UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.DC 20549
FORM 10-K
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the year ended June 30, 2019 | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________ |
Commission file number:x000-31091Annual Report Pursuant to Section 13 or 15(d)
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
(Exact name of the Securities Exchange Act of 1934
Nevada | 47-0925451 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | |
Identification No.) |
5-1-1206 Hefeng Jiangan, Nianqing Rd. Meilan District, Hainan Province, China 570203
(Issuer’s Telephone Number, Including AreaAddress of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (718) 788-4014
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the Registrant:registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xþ No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨þ No¨ .
Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | þ | Smaller reporting company | þ |
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨þ No x¨
The aggregate market value of the voting and non-voting common equity held by non-affiliatesnon-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day or registrant’sof the registrant’s most recently completed second fiscalfiscal quarter. As of December 31, 2009, the aggregate market value of the common stock held by non-affiliates of the Registrant (8,224,445 shares) was approximately $1,233,667.
The number of shares outstanding of each of the issuer’s classes ofregistrant’s common equity: 27,613,019stock outstanding as of September 1, 2010.
FORM 10-K
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
June 30, 2010
TABLE OF CONTENTS
PART I | |||
1 | |||
6 | |||
6 | |||
6 | |||
6 | |||
6 | |||
PART II | |||
7 | |||
8 | |||
Management’s Discussion and Analysis of Financial Condition and Results of | 8 | ||
Quantitative and Qualitative Disclosures About Market | 10 | ||
10 | |||
Changes | 11 | ||
11 | |||
12 | |||
PART III | |||
Directors, Executive Officers and Corporate | 13 | ||
13 | |||
14 | |||
Certain Relationships and Related Transactions, and Director | 14 | ||
15 | |||
PART IV | |||
16 | |||
16 |
i
FORWARD LOOKING STATEMENTS
Some discussions in this Annual Report on Form 10-K contain forward-looking statements withinthat have been made pursuant to the meaning of Section 21Eprovisions of the Private Securities ExchangeLitigation Reform Act of 1934, and Section 27A of the Securities Act of 1933. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” and similar expressions, we are identifying forward-looking statements. Forward-looking1995. These statements involve risks and uncertainties and relate to future events or future financial performance. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this Form 10-K. Forward-looking statements are often identified by words such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project,” “plans,” “seek” and similar expressions or words which, by their nature, refer to future events. In some cases, you can also identify forward-looking statements by terminology such as “may,” “will,” “should,” “plans,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology.
These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” below that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from thoseany future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. TheseIn addition, you are directed to factors include our current dependence on a limited number of sources of products and customers, continuing demand for our products, pricing pressures on our products caused by demand and competition, delivery deadlines, customer satisfaction, our ability to generate sales and expand our customer base, warranty obligations and claims, integrating any enterprises acquired, operating a portion of our businessdiscussed in the People’s Republic“Management’s Discussion and Analysis of China, currency controlsFinancial Condition and exchange rate exposure andResults of Operations” section as well as those discussed elsewhere in this Form 10-K.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future need for capital to expand our business.
As used in this Form 10-K, “we,” “us,” and “our” refer to Team 360 Sports, Inc., which is also sometimes referred to as the “Company.”
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS
The forward-looking statements made in this report on Form 10-K relate only to events or information as of the date on which the statements are made in this report on Form 10-K. Except as required by law, we undertake or intendno obligation to update or revise our forward-looking statements, and we assume no obligation to updatepublicly any forward-looking statements, contained in this reportwhether as a result of new information, or future events, or developments. Thus, you should not assume that our silence over time means that actual eventsotherwise, after the date on which the statements are bearing out as expressedmade or implied in such forward-looking statements.to reflect the occurrence of unanticipated events. You should carefully reviewread this report and consider the various disclosuresdocuments that we makereference in this report, including documents referenced by incorporation, completely and our other reports filed with the SECunderstanding that attemptour actual future results may be materially different from what we expect or hope.
ii
PART I
Corporate History
Cang Bao Tian Xia International Art Trade Center, Inc., formerly Zhongchai Machinery, Inc., and before that Equicap, Inc., a Nevada corporation (the “Company”, was a manufacturer and distributor of gears and gearboxes and drive axles that were marketed and sold to advise interested parties ofequipment manufacturers in China.
On July 29, 2011, the risks, uncertaintiesCompany terminated its registration with the Securities and other factors that may affect our business.
On May 11, 2018, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for the Company, then known as Zhongchai Machinery, Inc., proper notice having been given to the officers and other risks, uncertainties and factors, please reviewdirectors of Zhongchai Machinery, Inc. There was no opposition. On May 16, 2018, the disclosure included in this report under “Part I, Item 1A - Risk Factors.”
On July 24, 2018, the Company filed a Form 10 with the Securities and Exchange Commission, to again become a reporting issuer.
On December 16, 2018, Custodian Ventures LLC (the “Seller”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which the Seller agreed to sell to Xingtao Zhou and Yaqin Fu (together, the “Purchaser”), the 3,096,200 common shares and the 10,000,000 preferred shares of the Company (together, the “Shares”) owned by the Seller, for a total purchase price of $375,000. As a result of the sale, and David Lazar’s resignation as sole officer and director of the Company, there was a change of control of the Company. There is no family relationship or other relationship between the Seller and the Purchaser.
On January 8, 2019, the corporate name of the Company was changed to Cang Bao Tian Xia International Art Trade Center, Inc., and its trading symbol was changed shortly thereafter to TXCB.
Business
Business Objectives of the Company
Since the custodial proceedings, the Company had no business operations. Management has determined to direct its efforts and limited resources to pursue potential new business opportunities. The Company does not intend to limit itself to a particular industry and has not established any particular criteria upon which it shall consider a business opportunity.
The Company's common stock is subject to quotation on March 13, 2002,the OTC Pink Sheets under the symbol TXCB. There is currently only a limited trading market in the Company's shares nor do we believe that any active trading market has existed for approximately the last 5 years. There can be no assurance that there will be an active trading market for our securities following the effective date of this registration statement under the Exchange Act. In the event that an active trading market commences, there can be no assurance as to the market price of our shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained.
Management of the Company (“Management”) would have substantial flexibility in identifying and selecting a prospective new business opportunity. The Company is dependent on the judgment of its Management in connection with this process. In connection with an evaluation of a prospective or potential business opportunity, Management may be expected to conduct a due diligence review.
The time and costs required to pursue new business opportunities, which includes negotiating and documenting relevant agreements and preparing requisite documents for filing pursuant to applicable securities laws, can not be ascertained with any degree of certainty.
Management intends to devote such time as it deems necessary to carry out the Company's affairs. The exact length of time required for the purposepursuit of entering intoany new potential business opportunities is uncertain. No assurance can be made that we will be successful in our efforts. We cannot project the amount of time that our Management will actually devote to the Company's plan of operation.
The Company intends to conduct its activities so as to avoid being classified as an "Investment Company" under the Investment Company Act of 1940, and therefore avoid application of the costly and restrictive registration and other provisions of the Investment Company Act of 1940 and the regulations promulgated thereunder.
Company is a Blank Check Company
At present, the Company is a development stage company with no revenues, no assets and no specific business plan or purpose. The Company's business plan is to seek new business opportunities or to engage in a merger or acquisition with an unidentified company. As a result, the Company is a "blank check company" and, re-domicilingas a result, any offerings of the Company's securities under the Securities Act of 1933, as amended (the "Securities Act") must comply with Rule 419 promulgated by the Securities and Exchange Commission (the "SEC") under the Act. The Company's Common Stock is a "penny stock," as defined in Rule 3a51-1 promulgated by the SEC under the Securities Exchange Act. The Penny Stock rules require a broker-dealer, prior to a transaction in penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about Penny Stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its predecessor, Equicap, Inc.,sales person in the transaction, and monthly account statements showing the market value of each Penny Stock held in the customer's account. In addition, the Penny Stock rules require that the broker-dealer, not otherwise exempt from such rules, must make a California corporation ("Equicap California"). Effective January 25, 2005, Equicap California was merged withspecial written determination that the Penny Stock is suitable for the purchaser and into Equicapreceive the purchaser's written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the Penny Stock rules. So long as the common stock of the Company is subject to the Penny Stock rules, it may be more difficult to sell the Company's common stock.
We are a “Shell Company,” as defined in Rule 405 promulgated by the SEC under the Securities Act. A Shell Company is one that has no or nominal operations and either: (i) no or nominal assets; or (ii) assets consisting primarily of cash or cash equivalents. As a Shell Company, we are restricted in our use of Registrations on Form S-8 under the Securities Act; the lack of availability of the use of Rule 144 by security holders; and the lack of liquidity in our stock.
Form S-8
Shell companies are prohibited from using Form S-8 to register securities under the Securities Act. If a company ceases to be a Shell Company, it may use Form S-8 sixty calendar days, provided it has filed all reports and other materials required to be filed under the Exchange Act during the preceding 12 months (or for such shorter period that it has been required to file such reports and materials after the company files "Form 10 information," which is information that a company would be required to file in a statutory merger basedregistration statement on management's beliefForm 10 if it were registering a class of securities under Section 12 of the Exchange Act. This information would normally be reported on a current report on Form 8-K reporting the completion of a transaction that Nevada lawcaused the company to cease being a Shell Company.
Unavailability of Rule 144 for Resale
Rule 144(i) "Unavailability to Securities of Issuers With No or Nominal Operations and No or Nominal Non-Cash Assets" provides that Rule 144 is not available for the resale of securities initially issued by an issuer that is a Shell Company. We have identified our company as a Shell Company and, therefore, the holders of our securities may not rely on Rule 144 to have the restriction removed from their securities without registration or until the Company is no longer identified as a Shell Company and has filed all requisite periodic reports under the Exchange Act for the period of twelve (12) months.
