience in business consultation, operations, management and in the marketing industry. From 2015 to now, he has been the chairmen
of two non-profit organizations: Qiming Public Welfare Foundation (1/2015 to 9/2020) and Gansu Guolin Welfare Foundation (9/2020 to present).
Mr. Tao serves as CEO, CFO of Entrepreneur Universe Bright Group (EUBG) and also serves as the CFOs of the subsidiaries of EUBG in Hong
Kong and China. He focuses his arears in digital marketing, brands marketing and consumer economics. He is the authors of “The
Power of Consuming”, “No Names”, and “Winning in the System”, which are the popular marketing books in
China. Mr. Tao graduated from Beijing Institute of Technology with a BS degree, and was graduated from Beijing University of Posts and
Telecommunications with MBA degree.
JIANYONG LI – Director
Mr. Li is known as a startup team operation specialist
and problem-solver for emergencies event coordinator & management specialist in China. He has served several times as the chairperson
of conference and organize hundreds of Charity Fundraising Event. Mr. Li graduated from Beijing Institute of Technology with Bachelor’s
degree in Business Administration. He is currently the CEO of Entrepreneurship World Technology Holding Group Company Limited, the subsidiary
of the Company in Hong Kong. He was the deputy secretary-general of Qiming Public Welfare Foundation responsible for carrying out public
service activities in education, career for people with disabilities, and social welfare during the tenure. He has rich experiences as
a marketing manager and led thousands of marketing teams which attained annual sales of more than billions of dollars in China. Mr. Li
has been named as a team operations leader in the Asia-Pacific region in the marketing industry. He was awarded by China Annual Economic
Summit as 2020 Top Ten Economic (Industry) Innovative Entrepreneurs.
LIJUN YUAN – Director
Mr. Yuan is currently the CEO of Xian Yunchuang
Space Information Technology Co., Ltd., the subsidiary of the Company in China. He worked for Jucheng Group which ranked first in the
training industry in China, as Group Chief Operator. He worked as president for Shengshi Impact Education and Training Group, Shanghai
Huiju International Education Group, Shengshang (Beijing) Holding Group Limited, and Beijing Shengshang Education&Tech Co. Ltd. in
the past 10 years. He was awarded a Master’s degree of Business Administration from Xi’an Jiaotong University. Mr. Yuan was
honored as 2016 Top Ten Innovators Award in Shaanxi Province, and 2020 Most Influential People of Chinese National Brand.
Term of Office
The Company’s Directors are appointed for
a one-year term to hold office until the next annual general meeting of the Company’s shareholders or until removed from office
in accordance with the Company’s bylaws. The Company’s officers are appointed by the Company’s board of directors and
hold office until removed by the board, subject to their respective employment agreements.
Significant Employees
Mr. Guolin Tao is considered a significant employee.
Mr. Guolin Tao has more than 20 years of professional experience in business consultation, operations, management and in the marketing
industry. Mr. Guolin Tao serves as the CEO, CFO of the Company and also serves as the CFOs of the subsidiaries of EUBG in Hong Kong and
China. A copy of our employment contract with Mr. Guolin Tao is included as Exhibit 10.1 to this prospectus.
Family Relationships
There are no family relationships between or
among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
During the past 10 years, none of the Company’s
current directors, nominees for directors or current executive officers has been involved in any legal proceeding identified in Item
401(f) of Regulation S-K.
Audit Committee
We have not adopted
an audit committee charter. The Company’s board of directors will serve the function of the audit committee. The board of directors
in the future intends to establish an audit committee.
Compensation Committee and Governance
and Nomination Committee
We have not adopted
a compensation committee and governance committee charters. The board of directors currently serves these functions. The
board of directors will consider establishing a compensation committee and governance committee in the future.
Code of Conduct and Ethics
We have not adopted
a Code of Conduct for the Company’s executive officers, directors and the Company’s employees.
EXECUTIVE COMPENSATION
The following
summary compensation table sets forth all compensation awarded to, earned by, or paid to the Company’s named executive officers
paid by us during the years ended December 31, 2022 and 2021.
| |
| | |
Annual
Compensation | | |
Long
Term Compensation Awards | | |
| |
| |
| | |
| | |
| | |
Other | | |
Restricted | | |
Securities | | |
| |
| |
| | |
| | |
| | |
Annual | | |
Stock | | |
Underlying | | |
Total | |
| |
| | |
Salary | | |
Bonus | | |
Compensation | | |
Award(s) | | |
Options | | |
Compensation | |
Name and Principal Position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Guolin
Tao, | |
| 2022 | | |
| 239,636 | | |
| - | | |
| 3,471 | | |
| - | | |
| - | | |
| 243,107 | |
Chairman,
CEO, and CFO(1) | |
| 2021 | | |
| 197,924 | | |
| 31,482 | | |
| 175,534 | | |
| - | | |
| - | | |
| 404,940 | |
(1) |
Paid by the subsidiaries
Entrepreneurship World Technology Holding Group Company Limited and Xian Yunchuang Space Information Technology Co., Limited (formerly
known as “Entrepreneurship World Consultants Limited”) in Hong Kong and China. |
Employment Agreement
The Company entered into an employment agreement
with Mr. Guolin Tao in his capacity of the CEO and director of the Company, effective as of October 19, 2019, pursuant to the employment
agreement signed between Xian Yunchuang Space Information Technology Co., Ltd. (formerly known as “Entrepreneurship World Consultants
Limited”) and Mr. Guolin Tao.
Options/SAR Grants
During the last fiscal
year, we have not granted any stock options or Stock Appreciation Rights (“SARS”) to any executive officers or other individuals.
Aggregated Option/SAR exercised and Fiscal
year-end Option/SAR value table
Neither the Company’s
executive officers nor the other individuals listed in the tables above, exercised options or SARs during the last fiscal year.
Stock Option Plan
We have not adopted a stock option plan.
Long-term incentive plans
We have not adopted long term incentive plan.
Defined benefit or actuarial plan disclosure
As required by Chinese
law, our PRC subsidiary contributes 10% of an individual employee’s monthly salary to pension insurance.
Compensation of Directors
We do not have any non-executive
directors and currently no compensation arrangements are in place for the compensation of directors.
Employment contracts and termination of
employment and change-in-control arrangements
None of the Company’s
officers or employees is under an employment contract or has contractual rights triggered by a change in control of the company.
Compensation Committee Interlocks and
Insider Participation
We have not established
a Compensation Committee and the Company’s board of directors will serve this function. No interlocking relationship
exists between the Company’s board of directors and the board of directors or compensation committee of any other entity.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The
following table sets forth as of January 27, 2023, the number of shares of the Company’s common stock owned on record or beneficially
by each person known to be the beneficial owner of 5% or more of the issued and outstanding shares of the Company’s voting stock,
and by each of the Company’s directors and executive officers and by all its directors and executive officers as a group. Unless
otherwise indicated, the business address of each of our directors and executive offices is Suite 907, Saigao City Plaza Building
2, No. 170 Weiyang Road, Xi’an, China.
Name of Beneficial Owner | |
Amount and Nature of Beneficial
Ownership(1) | | |
Percentage of Beneficial
Ownership(2) | |
Directors and Officers: | |
| | |
| |
Guolin Tao(3) | |
| 1,030,916,276 | | |
| 60.60 | % |
Jianyong Li | |
| 21,347,916 | | |
| 1.25 | % |
Lijun Yuan | |
| 30,000,000 | | |
| 1.76 | % |
All executive officers and directors as a group (3 person) | |
| 1,082,264,192 | | |
| 63.61 | % |
5% Holders: | |
| | | |
| | |
Tethys Fountain Limited(3) Vistra
Corporate Services Center Wickhams
Cay II, Road Town Tortola,
VG 1110, British Virgin Island | |
| 1,030,916,276 | | |
| 60.60 | % |
New Finance
Consultants Limited(4)
957 Road Town
Tortola, British Virgin Island | |
| 140,899,285 | | |
| 8.28 | % |
(1) |
Under Rule 13d-3, a beneficial
owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned
by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares
are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of
an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person,
the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person)
by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock
actually outstanding. |
(2) |
Based upon 1,701,181,423
shares of common stock issued and outstanding. |
(3) |
Guolin Tao is the indirect
beneficial owner of 1,030,916,276 shares of common stock of the Company through Tethys
Fountain Limited, of which Guolin Tao is the indirect beneficial owner of 100% of its share
capital. |
(4) |
Sun Ying
is the indirect beneficial owner of 140,899,285 shares of common stock of the Company through
New Finance Consultants Limited, of which Sun Ying is the indirect beneficial owner
of 100% of its share capital. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Transactions with Related Parties
SEC regulations define the related person transactions
that require disclosure to include any transaction, arrangement or relationship in which the amount involved exceeds the lesser of $120,000
or one percent of the average of our total assets at year-end for the last two completed fiscal years in which we were or are to be a
participant and in which a related person had or will have a direct or indirect material interest. A related person is: (i) an executive
officer, director or director nominee, (ii) a beneficial owner of more than 5% of the Company’s common stock, (iii) an immediate
family member of an executive officer, director or director nominee or beneficial owner of more than 5% of the Company’s common
stock, or (iv) any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons has a
substantial ownership interest or control.
The following is the list of the related parties
with which we had transactions in the past two years:
(a) |
Xi’an CNT –
a company incorporated in the PRC, Xian. As of September 30, 2022, the shares of Xi’an CNT are wholly owned by certain family
members of Mr. Guolin Tao, among them - 55% is owned by the sister of Mr. Guolin Tao, Ms. Zhiyan Tao and 45% is owned by the brother-in-law
of Mr. Guolin Tao, Mr. Pan Chang. |
|
|
(b) |
Baiyin Wujinxia Cultural
Communication Co., Ltd. (“Baiyin Wujinxia”) – a company incorporated in the PRC. The CEO of the Company, Mr Tao
held 60% equity interest from October 31, 2019 to January 25, 2021 and such equity interest was fully transferred to Ms. Hanye Chang,
the spouse of Mr. Guolin Tao, on January 26, 2021. |
|
|
(c) |
Ms. Hanye Chang, the spouse
of Mr. Guolin Tao. |
(d) |
Mr. Yong Chang, the father
in law of Mr. Guolin Tao. |
(e) |
Mr. Jianyong Li, a director
of the Company. |
|
|
(f) |
New Finance Consultants
Limited, a shareholder of the Company, holding 8.3% equity interest as of September 30, 2022, December 31, 2021 and December 31,
2020. |
|
|
(g) |
Xian Yuanchuang Tribe Technology
Co., Ltd. (“Yuanchuang Tribe”)– a company incorporated in the PRC, Ms. Hanyu Chang, spouse of Mr. Guolin Tao, indirectly
held 29.99% equity interest from November 29, 2019 to February 10, 2021. |
|
|
(h) |
Xian Yuanchuang Federation
Information Technology Co., Ltd. (“Yuanchuang Federation”)- a company incorporated in the PRC, Yuanchuang Tribe held
100% equity interest December 30, 2019 to September 10, 2021. |
Described below are certain transactions or series
of transactions between us and certain related persons.
Related party transaction
1. |
Pursuant to an agreement signed on November
9, 2019, our PRC subsidiary agreed to provide sourcing services to Xi’an CNT, which include but not limit to product procurement,
coordination with suppliers and monitoring product quality. Our service fee represents the difference between the product price
charged by our suppliers and the price that we charged Xi’an CNT and supplier as its service fee. This agreement expired
on May 8, 2020.
As a result of above agreements, services
fees of $49,259 were recorded as revenue earned from Xi’an CNT for the years ended December 31, 2020. The revenue was not recurred
in 2021 as the agreements were either terminated or ceased. |
2.
|
On March 8, 2020, our PRC subsidiary
purchased a 2016 Europe-manufactured motor vehicle with Model No. of Mercedes-Benz V250 WD4WG2E1 from Ms. Hanye Chang for $86,931.
The purchase prices were determined based on the market price of similar vehicles with similar conditions at the time of purchase.
On March 12, 2020, our PRC subsidiary purchased
a 2018 China-manufactured motor vehicle with Model No. of Buick SGM6522UAA2 from Mr. Yong Chang for $45,639. The purchase prices
were determined based on the market price of similar vehicles with similar conditions at the time of purchase.
On March 3, 2020, our PRC subsidiary purchased
a 2014 China-manufactured motor vehicle with Model No. of Mercedes-Benz BJ7182EVXL from Mr. Jianyong Li for $28,997. The purchase
prices were determined based on the market price of similar vehicles with similar conditions at the time of purchase.
The Company uses these motor vehicles for
daily operational needs. |
3. |
On November 1, 2019, the PRC subsidiary
entered into a loan agreement with Baiyin Wujinxia in the amount of $305,804 (RMB2,000,000) for a period from November 1, 2019
to June 30, 2021. The loan is unsecured and bears fixed interest at 4.75% per annum. The total loan amount (including principle
and interest) was fully repaid to the Company on June 18, 2021, and the loan agreement was terminated on the same date.
We had recorded interest income of $0 and
$5,777 for the nine months ended September 30, 2022 and 2021, respectively; $5,794 and $3,888 for the year ended December 31, 2021
and 2020, respectively. |
4. |
On June 1, 2021, the PRC subsidiary entered
into service agreements with Yuanchuang Tribe and Yuanchuang Federation to develop a web application supporting the KOL Training
Related Services.
We recorded IT expenses of $60,718 and $86,718,
respectively, for the services provided by Yuanchuang Tribe and Yuanchuang Federation for the year ended December 31, 2021. |
Procedures for Approval of Related Party Transactions
The Company’s Board of Directors is charged
with reviewing and approving all potential related party transactions. We have not adopted other procedures or policy for review, or
standards for approval, of such transactions, but instead review them on a case-by-case basis. Any
Related Party Transaction that is not approved by the non-interested directors prior to its effectiveness or consummation and that is
not subsequently ratified by non-interested directors shall be voidable at the option of the non-interested directors and all persons
subject to this principal shall take all necessary action to unwind any Related Party Transaction voided by the non-interested directors
on terms that are fair to the Company and its shareholders.
Director Independence
A
majority of our Board of Directors are independent directors, see the discussion above under the section “Directors and Executive
Officers.”
SELLING STOCKHOLDERS
This prospectus covers the possible resale by
the selling stockholders identified in the table below of 140,000,000 shares of common stock. Ms. Fanfan Chen acquired 83,357,916 shares
from MDX in a private transaction that was exempt from registration under Regulation S of the Securities Act. In addition, Mr. Huacheng
Hu and Ms. Meizhen Ying acquired 70,000,000 and 15,000,000 shares from certain stockholders in a private transaction that was exempt
from registration under Regulation S of the Securities Act. The selling stockholders may sell some, all or none of their shares of common
stock. We do not know how long the selling stockholder will hold the shares of common stock before selling them, and we currently have
no agreements, arrangements or understandings with the selling stockholder regarding the sale of any of the shares.
The following table presents information regarding
the selling stockholder and the shares that each may offer and sell from time to time under this prospectus. The table is prepared based
on information supplied to us by the selling stockholder relating to such shares, including (i) all of the shares offered hereby, and
(ii) to our knowledge, all other securities held by the selling stockholder as of the date hereof, and reflects their respective holdings
as of January 27, 2023. Except for the ownership of shares of capital stock and as described below, each selling stockholder has not
had any material relationship with us within the past three years except as noted. Beneficial ownership is determined in accordance with
Section 13(d) of the Exchange Act and Rule 13d-3 thereunder. The percentage of shares beneficially owned prior to the offering is based
on 1,701,181,423 shares of our common stock actually outstanding as of January 27, 2023.
| |
Shares
Beneficially Owned
Before | | |
Shares to be Sold in this | | |
Shares Beneficially Owned After
Offering | |
Name of Selling Stockholder | |
this Offering | | |
Offering | | |
Number | | |
Percentage | |
Fanfan Chen 52 Yuejin Road Tower 8-1 29
Fllor Room 4 Fucheng District Mianyang City, China | |
| 83,357,916 | | |
| 70,000,000 | | |
| 13,357,916 | | |
| * | % |
Huacheng Hu No.9, Lane 470, Huku St Huku Shang
Village, Gushan Town Zhejiang Province Yongkang City, China | |
| 63,330,000 | | |
| 60,000,000 | | |
| 3,330,000 | | |
| * | % |
Meizhen Ying Unit 102, Unit 2, Bldg 4 Baidieli
Jiayuan District 2 Jiangnan St, Zhejiang Province Yongkang City, China | |
| 15,000,000 | | |
| 10,000,000 | | |
| 5,000,000 | | |
| * | % |
DESCRIPTION OF OUR CAPITAL
STOCK
General
The Company’s authorized capital stock
consists of 1,800,000,000 shares of common stock, par value $0.0001 per share, and 1,100,000 shares of preferred stock, par value $0.0001
per share. As of January 27, 2023, there were 1,701,181,423 shares of the Company’s common stock issued and outstanding and no
shares of the Company’s preferred stock issued and outstanding.
Common Stock
The Company’s common stock is entitled
to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise
required by law or provided in any resolution adopted by the Company’s board of directors with respect to any series of preferred
stock, the holders of the Company’s common stock will possess all voting power. Generally, all matters to be voted on by stockholders
must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares
of the Company’s common stock that are present in person or represented by proxy, subject to any voting rights granted to holders
of any preferred stock. Holders of the Company’s common stock representing fifty percent (50%) of the Company’s capital stock
issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of the
Company’s stockholders. A vote by the holders of a majority of the Company’s outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an amendment to the Company’s Articles of Incorporation. The
Company’s Articles of Incorporation do not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any outstanding
series of preferred stock created by the Company’s board of directors from time to time, the holders of shares of the Company’s
common stock will be entitled to such cash dividends as may be declared from time to time by the Company’s board of directors from
funds available therefore.