As a result of our classification as a Shell Company, our investors are not allowed to rely on the "safe harbor" provisions of Rule 144, promulgated pursuant to the Securities Act, so as not to be considered underwriters in connection with the sale of our securities until one year from the date that we cease to be a Shell Company. This will likely make it more advantageousdifficult for us to attract additional capital through subsequent unregistered offerings because purchasers of securities in such unregistered offerings will not be able to resell their securities in reliance on Rule 144, a corporation than California law. Equicap was consideredsafe harbor on which holders of restricted securities usually rely to resell securities.
Very Limited Liquidity of our Common Stock
Our common stock rarely trades on the OTC Pink Sheet Market, as there is no active market maker in our common stock. As a result, there is only limited liquidity in our common stock.
We will be deemed a blank check company until its March 2007under Rule 419 of the Securities Act
The provisions of Rule 419 apply to registration statements filed under the Securities Act by a blank check company, such as the Company. Rule 419 requires that a blank check company filing a registration statement deposit the securities being offered and proceeds of the offering into an escrow or trust account pending the execution of an agreement for an acquisition or merger. While we are not currently registering shares for an offering, we may do so in the future.
In addition, an issuer is required to file a post-effective amendment to a registration statement upon the execution of an agreement for an acquisition or merger. The rule provides procedures for the release of the offering funds, if any, in conjunction with the post effective acquisition or merger. The obligations to file post-effective amendments are in addition to the obligations to file Forms 8-K to report for both the entry into a material definitive (non-ordinary course of business) agreement and the completion of the transaction. Rule 419 applies to both primary and re-sale or secondary offerings.
Within five (5) days of filing a post-effective amendment setting forth the proposed terms of an acquisition, the Company must notify each investor whose shares are in escrow, if any. Each such investor then has no fewer than 20 and no greater than 45 business days to notify the Company in writing if they elect to remain an investor. A failure to reply indicates that the person has elected to not remain an investor. As all investors are allotted this second opportunity to determine to remain an investor, acquisition agreements should be conditioned upon enough funds remaining in escrow to close the transaction.
Effecting a business combination
Prospective investors in the Company's common stock will not have an opportunity to evaluate the specific merits or risks of any of the one or more business combinations that we may undertake A business combination may involve the acquisition of, Usunco Automotive Limited,or merger with, a British Virgin Islands company (“Usunco”). Equicap, Inc. changedwhich needs to raise substantial additional capital by means of being a publicly trading company, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various Federal and State securities laws. A business combination may involve a company which may be financially unstable or in its nameearly stages of development or growth.
The Company has not identified a target business or target industry
The Company's effort in identifying a prospective target business will not be limited to Zhongchai Machinery, Inc. (“Zhongchai” ora particular industry and the “Company”)Company may ultimately acquire a business in any industry Management deems appropriate. To date, the Company has not selected any target business on May 21, 2010.
Sources of target businesses
Our Management anticipates that target business candidates will be brought to our attention from various unaffiliated sources, including securities broker-dealers, investment bankers, venture capitalists, bankers and other members of the $450,000 advisory fee payablefinancial community, who may present solicited or unsolicited proposals. Our Management may also bring to Fountainhead, Equicap received net proceedsour attention target business candidates. While we do not presently anticipate engaging the services of approximately $10 millionprofessional firms that specialize in business acquisitions on any formal basis, we may engage these firms in the Offering. The investors were issued an aggregatefuture, in which event we may pay a finder's fee or other compensation in connection with a business combination. In no event, however, will we pay Management any finder's fee or other compensation for services rendered to us prior to or in connection with the consummation of 8,450,704 sharesa business combination.
Selection of common stock, then representing approximately 30%a target business and structuring of a business combination
Management owns 93.28% of the issued and outstanding common stock of Equicap. The price per shareshares of common stock was $1.42. vFinance was the exclusive placement agent for the Offering.
· | financial condition and results of operation of the target company; | |
· | growth potential; | |
· | experience and skill of Management and availability of additional personnel; | |
· | capital requirements; | |
· | competitive position; | |
· | stage of development of the products, processes or services; | |
· | degree of current or potential market acceptance of the products, processes or services; | |
· | proprietary features and degree of intellectual property or other protection of the products, processes or services; | |
· | regulatory environment of the industry; and | |
· | costs associated with effecting the business combination. |
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by the China/Gear Segmentour Management in effecting a business combination consistent with our business objective. In evaluating a prospective target business, we will conduct a due diligence review which will encompass, among other things, meetings with incumbent Management and inspection of ZhongChai China and its subsidiary, which focuses on manufacturing and distributionfacilities, as well as review of gears and gearboxes in China and by the North America/Auto Parts Segment of IBC, which focused on sourcing automotive parts and products from China and distributing them in North Americafinancial and other regions. Pursuantinformation which will be made available to us.
We will endeavor to structure a business combination so as to achieve the share transfer described above, Unsunco discontinued allmost favorable tax treatment to us, the target business and both companies' stockholders. However, there can be no assurance that the Internal Revenue Service or applicable state tax authorities will necessarily agree with the tax treatment of itsany business activities.
The time and costs required to select and evaluate a target business and to structure and complete the Special Administrative Regionbusiness combination cannot presently be ascertained with any degree of Hong Kong on April 24, 2009. On December 23, 2009, Zhongchai Holding acquired the 75% equity interest of ZhongChai China from Usunco, and on April 26, 2010, Zhongchai Holding acquired the remaining 25% of the equity interest of Zhongchai China from Xinchang Keyi Machinery Co., Ltd.. After the acquisition, Zhongchai China became a Wholly Owned Foreign Enterprises and wholly owned subsidiary of Zhongchai Holding.
Probable lack of business diversification
While we may seek to customers before the end of 2010.
· | subject us to numerous economic, competitive and regulatory developments, any or all of | which we may operate subsequent to a business combination, and | ||||
· | ||||||
result in our dependency upon the development or market acceptance of a single or limited number of products, processes or services. |
Limited ability to evaluate the target business' Management
We cannot assure you that our assessment of the Company were more concentratedtarget business' Management will prove to be correct. In addition, we cannot assure you that the future Management will have the necessary skills, qualifications or abilities to manage a public company intending to embark on a program of business development. Furthermore, the future role of our director, if any, in the last fiscal year when two customers accounted for 69% and 17%, respectively,target business cannot presently be stated with any certainty.
While it is possible that our director will remain associated in some capacity with us following a business combination, it is unlikely that he will devote his full efforts to our affairs subsequent to a business combination. Moreover, we cannot assure you that our director will have significant experience or knowledge relating to the operations of the net revenue in China.
Following a limited right of return for non-conforming products if returned in a timely fashion. The Company generally provides a one-year limited warranty covering manufacturing defects and functional failures of its transmission gearbox products. After evaluation and confirmation,business combination, we may seek to recruit additional managers to supplement the Company will either replace the defective product or accept returns by crediting the customer account. The Company, thus, becomes responsible for the costs and expensesincumbent Management of the returns.
Our auditors have expressed substantial doubt about our ability to acquaint those types of enterprises with its products. Therefore, the Company focuses on direct sales oncontinue as a business-to-business basis, by developing contacts with engine and gearbox producers and original equipment manufacturers. These contacts are developed through direct relationships, referrals and trade shows. One of the principal aspects of its marketing strategy is to focus customers on the Company’s commitment to quality products, customer service and after sales support.
Our audited financial statements for the years ended June 30, 2010. The Company’s sources2018 and 2017, were prepared using the assumption that we will continue our operations as a going concern. Our independent accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern. Our operations are dependent on our ability to raise sufficient capital or complete business combination as a result of which we become profitable. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. There is not enough cash on hand to fund our administrative expenses and operating expenses for partsthe next twelve months. Therefore, we may be unable to continue operations in the future as a going concern. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in the Company's shares of common stock.
Competition
In identifying, evaluating and componentsselecting a target business, we expect to encounter intense competition from other entities having a business objective similar to ours. Many of these entities are well established and semi-finished products were less concentratedhave extensive experience identifying and effecting business combinations, either directly or through affiliates. Many if not virtually most of these competitors possess far greater financial, human and other resources compared to our resources. While we believe that there are numerous potential target businesses that we may identify, our ability to compete in fiscal year 2010 compare to fiscal year 2009 when four main suppliers provided 32%, 13%, 5%, and 4%, respectively,acquiring certain of the Company’s consolidated purchases formore desirable target businesses will be limited by our limited financial and human resources. Our inherent competitive limitations are expected by Management to give others an advantage in pursuing the fiscal year.
If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from existing competitors of the business we acquire. In particular, certain industries which experience rapid growth frequently attract an increasingly larger number of competitors, including those with far greater financial, marketing, technical and it purchases products onother resources than the basis of purchase orders. None of our suppliers have any ownershipinitial competitors in the Company orindustry in which we seek to operate. The degree of competition characterizing the industry of any relationship withprospective target business cannot presently be ascertained. We cannot assure you that, subsequent to a business combination, we will have the insidersresources to compete effectively, especially to the extent that the target business is in a high-growth industry.
Employees
Xingtao Zhou -- President, Chief Executive Officer, Chief Financial Officer (Principal Accounting Officer), Chairman of the Company.Board of Directors
Mr. Zhou has served as the Company ships finished products directlychairman and founder of Hainan Cang Bao Tian Xia Artwork Co. Ltd. since 2017 and Cang Bao Ge (Hong Kong) Arts Co., Ltd since 2012. From 2009 to its customers2012, Mr. Zhou served as the president of Yi Hua Cultural Diffusion Co., Ltd. Mr. Zhou served as the curator of the Yin Yuan Min Su Museum from the factory warehouse in Zhejiang, China, or customers pick up finished products from our factory warehouse.
Liang Tan, Director
Liang Tan has served as the general manager of Shanghai Qingsheng Investment Co., Ltd. since 2017. Mr. Tan served as the deputy general manager of Shanghai Daren Asset Management Co., Ltd. from 2013 to 2016.
.
Conflicts of Interest
The Company's Management is not required to commit its full time to the Company's affairs. As a result, pursuing new business opportunities may require a longer period of time than if Management would devote full time to the Company's affairs. Management is not precluded from serving as an officer or director of any other entity that is engaged in business activities similar to those of the Company. Management has not identified and is not currently negotiating a new business opportunity for us. In the future, Management may become associated or affiliated with entities engaged in business activities similar to those we intend to conduct. In such event, Management may have conflicts of interest in determining to which entity a particular business opportunity should be presented. In the event that the Company's Management has multiple business affiliations, our Management may have legal obligations to present certain business opportunities to multiple entities. In the event that a conflict of interest shall arise, Management will consider factors such as reporting status, availability of audited financial statements, current capitalization and the laws of jurisdictions. If several business opportunities or operating entities approach Management with respect to a business combination, Management will consider the foregoing factors as well as the preferences of the Management of the operating company. However, Management will act in what it believes will increasingly compete on the basis of diversified products and larger production capabilities.
ITEM 1A. RISK FACTORS
We are a high degree of risk and uncertainty. You should carefully consider the risks described below, together with the other information contained in this Annual Report on Form 10-K, including the consolidated financial statements and notes thereto, when evaluating our Company and our business before deciding to invest in our common stock. The risks described below are not the only ones facing us. Additional risks not presently known to us or that we presently consider immaterial may also harm us. If anysmaller reporting company as defined by Rule 12b-2 of the following risks occur, our business, financial condition and resultsSecurities Exchange Act of operations and the value of our common stock could be materially harmed.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. [RESERVED]MINE SAFETY DISCLOSURES.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There is a very limitedno established public trading market for our stock. There cansecurities and a regular trading market may not develop, or if developed, may not be no assurancesustained. A stockholder in all likelihood, therefore, will not be able to resell his or her securities should he or he desire to do so when eligible for public resale. Furthermore, it is unlikely that a liquid market forlending institution will accept our securities as pledged collateral for loans unless a regular trading market develops. We have no plans, proposals, arrangements, or understandings with any person with regard to the development of a trading market in any of our securities.
Penny Stock Considerations
Our shares likely will ever develop. The following table sets forth for the periods indicated the high and low prices per share traded for our common stockbe “penny stocks” as reported on the OTCBB.
Quarter Ended | High | Low | ||||||
2008 | ||||||||
September 30 | $ | 0.20 | $ | 0.05 | ||||
December 31 | $ | 0.07 | $ | 0.01 | ||||
2009 | ||||||||
March 31 | $ | 0.05 | $ | 0.01 | ||||
June 30 | $ | 0.06 | $ | 0.02 | ||||
September 30 | $ | 0.12 | $ | 0.061 | ||||
December 31 | $ | 0.25 | $ | 0.05 | ||||
2010 | ||||||||
March 31 | $ | 0.35 | $ | 0.18 | ||||
June 30 | $ | 0.35 | $ | 0.06 |
Under the penny stock the compensation of theregulations, a broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of eachselling a penny stock held in the customer’s account, to anyone other than an established customer or accredited investor must make a special writtensuitability determination that the penny stock is a suitable investment forregarding the purchaser and must receive the purchaser’s written agreementconsent to the transaction. These disclosure requirementstransaction prior to the sale. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:
· | Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt; | |
· | Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities; | |
· | Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and | |
· | Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account. |
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our Common Stock, which may affect the ability of Selling Stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity if any, in the secondary marketmarket. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a stock that iscorresponding decrease in the price of our securities. Our shares in all probability will be subject to the penny stock rules. Since our common shares are subject to thesuch penny stock rules persons holding or receiving such shares mayand our stockholders will, in all likelihood, find it more difficult to sell their shares. Thesecurities.
OTC Bulletin Board Qualification for Quotation
To have our shares of Common Stock on the OTC Bulletin Board, a market liquiditymaker must file an application on our behalf in order to make a market for the shares couldour Common Stock. We have not had conversations with nor engaged any market maker to file our application on Form 211 with FINRA. No Assurances can be severely and adversely affected by limiting the ability of broker-dealersmade that we will be able to sell the shares and the ability of stockholdersobtain a sponsor to sell their stock in any secondary market.
Stockholders
As of the trading market can create the potential for significant changes in the trading price for the common stock as a resultdate of relatively minor changes in the supply and demand for our common stock and perhaps without regard to our business activities.
Dividends
We have approximately 426 record holders ofnot declared any cash dividends on our common stock. In addition to the record ownership, there are additional beneficial owners who hold their shares in street name or through other nominees, but we have not ascertained the number of such persons.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants, and rights | Number of securities remaining available | |||||||||
Equity compensation plans approved by security holders | -0- | -0- | -0- | |||||||||
Equity compensation plans not approved by security holders | 183,275 | $ | 1.065 | 1,604,148 | ||||||||
Total | 183,275 | $ | 1.065 | 1,604,148 |
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the four years ended June 30Securities Exchange Act of 1934 and are derived fromnot required to provide the audited consolidated financial statements of Zhongchai Machinery, Inc. after the Share Exchange between Equicap and Usunco in March 2007. Prior to the Share Exchange, Equicap was a shell company with nominal assets and operations and with a different fiscal year end. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information.
Year ended June 30, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | |||||||||||||
OPERATIONS DATA | ||||||||||||||||
Revenues | $ | 10.983,800 | $ | 4,923,918 | $ | 3,333,325 | $ | 1,817,264 | ||||||||
Net income (Loss) | $ | 1,072,405 | $ | (1,132,190 | ) | $ | (1,964,725 | ) | $ | (5,279,437 | ) | |||||
Income/(loss) per common share (basic and diluted) | $ | 0.04 | $ | (0.04 | ) | $ | (0.07 | ) | $ | (0.24 | ) | |||||
BALANCE SHEET DATA | ||||||||||||||||
Total assets | $ | 19,896,194 | $ | 17,102,682 | $ | 14,790,817 | $ | 13,893,621 | ||||||||
Shareholders' equity | $ | 10,892,510 | $ | 9,578,269 | $ | 10,701,893 | $ | 10,046,397 |
First | Second | Third | Fourth | |||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
Year Ended June 30, 2010 | ||||||||||||||||||||
Revenues | $ | 1,948,406 | 1,889,823 | 3,202,350 | 3,943,221 | $ | 10,983,800 | |||||||||||||
Gross profit | $ | 405,232 | 406,470 | 747,397 | 1,065,215 | $ | 2,624,314 | |||||||||||||
Net loss/Net Income | $ | (28,355 | ) | 46,332 | 263,861 | 790,567 | $ | 1,072,405 | ||||||||||||
LoLoss per common share - basic and diluted | $ | (0.00 | ) | 0.00 | 0.01 | 0.03 | $ | 0.04 | ||||||||||||
Year Ended June 30, 2009 | ||||||||||||||||||||
Revenues | $ | 1,186,570 | 820,527 | 976,967 | 1,939,854 | $ | 4,923,918 | |||||||||||||
Gross profit | $ | 334,483 | 126,630 | 206,421 | 416,895 | $ | 1,084,429 | |||||||||||||
Net loss | $ | (130,538 | ) | (366,701 | ) | (319,817 | ) | (315,134 | ) | $ | (1,132,190 | ) | ||||||||
Loss per common share -basic and diluted | $ | (0.00 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | $ | (0.04 | ) |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTRESULTS OF OPERATIONS
This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company for the fiscal years ended June 30, 2019 and 2018. The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including, but not limited to, those described in the “Risk Factors” set forth in Item 1A – Risk Factors and the matters set forth in other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements that speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
Business Development
The Company's current business objective is to seek a business combination with an operating company. We intend to use the Company's limited personnel and financial resources in connection with such activities. The Company doeswill utilize its capital stock, debt or a combination of capital stock and debt, in effecting a business through its wholly owned subsidiary, Zhongchaicombination. It may be expected that entering into a business combination will involve the issuance of restricted shares of capital stock. The issuance of additional shares of our capital stock:
· | may significantly reduce the equity interest of our stockholders; | |
· | will likely cause a change in control if a substantial number of our shares of capital stock are issued, and most likely will also result in the resignation or removal of our present officer and director; and | |
· | may adversely affect the prevailing market price for our common stock. |
Similarly, if we issued debt securities, it could result in:
· | default and foreclosure on our assets if our operating revenues after a business combination were insufficient to pay our debt obligations; | |
· | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contained covenants that required the maintenance of certain financial ratios or reserves and any such covenants were breached without a waiver or renegotiations of such covenants; | |
· | our immediate payment of all principal and accrued interest, if any, if the debt security was payable on demand; and | |
· | our inability to obtain additional financing, if necessary, if the debt security contained covenants restricting our ability to obtain additional financing while such security was outstanding. |
Cang Bao Tian Xia International Art Trade Center, Inc. has administrative offices located at 5-1-1206 Hefeng Jiangan, Nianqing Rd. Meilan District, Haikou, Hainan Province, China a Wholly Foreign Owned Enterprise established under the laws of the People’s Republic of China and Zhejiang Shengte Transmission Co., Ltd. (“Shengte”) a company established under the laws of the PRC and wholly owned by Zhongchai China. Through its operating subsidiaries, the Company570203.
The Company’s fiscal year end is currently engaged in manufacturing and sale of drivetrain products, mainly gears, transmission gearboxes, and transaxles in China.
Percentage of Interests | ||||||||||
Name of Entity | Place of Filing | June 30, 2010 | June 30, 2009 | |||||||
Zhongchai Holding (Hong Kong) Limited | Hong Kong | 100 | % | N/A | ||||||
(“Zhongchai Holding”) | ||||||||||
Zhejiang Zhongchai Machinery Co., Ltd. | PRC | 100 | % | 75 | % | |||||
(“Zhongchai China”, 100% subsidiary of Zhongchai Holding) | ||||||||||
Zhejiang Shengte Transmission Co., Ltd. | PRC | 100 | % | 100 | % | |||||
(“Shengte”, 100% subsidiary of Zhongchai China) | ||||||||||
Xinchang Lisheng Machinery Co., Ltd. | PRC | 60 | % | N/A | ||||||
(“Lisheng”, 60% subsidiary of Zhongchai China) |
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and related disclosure must be estimated, whichare prepared in accordance with GAAP. The preparation of these financial statements requires us to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Actual results may differ from these estimates under different assumptions or conditions. The selection of critical accounting policies, the judgments and other uncertainties affecting the application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our consolidated financial statements.