Subject to any preferential rights of any outstanding
series of preferred stock created from time to time by the Company’s board of directors, upon liquidation, dissolution or winding
up, the holders of shares of the Company’s common stock will be entitled to receive pro rata all assets available for distribution
to such holders.
In the event of any merger or consolidation with
or into another company in connection with which shares of the Company’s common stock are converted into or exchangeable for shares
of stock, other securities or property (including cash), all holders of the Company’s common stock will be entitled to receive
the same kind and amount of shares of stock and other securities and property (including cash). Holders of the Company’s common
stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the Company’s common
stock.
Preferred Stock
The Company’s board of directors has expressly
granted authority, without shareholder action, to authorize preferred shares of stock and to divide the authorized shares of the Company’s
preferred stock into one or more series, each of which must be so designated as to distinguish the shares of each series of preferred
stock from the shares of all other series and classes. The Company’s board of directors is authorized, within any limitations prescribed
by law and the Company’s articles of incorporation, to fix and determine the designations, rights, qualifications, preferences,
limitations and terms of the shares of any series of preferred stock including, but not limited to, the following:
(1) |
Designate in
whole or in part, the powers, preferences, limitations, and relative rights, of any class of shares before the issuance of any shares
of that class; |
(2) |
Create one
or more series within a class of shares, fix the number of shares of each such series, and designate, in whole or in part, the powers,
preferences, limitations, and relative rights of any class of shares before the issuance of any shares of that series; |
(3) |
Alter or revoke
the powers, preferences limitations, and relative rights granted to or imposed upon any wholly unissued class of shares or any wholly
unissued series of any class of shares; |
(4) |
Increase or
decrease the number of shares constituting any series, the number of shares of which was originally fixed by the board of directors,
either before or after the issuance of shares of the series: provided that, the number may not be decreased below the number of shares
of the series then outstanding or increased above the total number of authorized shares of the applicable class of shares available
for designation as a part of the series; |
(5) |
Determine the
dividend rate on the shares of any class of shares or series of shares, whether dividends will be cumulative, and if so, from which
date(s), and the relative rights of priority, if any, payment of dividends on shares of that class of shares or series of shares; |
(6) |
Determine whether
that class of shares or series of shares will have voting rights, in addition to the voting rights provided by law, and, if, so,
the terms of such voting; |
(7) |
Determine whether
or not these shares of that class of shares or series of shares will have conversion privileges and, if, so, the terms and conditions
of such conversion, including provision for adjustment of the conversion rate in such events as the board of directors determines; |
(8) |
Determine whether
or not these shares of that class of shares or series of shares will be redeemable and, if, so, the terms and conditions of such
redemption, including the date or date upon or after which they were redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different redemption dates; |
(9) |
Determine whether
or not these shares of that class of shares or series of shares will have a sinking fund for that redemption or purchase of shares
of that class of shares or series of shares and, if, so, the terms and amount of such sinking fund; |
(10) |
Determine the
rights of the shares of that class of shares of series of shares in the event of voluntary liquidation, dissolution or winding up
of the Corporation and the relative rights of priority, if any, of a payment of shares of that class of shares or series of shares;
and |
(11) |
Determine any
other relative rights, preference and limitation of that class of shares or series of shares. |
Provisions in The Company’s Articles
of Incorporation and By-Laws That Would Delay, Defer or Prevent a Change in Control
The Company’s articles of incorporation
authorize the Company’s board of directors to issue a class of preferred stock commonly known as a “blank check” preferred
stock. Specifically, the preferred stock may be issued from time to time by the board of directors as shares of one (1) or more classes
or series. The Company’s board of directors, subject to the provisions of the Company’s Articles of Incorporation and limitations
imposed by law, is authorized to adopt resolutions; to issue the shares; to fix the number of shares; to change the number of shares
constituting any series; and to provide for or change the following: the voting powers; designations; preferences; and relative, participating,
optional or other special rights, qualifications, limitations or restrictions, including the following: dividend rights, including whether
dividends are cumulative; dividend rates; terms of redemption, including sinking fund provisions; redemption prices; conversion rights
and liquidation preferences of the shares constituting any class or series of the preferred stock.
In each such case, we will not need any further
action or vote by the Company’s shareholders. One of the effects of undesignated preferred stock may be to enable the board of
directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred stock pursuant to the board
of director’s authority described above may adversely affect the rights of holders of common stock. For example, preferred stock
issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids
for the common stock at a premium or may otherwise adversely affect the market price of the common stock.
Share Purchase Warrants
We have no outstanding warrants to purchase the Company’s securities.
Options
We have no outstanding options to purchase the Company’s securities.
Convertible Securities
We have not issued and do not have outstanding
any securities convertible into shares of the Company’s common stock or any rights convertible or exchangeable into shares of the
Company’s common stock.
Certain Anti-Takeover Provisions
Nevada Revised Statutes sections 78.378 to 78.379
provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation
or bylaws of the corporation provide that the provisions of these sections do not apply. The Company’s articles of incorporation
and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person or
entity to acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition attempt,
among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200 or more stockholders,
at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business in the State of Nevada directly
or through an affiliated corporation. Because of these conditions, the statute currently does not apply to the Company’s company.
Debt Securities
None.
Other Securities to be Registered
None.
Transfer Agent
The Company’s transfer agent is Pacific
Stock Transfer Company located at 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119 with a phone number at (800) 785-7782.
USE OF PROCEEDS
We are registering shares of our common stock for the selling stockholder.
We will not receive any of the proceeds from any sale or other disposition of the common stock covered by this prospectus. All proceeds
from the sale of the common stock will be paid directly to the selling stockholder.
PLAN OF DISTRIBUTION
The shares will be offered and sold by the selling
stockholder at a fixed price of $0.30 per share until our common stock is quoted on OTC Market Group, Inc.’s “OTCQB”
or “OTCQX” tiers, and thereafter the shares may be sold at prevailing market prices or privately negotiated prices or in
transactions that are not in the public market. The selling stockholder, including their transferees, donees, pledgees, assignees and
successors-in-interest, may, from time to time, sell, transfer, or otherwise dispose of any or all of the shares covered by this prospectus
on any stock exchange, market, or trading facility on which our common stock is traded, or in private transactions. These dispositions
may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying
prices determined at the time of sale or at negotiated prices. The selling stockholder may use any one or more of the following methods
when disposing of shares:
| ● | disposition
on any national securities exchange on which our common stock may be listed at the time of
the sale; |
| ● | disposition
in the over-the-counter markets; |
| ● | ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block
trades in which the broker-dealer will attempt to sell the Shares as agent, but may position
and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases
by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an
exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately
negotiated transactions; |
| ● | writing
or settlement of options or other hedging transactions, whether through an options exchange
or otherwise; |
| ● | disposition
in one or more underwritten offerings in a best efforts basis or firm commitment basis; |
| ● | broker-dealers
may agree with the selling stockholder to sell a specified number of such Shares at a stipulated
price per share; |
| ● | a
combination of any such methods of sale; or |
| ● | any
other method permitted by applicable law. |
The selling stockholder may also sell shares
under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholder
may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholder
or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser in amounts to be negotiated. The selling stockholder
do not expect these commissions and discounts relating to its sales of shares to exceed what is customary in the types of transactions
involved.
The selling stockholder may enter into hedging
transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the
course of hedging the positions they assume. The selling stockholder may also sell shares of our common stock short and deliver these
securities to close out its short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.
The selling stockholder may also enter into option or other transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered
by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus, as supplemented
or amended to reflect such transaction.
The selling stockholder and any broker-dealers
or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities
Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale
of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The selling stockholder
have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute the common
stock.
Because the selling stockholder may be deemed
to be an “underwriter” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities
Act may be sold under Rule 144 rather than under this prospectus. The selling stockholder have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the resale shares.
The shares will be sold only through registered
or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the shares may not
be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under
the Exchange Act, any person engaged in the distribution of the shares may not simultaneously engage in market making activities with
respect to our common stock for a period of two business days prior to the commencement of the distribution. In addition, the selling
stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation
M, which may limit the timing of purchases and sales of shares of our common stock by the selling stockholder or any other person. We
will make copies of this prospectus available to the selling stockholder and have informed the selling stockholder of the need to deliver
a copy of this prospectus to each purchaser at or prior to the time of the sale.
We will not receive any proceeds from the sale
of the shares by the selling stockholder.
LEGAL MATTERS
Lewis Brisbois Bisgaard & Smith LLP, San
Francisco, CA will pass upon legal matters in connection with the validity of the common stock offered hereby, and King & Wood Mallesons
will pass upon legal matters as to Chinese law.
EXPERTS
The consolidated financial statements of Entrepreneur
Universe Bright Group for the years ended December 31, 2021 and 2020 included in this prospectus and the registration statement of which
the prospectus is a part, have been audited by Centurion ZD CPA & Co, our former independent registered public accounting firm, and
are included in reliance upon such report given on the authority of said firm as experts in auditing and accounting.
CHANGES IN REGISTRANT’S
CERTIFYING ACCOUNTANT
On September 7, 2022, Entrepreneur Universe Bright
Group (the “Company”) dismissed its independent accountant, Centurion ZD CPA & Co. (“CZD”), an audit firm
headquartered in Hong Kong.
The report of independent registered public accounting
firm of CZD regarding the Company’s financial statements for the fiscal years ended December 31, 2021 and 2020 did not contain
any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the years ended December 31, 2021 and
2020, and during the subsequent interim period from the end of the most recently completed fiscal year through September 7, 2022, the
date of dismissal, there were no “disagreements” (as described in Item 304(a)(10(iv) of Regulation S-K) with CZD on any matter
of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement(s), if not
resolved to the satisfaction of CZD would have caused it to make reference to such disagreement in its reports for such periods. Furthermore,
no “reportable events” occurred during the years ended December 31, 2021 and 2020, or subsequently up to September 7, 2022.
As used herein, the term “reportable event” means any of the items listed in paragraphs (a)(1)(v) of Item 304 of Regulation
S-K. The following material weaknesses have been identified and included in management’s assessment: (1) the Company did not maintain
appropriate cash controls; (2) the Company did not implement appropriate information technology controls; (3) the lack of sufficient
accounting personnel with appropriate level of knowledge, experience and training in U.S. GAAP and SEC reporting requirements; and (4)
the Company did not have adequate written policies and procedures, which resulted in a number of internal control deficiencies that were
identified as being significant. Also, as a small company, the Company does not have sufficient internal control personnel to set up
adequate review functions at each reporting level.
On September 7, 2022, the Board of Directors,
acting as the audit committee, of the Company announces that it has appointed Prager Metis CPAs, LLC (“PragerMetis”) as the
Company’s independent auditor for the fiscal year end December 31, 2022.
During the two most recent fiscal years ended
December 31, 2021 and 2020 and through the date the Company selected PragerMetis as its independent registered public accounting firm,
neither the Company nor anyone on behalf of the Company consulted PragerMetis regarding any accounting or auditing issues involving the
Company, including (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company’s financial statements, or (ii) any matter that was the subject of a “disagreement”
(as defined in Item 304(a)(1)(iv) of Regulation S-K of the Securities Exchange Act of 1934, as amended, and the related instructions
to Item 304 of Regulation S-K) or a “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K).
INTERESTS OF NAMED EXPERTS
AND COUNSEL
Except as noted below, no expert or counsel named
in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration or offering of the securities was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any
of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter,
managing or principal underwriter, voting trustee, director, officer, or employee.
WHERE YOU CAN FIND ADDITIONAL
INFORMATION
We are required to file annual, quarterly and
special reports, proxy statements and other information with the SEC. Our filings with the SEC are also available to the public at the
SEC’s Internet web site at http://www.sec.gov.
We have filed a registration statement, of which
this prospectus is a part, covering the securities offered hereby. As allowed by SEC rules, this prospectus does not include all of the
information contained in the registration statement and the included exhibits, financial statements and schedules. You are referred to
the registration statement, the included exhibits, financial statements and schedules for further information. This prospectus is qualified
in its entirety by such other information.
We are subject to the information and periodic
reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, in accordance therewith, file periodic
reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available
to the public over the Internet at the website of the SEC referred to above. We maintain a website at https://www.eubggroup.com/. The
reference to our website address does not constitute incorporation by reference of the information contained on our website, and you
should not consider the contents of our website in making an investment decision with respect to our common stock.
INDEX
TO FINANCIAL STATEMENTS
AUDITED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
CONDENSED
UNAUDITED FINANCIAL STATEMENTS
FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and the Board of Directors of Entrepreneur Universe Bright Group
Opinion
on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Entrepreneur Universe Bright Group and subsidiaries (the “Company”) as of December 31, 2021 and 2020, and
the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for
each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows
for each of the two years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that: (l) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined
that there are no critical audit matters.
/s/
Centurion ZD CPA & Co. |
|
Centurion
ZD CPA & Co. |
|
|
|
We
have served as the Company’s auditor since 2020. |
|
|
|
Hong
Kong, China |
|
|
|
April
15, 2022 |
|
|
|
PCAOB ID: 2769 |
|
ENTREPRENEUR
UNIVERSE BRIGHT GROUP
CONSOLIDATED
BALANCE SHEETS
AS
OF DECEMBER 31, 2021 AND 2020
(In
U.S. dollars except for number of shares)
| |
2021 | | |
2020 | |
ASSETS | |
| | |
| |
CURRENT ASSETS | |
| | |
| |
Cash and cash equivalents | |
$ | 7,649,129 | | |
$ | 3,846,470 | |
Debt products | |
| - | | |
| 3,058,041 | |
Accounts receivable | |
| 67,940 | | |
| 202,183 | |
Other receivables and prepayments | |
| 55,925 | | |
| 50,306 | |
Loan to a related company | |
| - | | |
| 186,796 | |
Total current assets | |
| 7,772,994 | | |
| 7,343,796 | |
| |
| | | |
| | |
NON-CURRENT ASSETS | |
| | | |
| | |
Plant and equipment, net | |
| 281,448 | | |
| 355,609 | |
Operating lease right-of-use assets, net | |
| 146,698 | | |
| 25,615 | |
Total non-current assets | |
| 428,146 | | |
| 381,224 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 8,201,140 | | |
$ | 7,725,020 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | 115,833 | | |
$ | - | |
Other payables and accrued liabilities | |
| 402,158 | | |
| 618,508 | |
Contract liabilities | |
| 216,142 | | |
| - | |
Receipt in advance | |
| 5,161 | | |
| 50,369 | |
Operating lease liabilities, current | |
| 59,370 | | |
| 29,933 | |
Tax payables | |
| 39,545 | | |
| 595,338 | |
Amount due to a shareholder | |
| - | | |
| 53,000 | |
Amount due to a director | |
| 171,443 | | |
| 51,309 | |
Borrowings | |
| - | | |
| 128,996 | |
Total current liabilities | |
| 1,009,652 | | |
| 1,527,453 | |
| |
| | | |
| | |
NON-CURRENT LIABILITY | |
| | | |
| | |
Deferred tax liabilities | |
| 342,546 | | |
| 626,546 | |
Operating lease liabilities, non-current | |
| 87,328 | | |
| - | |
Total non-current liabilities | |
| 429,874 | | |
| 626,546 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 1,439,526 | | |
| 2,153,999 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Preferred stock, par value $0.0001 per share, 1,100,000 shares authorized, Nil (December
31, 2020: Nil) shares issued and outstanding as of December 31, 2021 | |
| - | | |
| - | |
Common stock, par value $0.0001 per share; 1,800,000,000 shares authorized, 1,701,181,423
(December 31, 2020: 1,701,181,423) shares issued and outstanding as of December 31, 2021 | |
| 170,118 | | |
| 170,118 | |
Additional paid-in capital | |
| 6,453,048 | | |
| 6,453,048 | |
Statutory reserves | |
| 65,911 | | |
| 65,911 | |
Accumulated deficit | |
| (357,403 | ) | |
| (1,443,803 | ) |
Accumulated other comprehensive income | |
| 429,940 | | |
| 325,747 | |
Total stockholders’ equity | |
| 6,761,614 | | |
| 5,571,021 | |
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY | |
$ | 8,201,140 | | |
$ | 7,725,020 | |
The
accompanying notes are an integral part of these consolidated financial statements.
ENTREPRENEUR
UNIVERSE BRIGHT GROUP
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In
U.S. dollars except for number of shares)
| |
2021 | | |
2020 | |
Revenue | |
$ | 5,637,396 | | |
$ | 9,187,023 | |
Cost of revenue | |
| (1,827,082 | ) | |
| (661,462 | ) |
Gross profit | |
| 3,810,314 | | |
| 8,525,561 | |
Selling expenses | |
| (253,958 | ) | |
| (188,900 | ) |
General and administrative expenses | |
| (1,668,432 | ) | |
| (935,302 | ) |
Profit from operations | |
| 1,887,924 | | |
| 7,401,359 | |
Other income (expenses): | |
| | | |
| | |
Interest income | |
| 76,952 | | |
| 36,721 | |
Exchange loss | |
| (476 | ) | |
| (813 | ) |
Sundry income | |
| 110,916 | | |
| 35,648 | |
Total other income, net | |
| 187,392 | | |
| 71,556 | |
Income before income tax | |
| 2,075,316 | | |
| 7,472,915 | |
Income tax expense | |
| (988,916 | ) | |
| (2,504,845 | ) |
Net income | |
$ | 1,086,400 | | |
$ | 4,968,070 | |
Other comprehensive income | |
| | | |
| | |
Foreign currency translation adjustment | |
| 104,193 | | |
| 329,795 | |
Total comprehensive income | |
$ | 1,190,593 | | |
$ | 5,297,865 | |
| |
| | | |
| | |
Net income per share - Basic and diluted | |
$ | 0.00 | * | |
$ | 0.00 | * |
Weighted average number of common shares outstanding | |
| | | |
| | |
- Basic and Diluted | |
| 1,701,181,423 | | |
| 1,701,181,423 | |
| * | Less
than $0.01 per share |
The
accompanying notes are an integral part of these consolidated financial statements.