Going Concern
The Fiscal Year Endedaccompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to our ability to continue as a going concern.
Results of Operations
Comparison of twelve-month periods ended June 30, 2010 Compared2019 and 2018
Revenue
For the year ended June 30, 2019, the Company generated $0 in revenues. For the year ended June 30, 2018, the Company generated $0 in revenues.
Expenses
For the year ended June 30, 2019, we incurred operating expenses of $48,856. For the year ended June 30, 2018, we incurred operating expenses in the amount of $4,017,192. The decrease in operating expenses is attributable to a $4,000,000 preferred stock valuation for services related to the Fiscal Year Endedissuance of that stock to the David Lazar.
Net Loss
For the year ended June 30, 2009
Liquidity and Capital Resources
As of June 30, 2019, the Company has no business operations and $5,000 cash resources other than that provided by Management. We are dependent upon interim funding provided by Management or an affiliated party to pay professional fees and expenses. Management and an affiliated party have provided funding as may be required to pay for accounting fees and other administrative expenses of the Company until the Company enters into a business combination. The Company would be unable to continue as a going concern without interim financing provided by Management. As of June 30, 2019, we had $0 in cash. As of June 30, 2018, we had $0 in cash.
If we require additional financing, we cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all. The Company depends upon services provided by Management and an affiliated party to fulfill its filing obligations under the Exchange Act. At present, the Company has no financial resources to pay for such services.
The Company does not currently engage in any business activities that provide cash flow. The costs of investigating and analyzing business combinations, maintaining the filing of Exchange Act reports, the investigation, analyzing, and consummation of an acquisition for an unlimited period of time will be paid from additional money contributed by David Lazar, our sole officer and director, or an affiliated party.
During the next 12 months we anticipate incurring costs related to:
· | filing of Exchange Act reports; | |
· | franchise fees, registered agent fees, legal fees and accounting fees; and | |
· | investigating, analyzing and consummating an acquisition or business combination. |
Cash Flows:
|
| For the years ended |
| |||||
|
| June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Cash Flows from Operating Activities |
| $ | (1,759 | ) |
| $ | (14,096 | ) |
Cash Flows from Investing Activities |
|
| — |
|
|
| — |
|
Cash Flows from Financing Activities |
|
| (3,240 | ) |
|
| 19,096 |
|
Effects of Currency Translations |
|
| — |
|
|
| — |
|
Net increase in cash |
| $ | (5,000 | ) |
| $ | 5,000 |
|
On June 30, 2019 and 2018, we had $0 in current assets and $5,000 in current assets, respectively. As of June 30, 2019, we had $25,506 in liabilities and stockholders’ deficit, consisting of amounts due to third party vendor. As of June 30, 2018, we had $0 in liabilities.
We had a positive cash flow from operations of $1,759 during the year ended June 30, 2009. Revenue for2019. We financed our negative cash flow from operations during the 12 months ended June 30, 2019 through advances made by Xingtao Zhou.
We had zero cash flow from operations during the year ended June 30, 2010 consists of sales of gears30.
The Company currently plans to satisfy its cash requirements for the next 12 months through borrowings from its CEO or companies affiliated with its CEO and transmission gearboxes in China,believes it can satisfy its cash requirements so long as it is able to obtain financing from these affiliated parties. The Company expects that money borrowed will be used during the next 12 months to satisfy the Company's operating costs, professional fees and for $5,061,608general corporate purposes. There is no written funding agreement between the Company and $5,922,192, respectively. Mr. Lazar, our sole officer and director.
The increase in gears and gearboxes sales in fiscal 2010 comparedCompany has only limited capital. Additional financing is necessary for the Company to last year was attributed to the Company’s expansion in production capacity and continuous marketing efforts, and taking advantage of the recovery of the domestic market in China for gear and gearbox productscontinue as a result of Chinese government’s economic stimulus plan.
Off-Balance Sheet Arrangements
As of June 30, 2010, Zhongchai China had assets equal to $19,896,194 that primarily was comprised2019 and 2018, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of cashRegulation S-K promulgated under the Securities Act of 1934.
Contractual Obligations and cash equivalents and restricted cash of $1,586,407, net account receivables, note receivable and other receivables of $4,191,626, inventory of $2,680,666, and an advance payment of $4,993,607. The advance payment represented an advance payment made by the Zhongchai China to Zhejiang Xinchai Holdings Co., Ltd. ("Xinchai Holdings"), for purchase of the land use right and plant building for Zhongchai China’s future production expansion. Zhongchai’s current liabilities asCommitments
As of June 30, 2010 were $9,003,684, which primarily were comprised of trade accounts payable2019 and accrued expenses,2018, we did not have any contractual obligations.
Critical Accounting Policies
Our significant accounting policies are described in the notes payable, short-term loan and other payable. At June 30, 2010, Zhongchai had working capital of $4,448,622. ,Zhongchai believes that it has sufficient operating capital for its current operations.
Year ended June 30 | ||||||||
Statements of Cash Flows | 2010 | 2009 | ||||||
Net cash provided by operating activities | 3,350,611 | 1,754,778 | ||||||
Net cash used in investing activities | (5,304,480 | ) | (604,777 | ) | ||||
Net cash provided by (used in) financing activities | (777,351 | ) | 2,197,500 | |||||
Effect of foreign currency translation on cash | 11,709 | 1,444 | ||||||
Net increase (decrease) in cash and cash equivalents and restricted cash | (2,719,511 | ) | 3,348,945 |
ITEM 7A. QUANTATIVEQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS
The information required by this Item is incorporated herein by reference to the financial statements beginningannexed to this Form 10-K for the year ended June 30, 2019 begin on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management,Xingtao Zhou, who is our Chairman, Founder, Chief Executive Officerexecutive officer and acting Chief Financial Officer (“Certifying Officers”), has evaluated the effectivenessfinancial officer, as of June 30, 2019, we conducted an evaluation of our disclosure controls and procedures, (asas such term is defined in Rulesunder Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act)Act of 1934, as of the end of the fiscal period covered byamended. Based on this Annual Report on Form 10-K. Based upon such evaluation, the Certifying Officers haveour Chief Executive Officer has concluded that, as ofbased on the end of such period, June 30, 2010, the Company’smaterial weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission's rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is made knownaccumulated and communicated to management, including our Certifying Officers, and that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management's Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. OurAs defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, internal control system wasover financial reporting is a process designed by, or under the supervision of, Xingtao Zhou, the Company's Chief Executive Officer, and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the Company’smaintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company's management and board of directors regarding the preparationdirectors; and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can(3) provide only reasonable assurance with respect toregarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statement preparation and presentation.statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. ProjectionsAlso, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal financial officer, assessed the effectiveness of the Company’sour internal control over financial reporting as ofat June 30, 2010.2019. In making this assessment, itmanagement used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)(COSO) in Internal Control—Integrated Framework.Framework (2013). Based on ourthat assessment we believeunder those criteria, management has determined that, as of June 30, 2010, the Company’s2019, our internal control over financial reporting was not effective.
Our internal controls are not effective for the following reasons: (i) there is an inadequate segregation of duties consistent with control objectives as management is comprised of only two persons, one of which is the Company's principal executive officer and principal financial officer and, (ii) the Company does not have an audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.
In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity with GAAP. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will continue to reassess this matter to determine whether improvement in segregation of duty is feasible. In addition, we would need to expand our board to include independent members.
Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective based on those criteria.
This annual reportAnnual Report does not include an attestation report of the Company’sour registered public accounting firm regarding internal control over financial reporting. Management’sManagement's report was not subject to attestation by the Company’sCompany's registered public accounting firm pursuant to the rules ofexemption provided to issuers that are not "large accelerated filers" nor "accelerated filers" under the SecuritiesDodd-Frank Wall Street Reform and Exchange CommissionConsumer Protection Act.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that permit the Companyoccurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to provide only management’s report in this annual report.
ITEM 9B. OTHER INFORMATIONINFORMATION.
None
PART III
Neither the Company, its property, nor any of its directors or officers is a party to any pending legal proceeding, nor have they been subject to a bankruptcy petition filed against them. None of its officers or directors have been convicted in, nor is subject to, any criminal proceeding.
The following table sets forth certain information about eachnames and ages of the membersdirectors and executive officers of the Company and their positions with the Company are as follows:
Name | Age | Position | ||
Xingtao Zhou | 40 | President, Chief Executive Officer, Chief Financial Officer (Principal Accounting Officer), Chairman of the Board | ||
Liang Tan | 56 | Director |
Xingtao Zhou -- President, Chief Executive Officer, Chief Financial Officer (Principal Accounting Officer), Chairman of the Board of Directors and each executive officer:
Name | Age | Position with company | Serving as a Director or an Officer Since | |||
Peter Wang | 56 | Chairman, President and acting Chief Financial Officer | 2007 | |||
Rong Shi | 36 | Director | 2010 | |||
Chris Chen | 39 | Director | 2010 |
Mr. Peter Wang
Liang Tan, Director
Liang Tan has served as the general manager of Shanghai Qingsheng Investment Co., Ltd. since August 2004.2017. Mr. Shi founded and workedTan served as General Managerthe deputy general manager of Zhejiang Bokai Auto A/C CompressorShanghai Daren Asset Management Co., Ltd. between March 2003 and October 2005. He was member of Oversight Committee of Rongda Trading Company during 2005 and 2006. Mr. Shi earned his MBA degree from Macao University of Science and Technology in 2003 and his BA degree from Shaoxin Liberal Arts College in 1997. We believe Mr. Shi’s qualifications2013 to serve on our Board of Directors include his knowledge of compliance matters as evidenced by his Certificate for Sarbanes Oxley Training Program from Shanghai Financing University and Certificate for Compliance Officer for Public Company from China Stock Exchanges.