ENTREPRENEUR
UNIVERSE BRIGHT GROUP
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In
U.S. dollars except for number of shares)
| |
Common
Stock | | |
Additional | | |
Preferred
stock | | |
| | |
| | |
Accumulated
Other Comprehensive | | |
Total | |
| |
Number of | | |
| | |
Paid-In | | |
Number of | | |
| | |
Statutory | | |
Accumulated | | |
Income | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Shares | | |
Amount | | |
Reserve | | |
Deficit | | |
(Loss) | | |
Equity | |
Balance as of January 1,
2020 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 34,720 | | |
$ | (6,380,682 | ) | |
$ | (4,048 | ) | |
$ | 273,156 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,968,070 | | |
| - | | |
| 4,968,070 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 329,795 | | |
| 329,795 | |
Statutory reserve | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 31,191 | | |
| (31,191 | ) | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of December 31, 2020 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | (1,443,803 | ) | |
$ | 325,747 | | |
$ | 5,571,021 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,086,400 | | |
| - | | |
| 1,086,400 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 104,193 | | |
| 104,193 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of December 31, 2021 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | (357,403 | ) | |
| 429,940 | | |
| 6,761,614 | |
The
accompanying notes are an integral part of these consolidated financial statements.
ENTREPRENEUR
UNIVERSE BRIGHT GROUP
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In
U.S. dollars)
|
|
2021 |
|
|
2020 |
|
Cash flows from operating activities |
|
|
|
|
|
|
Net income |
|
$ |
1,086,400 |
|
|
$ |
4,968,070 |
|
Adjustments to reconcile net income to cash used in
operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
83,212 |
|
|
|
32,059 |
|
Amortization of operating lease right-of-use assets |
|
|
39,367 |
|
|
|
31,350 |
|
Deferred tax |
|
|
(293,366 |
) |
|
|
552,005 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Other receivables and prepayments |
|
|
(5,186 |
) |
|
|
(27,577 |
) |
Accounts receivable |
|
|
137,165 |
|
|
|
(28,585 |
) |
Amount due from a related company |
|
|
- |
|
|
|
235,930 |
|
Amount due to a shareholder |
|
|
(53,000) |
|
|
|
53,000 |
|
Accounts payable |
|
|
115,561 |
|
|
|
(57,954 |
) |
Other payables and accrued liabilities |
|
|
(220,493 |
) |
|
|
395,583 |
|
Tax payables |
|
|
(563,979 |
) |
|
|
415,984 |
|
Contract liabilities |
|
|
215,636 |
|
|
|
(87,490 |
) |
Receipt in advance |
|
|
(45,909 |
) |
|
|
29,104 |
|
Operating lease liabilities |
|
|
(43,745 |
) |
|
|
(27,259 |
) |
Net cash generated from operating
activities |
|
|
451,663 |
|
|
|
6,484,220 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
- |
|
|
|
(369,021 |
) |
Acquisition of debt products |
|
|
(2,789,855 |
) |
|
|
(2,897,689 |
) |
Redemption of debt products |
|
|
5,889,695 |
|
|
|
- |
|
Loan to a related company |
|
|
(123,994 |
) |
|
|
(147,912 |
) |
Repayment from a related company |
|
|
313,343 |
|
|
|
- |
|
Net cash generated from (used
in) investing activities |
|
|
3,289,189 |
|
|
|
(3,414,622 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceed from borrowings |
|
|
- |
|
|
|
128,927 |
|
Repayment of borrowings |
|
|
(128,656 |
) |
|
|
- |
|
Advance from a director |
|
|
121,090 |
|
|
|
41,271 |
|
Net cash (used in) generated
from financing activities |
|
|
(7,566 |
) |
|
|
170,198 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates
on cash |
|
|
69,373 |
|
|
|
206,796 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
3,802,659 |
|
|
|
3,446,592 |
|
Cash and cash equivalents
at beginning of year |
|
|
3,846,470 |
|
|
|
399,878 |
|
Cash and cash equivalents
at end of year |
|
$ |
7,649,129 |
|
|
$ |
3,846,470 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
1,326,242 |
|
|
$ |
1,536,857 |
|
Withholding tax paid |
|
$ |
518,702 |
|
|
$ |
- |
|
Non-cash financing activities
Operating lease assets obtained in exchange for operating lease obligations |
|
$ |
171,419 |
|
|
$ |
55,622 |
|
The
accompanying notes are an integral part of these consolidated financial statements.
ENTREPRENEUR
UNIVERSE BRIGHT GROUP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In
U.S. dollars except for number of shares)
NOTE
1 – ORGANIZATION AND BUSINESS
Entrepreneur
Universe Bright Group (“EUBG” or the “Company”), formerly known as Ketcher Industries LLC and REE International,
Inc., was incorporated in the State of Nevada on April 21, 1999 under the name LE GOURMET CO, INC. Since its inception, the Company had
the following name changes: On March 17, 2003, to Estelle Reyna, Inc.; on September 11, 2003 to Karma Media, Inc.; on July 8, 2005 to
Pitboss Entertainment, Inc.; on March 3, 2006 to US Energy Holdings, Inc.; on December 20, 2006 to Lonestar Group Holdings Company; on
November 9, 2007 to Guardian Angel Group, Inc.; on May 18, 2011 to REE International, Inc.; and on March 23, 2020, the Company filed
a Certificate of Amendment to the Nevada Secretary of State amending Article I of its Articles of Incorporation changing the Company’s
name to Entrepreneur Universe Bright Group, with an effective date of April 3, 2020.
Lonestar
Group Holdings Company was a voluntary filer and filed a Form 15 with the Securities and Exchange Commission (“SEC”) on August
20, 2007.
In
July 2018, XTC Inc. (“XTC”), a shareholder of the Company, petitioned the Eight Judicial District Court in Clark County,
Nevada (the “Court”), for appointment as custodian of the Company. On September 4, 2018, the Court granted XTC custodianship
of the Company with the right to appoint officers and directors, negotiate and compromise debt, execute contracts, issue stock and authorize
new classes of stock (“Custodianship”).
Since
the Form 15 filing on August 20, 2007 and prior to the Custodianship, the management believes that the Company was inactive with no business
operations. In December 2018, XTC filed a Certificate of Revival for a revival of its charter, effective December 13, 2018, with the
Nevada Secretary of State. XTC acted together with MXD Inc. (“MXD”) to revive the Company and to get current. MXD is a private
company incorporated in the State of Colorado. As the president of XTC is also the president of MXD, the Company considered that the
XTC and MXD are under common control.
XTC
and MXD performed the following actions in its capacity as custodian:
|
● |
Funded
all expenses of the Company including paying off all outstanding liabilities discovered; |
|
● |
Brought
the Company back in compliance with the Nevada Secretary of State, resident agent, transfer agent, OTC Markets Group; |
|
● |
Brought
in and paid for accounting professionals as well as securities counsel. |
On
December 18, 2018, the Company formed REE International, Inc. Colorado (“REE-CO”). On December 21, 2018, the Company entered
into an Agreement for Divestiture of Assets to Subsidiary with REE-CO, where the Company transferred all assets, liabilities, and business
to REE-CO. in exchange for 1,000 shares of REE-CO, and became the parent company of REE-CO. Since then, the Company has no assets, liabilities
and business.
On
December 28, 2018, the Company entered into a Sale and Purchase Agreement (the “SPA”) with XTC to transfer 1,000 common shares
of REE-CO to XTC at nil cash consideration (with XTC assuming all of the obligations and liabilities of REE-CO). Pursuant to the SPA,
all the assets and liabilities previously reported in the Company’s financial statements were acquired by XTC and all the continuing
obligations assumed were taken up by XTC. The gain on disposal of $328,423 was recognized in additional paid-up capital for the year
ended December 31, 2018. Since the closing of the SPA, REE-CO ceased to be a subsidiary of the Company on the same date, and the Company
no longer had any assets, liabilities and business.
In
consideration of the payments made to revive the Company and get current by the XTC and MXD, the Company issued 1,000,000 shares of Series
A Preferred Stock to MXD on December 11, 2018 and issued 50,000 shares of Series B Preferred Stock to XTC on February 27, 2019, respectively.
On
March 5, 2019 the total authorized common stock was increased to 1,800,000,000.
On
April 24, 2019, XTC was discharged as custodian of the Company. Prior to the Custodianship and immediately before May 15, 2019, the Company
has abandoned all of its business operations.
On
May 15, 2019, 1,590,605,141 shares of common stock of the Company was issued to MXD (the “Issuance”) as consideration for
its services to revive the Company and get current, at an aggregate fair value of $135,000, which was recognized as share-based payments
for the year ended December 31, 2019. On the same date, MXD and XTC agreed to voluntarily retire 1,000,000 shares of Series A Preferred
Stock and 50,000 shares of Series B Preferred Stock, respectively.
Immediately
after the Issuance, MXD entered into certain Sale and Purchase Agreements, dated May 15, 2019 (the “Stock Purchase Agreements”),
with Tethys Fountain Limited, New Finance Consultants Limited, Jia Wang, Jianyong Li, Haijun Jiang, Xuebin Wu and Fanfan Chen (collectively,
the “Purchasers”), to transfer all its 1,590,605,141 shares of common stock of the Company to the Purchasers in exchange
for an aggregate purchase price of $135,000. Upon the closing of the Stock Purchase Agreements, the Purchasers collectively owned 93.5%
of the issued and outstanding shares of the Company’s common stock, and Tethys Fountain Limited became the controlling shareholder
of the Company.
The
Company currently trades on the Pink Sheet under the symbol “EUBG”. The Company’s fiscal year end is December 31st.
The
Company, through its wholly owned subsidiaries, mainly engages in provision of digital marketing consultation services in Hong Kong and
China.
Company
name |
|
Place/date
of incorporation |
|
Principal
activities |
1.
Entrepreneurship World Technology Holding Group Company Limited |
|
Hong
Kong/May 15, 2019 |
|
Provision
of consulting and promotional services |
|
|
|
|
|
2.
Xian Yunchuang Space Information Technology Co., Ltd. |
|
The
People’s Republic of China (“PRC”)/October 18, 2019 |
|
Provision
of digital marketing consultation services |
|
|
|
|
|
3.
Xian Yunchuang Space Information Technology Co., Ltd, BaiYin Branch |
|
PRC/May
7, 2020 |
|
Provision
of digital marketing consultation services |
COVID-19
In
early January of 2020, a novel coronavirus (“COVID-19”) outbreak took place in Wuhan, China. Subsequently, it has spread
rapidly to Asia and other parts of the world. The COVID-19 outbreak has resulted in widespread economic disruptions in China, as well
as stringent government measures by the Chinese government to contain its transmissions including quarantines, travel restrictions, and
temporary closures of non-essential businesses in China and elsewhere. The outbreak in China mainly occurred in the first quarter of
2020, and it gradually stabilized and business activities started to resume under the guidance and support of the government since late
second quarter of 2020.
As
of December 31, 2020, the COVID-19 outbreak in China appears to be generally under control and business activities have recovered on
the whole. In addition, the Company resumed contacting potential customers as of June 2020, and the aforementioned negative impact has
been further mitigated since the third quarter of 2020, when the outbreak became more stabilized in China and other regions in the world.
However, sporadic cases continue to be found during the first half year of 2021 in China. For example, a new Delta variant of COVID-19
had been found in certain cities in China in the second quarter of 2021, which may cause another outbreak, thus increasing risks and
possible further disruption to businesses. Therefore, certain of the Company’s consulting services were suspended from April 2021
to August 2021. We have resumed these consulting businesses from August 2021 in order to maintain diversified services for the Company’s
customers.
As of December 31, 2021, the COVID-19 pandemic
continues to be dynamic, and near-term challenges across the economy remain. Although vaccines are now being distributed and administered
across many parts of the world, new variants of the virus have emerged and may continue to emerge that have shown to be more contagious.
We continue to adhere to applicable governmental and commercial restrictions and to work to mitigate the impact of COVID-19 on our employees,
customers, communities, liquidity and financial position. The extent to which the COVID-19 outbreak may impact the company’s business,
operations and financial results from this point forward will depend on numerous evolving factors that the company cannot accurately
predict. Those factors include the following: the duration and scope of the pandemic; governmental, business and individuals’ actions
in response to the pandemic in the future; and any other further development of the COVID-19 outbreak.
Substantially all of the Company’s revenues
and operations are concentrated in China. Consequently, our results of operations and financial performances have been affected since
2020 and into the first quarter of 2022. Due to the government measures taken to contain COVID-19, the offline activities of the Company’s
PRC subsidiary were restricted from late January to May 2020, resulting in cancellations or postponements of the marketing efforts of
our customers. In addition, due to widespread economic disruptions during the outbreak, demand for the Company’s consulting services
by small and medium-sized enterprises were also adversely affected. Specifically, as a result of government mandated closures of non-essential
business in China, many of the Company’s customers’ business were suspended while others permanently closed their businesses.
From December 22, 2021 to January 24, 2022, Xian city, the PRC, went into lockdown following a coronavirus outbreak that officials attributed
to the delta variant. This affected both the Company’s digital marketing consulting services and our KOL Training Related Services.
The
Company achieved an operating revenue of $5,637,396 and $9,187,023 for the years ended December 31, 2021 and 2020, respectively, representing
a decrease of approximately 38.6% from the prior year. COVID-19 has and may continue to adversely affect the Company’s financial
and business performance.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting
principles (“U.S. GAAP”).
After
the close of the year to which these financial statements relate, the Company experienced (and continues to experience) adverse impacts
of novel coronavirus (COVID-19) and the related public health orders. In December 2021, there was a COVID-19 outbreak in Xian city, the
PRC. Finally, the Company expects that the impact of the COVID-19 outbreak on the United States and world economies will continue to
have a material adverse impact on the demand for the Company’s business. Because of the significant uncertainties surrounding the
COVID-19 pandemic, the extent of the business interruption and the related financial impact cannot be reasonably estimated at this time.
Use
of Estimates
The
preparation of these financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing
basis, the Company evaluates its estimates 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 for 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.
Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that
the Company believes are the most critical to fully understanding and evaluating its consolidated financial statements.
The COVID-19 pandemic
has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns
or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. During the year ended
December 31, 2021, the Company faced increasing uncertainties around its estimates of revenue collectability and accounts receivable
credit losses. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration
and degree of impact associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information
emerges, and such changes are recognized or disclosed in its consolidated financial statements.
Recently
Adopted Accounting Standards
In
December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income
taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent
application among reporting entities. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all
periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained
earnings as of the beginning of the fiscal year of adoption. The Company applied the new standard beginning January 1, 2021. The
adoption of ASU 2019-12 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.
In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number
of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models. As a result,
a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features
require bifurcation and recognition as derivatives. For contracts in an entity’s own equity, the type of contracts primarily affected
by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure
to meet the settlement conditions of the derivative scope exception. This update simplifies the related settlement assessment by removing
the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required
to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if adopted as of the beginning of
such fiscal year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the
Company’s consolidated financial statement presentation or disclosures. The adoption of ASU 2020-06 did not have any impact on
the Company’s consolidated financial statement presentation or disclosures.
Recently
Issued Accounting Standards
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires
entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current
conditions, and reasonable and supportable forecasts. ASU 2016-13 replaces the existing incurred loss model and is applicable to the
measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 is to be adopted on a modified retrospective
basis. As a smaller reporting company, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning
after December 15, 2022. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated
financial statement presentations and disclosures.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50),
Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU
2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an
exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange
as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as
the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification
or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment
for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination
or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring
on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects
to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes
that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statement
presentation or disclosures.
In
November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.
This update requires certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution
accounting model by analogy. This update is effective for annual periods beginning after December 15, 2021, and early application is
permitted. This guidance should be applied either prospectively to all transactions that are reflected in financial statements at the
date of initial application and new transactions that are entered into after the date of initial application or retrospectively to those
transactions. The Company does not expect the impact of this guidance to have a material impact on the Company’s consolidated financial
statements.
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until
a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
Basis
of Consolidation and Noncontrolling Interests
The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company
balances and transactions within the Company have been eliminated upon consolidation.
A
subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the
Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the
meeting of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an
agreement among the shareholders or equity holders.
Leases
The
Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on
the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the
rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate
based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use
(“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and
lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized
based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the
lease term. The Company elected the package of practical expedients permitted under the transition guidance to combine the lease and
non-lease components as a single lease component for operating leases associated with the Company’s office space lease, and to
keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated
statements of income on a straight-line basis over the lease term.
ROU
assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject
to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.
ROU
assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent
from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used,
which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets
and liabilities.
The
Company recognized no impairment of ROU assets as of December 31, 2021 and December 31, 2020.
The
operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current
on the Company’s consolidated balance sheets.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers cash, money market funds, investments in interest bearing demand deposit
accounts, time deposits and all highly liquid investments placed with banks or other financial institutions with an original maturity
of three months or less to be cash equivalents.
As
of December 31, 2021, cash held in accounts managed by online payment platforms such as Alipay and WeChat Pay amounted to $161,188 (as
at December 31, 2020: Nil), which have been classified as cash and cash equivalents in the consolidated balance sheets.
Accounts
receivable
Accounts
receivable are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns. The allowance for doubtful
accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable.
The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions.
Outstanding
accounts receivable balances are reviewed individually for collectability. Account balances are charged off against the allowance after
all means of collection have been exhausted and the potential for recovery is considered remote.
Debt
products
All
debt products are carried at fair value at the end of each reporting period. Changes in the carrying amount of debt products relating
to interest income calculated using the effective interest method are recognized in consolidated statement of profit or loss. Other changes
in the carrying amount of these products, net of any related tax effects, are excluded form earnings and are included in other comprehensive
income or loss and reported as a separate component of stockholders’ equity or deficit until realized. Realized gains and losses
and declines in value judged to be other than temporary, if any, on debt products are included in other income (expense), net.
The
Company regularly reviews all of its investments for other-than-temporary declines in estimated fair value. Its review includes the consideration
of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss
position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it
is more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. When
the Company determines that the decline in estimated fair value of an investment is below the amortized cost basis and the decline is
other-than-temporary, it reduces the carrying value of the security and record a loss for the amount of such decline. The Company has
not recorded any declines in value judged to be other than temporary on its investments in debt securities.
Plant
and equipment
Plant
and equipment are recorded at cost less accumulated depreciation and accumulated impairment. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
| |
Estimated
useful lives (years) |
Motor vehicle | |
4 - 5 |
The
gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the lower of the carrying value
or fair value less cost to sell the relevant assets and is recognized in general and administrative expenses in the consolidated statements
of comprehensive income.
Impairment
of Long-lived Assets
In
accordance with ASC 360-10-35, we review the carrying values of long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The Company assesses the recover-ability of the assets based on
the non-discounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future
cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than
the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated
fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. No impairment has
been recorded by the Company for the years ended December 31, 2021 and 2020.
Revenue
Recognition
The
Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which it expects to receive in exchange for those goods. The Company recognizes revenues following the five step model prescribed under
ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues
when (or as) we satisfy the performance obligation.
The
Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or net
basis. The Company is acting as the principal if it obtains control over the goods and services before they are transferred to customers.
When the Company is primarily obligated in a transaction, is generally subject to inventory risk, has latitude in establishing prices,
or has several but not all of these indicators, the Company acts as the principal and revenue is recorded on a gross basis. When the
Company is not primarily obligated in a transaction, does not generally bear the inventory risk and does not have the ability to establish
the price, the Company acts as the agent and revenue is recorded on a net basis
The
Company derives its revenue primarily from net transaction services, including consultancy services, sourcing and marketing services,
and digital training related services.
Consultancy
services
The
Company generates the majority of its revenues by providing consulting services to its clients. Most of its consulting service contracts
are based on one of the following types of arrangements:
Performance-based
arrangements represent forms of variable consideration determined by pre-established fixed rates. In these arrangements, the Company’s
fees are based on the attainment of contractually defined objectives with our client, such as assisting the client in achieving a specific
business objective (e.g. end customer placed an order to buy a product or enroll a course). The Company is entitled a fixed rate on revenue
generated by the client that are related to the scope of respective consultancy services upon client acceptance on the services provided.
Fixed-fee arrangements require the client
to pay a pre-established fee in exchange for a pre-determined set of professional services. Generally, the client agrees to pay a fixed
fee prior to contract inception. The Company recognizes revenues for its professional services rendered under these fixed-fee billing
arrangements monthly over the specified contract term.
Sourcing and marketing services
The Company provides agency-based sourcing and
digital marketing services to connect marketplace operators and merchants. Most of its sourcing and marketing services are based on one
of the following types of arrangements:
Agency-based sourcing services represents
product procurement on behalf of marketplace operators. The Company recognized revenues from agency-based sourcing at a fixed rate on
the value of goods that are sourced and delivered to the ultimate customers by the merchants. The Company reports revenues from these
transactions on a net basis because the performance obligation is to facilitate a transaction between marketplace operators and merchants,
for which the Company did not obtain the control over the products before passing on to the end customers. The Company is not primarily
responsible for fulfilling the promise and not exposed to inventory risk.
Digital marketing services are provided
to the marketplace to promote designated products or services through social medial influencers engaged by the Company. The Company is
entitled to a fixed rate on the revenue generated by the marketplace that are related to the designated products or services.
The post-sale services, goods return and other
kinds of product issue are responsibilities of the merchants. Upon successful delivery to ultimate customers by the merchants, there
is no unfulfilled obligation that could affect the marketplace operators’ and merchants’ acceptance of the services provided.
The acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.
Digital training related services
Fixed-fee digital training related services
are provided to clients who are interested to conduct live-broadcasting business through social medias. The Company require the clients
to pay a pre-established fee in exchange for the services. Revenues are recognized when promised services (e.g. preliminary consulting
work, setting up an e-learning account and delivery of learning materials) are delivered to the clients.
The Company derived services revenues of $4,152,617
and $8,592,970 for the years ended December 31, 2021 and 2020, respectively, from provision of certain consultancy services and sourcing
and marketing services through the program application (“App”) platform managed by a related company, Xi’an Chuangyetianxia
Network Technology Co., Ltd. (“Xian CNT”). The Company CEO, Mr. Tao, has significant influence over Xian CNT.
During the years ended December 31, 2021 and
2020, revenues generated from Xian CNT are disclosed in note 5 of the consolidated financial statements.
Practical expedients and exemption
The Company has not occurred any costs to obtain
contracts, and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one
year or less.
Other service income is earned when services
have been rendered.
Revenue by major service line
| |
2021 | | |
2020 | |
Consultancy services | |
| 4,237,261 | | |
| 8,984,967 | |
Sourcing and marketing services | |
| 223,620 | | |
| 202,056 | |
Digital training related services | |
| 1,176,515 | | |
| - | |
| |
$ | 5,637,396 | | |
$ | 9,187,023 | |
Revenue by recognition over time vs point in
time
| |
2021 | | |
2020 | |
Revenue recognized at a point in time | |
| 5,637,396 | | |
| 9,100,334 | |
Revenue recognized over time | |
| - | | |
| 86,689 | |
| |
$ | 5,637,396 | | |
$ | 9,187,023 | |
Revenue recorded on a gross vs net basis
| |
2021 | | |
2020 | |
Revenue recorded on a gross basis | |
| 5,413,776 | | |
| 8,984,967 | |
Revenue recorded on a net basis | |
| 223,620 | | |
| 202,056 | |
| |
$ | 5,637,396 | | |
$ | 9,187,023 | |
Contract liabilities
The Company’s contract liabilities consist
of deferred revenue associated with consultancy fees and provision of fixed-fee training related services. The table below presents the
activity of the deferred consultancy services revenue during the years ended December 31, 2021 and 2020, respectively:
| |
2021 | | |
2020 | |
Balance at beginning of year | |
$ | - | | |
$ | 87,136 | |
Service fees collected | |
| 1,377,349 | | |
| - | |
Service revenue earned | |
| (1,176,515 | ) | |
| (86,689 | ) |
Exchange realignment | |
| 15,308 | | |
| (447 | ) |
Balance at end of year | |
$ | 216,142 | | |
$ | - | |
Cost of revenue
Cost of revenues consists primarily of employee
compensation, service fees, agency fees, and the related IT expenses, which are directly attributable to the revenues
Employee benefits
Full time employees of the Company in the PRC
participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing
fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC subsidiary of the Company
make contributions to the government for these benefits based on certain percentages of the employees’ salaries, up to a maximum
amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions made. Total amounts
of such employee benefit expenses, which were expensed as incurred, were approximately $124,386 (including prior years housing funds
of $11,014) and $4,911 for the years ended December 31, 2021 and 2020, respectively.
Foreign Currency and Foreign Currency Translation
The reporting currency of the Company is the
United States dollar (“US dollar”). The financial records of the Company’s PRC operating subsidiaries are maintained
in their local currency, the Renminbi (“RMB”), which is the functional currency. The financial records of the Company’s
Hong Kong operating subsidiary are maintained in its local currency, the Hong Kong Dollar (“HKD”), which is the functional
currency. Assets and liabilities of the subsidiaries are translated into the reporting currency at the exchange rates at the balance
sheet date, equity accounts are translated at historical exchange rates, and income and expense items are translated using the average
rate for the year. The translation adjustments are recorded in accumulated other comprehensive loss under shareholders’ equity.
Monetary assets and liabilities denominated in
currencies other than the applicable functional currencies are translated into the functional currencies at the prevailing rates of exchange
at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable functional currencies at historical
exchange rates. Transactions in currencies other than the applicable functional currencies during the year are converted into the functional
currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction gains and losses are recognized in the
consolidated statements of operations.
RMB is not a fully convertible currency. All
foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”)
or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreign exchange transactions are
the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into US
dollars has been made at the following exchange rates for the respective periods:
Year ended December 31,
2020 |
|
|
Balance sheet,
except for equity accounts |
|
RMB
6.5401 to US$1.00 |
Income statement and cash
flows |
|
RMB
6.9021 to US$1.00 |
|
|
|
Year ended December 31,
2021 |
|
|
Balance sheet, except for
equity accounts |
|
RMB
6.3559 to US$1.00 |
Income statement and cash
flows |
|
RMB
6.4519 to US$1.00 |
During the years presented, HKD is pegged to
the U.S. dollar within a narrow range.
Income Taxes
Income taxes are accounted for using an asset
and liability approach which requires the recognition of income taxes payable or refundable for the current year and deferred tax liabilities
and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.
Deferred income taxes are determined based on the differences between the accounting basis and the tax basis of assets and liabilities
and are measured using the currently enacted tax rates and laws. Deferred tax assets are reduced by a valuation allowance, if based on
available evidence, it is considered that it is more likely than not that some portion of or all of the deferred tax assets will not
be realized. In making such determination, the Company considers factors including future reversals of existing taxable temporary differences,
future profitability, and tax planning strategies. If events were to occur in the future that would allow the Company to realize more
of its deferred tax assets than the presently recorded net amount, an adjustment would be made to the deferred tax assets that would
increase income for the period when those events occurred. If events were to occur in the future that would require the Company to realize
less of its deferred tax assets than the presently recorded net amount, an adjustment would be made to the valuation allowance against
deferred tax assets that would decrease income for the period when those events occurred. Significant management judgment is required
in determining income tax expense and deferred tax assets and liabilities.
The Company conducts business in the PRC and
Hong Kong and is subject to tax in these jurisdictions. As a result of its business activities, the Company will file tax returns that
are subject to examination by the respective tax authorities.
Uncertain Tax Positions
Management reviews regularly the adequacy of
the provisions for taxes as they relate to the Company’s income and transactions. In order to assess uncertain tax positions, the
Company applies a more likely than not threshold and a two-step approach for tax position measurement and financial statement recognition.
For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon
settlement. As of December 31, 2021 and 2020, the Company had not recorded any liability for uncertain tax positions. In subsequent periods,
any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.
Net income per Share of Common Stock
The Company has adopted ASC Topic 260, “Earnings
per Share,” (“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying
financial statements, basic earnings (loss) per share is computed by dividing net income by the weighted average number of shares of
common stock outstanding during the year.
| |
2021 | | |
2020 | |
Net income | |
$ | 1,086,400 | | |
$ | 4,968,070 | |
| |
| | | |
| | |
Weighted average number of common stock outstanding | |
| | | |
| | |
- basic and diluted | |
| 1,701,181,423 | | |
| 1,701,181,423 | |
| |
| | | |
| | |
Net income per share | |
| | | |
| | |
- basic and diluted | |
$ | 0.00 | * | |
$ | 0.00 | * |
| * | Less
than $0.01 per share |
The calculation of basic net income per share
of common stock is based on the net income for the years ended December 31, 2021 and 2020 and the weighted average number of ordinary
shares outstanding.
For the years ended December 31, 2021 and 2020,
the Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
Segments
The Company uses the “management approach”
in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s
chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s
reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue of
marketing consultation services and operating results of the Company and, as such, the Company has determined that the Company has one
operating segment (provision of consulting, sourcing and marketing services, and digital training related services in China) as defined
by ASC Topic 280 “Segment Reporting”.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents.
As of December 31, 2021 and 2020, $7,649,129
and $3,846,470 of the Company’s cash and cash equivalents, respectively were held at financial institutions and online payment
platforms located in the PRC and Hong Kong that management believes to be of high credit quality. The Company has not experienced any
losses on cash and cash equivalents to date. The Company does not require collateral or other securities to support financial instruments
that are subject to credit risk.
The Company operates principally in the PRC and
Hong Kong and grants credit to its customers in these geographic regions. Although the PRC is economically stable, it is always possible
that unanticipated events in foreign countries could disrupt the Company’s operations.
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement and
Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable
inputs when measuring fair value. Certain current assets and current liabilities are financial instruments. Management believes their
carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments
and their expected realization and, if applicable, their current interest rates are equivalent to interest rates currently available.
The three levels of valuation hierarchy are defined 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 liability, 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
measurement. |
Valuation of debt products depends upon a number
of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, and other relevant
terms of the debt. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair
market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing the Company’s
debt investments. The fair value of these debt products classified as Level 2 are established by reference to the prices quoted by respective
fund administrators.
The carrying amounts of financial assets and
liabilities, such as cash and cash equivalents, accounts receivable, other receivables, loan to a related company, accounts payable and
other payables, amounts due to a director and a shareholder and borrowings approximate their fair values because of the short maturity
of these instruments or the rate of interest of these instruments approximate the market rate of interest.
Comprehensive Income
Comprehensive income is defined as the change
in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments
from owners and distributions to owners. Accumulated other comprehensive income includes cumulative foreign currency translation adjustment.
NOTE 3 – DEBT PRODUCTS
| |
2021 | | |
2020 | |
Debt products issued by bank,
at fair value | |
$ | - | | |
$ | 3,058,041 | |
Debt products include financial products issued
and managed by banks in the PRC. The fair value of these debt products classified as Level 2 are established by reference to the prices
quoted by the bank.
As at December 31, 2020, the debt products have
no maturity date, and bear variable interest rate, currently at 2.35% per annum. No fair value change has been recognized for the year
ended December 31, 2020. The debt products have been subsequently redeemed on February 2, 2021.
During the year ended December 31, 2021, the
Company further acquired debt products of $2,789,855, which had no maturity date, and bear variable interest rate with a range from 2.45%
to 3.02% per annum. All these newly acquired debt products had been redeemed on July 15, 2021 with a gain of $2,059.
NOTE 4 – PLANT AND EQUIPMENT
Plant and equipment as of December 31, 2021 and
December 31, 2020 are summarized below:
| |
2021 | | |
2020 | |
Motor vehicle | |
$ | 400,732 | | |
$ | 389,443 | |
Less: Accumulated depreciation | |
| (119,284 | ) | |
| (33,834 | ) |
Plant and equipment, net | |
$ | 281,448 | | |
$ | 355,609 | |
Depreciation expenses, classified as operating
expenses, were $83,212 and $32,059 for the years ended December 31, 2021 and 2020, respectively.
NOTE 5 – RELATED PARTY TRANSACTIONS
The following is the list of the related parties
with which the Company had transactions for the years ended December 31, 2021 and 2020:
| (a) | Xian
CNT – a company incorporated in the PRC, Xian. As of December 31, 2021, the shareholders
of Xian CNT are 90% owned by certain family members of Mr. Guolin Tao, among them - 45% is
owned by the sister of Mr. Tao, Ms. Tao Zhiyan and 45% is owned by the brother-in-law of
Mr. Guolin Tao, Mr. Pan Chang. |
| (b) | Baiyin
Wujinxia Cultural Communication Co., Ltd. (“Baiyin Wujinxia”) – a company
incorporated in the PRC, the Company CEO, Mr Tao held 60% equity interest from October 31,
2019 to January 25, 2021 and on January 26, 2021 fully transferred to Ms. Hanye Chang, spouse
of Mr. Guolin Tao. |
| (c) | Ms.
Hanye Chang, spouse of Mr. Guolin Tao. |
| (d) | Mr.
Yong Chang, father in law of Mr. Guolin Tao |
| (e) | Mr.
Jianyong Li, a director of the Company. |
|
(f) |
New Finance Consultants
Limited, a shareholder of the Company, holding 8.3% equity interest as of December 31, 2021 and 2020. |
| (g) | Xian
Yuanchuang Tribe Technology Co., Ltd. (“Yuanchuang Tribe”)– a company incorporated
in the PRC, Ms. Hanyu Chang, spouse of Mr. Guolin Tao, indirectly held 29.99% equity interest
from November 29, 2019 to February 10, 2021. |
| (h) | Xian
Yuanchuang Federation Information Technology Co., Ltd. (“Yuanchuang Federation”)-
a company incorporated in the PRC, Yuanchuang Tribe held 100% equity interest December 30,
2019 to September 10, 2021. |
Related party transaction
| |
2021 | | |
2020 | |
Sourcing and marketing services income generated from | |
| | |
| |
- Xian CNT | |
$ | - | | |
$ | 49,259 | |
| |
| | | |
| | |
Purchase of motor vehicles from | |
| | | |
| | |
- Ms. Hanye Chang | |
| - | | |
| 86,931 | |
- Mr. Yong Chang | |
| - | | |
| 45,639 | |
- Mr. Jianyong Li | |
| - | | |
| 28,977 | |
| |
| | | |
| | |
Interest income | |
| | | |
| | |
- Baiyin Wujinxia | |
| 5,794 | | |
| 3,888 | |
| |
| | | |
| | |
IT expenses | |
| | | |
| | |
- Yuanchuang Tribe | |
| 60,718 | | |
| - | |
- Yuanchuang Federation | |
| 86,718 | | |
| - | |
Sourcing and marketing income were received by
the Company at fees agreed by both parties in accordance with the relevant agreements.