ITEM 11. EXECUTIVE COMPENSATION
Name and Principal Position | Fiscal Year | Salary | Bonus | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Peter Wang, Chairman | 2009 | $ | 50,000 | - | - | - | - | $ | 50,000 | |||||||||||||||||||
and President | 2010 | $ | 50,000 | - | - | - | - | $ | 50,000 | |||||||||||||||||||
David Ming He, Chief | 2009 | $ | 48,000 | - | - | - | - | $ | 48,000 | |||||||||||||||||||
Financial Officer(1) | 2010 | $ | 32,000 | - | - | - | - | $ | 32,000 |
Summary Compensation. The following table sets forth information concerningsummarizes, for each of 2019 and 2018 the other compensation grantedawarded, paid to or earned by our President, CEO and Chairman of the Board of Directors, Xingtao Zhou and our former CEO, David Lazar who are compensated for their services to the named executive officers forCompany; no other officer receives compensation from the fiscal year ended June 30, 2010.
Name | Year | Medical Premiums | 401K Employer Match | |||||||
Peter Wang | 2010 | $ | 12,000 | - | ||||||
David Ming He | 2010 | $ | 8,000 | - |
Summary Compensation Table
Name and Principal Position |
|
| Year |
|
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Non-Qualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
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|
Xingtao Zhou (1) |
|
| 2019 |
|
| 0 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
President CEO,CFO, (Principal Accounting Officer) Chairman |
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David Lazar (1) |
|
| 2018 |
|
| — |
|
| — |
|
| 4,003,096 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,003,096 |
|
former CEO |
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———————
(1)
Mr. Lazar resigned as CEO on December 28, 2018, when the change of Zhongchai are employed on “at will” employment agreements. The Company intends to establish formal employment contracts for certain other key employees in the future.
The Company has reservedno stock option, retirement, pension, or profit sharing programs for the benefit of directors, officers or other employees, but our officers and directors may recommend adoption of one or more such programs in the future.
The Company does not have a total of 3,750,000 shares of common stock for issuance under the Option Plan.
Name | Fees Earned or Paid in Cash | Option Awards | Total | |||||||||
Rong Shi | $ | -0- | $ | -0- | $ | -0- | ||||||
Chris Chen | $ | -0- | $ | -0- | $ | -0- |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regardingas of April 2, 2018, with respect to the beneficial ownership of our common stock beneficially owned on August 31, 2010, for (i) each stockholderdirector and officer, (ii) all of our directors and officers as a group, and (iii) each person known to be the beneficial owner of 5%us to own beneficially five percent (5%) or more of the outstanding shares of our common stock, (ii) each current executive officer and director, and (iii) all executive officers and directors as a group. The table is based on a totalstock. As of 27,613,019July 30, 2019 there were 35,319,245 shares of common stock outstanding.
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned (1) | % of common stock Beneficially Owned | ||||||
Sinoquest Management Ltd. (2) 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C. | 4,120,990 | 14.92 | % | |||||
Peter Wang (2) 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C. | 1,957,470 | 7.09 | % | |||||
Rong Shi (3) 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C. | 200,000 | * | ||||||
Chris Chen 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C. | -0- | * | ||||||
Ruihua International Ltd. (4) 11/F Front Block, Hang Lok Building, 130 Wing Lok Street, Sheung Wan, Hong Kong | 17,431,104 | 63.13 | % | |||||
All Directors and Executive Officers as a Group (3 persons) (5) | 2,157,470 | 7.81 | % |
Name and Address of Beneficial Owner (1) |
| Class of Securities |
| Shares Owned |
| Percentage Owned (3) |
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Directors and Executive Officers |
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Xingtao Zhou, |
| Preferred Stock |
| 10,000,000 |
| 100% |
Chief Executive Officer, Chief Financial Officer, President and Chairman |
| Common Stock |
| 17,904,771 |
| 50.69% |
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Yaqin Fu(2) |
| Common Stock |
| 663,849 |
| 1.88% |
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All Officers and Directors |
| Common Stock |
| 18,568,620 |
| 52.57% |
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5% Stockholders |
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Li Ren |
| Common Stock |
| 1,763,200 |
| 5.00% |
———————
(1) | Beneficial ownership |
(2) | Yaqin Fu is the wife of Liang Tan, a |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
There is no family relationship between the fiscal year endedtwo directors. The new directors and officer have no material plan, contract or arrangement (written or not written) to which either is a party, or in which either participates, that is entered into, or a material amendment, in connection with any grant or award to any either person or modification thereto, under any such plan, contract or arrangement.
The following table shows the relationship of stockholders of the Company's common stock and their relationship to officers, directors and principal stockholders of the Company:
Name | Shares | Relationship to | ||
Yaqin Fu | 663,849 | Wife of Liang Tan* |
Related Party Transactions
As of December 31, 2018, and June 30, 2010,2018, the Company did not enter into anyhad a loan payable of $0 and $5,000, respectively to David Lazar, Chief Executive Officer. On December 13, 2018, the Company forgave $31,446 of the loan payable to David Lazar. The gain was recorded in additional paid in capital due to its related party transactionsnature. As of June 30, 2019, $0 remains outstanding.
On June 15, 2018, the company entered into a promissory notes payable with any director, officer, nominee for director, beneficial ownerDavid Lazar, Chief Executive Officer. The note is unsecured, noninterest bearing and due in 12 months from the date of 5% or moreissuance. On December 13, 2018, the Company forgave $5,000 of the equity securitiesentire amounts owed on this promissory note to David Lazar. The gain was recorded in additional paid in capital due to its related party nature. As of June 30, 2019, $0 remains outstanding.
On June 19, 2018, the Company issued 3,096,200 shares of common stock issued at par value of $0.001, for services valued at $3,096 to Custodian Ventures, LLC, the company controlled by David Lazar.
On June 19, 2018 the Company created 10,000,000 shares of Series A Preferred Stock, out of the 10,000,000 shares that were already authorized. On that same date, the Company issued 10,000,000 shares of the Series A preferred stock to Custodian Ventures LLC, the company controlled by David Lazar, Chief Executive Officer for services valued at $4,000,000.
On December 16, 2018, Custodian Ventures LLC (the “Seller”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which the Seller agreed to sell to Xingtao Zhou and Yaqin Fu (together, the “Purchaser”), the 3,096,200 common shares and the 10,000,000 preferred shares of the Company or their family members.
ITEM 14. PRINCIPAL ACCOUNTANTACCOUNTING FEES AND SERVICES
The following table shows the fees paid or accrued by us for the audit and other services provided by Patrizio & ZhaoBF Borges PC, for the fiscal periods shown.
|
| June 30, |
|
| June 30, |
| ||
|
| 2019 |
|
| 2018 |
| ||
Audit Fees |
| $ | 13,100 |
|
| $ | — |
|
Audit Related Fees |
|
| — |
|
|
| — |
|
Tax Fees |
|
| — |
|
|
| — |
|
All Other Fees |
|
| — |
|
|
| — |
|
Total |
| $ | 13,100 |
|
| $ | — |
|
Audit fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by the above auditors in connection with statutory and regulatory fillings or engagements.
Audit-Related Fees" are fees for assurance and related services by the principal accountant that are traditionally performed by the principal accountant and which are "reasonably related to the performance of the audit or review of the registrant's financial statements.
In the absence of a formal audit committee, the full Board of Directors pre-approves all audit and non-audit services to be performed by the independent registered public accounting firm in accordance with the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended. The Board of Directors pre-approved 100% of the audit, audit-related and tax services performed by the independent registered public accounting firm for the fiscal years ended June 30, 20092019 and June 30, 2010:
June 30, 2010 | June 30, 2009 | |||||||
Audit Fees | $ | 93,000 | $ | 93,000 | ||||
Audit Related Fees | 2,897 | - | ||||||
Tax Fees | - | - | ||||||
All Other Fees | - | - | ||||||
$ | 95,897 | $ | 93,000 |
PART IV
ITEM 15. Exhibits, EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this Annual Report:
(a) Financial Statement Schedules.