Interest income was charged at an interest rate
agreed by both parties in accordance with a loan agreement.
IT expenses were charged at fees agreed by both
parties in accordance with the relevant services agreements.
Related party balances
| |
2021 | | |
2020 | |
Loan to a related company | |
| | |
| |
- Baiyin Wujinxia | |
$ | - | | |
$ | 186,796 | |
| |
| | | |
| | |
Amount due to a director | |
| | | |
| | |
- Mr. Guolin Tao | |
$ | 171,443 | | |
$ | 51,309 | |
| |
| | | |
| | |
Amount due to a shareholder | |
| | | |
| | |
- New Finance Consultants Limited | |
$ | - | | |
$ | 53,000 | |
| |
| | | |
| | |
Accounts payable | |
| | | |
| | |
- Yuanchuang Tribe | |
$ | 16,135 | | |
$ | - | |
- Yuanchuang Federation | |
| 21,390 | | |
| - | |
On November 1, 2019, the Company entered into
a loan agreement with Baiyin Wujinxia to loan a total amount of $305,804 (RMB2,000,000) for a period from November 1, 2019 to September
30, 2021. The loan is unsecured and bears fixed interest at 4.75% per annum. The outstanding amount (including loan interest) as at December
31, 2020 was fully repaid on June 18, 2021 and the loan agreement was early terminated on the same date.
The amounts due to director/shareholder as of
December 31, 2021 and 2020 are unsecured, non-interest bearing and repayable on demand.
On June 1, 2021, the Company entered into IT
consultation agreements with Yuanchuang Tribe and Yuanchuang Federation, respectively. The outstanding amounts as at December 31, 2021
are subsequently settled in January 2022.
NOTE 6 – ACCOUNTS RECEIVABLE, NET
Accounts receivable as of December 31, 2021 and
2020:
| |
2021 | | |
2020 | |
Account receivables | |
$ | 67,940 | | |
$ | 202,183 | |
Less: Allowance for doubtful accounts | |
| - | | |
| - | |
| |
$ | 67,940 | | |
$ | 202,183 | |
NOTE 7 – OTHER RECEIVABLES AND PREPAYMENTS
Other receivables and prepayments consisted of
the following as of December 31, 2021 and December 31, 2020:
| |
2021 | | |
2020 | |
Deposits and other receivables | |
$ | 18,430 | | |
$ | 19,027 | |
Prepayments | |
| 37,495 | | |
| 31,279 | |
| |
$ | 55,925 | | |
$ | 50,306 | |
NOTE 8 – LOAN RECEIVABLES
On February 8, 2021, the Company has provided
a $500,000 loan to an independent customer of the Company’s consultancy business. The loan was interest-bearing at 10% per annum,
repayable on February 7, 2022 and secured by the corporate guarantee of the customer. On August 5, 2021, the customer fully repaid the
loan principal and interest.
Loan interest income was $23,660 for the year
ended December 31, 2021.
NOTE 9 – ACCRUED LIABILITIES AND OTHER
PAYABLES
Accrued liabilities and other payables consisted
of the following as of December 31, 2021 and 2020:
| |
2021 | | |
2020 | |
Other payables | |
| 83,494 | | |
| 110,599 | |
Salary payable | |
| 105,294 | | |
| 229,010 | |
Accrued audit fees | |
| 130,000 | | |
| 221,000 | |
Other accrued expenses | |
| 83,370 | | |
| 57,899 | |
| |
$ | 402,158 | | |
$ | 618,508 | |
NOTE 10 – BORROWINGS
On April 20, 2020, the Company borrowed a loan
of $128,927 (HK$1,000,000) from an unrelated individual. The loan was interest-free, unsecured, and repayable on April 2021. The Company
repaid the borrowing on February 2, 2021.
NOTE 11 – COMMON STOCK
The Company was incorporated on April 21, 1999
with an authorized share capital of 25,000,000 common stock with a par value of $0.001 per share.
On March 5, 2019, the total number of authorized
shares were increased to 1,800,000,000 common stock with a par value of $0.0001 per share.
NOTE 12 – STATUTORY RESERVES
As stipulated by the relevant laws and regulations
in the PRC, company established in the PRC (the “PRC subsidiary”) is required to maintain a statutory reserve made out of
profit for the year based on the PRC subsidiary’ statutory financial statements which are prepared in accordance with the accounting
principles generally accepted in the PRC. The amount and allocation basis are decided by the director of the PRC subsidiary annually
and is not to be less than 10% of the profit for the year of the PRC subsidiary. The aggregate amount allocated to the reserves will
be limited to 50% of registered capital for certain subsidiaries. Statutory reserve can be used for expanding the capital base of the
PRC subsidiary by means of capitalization issue.
In addition, as a result of the relevant PRC
laws and regulations which impose restriction on distribution or transfer of assets out of the PRC statutory reserve, $65,911 representing
the PRC statutory reserve of the subsidiary as of December 31, 2021 and 2020, are also considered under restriction for distribution.
NOTE 13 – INCOME TAXES
(a) |
The local (United States)
and foreign components of income (loss) before income taxes were comprised of the following: |
| |
2021 | | |
2020 | |
Tax jurisdictions from: | |
| | |
| |
- Local | |
| (791,930 | ) | |
| (365,055 | ) |
- Foreign, representing: | |
| | | |
| | |
HK | |
| (53,508 | ) | |
| 45,181 | |
PRC | |
| 2,920,754 | | |
| 7,792,789 | |
Income before income taxes | |
$ | 2,075,316 | | |
$ | 7,472,915 | |
Income is subject to tax in the various countries
in which the Company operates.
The Company is incorporated in the State of Nevada
and is subject to the U.S. federal tax and state tax. The Tax Cuts and Jobs Act of (“TCJ Act”) was signed into law in December
2017, and among its many provisions, it imposed a mandatory one-time transition tax on undistributed international earnings and reduced
the U.S. corporate income tax rate to 21%, effective January 1, 2019. No provision for income taxes in the United States has been made
as the Company had no taxable income for the years ended December 31, 2021 and 2020.
The Company mainly conducts its operating business
through its subsidiaries in China, including Hong Kong.
The subsidiary incorporated in Hong Kong is subject
to Hong Kong taxation on income derived from their activities conducted in Hong Kong. Hong Kong Profits Tax has been calculated at 16.5%
of the estimated assessable profit for the years ended December 31, 2021 and 2020. The provision for Hong Kong Profits Tax is calculated
at 8.25% on assessable profits up to $257,313 (HK$2,000,000) for the years ended December 31, 2021 and 2020 and subject to a waiver of
100% of the profits tax under a cap of $1,287 (HK$10,000) for the years ended December 31, 2021 and 2020, respectively.
The subsidiary incorporated in mainland China
is governed by the Income Tax Law of the PRC concerning foreign invested enterprises and foreign enterprises and various local income
tax laws (the Income Tax Laws), and are subject to 25% tax rate throughout the periods presented.
Under the PRC EIT law, withholding income tax,
normally at a rate of 10%, is imposed on dividend paid by PRC entities out of its profits earned since January 1, 2008 to its overseas
investors (including Hong Kong investors). Deferred taxation on the undistributed profits of the PRC subsidiaries has been provided in
the consolidated financial statements to the extent that in the opinion of the directors such profits will be distributed in the foreseeable
future. Total undistributed profits of the Company’s PRC subsidiary at December 31, 2021 and 2020 were $3,579,288 and $6,269,752,
respectively. At December 31, 2021 and 2020, the Company recognized deferred tax liabilities of $357,929 and $626,975, respectively,
in respect of the undistributed profits.
Income tax expense consists of the following:
| |
2021 | | |
2020 | |
Current tax: | |
| | |
| |
Hong Kong | |
| (840 | ) | |
| 2,433 | |
China | |
| 768,717 | | |
| 1,950,407 | |
| |
| | | |
| | |
Deferred tax | |
| | | |
| | |
China | |
| 221,039 | | |
| 552,005 | |
Total | |
$ | 988,916 | | |
$ | 2,504,845 | |
The provision for income taxes consisted of the
following:
| |
2021 | | |
2020 | |
Income before income tax | |
| 2,075,316 | | |
| 7,472,915 | |
Statutory income tax rate | |
| 21 | % | |
| 21 | % |
Income tax credit computed at statutory income rate | |
| 435,816 | | |
| 1,569,312 | |
Reconciling items: | |
| | | |
| | |
Non-deductible expenses (income), net | |
| 186,907 | | |
| 78,866 | |
Effect of tax reliefs granted to Hong Kong subsidiary | |
| - | | |
| (1,289 | ) |
Under-provision in prior period | |
| 11,198 | | |
| - | |
Rate differential in different tax jurisdictions | |
| 119,238 | | |
| 305,951 | |
Deferred tax provided on dividends withholding
tax of PRC subsidiaries | |
| 235,757 | | |
| 552,005 | |
Income tax expense | |
$ | 988,916 | | |
$ | 2,504,845 | |
The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2021 and 2020 are presented below:
| |
2021 | | |
2020 | |
Deferred tax assets: | |
| | |
| |
Accelerated depreciation | |
$ | 1,778 | | |
$ | 429 | |
Deductible temporarily difference arising from other payable | |
| 13,605 | | |
| - | |
Less: Net off with deferred tax liabilities
for financial reporting purposes | |
| (15,383 | ) | |
| (429 | ) |
Net total deferred tax
assets | |
| - | | |
| - | |
| |
| | | |
| | |
Deferred tax liabilities: | |
| | | |
| | |
Undistributed profits of a PRC subsidiary | |
| 357,929 | | |
| 626,975 | |
Less: Net off with deferred tax assets
for financial reporting purposes | |
| (15,383 | ) | |
| (429 | ) |
Net total deferred tax
liabilities | |
$ | 342,546 | | |
$ | 626,546 | |
NOTE 14 – LEASE
On May 13, 2020, the Company entered into a lease
agreement for office space in Xian, the PRC with a non-cancellable lease term, commencing on May 13, 2020 and expiring on July 15, 2021.
The monthly rental payment is approximately $4,092 (RMB28,244) per month.
On June 10, 2021, the Company entered into a
lease agreement for office space in Xian, the PRC with a non-cancellable lease term, commencing on July 16, 2021 and expiring on July
15, 2024. The monthly rental payment is approximately $5,107 (RMB32,951) per month.
Operating lease expense for the years ended December
31, 2021 and 2020 were as follows:
| |
2021 | | |
2020 | |
Operating lease cost – straight
line | |
$ | 39,367 | | |
$ | 31,350 | |
Total lease expense | |
$ | 39,367 | | |
$ | 31,350 | |
The following is a schedule, by years, of maturities
of lease liabilities as of December 31, 2021:
| |
Operating leases | |
12 months ending December 31, | |
| |
2022 | |
$ | 62,212 | |
2023 | |
| 62,212 | |
2024 | |
| 31,106 | |
2025 | |
| - | |
Thereafter | |
| - | |
Total undiscounted cash flows | |
| 155,530 | |
Less: imputed interest | |
| (8,832 | ) |
Present value of lease liabilities | |
$ | 146,698 | |
Lease term and discount rate
| |
December 31, 2021 | |
Weighted-average remaining lease term - year | |
| 2.5 | |
Weighted-average discount rate (%) | |
| 4.90 | % |
NOTE 15 – CONTINGENIES AND COMMITMENTS
Contingencies
Certain conditions may exist as of the date the
consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the
Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of
any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. There
was no contingency of this type as of December 31, 2021 and 2020.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability
would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency
is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss if determinable and material would be disclosed. There was no contingency of this type
as of December 31, 2021 and 2020.
Loss contingencies considered to be remote by
management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
NOTE 16 – CERTAIN RISKS AND CONCENTRATIONS
The Company had the following customers that
individually comprised 10% or more of net revenue for the years ended December 31, 2021 and 2020:
| |
2021 | | |
2020 | |
Customer A | |
$ | 1,438,514 | | |
| 26 | % | |
$ | 4,995,641 | | |
| 54 | % |
Customer B (Note) | |
| 1,008,417 | | |
| 18 | % | |
| 1,586,867 | | |
| 17 | % |
Customer C | |
| 730,829 | | |
| 13 | % | |
| * | | |
| * | |
| * | Comprised
less than 10% of net revenue for the respective period. |
The Company had the following customers that
individually comprised 10% or more of net accounts receivable as of December 31, 2021 and 2020:
| |
2021 | | |
2020 | |
Customer A | |
$ | * | | |
| * | % | |
$ | 57,608 | | |
| 28 | % |
Customer B (Note) | |
| * | | |
| * | % | |
| 39,291 | | |
| 19 | % |
Customer C | |
| * | | |
| * | % | |
| * | | |
| *
% | |
Customer D | |
| 20,272 | | |
| 30 | % | |
| * | | |
| *
% | |
Customer E | |
| 18,408 | | |
| 27 | % | |
| 31,379 | | |
| 16 | % |
Customer F | |
| 15,864 | | |
| 23 | % | |
| * | | |
| *
% | |
| * | Comprised
less than 10% of net account receivable for the respective period. |
Note : Customer B is an ultimate shareholder
of Service Vendor C and Service Vendor E disclosed below.
The Company had the following service vendors
that individually comprised 10% or more of cost of revenue for the years ended December 31, 2021 and 2020:
| |
2021 | | |
2020 | |
Service vendor | |
$ | 579,959 | | |
| 32 | % | |
$ | * | | |
| * | |
Service vendor B | |
| 186,934 | | |
| 10 | % | |
| * | | |
| * | |
| * | Comprised
less than 10% of cost of revenue for the respective period. |
The Company had the following service vendors
that individually comprised 10% or more of accounts payable as of December 31, 2021 and December 31, 2020:
| |
2021 | | |
2020 | |
| |
| | |
| | |
| | |
| |
Service vendor B | |
$ | 49,560 | | |
| 43 | % | |
$ | * | | |
| * | |
Service vendor C (Note) | |
| 21,390 | | |
| 18 | % | |
| * | | |
| * | |
Service vendor D | |
| 19,308 | | |
| 17 | % | |
| * | | |
| * | |
Service vendor E (Note) | |
| 16,135 | | |
| 14 | % | |
| * | | |
| * | |
| * | Comprised
less than 10% of accounts payable for the respective period. |
Note: Customer B disclosed above is an ultimate
shareholder of Service Vendor C and Service Vendor E.
At December 31, 2021 and 2020, the Company’s
cash and cash equivalents included bank deposits in accounts maintained in China and Hong Kong and liquid funds in online payment platforms.
The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank
accounts.
For the credit risk related to trade accounts
receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit
losses.
NOTE 18 – SUBSEQUENT EVENTS
On March 22, 2022, the PRC subsidiary learned
that Beijing Jade Bird Culture and Art Research Institute (“Jade Bird”), the KOL agency that the PRC subsidiary works with
to coordinate digital training related service, suspended its service after receiving a notice from China National Personal Talent Training
Network (“CNPTTN”), a PRC regulatory agency for the talent training, that until further notice CNPTTN has suspended all recruitment
services using its CNPTTN’s name. As a result of the suspension, the PRC subsidiary has also suspended its digital training related
services with Jade Bird from March 22, 2022 until further notice. Jade Bird is an authorized licensee of CNPTTN. The management of the
Company consider that it is not practicable to provide a reasonable estimate of that effect until a detailed review have been completed.
For the years ended December 31, 2021 and 2020, the digital training related services with Jade Bird represented 20.9% and 0% of our
total revenue, or $1,176,515 and $0, respectively.