Page | |||
Report of Independent Registered Accounting Firm | F-2 | ||
Balance Sheets as of June 30, 2019 and 2018 | F-3 | ||
Statements of Operations and Comprehensive Loss for the years ended June 30, 2019 and 2018 | F-4 | ||
Statement of Changes in Shareholders’ Deficit for the years ended June 30, 2019 and 2018 | F-5 | ||
Statements of Cash Flows for the years ended June 30, 2019 and 2018 | F-6 | ||
Notes to Financial Statements | F-7 |
(b) Exhibits:
Exhibit | ||
Number | Name | |
31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). | |
32.1 | Certification of Principal Executive Officer and | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Schema Document | |
101.CAL | XBRL Calculation Linkbase Document | |
101.DEF | XBRL Definition Linkbase Document | |
101.LAB | XBRL Label Linkbase Document | |
101.PRE | XBRL Presentation Linkbase Document |
Not applicable.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC. | ||
Date: September 19, 2019 | By: | /s/ Xingtao Zhou |
Xingtao Zhou, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer) | ||
INDEX TO FINANCIAL STATEMENTS
Page | |
Report of Independent Registered | F-2 |
Balance Sheets as of June 30, 2019 and 2018 | F-3 |
Statements of Operations and Comprehensive | F-4 |
Statement of Changes in Shareholders’ Deficit for the years ended June 30, 2019 and 2018 | F-5 |
Statements of Cash Flows for the years ended June 30, 2019 and 2018 | F-6 |
Notes to | F-7 |
Report of Independent Registered Public Accounting Firm
To the Boardshareholders and the board of Directors and Stockholders
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Zhongchai Machinery,Cang Bao Tian Xia International Art Trade Center, Inc. (the “Company”"Company") as of June 30, 20102019 and 2009, and2018, the related consolidated statements of operations, and comprehensive income (loss)stockholders' equity (deficit), stockholders’ equity and cash flows for the years then ended. These financial statements areended, and the responsibility ofrelated notes (collectively referred to as the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
Basis for Opinion
These financial statements are the responsibility of America.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s minimal activities raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2018
Lakewood, CO
September 19, 2019
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
BALANCE SHEETS
|
| June 30, 2019 |
|
| June 30, 2018 |
| ||
|
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | — |
|
| $ | 5,000 |
|
Total current assets |
|
| — |
|
|
| 5,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | — |
|
| $ | 5,000 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts Payable and Accrued Expenses |
| $ | 10,650 |
|
| $ | — |
|
Related party notes payable |
|
| — |
|
|
| 5,000 |
|
Loan payable – related party |
|
| 15,856 |
|
|
| 14,096 |
|
Total current liabilities |
|
| 26,506 |
|
|
| 19,096 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
Series A Preferred Stock, 10,000,000 shares authorized at $0.001 per share: 9,992,000 and 10,000,000 shares issued and outstanding as of June 30, 2019 and 2018, respectively |
|
| 9,992 |
|
|
| 10,000 |
|
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 35,319,245 and 3,319,245 shares issued and outstanding as of June 30, 2019 and 2018, respectively |
|
| 35,319 |
|
|
| 3,319 |
|
Additional paid in capital |
|
| 20,509,768 |
|
|
| 20,505,314 |
|
Accumulated deficit |
|
| (20,581,585 | ) |
|
| (20,532,729 | ) |
Total stockholders' deficit |
|
| (26,506 | ) |
|
| (14,096 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | — |
|
| $ | 5,000 |
|
The accompanying notes are an integral part of these financial statements.
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
STATEMENTS OF OPERATIONS
|
| For the years ended |
| |||||
|
| June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
OPERATING EXPENSES: |
|
|
|
|
|
| ||
Related party professional fees – preferred stock |
| $ | — |
|
| $ | 4,000,000 |
|
Related party professional fees – common stock |
|
| — |
|
|
| 3,096 |
|
Legal expense |
|
| 25,750 |
|
|
| 5,300 |
|
Audit and accounting expense |
|
| 16,550 |
|
|
| — |
|
License and registration fees |
|
| 5,256 |
|
|
| 8,796 |
|
Transfer agent |
|
| 1,300 |
|
|
| — |
|
TOTAL OPERATING EXPENSE |
|
| 48,856 |
|
|
| 4,017,192 |
|
|
|
|
|
|
|
|
|
|
NET LOSS |
| $ | (48,856 | ) |
| $ | (4,017,192 | ) |
Net loss per common share – basic and diluted |
| $ | (0.00 | ) |
| $ | (12.37 | ) |
Weighted average common shares outstanding – basic and diluted |
|
| 15,154,861 |
|
|
| 324,838 |
|
The accompanying notes are an integral part of these financial statements.
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
STATEMENT OF STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||
|
| Series A Preferred Stock |
|
| Common Stock |
|
| Capital |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||
|
| Number of Shares |
|
| Par Value |
|
| Number of Shares |
|
| Par Value |
|
| Deficiency |
|
| Deficit |
|
| Deficit |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance – June 30, 2017 |
|
| — |
|
| $ | — |
|
|
| 223,045 |
|
| $ | 223 |
|
| $ | 16,515,314 |
|
| $ | (16,515,537 | ) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Shares issued for services -Preferred |
|
| 10,000,000 |
|
|
| 10,000 |
|
|
|
|
|
|
|
|
|
|
| 3,990,000 |
|
|
|
|
|
|
| 4,000,000 |
|
Shares issued for services - Common |
|
|
|
|
|
|
|
|
|
| 3,096,200 |
|
|
| 3,096 |
|
|
|
|
|
|
|
|
|
|
| 3,096 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,017,192 | ) |
|
| (4,017,192 | ) |
Balance – June 30, 2018 |
|
| 10,000,000 |
|
| $ | 10,000 |
|
|
| 3,319,245 |
|
| $ | 3,319 |
|
| $ | 20,505,314 |
|
| $ | (20,532,729 | ) |
| $ | (14,096 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of related party loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| 36,446 |
|
|
| — |
|
|
| 36,446 |
|
Conversion of Preferred stock into common stock |
|
| (8,000 | ) |
|
| (8 | ) |
|
| 32,000,000 |
|
|
| 32,000 |
|
|
| (31,992 | ) |
|
|
|
|
|
| — |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (48,856 | ) |
|
| (48,856 | ) |
Balance – June 30, 2019 |
|
| 9,992,000 |
|
| $ | 9,992 |
|
|
| 35,319,245 |
|
| $ | 35,319 |
|
| $ | 20,509,768 |
|
| $ | (20,581,585 | ) |
| $ | (26,506 | ) |
June 30, 2010 | June 30, 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,495,597 | $ | 3,990,767 | ||||
Restricted cash | 90,810 | 315,151 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $37,670 and $7,732 at June 30, 2010 and 2009, respectively | 3,618,030 | 1,540,402 | ||||||
Inventory | 2,680,666 | 1,568,445 | ||||||
Notes receivable | 463,465 | 448,655 | ||||||
Advance payments | 4,993,607 | 2,988,235 | ||||||
Other current assets | 110,131 | 115,266 | ||||||
Total current assets | 13,452,306 | 10,966,921 | ||||||
Property and equipment, net | 3,017,569 | 2,662,924 | ||||||
Goodwill | 3,425,868 | 3,407,262 | ||||||
Other noncurrent assets: | 451 | 65,575 | ||||||
Total assets | $ | 19,896,194 | $ | 17,102,682 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 3,504,923 | $ | 1,562,217 | ||||
Trade notes payable | 142,365 | 315,151 | ||||||
Short-term bank loans | 1,428,810 | 2,197,500 | ||||||
Taxes payable | 224,108 | 54,292 | ||||||
Dividend payable | 381,201 | - | ||||||
Other current liabilities | 3,322,277 | 635,408 | ||||||
Total current liabilities | 9,003,684 | 4,764,568 | ||||||
Total liabilities | 9,003,684 | 4,764,568 | ||||||
Stockholders’ equity: | ||||||||
Common stock, $.001 par value, 500,000,000 shares authorized, 27,613,019 and 27,613,019 shares issued and outstanding at June 30, 2010 and 2009, respectively | 27,613 | 27,613 | ||||||
Stock subscription receivable | (33,120 | ) | (33,120 | ) | ||||
Additional paid-in capital | 16,484,097 | 16,484,097 | ||||||
Statutory reserves | 315,152 | 124,460 | ||||||
Retained earnings (Accumulated deficit) | (7,558,542 | ) | (8,440,255 | ) | ||||
Accumulated other comprehensive income | 1,361,646 | 1,415,474 | ||||||
Total stockholders’ equity | 10,596,846 | 9,578,269 | ||||||
Noncontrolling interest | 295,664 | 2,759,845 | ||||||
Total equity | 10,892,510 | 12,338,114 | ||||||
Total liabilities and equity | $ | 19,896,194 | $ | 17,102,682 |
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
STATEMENTS OF CASH FLOWS
|
| For the years ended June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net Income |
| $ | (48,856 | ) |
| $ | (4,017,192 | ) |
Adjustments to reconcile net loss to net cash (used in) operating activities: |
|
|
|
|
|
|
|
|
Shares issued for services |
|
| — |
|
|
| 4,003,096 |
|
Forgiveness of related party loan |
|
| 31,446 |
|
|
| — |
|
Forgiveness of related party notes payable |
|
| 5,000 |
|
|
| — |
|
Changes in net assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
| 10,650 |
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES |
|
| (1,760 | ) |
|
| (14,096 | ) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payments on related party notes payable |
|
| (5,000 | ) |
|
| — |
|
Payment on related party loan |
|
| (31,446 | ) |
|
| — |
|
Proceeds from related party notes payable |
|
| — |
|
|
| 5,000 |
|
Proceeds from related party |
|
| 33,206 |
|
|
| 14,096 |
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| (3,240 | ) |
|
| 19,096 |
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH |
|
| (5,000 | ) |
|
| 5,000 |
|
|
|
|
|
|
|
|
|
|
CASH – BEGINNING OF PERIOD |
|
| 5,000 |
|
|
| — |
|
CASH – END OF PERIOD |
| $ | — |
|
| $ | 5,000 |
|
|
|
|
|
|
|
|
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Debt forgiveness recorded in additional paid in capital |
| $ | 36,446 |
|
| $ | — |
|
The accompanying notes are an integral part of these financial statements.