ENTREPRENEUR UNIVERSE BRIGHT
GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In U.S. dollars except for number of shares)
| |
September 30,
2022 | | |
December 31,
2021 | |
| |
| | |
| |
ASSETS | |
| | |
| |
CURRENT ASSETS | |
| | |
| |
Cash and
cash equivalents | |
$ | 6,330,431 | | |
$ | 7,649,129 | |
Accounts receivable | |
| 287,436 | | |
| 67,940 | |
Loan and interest receivables | |
| 983,699 | | |
| - | |
Other
receivables and prepayments | |
| 41,068 | | |
| 55,925 | |
Total
current assets | |
| 7,642,634 | | |
| 7,772,994 | |
| |
| | | |
| | |
NON-CURRENT ASSETS | |
| | | |
| | |
Plant and equipment,
net | |
| 202,431 | | |
| 281,448 | |
Operating
lease right-of-use assets, net | |
| 93,387 | | |
| 146,698 | |
Total non-current assets | |
| 295,818 | | |
| 428,146 | |
| |
| | | |
| | |
TOTAL
ASSETS | |
$ | 7,938,452 | | |
$ | 8,201,140 | |
| |
| | | |
| | |
LIABILITIES AND
STOCKHOLDERS’ EQUITY | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | - | | |
$ | 115,833 | |
Other payables and accrued
liabilities | |
| 225,119 | | |
| 402,158 | |
Contract liabilities | |
| - | | |
| 216,142 | |
Receipt in advance | |
| - | | |
| 5,161 | |
Operating lease liabilities,
current | |
| 51,119 | | |
| 59,370 | |
Tax payables | |
| 133,931 | | |
| 39,545 | |
Amount
due to a director | |
| 167,935 | | |
| 171,443 | |
Total
current liabilities | |
| 578,104 | | |
| 1,009,652 | |
| |
| | | |
| | |
NON-CURRENT LIABILITY | |
| | | |
| | |
Deferred tax liabilities | |
| 297,200 | | |
| 342,546 | |
Operating
lease liabilities, non-current | |
| 42,269 | | |
| 87,328 | |
Total
non-current liabilities | |
| 339,469 | | |
| 429,874 | |
| |
| | | |
| | |
TOTAL
LIABILITIES | |
| 917,573 | | |
| 1,439,526 | |
| |
| | | |
| | |
COMMITMENTS AND
CONTINGENCIES | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS’
EQUITY | |
| | | |
| | |
Preferred stock, par value $0.0001 per
share, 1,100,000 shares authorized, Nil (December 31, 2021: Nil) shares issued and outstanding as of September 30, 2022 | |
| - | | |
| - | |
Common stock, par value $0.0001 per share;
1,800,000,000 shares authorized, 1,701,181,423 (December 31, 2021: 1,701,181,423) shares issued and outstanding as of September 30,
2022 | |
| 170,118 | | |
| 170,118 | |
Additional paid-in capital | |
| 6,453,048 | | |
| 6,453,048 | |
Statutory reserves | |
| 65,911 | | |
| 65,911 | |
Retained earnings (accumulated
deficit) | |
| 267,621 | | |
| (357,403 | ) |
Accumulated
other comprehensive income | |
| 64,181 | | |
| 429,940 | |
Total
stockholders’ equity | |
| 7,020,879 | | |
| 6,761,614 | |
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 7,938,452 | | |
$ | 8,201,140 | |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
ENTREPRENEUR UNIVERSE BRIGHT
GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
(In U.S. dollars except for number of shares)
| |
For the three months ended
September 30, | | |
For the nine months ended
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Revenue | |
| 801,784 | | |
| 1,622,471 | | |
$ | 2,851,656 | | |
$ | 4,479,415 | |
Cost of revenue | |
| (140,009 | ) | |
| (870,967 | ) | |
| (565,820 | ) | |
| (1,289,739 | ) |
Gross profit | |
| 661,775 | | |
| 751,504 | | |
| 2,285,836 | | |
| 3,189,676 | |
Selling expenses | |
| (10,043 | ) | |
| (54,921 | ) | |
| (34,957 | ) | |
| (224,935 | ) |
General and administrative expenses | |
| (423,931 | ) | |
| (326,090 | ) | |
| (1,066,604 | ) | |
| (905,391 | ) |
Profit from operations | |
| 227,801 | | |
| 370,493 | | |
| 1,184,275 | | |
| 2,059,350 | |
Other income (expenses): | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 10,522 | | |
| 15,934 | | |
| 33,489 | | |
| 66,213 | |
Exchange gain (loss) | |
| (135,842 | ) | |
| 8,957 | | |
| (107,920 | ) | |
| (3,088 | ) |
Sundry income | |
| 1,304 | | |
| 13,956 | | |
| 110,336 | | |
| 45,816 | |
Total other income (expenses), net | |
| (124,016 | ) | |
| 38,847 | | |
| 35,905 | | |
| 108,941 | |
Income before income tax | |
| 103,785 | | |
| 409,340 | | |
| 1,220,180 | | |
| 2,168,291 | |
Income tax expense | |
| (135,784 | ) | |
| (201,789 | ) | |
| (595,156 | ) | |
| (872,063 | ) |
Net (loss) income | |
$ | (31,999 | ) | |
| 207,551 | | |
$ | 625,024 | | |
$ | 1,296,228 | |
Other comprehensive (loss) income | |
| | | |
| - | | |
| | | |
| | |
Foreign currency translation adjustment | |
| (128,843 | ) | |
| (2,946 | ) | |
| (365,759 | ) | |
| 63,036 | |
Total comprehensive (loss) income | |
$ | (160,842 | ) | |
| 204,605 | | |
$ | 259,265 | | |
$ | 1,359,264 | |
| |
| | | |
| | | |
| | | |
| | |
Net (loss) income per share - Basic and diluted | |
$ | 0.00 | * | |
| 0.00 | * | |
$ | 0.00 | * | |
$ | 0.00 | * |
Weighted average number of common shares outstanding | |
| | | |
| | | |
| | | |
| | |
- Basic and Diluted | |
| 1,701,181,423 | | |
| 1,701,181,423 | | |
| 1,701,181,423 | | |
| 1,701,181,423 | |
* |
Less than $0.01 per
share |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
ENTREPRENEUR UNIVERSE BRIGHT
GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In U.S. dollars except for number of shares)
Three and nine months ended September 30, 2021
| |
Common Stock | | |
Additional | | |
Preferred stock | | |
| | |
| | |
Accumulated Other | | |
Total | |
| |
Number of Shares | | |
Amount | | |
Paid-In Capital | | |
Number of Shares | | |
Amount | | |
Statutory Reserves | | |
Accumulated Deficit | | |
Comprehensive Income | | |
Stockholders’ Equity | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of January 1, 2021 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | (1,443,803 | ) | |
$ | 325,747 | | |
$ | 5,571,021 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 966,636 | | |
| - | | |
| 966,636 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 24,465 | | |
| 24,465 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2021 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | (477,167 | ) | |
$ | 350,212 | | |
$ | 6,562,122 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 122,041 | | |
| - | | |
| 122,041 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 41,517 | | |
| 41,517 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of June 30, 2021 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | (355,126 | ) | |
$ | 391,729 | | |
$ | 6,725,680 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 207,551 | | |
| - | | |
| 207,551 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,946 | ) | |
| (2,946 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of September 30, 2021 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | (147,575 | ) | |
$ | 388,783 | | |
$ | 6,930,285 | |
ENTREPRENEUR UNIVERSE BRIGHT
GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In U.S. dollars except for number of shares)
Three and nine months ended September 30, 2022
| |
Common Stock | | |
Additional | | |
Preferred stock | | |
| | |
(Accumulated Deficit) | | |
Accumulated Other | | |
Total | |
| |
Number of Shares | | |
Amount | | |
Paid-In Capital | | |
Number of Shares | | |
Amount | | |
Statutory Reserves | | |
Retained earnings | | |
Comprehensive Income | | |
Stockholders’ Equity | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of January 1, 2022 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | (357,403 | ) | |
$ | 429,940 | | |
$ | 6,761,614 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 391,173 | | |
| - | | |
| 391,173 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,135 | ) | |
| (5,135 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2022 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | 33,770 | | |
$ | 424,805 | | |
$ | 7,147,652 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 265,850 | | |
| - | | |
| 265,850 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (231,781 | ) | |
| (231,781 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of June 30, 2022 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | 299,620 | | |
$ | 193,024 | | |
$ | 7,181,721 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (31,999 | ) | |
| - | | |
| (31,999 | ) |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (128,843 | ) | |
| (128,843 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of September 30, 2022 | |
| 1,701,181,423 | | |
$ | 170,118 | | |
$ | 6,453,048 | | |
| - | | |
$ | - | | |
$ | 65,911 | | |
$ | 267,621 | | |
$ | 64,181 | | |
$ | 7,020,879 | |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
ENTREPRENEUR UNIVERSE BRIGHT
GROUP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In U.S. dollars)
| |
Nine
months ended September 30, | |
| |
2022 | | |
2021 | |
Cash flows from operating activities | |
| | |
| |
Net income | |
$ | 625,024 | | |
$ | 1,296,228 | |
Adjustments to reconcile net income to cash used in operating
activities: | |
| | | |
| | |
Depreciation | |
| 62,516 | | |
| 62,222 | |
Amortization of operating lease right-of-use assets | |
| 40,575 | | |
| 39,248 | |
Deferred tax | |
| (33,117 | ) | |
| (319,660 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Other receivables and prepayments | |
| 11,128 | | |
| (179,961 | ) |
Accounts receivable | |
| (244,432 | ) | |
| 95,800 | |
Accounts payable | |
| (111,527 | ) | |
| 431,690 | |
Other payables and accrued liabilities | |
| (159,123 | ) | |
| (284,226 | ) |
Tax payables | |
| 106,699 | | |
| (445,713 | ) |
Contract liabilities | |
| (208,106 | ) | |
| 4,158 | |
Receipt in advance | |
| (4,969 | ) | |
| (34,318 | ) |
Operating lease liabilities | |
| (40,574 | ) | |
| (43,614 | ) |
Net cash generated from operating activities | |
| 44,094 | | |
| 621,854 | |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Purchase of property, plant and equipment | |
| (9,746 | ) | |
| - | |
Acquisition of debt products | |
| - | | |
| (2,781,482 | ) |
Redemption of debt products | |
| - | | |
| 5,872,017 | |
Loan receivables to unrelated third parties | |
| (1,060,394 | ) | |
| (499,554 | ) |
Loan to a related company | |
| - | | |
| (123,621 | ) |
Repayment from a related company | |
| - | | |
| 312,401 | |
Repayment from a unrelated third party | |
| - | | |
| 499,554 | |
Net cash (used in) generated from investing
activities | |
| (1,070,140 | ) | |
| 3,279,315 | |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Repayment of borrowings from a director | |
| (3,490 | ) | |
| (128,751 | ) |
Advance from a director | |
| - | | |
| 67,882 | |
Net cash used in financing activities | |
| (3,490 | ) | |
| (60,869 | ) |
| |
| | | |
| | |
Effect of exchange rates on cash | |
| (289,162 | ) | |
| 37,171 | |
| |
| | | |
| | |
Net (decrease) increase in cash and cash equivalents | |
| (1,318,698 | ) | |
| 3,877,471 | |
Cash and cash equivalents at beginning
of period | |
| 7,649,129 | | |
| 3,846,470 | |
Cash and cash equivalents at end
of period | |
$ | 6,330,431 | | |
$ | 7,723,941 | |
| |
| | | |
| | |
Supplemental cash flow information | |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Income taxes | |
$ | 369,878 | | |
$ | 1,115,659 | |
Withholding tax paid | |
$ | 151,485 | | |
$ | 517,145 | |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
ENTREPRENEUR UNIVERSE BRIGHT
GROUP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2022 AND 2021
(UNAUDITED)
(In U.S. dollars except for number of shares)
NOTE 1 – ORGANIZATION AND BUSINESS
Entrepreneur Universe Bright Group (“EUBG”
or the “Company”) was incorporated in the State of Nevada on April 21, 1999 under the name LE GOURMET CO, INC. Since its
inception, the Company had the following name changes: On March 17, 2003, to Estelle Reyna, Inc.; on September 11, 2003 to Karma Media,
Inc.; on July 8, 2005 to Pitboss Entertainment, Inc.; on March 3, 2006 to US Energy Holdings, Inc.; on December 20, 2006 to Lonestar
Group Holdings Company; on November 9, 2007 to Guardian Angel Group, Inc.; on May 18, 2011 to REE International, Inc.; and on March 23,
2020, the Company filed a Certificate of Amendment to the Nevada Secretary of State amending Article I of its Articles of Incorporation
changing the Company’s name to Entrepreneur Universe Bright Group, with an effective date of April 3, 2020.
On May 15, 2019, MXD Inc., a private company
incorporated in the State of Colorado, entered into certain Sale and Purchase Agreements (the “Stock Purchase Agreements”),
with Tethys Fountain Limited, New Finance Consultants Limited, Jia Wang, Jianyong Li, Haijun Jiang, Xuebin Wu and Fanfan Chen (collectively,
the “Purchasers”), to transfer all its 1,590,605,141 shares of common stock of the Company to the Purchasers in exchange
for an aggregate purchase price of $135,000. Upon the closing of the Stock Purchase Agreements, the Purchasers collectively owned 93.5%
of the issued and outstanding shares of the Company’s common stock, and Tethys Fountain Limited became the controlling shareholder
of the Company.
The Company currently trades on the Pink Sheet
under the symbol “EUBG”. The Company’s fiscal year end is December 31st.
The Company, through its wholly owned subsidiaries,
mainly engages in provision of digital marketing consultation services in Hong Kong and China.
Company
name |
|
Place/date
of incorporation |
|
Principal
activities |
1. Entrepreneurship World Technology Holding Group
Company Limited |
|
Hong Kong/May 15, 2019 |
|
Provision of consulting and promotional services |
|
|
|
|
|
2. Xian Yunchuang Space Information Technology Co.,
Ltd. |
|
The People’s Republic of China (“PRC”)/October
18, 2019 |
|
Provision of digital marketing consultation services |
|
|
|
|
|
3. Xian Yunchuang Space Information Technology Co.,
Ltd, BaiYin Branch |
|
PRC/May 7, 2020 |
|
Provision of digital marketing consultation services |
COVID-19
In early January of 2020, a novel coronavirus
(“COVID-19”) outbreak took place in Wuhan, China. Subsequently, it has spread rapidly to Asia and other parts of the world.
The COVID-19 outbreak has resulted in widespread economic disruptions in China, as well as stringent government measures by the Chinese
government to contain its transmissions including quarantines, travel restrictions, and temporary closures of non-essential businesses
in China and elsewhere. The outbreak in China mainly occurred in the first quarter of 2020, and it gradually stabilized and business
activities started to resume under the guidance and support of the government since late second quarter of 2020.
As of December 31, 2020, the COVID-19 outbreak
in China appears to be generally under control and business activities have recovered on the whole. In addition, the Company resumed
contacting potential customers as of June 2020, and the aforementioned negative impact has been further mitigated since the third quarter
of 2020, when the outbreak became more stabilized in China and other regions in the world. However, sporadic cases continue to be found
during the first half year of 2021 in China. For example, a new Delta variant of COVID-19 had been found in certain cities in China in
the second quarter of 2021, which may cause another outbreak, thus increasing risks and possible further disruption to businesses. Therefore,
certain of the Company’s consulting services were suspended from April 2021 to August 2021. We have resumed these consulting businesses
from August 2021 in order to maintain diversified services for the Company’s customers.
As of December 31, 2021 and September 30, 2022,
the COVID-19 pandemic continues to be dynamic, and near-term challenges across the economy remain. Although vaccines are now being distributed
and administered across many parts of the world, new variants of the virus have emerged and may continue to emerge that have shown to
be more contagious. We continue to adhere to applicable governmental and commercial restrictions and to work to mitigate the impact of
COVID-19 on our employees, customers, communities, liquidity and financial position. The extent to which the COVID-19 outbreak may impact
the company’s business, operations and financial results from this point forward will depend on numerous evolving factors that
the company cannot accurately predict. Those factors include the following: the duration and scope of the pandemic; governmental, business
and individuals’ actions in response to the pandemic in the future; and any other further development of the COVID-19 outbreak.
Substantially all of the Company’s revenues
and operations are concentrated in China. Consequently, our results of operations and financial performances have been affected since
2020 and into the first half of 2022. Due to the government measures taken to contain COVID-19, the offline activities of the Company’s
PRC subsidiary were restricted from late January to May 2020, resulting in cancellations or postponements of the marketing efforts of
our customers. In addition, due to widespread economic disruptions during the outbreak, demand for the Company’s consulting services
by small and medium-sized enterprises were also adversely affected. Specifically, as a result of government mandated closures of non-essential
business in China, many of the Company’s customers’ business were suspended while others permanently closed their businesses.
From December 22, 2021 to January 24, 2022, Xian city, the PRC, went into lockdown following a coronavirus outbreak that officials attributed
to the delta variant. From April 16, 2022 to April 19, 2022, the city was under temporary controls of social activities after reporting
more than 40 infections in half month. This affected both the Company’s digital marketing consulting services and our KOL Training
Related Services.
The Company achieved an operating revenue of
$2,851,656 and $4,479,415 for the nine months ended September 30, 2022 and 2021, respectively, representing a decrease of approximately
36.3% from the prior period. For the three months ended September 30, 2022 and 2021, the Company operating revenue were $801,784 and
$1,622,471, respectively, representing a decrease of 50.6%. COVID-19 has and may continue to adversely affect the Company’s financial
and business performance.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“U.S.
GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial
reporting.
The interim condensed consolidated financial
information as of September 30, 2022 and for the three and nine months periods ended September 30, 2022 and 2021 have been prepared without
audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in
consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
The interim condensed consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto,
included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, previously filed with the SEC
on April 15, 2022.
In the opinion of management, all adjustments
(which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s interim
condensed consolidated financial position as of September 30, 2022, its interim condensed consolidated results of operations and cash
flows for the three and nine months period ended September 30, 2022 and 2021, as applicable, have been made. The interim results of operations
are not necessarily indicative of the operating results for the full fiscal year or any future periods.
During the nine months ended September 30, 2022,
the Company experienced (and continues to experience) adverse impacts of novel coronavirus (COVID-19) and the related public health orders.
The Company expects that the impact of the COVID-19 outbreak on China and world economies will continue to have a material adverse impact
on the demand for the Company’s business. Because of the significant uncertainties surrounding the COVID-19 pandemic, the extent
of the business interruption and the related financial impact cannot be reasonably estimated at this time.
Use of Estimates
The preparation of these financial statements
in conformity with U.S. GAAP requires management of the Company to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, the Company evaluates its estimates
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 for 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. Identified below are the accounting
policies that reflect the Company’s most significant estimates and judgments, and those that the Company believes are the most
critical to fully understanding and evaluating its condensed consolidated financial statements.
The COVID-19 pandemic has created and
may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns,
depress demand for the Company’s business, and adversely impact its results of operations. During the nine months ended September
30, 2022, the Company faced increasing uncertainties around its estimates of revenue collectability and accounts receivable credit losses.
The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact
associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional information emerges, and
such changes are recognized or disclosed in its condensed consolidated financial statements.
Recently Adopted Accounting Standards
In May 2021, the FASB issued ASU 2021-04, Earnings
Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic
718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain
Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance
as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written
call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a
new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified
or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model
that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination,
debt modification, and modifications unrelated to equity issuance and debt origination or modification). The Company applied the new
standard beginning January 1, 2022. The adoption of ASU 2021-04 did not have any impact on the Company’s condensed consolidated
financial statement presentation or disclosures.
In November 2021, the FASB issued ASU 2021-10,
Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires certain annual
disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.
The Company applied the new standard beginning January 1, 2022. The adoption of this guidance did not have a material impact on the Company’s
condensed consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB
issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires entities to measure
all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable
and supportable forecasts. ASU 2016-13 replaces the existing incurred loss model and is applicable to the measurement of credit losses
on financial assets measured at amortized cost. ASU 2016-13 is to be adopted on a modified retrospective basis. As a smaller reporting
company, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. The
Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its condensed consolidated financial statement
presentations and disclosures. In March 2022, the FASB issued ASU 2022-02, Topic 326. The ASU eliminates the accounting guidance for
trouble debt restructurings by creditors in Subtopic 310-40, and enhances the disclosure requirements for modifications of loans to borrowers
experiencing financial difficulty. Additionally, the ASU requires disclosure of gross writeoffs of receivables by year of origination
for receivables within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. This ASU is
effective for periods beginning after December 15, 2022. The Company is currently evaluating the impact that the adoption of ASU 2016-13
and ASU 2022-02 will have on its condensed consolidated financial statement presentations and disclosures.
Other accounting standards that have been issued
or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a
material impact on the Company’s condensed consolidated financial statements upon adoption.
Basis of Consolidation and Noncontrolling Interests
The condensed consolidated financial statements
include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within
the Company have been eliminated upon consolidation.
A subsidiary is an entity in which (i) the
Company directly or indirectly controls more than 50% of the voting power; or (ii) the Company has the power to appoint or remove
the majority of the members of the board of directors or to cast a majority of votes at the meeting of the board of directors or to govern
the financial and operating policies of the investee pursuant to a statute or under an agreement among the shareholders or equity holders.
Leases
The Company determines if an arrangement is a
lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease
payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily
determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the
commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”) assets
represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of
the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. The Company
elected the package of practical expedients permitted under the transition guidance to combine the lease and non-lease components as
a single lease component for operating leases associated with the Company’s office space lease, and to keep leases with an initial
term of 12 months or less off the balance sheet and recognize the associated lease payments in the condensed consolidated statements
of income on a straight-line basis over the lease term.
ROU assets are reviewed for impairment when indicators
of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property,
Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.
ROU assets are tested for impairment individually
or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities.
An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable
cash flows are largely independent of the cash flows of other groups of assets and liabilities.
The Company recognized no impairment of ROU assets
as of September 30, 2022 and December 31, 2021.
The operating lease is included in operating
lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current on the Company’s condensed
consolidated balance sheets.
Cash and Cash Equivalents
For purposes of the statement of cash flows,
the Company considers cash, money market funds, investments in interest bearing demand deposit accounts, time deposits and all highly
liquid investments placed with banks or other financial institutions with an original maturity of three months or less to be cash equivalents.
As of September 30, 2022, cash held in accounts
managed by online payment platforms such as Alipay and WeChat Pay amounted to $599 (as at December 31, 2021: $161,188), which have been
classified as cash and cash equivalents in the condensed consolidated balance sheets.
Accounts receivable
Accounts receivable are recorded at the invoiced
amount, net of allowances for doubtful accounts and sales returns. The allowance for doubtful accounts is the Company’s best estimate
of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based
on historical write-off experience, customer specific facts and economic conditions.
Outstanding accounts receivable balances are
reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote.
Plant and equipment
Plant and equipment are recorded at cost less
accumulated depreciation and accumulated impairment. Depreciation is computed using the straight-line method over the estimated useful
lives of the assets.
| |
Estimated useful lives
(years) | |
Motor vehicle | |
| 4
– 5 | |
Office equipment | |
| 3 | |
The gain or loss on the disposal of plant and
equipment is the difference between the net sales proceeds and the lower of the carrying value or fair value less cost to sell the relevant
assets and is recognized in general and administrative expenses in the condensed consolidated statements of comprehensive income.
Impairment of Long-lived Assets
In accordance with ASC 360-10-35, we review the
carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an
asset may not be recoverable. The Company assesses the recover-ability of the assets based on the non-discounted future cash flows the
assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from
the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset.
If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted
cash flows approach or, when available and appropriate, to comparable market values. No impairment has been recorded by the Company for
the three and nine months ended September 30, 2022 and 2021.
Revenue Recognition
The Company recognizes revenues when its customer
obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for
those goods. The Company recognizes revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s)
with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance
obligation.
The Company evaluates if it is a principal or
an agent in a transaction to determine whether revenue should be recorded on a gross or net basis. The Company is acting as the principal
if it obtains control over the goods and services before they are transferred to customers. When the Company is primarily obligated in
a transaction, is generally subject to inventory risk, has latitude in establishing prices, or has several but not all of these indicators,
the Company acts as the principal and revenue is recorded on a gross basis. When the Company is not primarily obligated in a transaction,
does not generally bear the inventory risk and does not have the ability to establish the price, the Company acts as the agent and revenue
is recorded on a net basis
The Company derives its revenue primarily from
net transaction services, including consultancy services, sourcing and marketing services, and digital training related services.
Consultancy services
The Company generates the majority of its revenues
by providing consulting services to its clients. Most of its consulting service contracts are based on one of the following types of
arrangements:
Performance-based arrangements represent
forms of variable consideration determined by pre-established fixed rates. In these arrangements, the Company’s fees are based
on the attainment of contractually defined objectives with our client, such as assisting the client in achieving a specific business
objective (e.g. end customer placed an order to buy a product or enrolment of a course, or improve the performance quality and profitability
of our client’s livestream performers). The Company is entitled a fixed rate on revenue generated by the client that are related
to the scope of respective consultancy services upon client acceptance on the services provided.
Fixed-fee arrangements require the client
to pay a pre-established fee in exchange for a pre-determined set of professional services. Generally, the client agrees to pay a fixed
fee prior to contract inception. The Company recognizes revenues for its professional services rendered under these fixed-fee billing
arrangements monthly over the specified contract term.
Sourcing and marketing services
The Company provides agency-based sourcing and
digital marketing services to connect marketplace operators and merchants. Most of its sourcing and marketing services are based on one
of the following types of arrangements:
Agency-based sourcing services represents
product procurement on behalf of marketplace operators. The Company recognized revenues from agency-based sourcing at a fixed rate on
the value of goods that are sourced and delivered to the ultimate customers by the merchants. The Company reports revenues from these
transactions on a net basis because the performance obligation is to facilitate a transaction between marketplace operators and merchants,
for which the Company did not obtain the control over the products before passing on to the end customers. The Company is not primarily
responsible for fulfilling the promise and not exposed to inventory risk.
Digital marketing services are provided
to the marketplace to promote designated products or services through social medial influencers engaged by the Company. The Company is
entitled to a fixed rate on the revenue generated by the marketplace that are related to the designated products or services.
The post-sale services, goods return and other
kinds of product issue are responsibilities of the merchants. Upon successful delivery to ultimate customers by the merchants, there
is no unfulfilled obligation that could affect the marketplace operators’ and merchants’ acceptance of the services provided.
The acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.
Digital training related services
Fixed-fee digital training related services
are provided to clients who are interested to conduct live-broadcasting business through social medias. The Company require the clients
to pay a pre-established fee in exchange for the services. Revenues are recognized when promised services (e.g. preliminary consulting
work, setting up an e-learning account and delivery of learning materials) are delivered to the clients.
The Company derived services revenues of $702,371
and $1,515,371 for the three months ended September 30, 2022 and 2021, respectively; and $2,207,029 and $4,268,054 for the nine months
ended September 30, 2022 and 2021, respectively, from provision of certain consultancy services and sourcing and marketing services through
the program application (“App”) platform managed by a related company, Xi’an Chuangyetianxia Network Technology Co.,
Ltd. (“Xian CNT”). The Company CEO, Mr. Tao, has significant influence over Xian CNT.
Practical expedients and exemption
The Company has not occurred any costs to obtain
contracts, and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one
year or less.
Other service income is earned when services
have been rendered.
Revenue by major service line
| |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Consultancy services | |
| 699,257 | | |
| 1,554,834 | | |
| 2,211,307 | | |
| 4,362,581 | |
Sourcing and marketing services | |
| 102,527 | | |
| 67,637 | | |
| 372,475 | | |
| 116,834 | |
Digital training related services | |
| - | | |
| - | | |
| 267,874 | | |
| - | |
| |
$ | 801,784 | | |
$ | 1,622,471 | | |
$ | 2,851,656 | | |
$ | 4,479,415 | |
Revenue by recognition over time vs point in
time
| |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Revenue recognized at a point in time | |
| 801,784 | | |
| 1,622,471 | | |
| 2,851,656 | | |
| 4,479,415 | |
Revenue recognized over time | |
| - | | |
| - | | |
| - | | |
| - | |
| |
$ | 801,784 | | |
$ | 1,622,471 | | |
$ | 2,851,656 | | |
$ | 4,479,415 | |
Revenue recorded on a gross vs net basis
| |
Three
months ended September 30, | | |
Nine
months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Revenue recorded on a gross basis | |
| 699,257 | | |
| 1,554,834 | | |
| 2,479,181 | | |
| 4,362,581 | |
Revenue recorded on a net basis | |
| 102,527 | | |
| 67,637 | | |
| 372,475 | | |
| 116,834 | |
| |
$ | 801,784 | | |
$ | 1,622,471 | | |
$ | 2,851,656 | | |
$ | 4,479,415 | |
Contract liabilities
The Company’s contract liabilities consist
of deferred revenue associated with consultancy fees and provision of fixed-fee training related services. The table below presents the
activity of the deferred consultancy services revenue during the nine months ended September 30, 2022 and December 31, 2021, respectively:
| |
September 30, 2022 | | |
December 31, 2021 | |
Balance at beginning of period | |
$ | 216,142 | | |
$ | - | |
Service fees collected | |
| 224,435 | | |
| 1,377,349 | |
Refunded | |
| (152,888 | ) | |
| - | |
Service revenue earned | |
| (267,874 | ) | |
| (1,176,515 | ) |
Exchange realignment | |
| (19,815 | ) | |
| 15,308 | |
Balance at end of period | |
$ | - | | |
$ | 216,142 | |
Cost of revenue
Cost of revenues consists primarily of employee
compensation, service fees, agency fees, and the related IT expenses, which are directly attributable to the revenues
Employee benefits
Full time employees of the Company in the PRC
participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing
fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC subsidiary of the Company
make contributions to the government for these benefits based on certain percentages of the employees’ salaries, up to a maximum
amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions made. Total amounts
of such employee benefit expenses, which were expensed as incurred, were approximately $17,744 and $31,273 for the three months ended
September 30, 2022 and 2021, respectively; and $47,963 and $78,957 for the nine months ended September 30, 2022 and 2021, respectively.
Foreign Currency and Foreign Currency Translation
The reporting currency of the Company is the
United States dollar (“US dollar”). The financial records of the Company’s PRC operating subsidiaries are maintained
in their local currency, the Renminbi (“RMB”), which is the functional currency. The financial records of the Company’s
Hong Kong operating subsidiary are maintained in its local currency, the Hong Kong Dollar (“HKD”), which is the functional
currency. Assets and liabilities of the subsidiaries are translated into the reporting currency at the exchange rates at the balance
sheet date, equity accounts are translated at historical exchange rates, and income and expense items are translated using the average
rate for the period. The translation adjustments are recorded in accumulated other comprehensive loss under shareholders’ equity.
Monetary assets and liabilities denominated in
currencies other than the applicable functional currencies are translated into the functional currencies at the prevailing rates of exchange
at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable functional currencies at historical
exchange rates. Transactions in currencies other than the applicable functional currencies during the period are converted into the functional
currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction gains and losses are recognized in the
condensed consolidated statements of operations.
RMB is not a fully convertible currency. All
foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”)
or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreign exchange transactions are
the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into US
dollars has been made at the following exchange rates for the respective periods:
Nine months ended September 30, 2022 |
|
|
Balance sheet, except for equity
accounts |
|
RMB 7.1160 to
US$1.00 |
Income statement and cash flows |
|
RMB 6.6013 to US$1.00 |
|
|
|
Nine months ended September 30, 2021 |
|
|
Balance sheet, except
for equity accounts |
|
RMB
6.4466 to US$1.00 |
Income statement and
cash flows |
|
RMB
6.4714 to US$1.00 |
During the periods presented, HKD is pegged to
the U.S. dollar within a narrow range.
Income Taxes
Income taxes are accounted for using an asset
and liability approach which requires the recognition of income taxes payable or refundable for the current period and deferred tax liabilities
and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.
Deferred income taxes are determined based on the differences between the accounting basis and the tax basis of assets and liabilities
and are measured using the currently enacted tax rates and laws. Deferred tax assets are reduced by a valuation allowance, if based on
available evidence, it is considered that it is more likely than not that some portion of or all of the deferred tax assets will not
be realized. In making such determination, the Company considers factors including future reversals of existing taxable temporary differences,
future profitability, and tax planning strategies. If events were to occur in the future that would allow the Company to realize more
of its deferred tax assets than the presently recorded net amount, an adjustment would be made to the deferred tax assets that would
increase income for the period when those events occurred. If events were to occur in the future that would require the Company to realize
less of its deferred tax assets than the presently recorded net amount, an adjustment would be made to the valuation allowance against
deferred tax assets that would decrease income for the period when those events occurred. Significant management judgment is required
in determining income tax expense and deferred tax assets and liabilities.
The Company conducts business in the PRC and
Hong Kong and is subject to tax in these jurisdictions. As a result of its business activities, the Company will file tax returns that
are subject to examination by the respective tax authorities.
Uncertain Tax Positions
Management reviews regularly the adequacy of
the provisions for taxes as they relate to the Company’s income and transactions. In order to assess uncertain tax positions, the
Company applies a more likely than not threshold and a two-step approach for tax position measurement and financial statement recognition.
For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon
settlement. As of September 30, 2022 and December 31, 2021, the Company had not recorded any liability for uncertain tax positions. In
subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.
Net (loss) income per Share of Common Stock
The Company has adopted ASC Topic 260, “Earnings
per Share,” (“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying
financial statements, basic earnings (loss) per share is computed by dividing net income by the weighted average number of shares of
common stock outstanding during the period.
| |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Net (loss)
income | |
$ | (31,999 | ) | |
$ | 207,551 | | |
$ | 625,024 | | |
$ | 1,296,228 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common stock outstanding | |
| | | |
| | | |
| | | |
| | |
- basic and diluted | |
| 1,701,181,423 | | |
| 1,701,181,423 | | |
| 1,701,181,423 | | |
| 1,701,181,423 | |
| |
| | | |
| | | |
| | | |
| | |
Net (loss) income per share | |
| | | |
| | | |
| | | |
| | |
- basic and diluted | |
$ | 0.00 | * | |
$ | 0.00 | * | |
$ | 0.00 | * | |
$ | 0.00 | * |
* |
Less than $0.01 per share |
The calculation of basic net (loss) income per
share of common stock is based on the net (loss) income for the three and nine months ended September 30, 2022 and 2021 and the weighted
average number of ordinary shares outstanding.
For the three and nine months ended September
30, 2022 and 2021, the Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
Segments
The Company uses the “management approach”
in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s
chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s
reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue of
marketing consultation services and operating results of the Company and, as such, the Company has determined that the Company has one
operating segment (provision of consulting, sourcing and marketing services, and digital training related services in China) as defined
by ASC Topic 280 “Segment Reporting”.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents.
As of September 30, 2022 and December 31, 2021,
$6,330,431 and $7,649,129 of the Company’s cash and cash equivalents, respectively were held at financial institutions and online
payment platforms located in the PRC and Hong Kong that management believes to be of high credit quality. The Company has not experienced
any losses on cash and cash equivalents to date. The Company does not require collateral or other securities to support financial instruments
that are subject to credit risk.
The Company operates principally in the PRC and
Hong Kong and grants credit to its customers in these geographic regions. Although the PRC is economically stable, it is always possible
that unanticipated events in foreign countries could disrupt the Company’s operations.
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement and
Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable
inputs when measuring fair value. Certain current assets and current liabilities are financial instruments. Management believes their
carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments
and their expected realization and, if applicable, their current interest rates are equivalent to interest rates currently available.
The three levels of valuation hierarchy are defined 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 liability, 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 measurement. |
Valuation of debt products depends upon a number
of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, and other relevant
terms of the debt. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair
market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing the Company’s
debt investments. The fair value of these debt products classified as Level 2 are established by reference to the prices quoted by respective
fund administrators.
The carrying amounts of financial assets and
liabilities, such as cash and cash equivalents, accounts receivable, other receivables, loan to a related company, accounts payable and
other payables, amounts due to a director and a shareholder and borrowings approximate their fair values because of the short maturity
of these instruments or the rate of interest of these instruments approximate the market rate of interest.
Comprehensive Income
Comprehensive income is defined as the change
in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments
from owners and distributions to owners. Accumulated other comprehensive income includes cumulative foreign currency translation adjustment.
NOTE 3 – PLANT AND EQUIPMENT
Plant and equipment as of September 30, 2022
and December 31, 2021 are summarized below:
| |
September 30, 2022 | | |
December 31, 2021 | |
Motor vehicle | |
$ | 357,927 | | |
$ | 400,732 | |
Office equipment | |
| 9,041 | | |
| - | |
| |
| 366,968 | | |
| 400,732 | |
Less: Accumulated depreciation | |
| (164,537 | ) | |
| (119,284 | ) |
Plant and equipment, net | |
$ | 202,431 | | |
$ | 281,448 | |
Depreciation expenses,
classified as operating expenses, were $20,194 and $20,743 for the three months ended September 30, 2022 and 2021, respectively; and
$62,516 and $62,222 for the nine months ended September 30, 2022 and 2021, respectively.