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and Comprehensive Income (Loss)
For the Years Ended June 30, | ||||||||
2010 | 2009 | |||||||
Sales | $ | 10,983,800 | $ | 4,923,918 | ||||
Cost of sales | 8,359,486 | 3,839,489 | ||||||
Gross profit | 2,624,314 | 1,084,429 | ||||||
Operating expenses | ||||||||
Selling, general and administrative | 1,287,359 | 2,048,155 | ||||||
Income (loss) from operations | 1,336,955 | (963,726 | ) | |||||
Other income (expenses): | ||||||||
Interest income (expense), net | (82,096 | ) | 16,145 | |||||
Other income, net | 345,867 | 138,697 | ||||||
Loss on disposal of a subsidiary-IBC | - | (220,782 | ) | |||||
Total other income (expenses) | 263,771 | (65,940 | ) | |||||
Income (loss) before provision for income taxes | 1,600,726 | (1,029,666 | ) | |||||
Provision for income taxes | 264,418 | 57,246 | ||||||
Net income (loss) | 1,336,308 | (1,086,912 | ) | |||||
Less: Net income attributable to noncontrolling interest | 263,903 | 45,278 | ||||||
Net income (loss) attributable to Zhongchai Machinery, Inc. | 1,072,405 | (1,132,190 | ) | |||||
Other comprehensive income (loss) | ||||||||
Foreign currency translation adjustment | (53,828 | ) | 42,646 | |||||
Comprehensive income (loss) | $ | 1,018,577 | $ | (1,089,544 | ) | |||
Earnings (loss) per common share: | ||||||||
Basic | $ | 0.04 | $ | (0.04 | ) | |||
Diluted | $ | 0.04 | $ | (0.04 | ) | |||
Weighted average number of common shares outstanding: | ||||||||
Basic | 27,613,019 | 28,146,164 | ||||||
Diluted | 27,613,019 | 28,146,164 |
Accumulated | ||||||||||||||||||||||||||||||||
Stock | Additional | Retained | Other | Total | ||||||||||||||||||||||||||||
Common Stock | Subscriptions | Paid-in | Statutory | Earnings | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||
Shares | Amount | Receivable | Capital | Reserves | (Deficit) | Income | Equity | |||||||||||||||||||||||||
Balance June 1, 2008 | 28,169,013 | $ | 28,169 | $ | (32,400 | ) | $ | 16,516,901 | $ | 62,253 | $ | (7,245,858 | ) | $ | 1,372,828 | $ | 10,701,893 | |||||||||||||||
Cancellation of common stock | (555,994 | ) | (556 | ) | - | (32,804 | ) | - | - | - | (33,360 | ) | ||||||||||||||||||||
Shareholder Contribution | - | - | (720 | ) | - | - | - | - | (720 | ) | ||||||||||||||||||||||
Net Loss | - | - | - | - | - | (1,132,190 | ) | - | (1,132,190 | ) | ||||||||||||||||||||||
Statutory reserves | - | - | - | - | 62,207 | (62,207 | ) | - | - | |||||||||||||||||||||||
Foreign Currency Translation | - | - | - | - | - | - | 42,646 | 42,646 | ||||||||||||||||||||||||
Balance June 30, 2009 | 27,613,019 | $ | 27,613 | $ | (33,120 | ) | $ | 16,484,097 | $ | 124,460 | $ | (8,440,255 | ) | $ | 1,415,474 | $ | 9,578,269 | |||||||||||||||
Net Income | - | - | - | - | - | 1,072,405 | - | 1,072,405 | ||||||||||||||||||||||||
Statutory reserves | - | - | - | - | 190,692 | (190,692 | ) | - | - | |||||||||||||||||||||||
Foreign Currency Translation | - | - | - | - | - | - | (53,828 | ) | (53,828 | ) | ||||||||||||||||||||||
Balance June 30, 2010 | 27,613,019 | $ | 27,613 | $ | (33,120 | ) | $ | 16,484,097 | $ | 315,152 | $ | (7,558,542 | ) | $ | 1,361,646 | $ | 10,596,846 |
For the Years Ended June 30, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 1,072,405 | $ | (1,132,190 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Noncontrolling interest | 263,903 | 45,278 | ||||||
Depreciation and amortization | 323,734 | 215,844 | ||||||
Loss on disposal of assets | 4,847 | - | ||||||
Provision for bad debts | 29,768 | 92,017 | ||||||
Stock based compensation | 63,606 | 108,789 | ||||||
Non-cash payments of rent | - | 3,750 | ||||||
Loss on disposal of a subsidiary-IBC | - | 390,431 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (2,090,134 | ) | (1,154,135 | ) | ||||
Inventory | (1,098,936 | ) | (322,261 | ) | ||||
Notes receivable - trade | (47,470 | ) | (95,257 | ) | ||||
Advance payments | 219,504 | 2,091,724 | ||||||
Other current assets | 3,902 | 184,912 | ||||||
Accounts payable and accrued expenses | 1,926,414 | 838,019 | ||||||
Trade notes payable | (173,760 | ) | 315,151 | |||||
Taxes payable | 168,795 | 54,145 | ||||||
Other current liabilities | 2,684,033 | 118,561 | ||||||
Total adjustments | 2,278,206 | 2,886,968 | ||||||
Net cash provided by operating activities | 3,350,611 | 1,754,778 | ||||||
Cash flows from investing activities: | ||||||||
Notes receivable - other | 35,000 | (57,500 | ) | |||||
Advance payments for purchase of land use rights and building | (2,200,050 | ) | - | |||||
Additions to property and equipment | (393,720 | ) | (368,312 | ) | ||||
Additions to construction in progress | (272,436 | ) | - | |||||
Payments to noncontrolling interest for ownership buyback | (2,473,274 | ) | - | |||||
Loss on disposal of a subsidiary –IBC, net of cash | - | (178,965 | ) | |||||
Net cash used in investing activities | (5,304,480 | ) | (604,777 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from (repayments of) short-term bank loans | (777,351 | ) | 2,197,500 | |||||
Net cash provided by (used in) financing activities | (777,351 | ) | 2,197,500 | |||||
Effect of foreign currency translation on cash | 11,709 | 1,444 | ||||||
Net increase (decrease) in cash and cash equivalents | (2,719,511 | ) | 3,348,945 | |||||
Cash and cash equivalents and restricted cash at beginning of year | 4,305,918 | 956,973 | ||||||
Cash and cash equivalents and restricted cash at end of year | $ | 1,586,407 | $ | 4,305,918 |
Note 1 – Organization and Naturebasis of Business
Basis of Presentation and Organization
Cang Bao Tian Xia International Art Trade Center, Inc., formerly Zhongchai Machinery, Inc. (“Zhongchai Machinery” or “the Company”) (Formerly “Equicap,, and before that Equicap, Inc.”), a Nevada corporation is(the “Company”, was a manufacturer and distributor of gears and gearboxes and drive axles which arethat were marketed and sold to equipment manufacturers in China.
On July 6, 2007, the Board of Directors of Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”), the China based and 75% owned subsidiary of the Company, approved and finalized a Share Purchase Agreement (“Share Purchase Agreement”) with Xinchang Keyi Machinery Co., Ltd., (“Keyi”) a corporation incorporated in the People’s Republic of China. Pursuant to the Share Purchase Agreement, Zhejiang Zhongchai purchased all the outstanding equity of Zhejiang Shengte Transmission Co., Ltd. (“Shengte”) from Keyi, the sole owner of Shengte for approximately $3.7 million.
On March 7, 2007, the Company and Usunco Automotive, Ltd. (“Usunco”), a British Virgin Islands company, entered into a Share Exchange Agreement (“Exchange Agreement”) which was consummated on March 9, 2007. Under the terms of the Exchange Agreement, the Company acquired all of the outstanding equity securities of Usunco in exchange for 18,323,944 shares of the Company’s common stock.
Since the Company had been a public shell company prior to the share exchange, the share exchange was treated as a recapitalization of the Company. As such, the historical financial information prior to the share exchange iswas that of Usunco and its subsidiaries. Historical share amounts have beenwere restated to reflect the effect of the share exchange.
On June 18, 2006, Usunco acquired 100% of IBC Automotive Products Inc (“IBC”), a California Corporation as of May 14, 2004 (date of inception), through a Share Exchange Agreement of 28% of Usunco’s shares. IBC was considered a “predecessor” business to Usunco as its operations constituted the business activities of Usunco formed to consummate the acquisition of IBC. The consolidated financial statements reflectat that time reflected all predecessor statements of income and cash flow activities from the inception of IBC in May 2004.
On June 15, 2009, IBC was sold to certain of the management persons of IBC in exchange for the following: (i) the cancellation of an aggregate of 555,994 shares of common stock of the Company which those individuals owned, and (ii) the payment of $60,000 in installments pursuant to the terms of an unsecured promissory note, the final payment of which will bewas made on November 15, 2010. As part of the transaction, the Company cancelled $428,261 through the closing date,, of inter-company debt which funds had been used in the business of IBC prior to the transaction.
On September 22, 2009, Xinchang Xian Lisheng Machinery Co., Ltd. (“Lisheng”) was incorporated by Zhejiang Zhongchai and two individual investors. Total registered capital of Lisheng iswas RMB 5 million, of which Zhejiang Zhongchai accountsaccounted for 60%. The Company plans to startstarted production of die casting products in 2010 for use in gearboxes, diesel engines and other machinery products.
On December 16, 2009, Zhongchai Machinery and its wholly owned subsidiaries, Usunco and Zhongchai Holding (Hong Kong) Limited, a Hong Kong company (“Zhongchai Holding”), took action to approve transfer of the shares of Zhejiang Zhongchai Machinery Co., from Usunco to Zhongchai Holding. The transfer was completed on December 23, 2009. The purpose of the transfer was to take advantage of the tax treaty between the People’sPeoples Republic of China and the Special Administrative Region of Hong Kong which reduces the withholding tax rate of the PRC on payments to entities outside of China. Usunco, which no longer had any assets after transferring all of them to Zhongchai Holding was subsequently dissolved. The consolidated financial statements will continuecontinued to account for Zhejiang Zhongchai Machinery Co., in the same manner as before the transfer of the ownership. Shareholder approval by the shareholders of Zhongchai Machinery was not required under Nevada law, as there was no sale of all or substantially all the assets of the Company. The shareholder ownership and shareholder rights of Zhongchai Machinery remainremained the same as before the transaction.
F-7
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and Nature of Business (continued)
On April 26, 2010, Zhongchai Holding (Hong Kong) Limited.Limited (“Zhongchai Holding”), which owned 75% of the equity in Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”), executed a Share Purchase Agreement (“Share Purchase Agreement”) with Xinchang Keyi Machinery Co., Ltd., (“Keyi”) a corporation incorporated in the People’s Republic of China. Pursuant to the Share Purchase Agreement, Zhongchai Holding purchased the residual 25% equity of Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”) from Keyi at $2.6 million. The agreement has beenShare Purchase Agreement was approved by the local government agency and a new business license has beenwas issued as Wholly Foreign Owned Enterprise.