NOTE 4 – RELATED PARTY TRANSACTIONS
The following is the list of the related parties
with which the Company had transactions for the three and nine months ended September 30, 2022 and 2021:
|
(a) |
Baiyin Wujinxia Cultural
Communication Co., Ltd. (“Baiyin Wujinxia”) – a company incorporated in the PRC, the Company CEO, Mr Tao held 60%
equity interest from October 31, 2019 to January 25, 2021 and on January 26, 2021 fully transferred to Ms. Hanye Chang, spouse of
Mr. Guolin Tao. |
|
(b) |
Xian Yuanchuang Tribe Technology
Co., Ltd. (“Yuanchuang Tribe”)– a company incorporated in the PRC, Ms. Hanyu Chang, spouse of Mr. Guolin Tao, indirectly
held 29.99% equity interest from November 29, 2019 to February 10, 2021. |
|
(c) |
Xian Yuanchuang Federation
Information Technology Co., Ltd. (“Yuanchuang Federation”)- a company incorporated in the PRC, Yuanchuang Tribe held
100% equity interest December 30, 2019 to September 10, 2021. |
Related party transaction
| |
Three months ended September
30, | | |
Nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Interest income | |
| | | |
| | | |
| | | |
| | |
Baiyin Wujinxia | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 5,777 | |
On November 1, 2019, the Company entered into
a loan agreement with Baiyin Wujinxia to loan a total amount of $305,804 (RMB2,000,000) for a period from November 1, 2019 to September
30, 2021. The loan was unsecured and bears fixed interest at 4.75% per annum. The outstanding amount (including loan interest) of $186,796
as at December 31, 2020 was fully repaid on June 18, 2021 and the loan agreement was early terminated on the same date.
Interest income was charged at an interest rate
agreed by both parties in accordance with a loan agreement.
Related party balances
| |
September 30, 2022 | | |
December 31, 2021 | |
Amount due to a director | |
| | |
| |
- Mr. Guolin Tao | |
$ | 167,935 | | |
$ | 171,443 | |
| |
| | | |
| | |
Accounts payable | |
| | | |
| | |
- Yuanchuang Tribe | |
$ | - | | |
$ | 16,135 | |
- Yuanchuang Federation | |
| - | | |
| 21,390 | |
The amount due to director as of September 30,
2022 and December 31, 2021 is unsecured, non-interest bearing and repayable on demand.
On June 1, 2021, the Company entered into IT
consultation agreements with Yuanchuang Tribe and Yuanchuang Federation, respectively. The outstanding amounts as at December 31, 2021
are subsequently settled in January 2022.
NOTE 5 – ACCOUNTS RECEIVABLE, NET
Accounts receivable as of September 30, 2022
and December 31, 2021:
| |
September 30, 2022 | | |
December 31, 2021 | |
Account receivables | |
$ | 287,436 | | |
$ | 67,940 | |
Less: Allowance for doubtful accounts | |
| - | | |
| - | |
| |
$ | 287,436 | | |
$ | 67,940 | |
NOTE 6 – OTHER RECEIVABLES AND PREPAYMENTS
Other receivables and prepayments consisted of
the following as of September 30, 2022 and December 31, 2021:
| |
September 30, 2022 | | |
December 31, 2021 | |
Deposits and other receivables | |
$ | 25,297 | | |
$ | 18,430 | |
Prepayments | |
| 15,771 | | |
| 37,495 | |
| |
$ | 41,068 | | |
$ | 55,925 | |
NOTE 7 – LOAN RECEIVABLES
On September 29, 2022, the Company has provided
loans of $983,699 to two independent vendors of the Company’s consultancy business. The loans were interest-bearing at 7% per annum,
repayable on October 28, 2022 and secured by the personal guarantee of these customers. On October 18, 2022, the borrowers fully repaid
the loan principal and interest.
On February 8, 2021, the Company has provided
a $500,000 loan to an independent customer of the Company’s consultancy business. The loan was interest-bearing at 10% per annum,
repayable on February 7, 2022 and secured by the corporate guarantee of the customer. On August 5, 2021, the customer fully repaid the
loan principal and interest.
Loan interest income were $0 and $4,093 for the three
months ended September 30, 2022 and 2021, respectively; and $0 and $23,678 for the nine months ended September 30, 2022 and 2021, respectively.
NOTE 8 –OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities and consisted
of the following as of September 30, 2022 and December 31, 2021:
| |
September 30, 2022 | | |
December 31, 2021 | |
Other payables | |
$ | 84,350 | | |
$ | 83,494 | |
Salary payable | |
| 64,757 | | |
| 105,294 | |
Accrued audit fees | |
| 25,000 | | |
| 130,000 | |
Other accrued expenses | |
| 51,012 | | |
| 83,370 | |
| |
$ | 225,119 | | |
$ | 402,158 | |
NOTE 9 – STATUTORY RESERVES
As stipulated by the relevant laws and regulations
in the PRC, company established in the PRC (the “PRC subsidiary”) is required to maintain a statutory reserve made out of
profit for the year based on the PRC subsidiary’ statutory financial statements which are prepared in accordance with the accounting
principles generally accepted in the PRC. The amount and allocation basis are decided by the director of the PRC subsidiary annually
and is not to be less than 10% of the profit for the year of the PRC subsidiary. The aggregate amount allocated to the reserves will
be limited to 50% of registered capital for certain subsidiaries. Statutory reserve can be used for expanding the capital base of the
PRC subsidiary by means of capitalization issue.
In addition, as a result of the relevant PRC
laws and regulations which impose restriction on distribution or transfer of assets out of the PRC statutory reserve, $65,911 representing
the PRC statutory reserve of the subsidiary as of September 30, 2022 and December 31, 2021, are also considered under restriction for
distribution.
NOTE 10 – INCOME TAXES
(a) |
The local
(United States) and foreign components of income (loss) before income taxes were comprised of the following: |
| |
Three
months ended September 30, | | |
Nine
months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Tax jurisdictions from: | |
| | |
| | |
| | |
| |
- Local | |
$ | (228,524 | ) | |
$ | (156,168 | ) | |
$ | (481,680 | ) | |
$ | (344,756 | ) |
- Foreign, representing: | |
| | | |
| | | |
| | | |
| | |
HK | |
| (175,426 | ) | |
| (3,278 | ) | |
| (195,339 | ) | |
| (26,845 | ) |
PRC | |
| 507,735 | | |
| 568,786 | | |
| 1,897,199 | | |
| 2,539,892 | |
| |
| | | |
| | | |
| | | |
| | |
Income before income taxes | |
$ | 103,785 | | |
$ | 409,340 | | |
$ | 1,220,180 | | |
$ | 2,168,291 | |
Income is subject to tax in the various countries
in which the Company operates.
The Company is incorporated in the State of Nevada
and is subject to the U.S. federal tax and state tax. The Tax Cuts and Jobs Act of (“TCJ Act”) was signed into law in December
2017, and among its many provisions, it imposed a mandatory one-time transition tax on undistributed international earnings and reduced
the U.S. corporate income tax rate to 21%, effective January 1, 2019. No provision for income taxes in the United States has been made
as the Company had no taxable income for the three and nine months ended September 30, 2022 and 2021.
The Company mainly conducts its operating business
through its subsidiaries in China, including Hong Kong.
The subsidiary incorporated in Hong Kong is subject
to Hong Kong taxation on income derived from their activities conducted in Hong Kong. Hong Kong Profits Tax has been calculated at 16.5%
of the estimated assessable profit for the three and nine months ended September 30, 2022 and 2021. The provision for Hong Kong Profits
Tax is calculated at 8.25% on assessable profits up to $281,057 (HK$2,000,000) for the three and nine months ended September 30, 2022
and 2021 and subject to a waiver of 100% of the profits tax under a cap of $1,405 (HK$10,000) for the three and nine months ended September
30, 2022 and 2021, respectively.
The subsidiary incorporated in mainland China
is governed by the Income Tax Law of the PRC concerning foreign invested enterprises and foreign enterprises and various local income
tax laws (the Income Tax Laws), and are subject to 25% tax rate throughout the periods presented.
Under the PRC EIT law, withholding income tax,
normally at a rate of 10%, is imposed on dividend paid by PRC entities out of its profits earned since January 1, 2008 to its overseas
investors (including Hong Kong investors). Deferred taxation on the undistributed profits of the PRC subsidiaries has been provided in
the condensed consolidated financial statements to the extent that in the opinion of the directors such profits will be distributed in
the foreseeable future. Total undistributed profits of the Company’s PRC subsidiary at September 30, 2022 and December 31, 2021
were $3,123,352 and $3,579,288, respectively. At September 30, 2022 and December 31, 2021, the Company recognized deferred tax liabilities
of $312,335 and $357,929, respectively, in respect of the undistributed profits.
Income tax (credit) expense consists of the following:
| |
Three
months ended September 30, | | |
Nine
months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Current tax: | |
| | |
| | |
| | |
| |
Hong Kong | |
| - | | |
| (841 | ) | |
| - | | |
| (841 | ) |
China | |
$ | 127,727 | | |
$ | 154,923 | | |
$ | 463,206 | | |
$ | 676,433 | |
| |
| | | |
| | | |
| | | |
| | |
Deferred tax | |
| | | |
| | | |
| | | |
| | |
Hong Kong | |
| 8,641 | | |
| 55,683 | | |
| 133,454 | | |
| 206,359 | |
China | |
| (584 | ) | |
| (7,976 | ) | |
| (1,504 | ) | |
| (9,888 | ) |
Total | |
$ | 135,784 | | |
$ | 201,789 | | |
$ | 595,156 | | |
$ | 872,063 | |
The provision for income taxes consisted of the
following:
| |
Three
months ended September 30, | | |
Nine
months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Income
before income tax | |
$ | 103,785 | | |
$ | 409,340 | | |
$ | 1,220,180 | | |
$ | 2,168,291 | |
Statutory
income tax rate | |
| 21 | % | |
| 21 | % | |
| 21 | % | |
| 21 | % |
Income tax credit
computed at statutory income rate | |
| 21,795 | | |
| 85,962 | | |
| 256,238 | | |
| 455,342 | |
Reconciling items: | |
| | | |
| | | |
| | | |
| | |
Non-deductible expenses | |
| 75,971 | | |
| 37,816 | | |
| 134,157 | | |
| 106,185 | |
Rate differential
in different tax jurisdictions | |
| 28,203 | | |
| 23,169 | | |
| 84,678 | | |
| 105,018 | |
Deferred tax provided
on dividends withholding tax of PRC subsidiaries | |
| 9,561 | | |
| 55,683 | | |
| 133,454 | | |
| 206,359 | |
Over-provision
in prior year | |
| 254 | | |
| (841 | ) | |
| (13,371 | ) | |
| (841 | ) |
Income
tax (credit) expense | |
$ | 135,784 | | |
$ | 201,789 | | |
$ | 595,156 | | |
$ | 872,063 | |
The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and liabilities as of September 30, 2022 and December 31, 2021 are presented
below:
| |
September 30, 2022 | | |
December 31, 2021 | |
Deferred tax assets: | |
| | |
| |
Accelerated depreciation | |
$ | 2,984 | | |
$ | 1,778 | |
Deductible temporarily difference arising from other payable | |
| 12,151 | | |
| 13,605 | |
Less: Net off with deferred tax liabilities for financial reporting purposes | |
| (15,135 | ) | |
| (15,383 | ) |
Net total deferred tax assets | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Deferred tax liabilities: | |
| | | |
| | |
Undistributed profits of a PRC subsidiary | |
$ | 312,335 | | |
$ | 357,929 | |
Less: Net off with deferred tax assets for financial reporting purposes | |
| (15,135 | ) | |
| (15,383 | ) |
Net total deferred tax liabilities | |
$ | 297,200 | | |
$ | 342,546 | |
NOTE 11 – LEASE
On June 10, 2021, the Company entered into a
lease agreement for office space in Xian, the PRC with a non-cancellable lease term, commencing on July 16, 2021 and expiring on July
15, 2024. The monthly rental payment is approximately $4,992 (RMB32,951) per month.
Operating lease expense for the three and nine
months ended September 30, 2022 and 2021 were as follows:
| |
Three
months ended September 30, | | |
Nine
months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Operating lease cost – straight
line | |
| 14,406 | | |
| 15,277 | | |
| 44,925 | | |
| 41,462 | |
Total lease expense | |
$ | 14,406 | | |
| 15,277 | | |
$ | 44,925 | | |
$ | 41,462 | |
The following is a schedule, by years, of maturities
of lease liabilities as of September 30, 2022:
| |
Operating leases | |
| |
| |
Remainder of 2022 | |
$ | 13,892 | |
2023 | |
| 55,567 | |
2024 | |
| 27,784 | |
2025 | |
| - | |
Thereafter | |
| - | |
Total undiscounted cash flows | |
| 97,243 | |
Less: imputed interest | |
| (4,096 | ) |
Present value of lease liabilities | |
$ | 93,147 | |
Lease term and discount rate
| |
September 30, 2022 | |
Weighted-average remaining lease term - year | |
| 1.75 | |
Weighted-average discount rate (%) | |
| 4.90 | % |
Supplemental cash flow information related to
lease where the Company was the lessee for the nine months ended September 30, 2022 and 2021 was as follows:
| |
Nine
months ended September 30, | |
| |
2022 | | |
2021 | |
Operating cash outflows from
operating lease | |
$ | 44,925 | | |
$ | 45,827 | |
NOTE 12 – CONTINGENIES AND COMMITMENTS
Contingencies
Certain conditions may exist as of the date the
condensed consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when
one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities,
and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are
pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected
to be sought. There was no contingency of this type as of September 30, 2022 and December 31, 2021.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability
would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency
is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss if determinable and material would be disclosed. There was no contingency of this type
as of September 30, 2022 and December 31, 2021.
Loss contingencies considered to be remote by
management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
NOTE 13 – CERTAIN RISKS AND CONCENTRATIONS
The Company had the following customers that
individually comprised 10% or more of net revenue for the three and nine months ended September 30, 2022 and 2021:
| |
Three months ended
September 30, | |
| |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Customer A (note) | |
$ | 437,679 | | |
| 55 | % | |
$ | * | | |
| * | % |
Customer B | |
| * | | |
| * | % | |
| 210,337 | | |
| 13 | % |
Customer C | |
| * | | |
| * | % | |
| 170,019 | | |
| 10 | % |
Customer D | |
| * | | |
| * | % | |
| 172,765 | | |
| 11 | % |
* Comprised less than 10% of net revenue for
the respective period.
| |
Nine months ended
September 30, | |
| |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Customer A (note) | |
$ | 1,284,209 | | |
| 45 | % | |
$ | * | | |
| * | % |
Customer B | |
| * | | |
| * | % | |
| 1,321,937 | | |
| 30 | % |
Customer C | |
| * | | |
| * | % | |
| 905,215 | | |
| 20 | % |
Customer D | |
| * | | |
| * | % | |
| 627,321 | | |
| 14 | % |
* Comprised less than 10% of net revenue for
the respective period.
The Company had the following customers that
individually comprised 10% or more of net accounts receivable as of September 30, 2022 and December 31, 2021:
| |
September 30,
2022 | |
December 31,
2021 | |
Customer A (note i) | |
$ | 128,779 | | |
| 45 | % |
$ | 15,864 | | |
| 23 | % |
Customer E | |
| 59,413 | | |
| 21 | % |
| * | | |
| * | % |
Customer F | |
| 46,347 | | |
| 16 | % |
| * | | |
| * | % |
Customer G | |
| * | | |
| * | % |
| 18,408 | | |
| 27 | % |
Customer H | |
| * | | |
| * | % |
| 20,272 | | |
| 30 | % |
The Company had the following service vendor
that individually comprised 10% or more of cost of revenue for the nine months ended September 30, 2022 and 2021:
| |
Nine months ended September
30, | |
| |
2022 | | |
2021 | |
Service vendor A (note) | |
$ | 135,223 | | |
| 24 | % | |
$ | 400,105 | | |
| 31 | % |
The Company had the following service vendors
that individually comprised 10% or more of accounts payable as of September 30, 2022 and December 31, 2021:
| |
September 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Service vendor B | |
$ | * | | |
| * | % | |
$ | 49,560 | | |
| 43 | % |
Service vendor C | |
| * | | |
| * | % | |
| 21,390 | | |
| 18 | % |
Service vendor D | |
| * | | |
| * | % | |
| 19,308 | | |
| 17 | % |
Service vendor E | |
| * | | |
| * | % | |
| 16,135 | | |
| 14 | % |
* |
Comprised less than 10%
of accounts payable for the respective period. |
Note: Customer A and Service vendor A disclosed
above is the same Company.
At September 30, 2022 and December 31, 2021,
the Company’s cash and cash equivalents included bank deposits in accounts maintained in China and Hong Kong and liquid funds in
online payment platforms. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant
risks on its cash in bank accounts.
For the credit risk related to trade accounts
receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit
losses.
NOTE 14 – SUBSEQUENT EVENTS
The Company has evaluated the existence of events
and transactions subsequent to the balance sheet date through the date the unaudited consolidated financial statements were issued and
has determined that there were no significant subsequent events or transactions which would require recognition or disclosure in the
financial statements.
ENTREPRENEUR UNIVERSE BRIGHT GROUP
140,000,000 Shares
Common Stock
FEBRUARY 7, 2023
PROSPECTUS
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