On July 26, 2011, the Company held a Special Meeting of Shareholders. At the special meeting the Company’s shareholders approved an amendment to cease its periodic reporting obligation under the Securities Exchange Act of 1934 and thereby forego many of the expenses associates with operating as a public company subject to SEC reporting obligations.
On July 27, 2011, the Company, the Company approved a 1 for 120 reverse stock split of its then outstanding shares of the Company’s Common Stock.
On July 29, 2011, the Company terminated its registration with the Securities and Exchange Commission.Following such termination, the Company went private. Therefore, it became unclear when and if the Company ceased conducting business operations, as no further information became publicly available.
On May 11, 2018, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for the Company, then known as Zhongchai Machinery, Inc., proper notice having been given to the officers and directors of Zhongchai Machinery, Inc. There was no opposition. On May 16, 2018, the Company filed a certificate of revival with the State of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director. On June 19, 2018, the Company issued 3,096,200 shares of common stock issued at par value of $0.001, to Custodian Ventures, LLC, for services valued at $3,096.20. On June 19, 2018, the Company issued 10,000,000 shares of Series A Preferred Stock issued at par value of $0.001, to Custodian Ventures, LLC, for services valued at $4,000,000.
On July 24, 2018, the Company filed a Form 10 with the Securities and Exchange Commission, to again become a reporting issuer.
On December 16, 2018, Custodian Ventures LLC (the “Seller”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which the Seller agreed to sell to Xingtao Zhou and Yaqin Fu (together, the “Purchaser”), the 3,096,200 common shares and the 10,000,000 preferred shares of the Company (together, the “Shares”) owned by the Seller, for a total purchase price of $375,000. As a result of the sale, and David Lazar’s resignation as sole officer and director of the Company, there was a change of control of the Company. There is no family relationship or other relationship between the Seller and the Purchaser.
On January 08, 2019, the corporate name of the Company was changed to Cang Bao Tian Xia International Art Trade Center, Inc.
The accompanying condensed financial statements are prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The Company is a development stage enterprise devoting substantial efforts to establishing a new business, financial planning, raising capital, and research into products which may become part of the Company’s product portfolio. The Company has not realized significant sales through since inception. A development stage company is defined as one in which all efforts are devoted substantially to establishing a new business and, even if planned principal operations have commenced, revenues are insignificant.
F-8
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and 2018
Note 2- Going Concern
The accompanying condensed financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility is in effect. While management of the Company believes that it will be successful in its capital formation and planned operating activities, there can be no assurance that the Company will be able to raise additional equity capital or be successful in the development and commercialization of the products it develops or initiates collaboration agreements thereon. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
Note 23 – Summary of Significant Accounting Policies
Cash and Cash Equivalents
For purposes of reporting within the statements have been prepared in accordance with accounting principles generally accepted in the United Stated of America. The consolidated financial statements include the accounts of Zhongchai Machinery, Inc. and its controlling subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.
Employee Stock-Based Compensation
The Company accounts for Doubtful Accounts
Income Taxes
The Company accounts receivablefor income taxes pursuant to FASB ASC Topic 740,Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are stateddetermined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws.
Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the reliability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Fair Value Measurement
The Company values its amounts due to related partings and short term loans payable under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
F-9
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and 2018
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the amount management expectsmeasurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to collect fromthe valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances outstanding atbased on the endobservability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the period. Basedfair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Valuations for assets and liabilities that can be obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company’s principal markets for these securities are the secondary institutional markets, and valuations are based on observable market data in those markets.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The Company uses Level 3 to value its assessmentderivative instruments.
Subsequent Event
The Company evaluated subsequent events through the date when financial statements are issued for disclosure consideration.
Recent Accounting Pronouncements
On May 15, 2019, the FASB issued ASU 2019-05, 9 which provides transition relief for entities adopting the Board’s credit losses standard, ASU 2016-13. Specifically, ASU 2019-05 amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of the credit history with customers having outstanding balanceslosses guidance in ASC 326-20, (3) are eligible for the fair value option under ASC 825-10, and current relationships with them, management makes conclusions whether(4) are not held-to-maturity debt securities. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt the ASU in any realizationinterim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date of lossesASU 2016-13. The Company does not believe that this will have an impact on balances outstanding atits financial statements.
On March 21, 2019, the endFASB issued ASU 2019-03, 2 which amends the definition of the period will be deemed uncollectible based onterm “collections” in U.S. GAAP by aligning it with the agedefinition used in the Code of Ethics for Museums of the receivables.American Alliance of Museums. The amendments in the ASU “require that a collection-holding entity disclose its policy for the use of proceeds from when collection items are deaccessioned (that is, removed from a collection).” Next Steps: The ASU’s amendments are effective prospectively for annual financial statements issued for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company reserves 0.5%does not believe that this will have an impact on its financial statements.
F-10
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and 2018
On June 20, 2018, the FASB issued ASU 2018-07,1 which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of accounts receivable balancesthe guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. For public business entities (PBEs), the amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim periods therein. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted if financial statements have not yet been issued (for PBEs) or have not yet been made available for issuance (for all other entities), but no earlier than an entity’s adoption date of ASC 606.2. If early adoption is elected, all amendments in the ASU that apply must be adopted in the same period. In addition, if early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is still evaluating the impact that the new accounting guidance will have been outstanding less than threeon its financial statements and related disclosures and has not yet determined the method by which it will adopt the standard.
Note 4 – Related Party Transactions
On June 15, 2018, the company entered into a promissory notes payable with David Lazar, Chief Executive Officer. The note is unsecured, noninterest bearing and due in 12 months
On June 19, 2018, the Company issued 3,096,200 shares of common stock issued at the lower of cost or net realizable value. Cost is calculated on the weighted-average basis and includes all costs to acquire and other costs incurred in bringing the inventory to their present location and condition. The Company evaluates the net realizablepar value of its inventory$0.001, for services valued at $3,096 to Custodian Ventures, LLC, the company controlled by David Lazar.
On June 19, 2018 the Company created 10,000,000 shares of Series A Preferred Stock, out of the 10,000,000 shares that were already authorized. On that same date, the Company issued 10,000,000 shares of the Series A preferred stock to Custodian Ventures LLC, the company controlled by David Lazar, Chief Executive Officer for services valued at $4,000,000.
On December 16, 2018, Custodian Ventures LLC (the “Seller”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which the Seller agreed to sell to Xingtao Zhou and Yaqin Fu (together, the “Purchaser”), the 3,096,200 common shares and the 10,000,000 preferred shares of the Company (together, the “Shares”) owned by the Seller, for a total purchase price of $375,000. As a result of the sale, and David Lazar’s resignation as sole officer and director of the Company, there was a change of control of the Company. There is no family relationship or other relationship between the Seller and the Purchaser.
During the period July 01, 2018 thru December 13, 2018, David Lazar, paid $17,350 of expenses related to accounting, transfer agent, audit and legal fees on a regular basis and records a provision for lossbehalf of the company. On December 13, 2018, the Company forgave $31,446 of the loan payable to reduce the computed weighted-average cost if it exceeds the net realizable value.David Lazar. The Company did not record any provision for slow-moving and obsolete inventory asgain was recorded in additional paid in capital due to its related party nature. As of June 30, 20102019, $0 remains outstanding.
During the period December 14, 2018 thru June 30, 2019, Mr. Xingtao Zhou, paid a total of $15,856 in expenses on behalf of the company, for legal, transfer agent, audit and 2009.
Note 25 – SummaryStockholders Equity
Common Stock
On June 19, 2018, the Company issued 3,096,200 shares of Significant Accounting Policies (continued)
On February 14, 2019, the Company issued 32,000,000 common shares to shareholders pursuant to the conversion of 8,000 shares of Series A Preferred Stock at a conversion price of $0.0000025 per common share. As of June 30, 2019, 35,319,245 shares remain outstanding.
F-11
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and Equipment
Preferred Stock
The Company is authorized to issue 10,000,000 shares of $.001 par value preferred shares. On June 19, 2018 the Company created 10,000,000 shares of Series A Preferred Stock, out of the 10,000,000 shares that were already authorized. On that same date, the Company issued 10,000,000 shares of the Series A preferred stock to Custodian Ventures LLC, the company controlled by David Lazar, Chief Executive Officer for services valued at $4,000,000.
The following is a description of the material rights of our Series A Preferred Stock:
Each share of Series A Preferred Stock shall have a par value of $0.001 per share. The Series A Preferred Stock shall vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, on a 1 for one basis. If the Company effects a stock split which either increases or decreases the number of shares of Common Stock outstanding and equipment are statedentitled to vote, the voting rights of the Series A shall not be subject to adjustment unless specifically authorized.
Each share of Series A Preferred Stock shall be convertible at cost. Depreciation is calculated baseda rate of $0.0000025 per share of Common Stock (“Conversion Ratio”), at the option of a Holder, at any time and from time to time, from and after the issuance of the Series A Preferred Stock.
Subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the holders of shares of Series A Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, upon any payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation) on the straight-line method overCommon Stock of the estimated useful livesCorporation, as and if declared by the Board of Directors, as if the Series A Preferred Stock had been converted into Common Stock. Subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the payment of any dividends on the any series or classes of stock of the Corporation shall be subject to any priority set forth in Paragraph (I)(c)(3) of Article FIFTH of the Articles of Incorporation, as such may from time to time be amended.
In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets as follows:
The Series A Preferred Stock shares are nonredeemable other than upon the mutual agreement of the Company reviewsand the recoverabilityholder of shares to be redeemed, and even in such case only to the extent permitted by this Certificate of Designation, the Corporation’s Articles of Incorporation and applicable law.
F-12
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and 2018
Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price of the Series A Preferred Stock by the Series A Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Series A Conversion Price per share shall be $0.0000025 for shares of Series A Preferred Stock.
Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the applicable Series A Conversion Price in effect for such share immediately upon the earlier of (i) except as provided below in Section 4(c), the Corporation’s sale of its long-lived assets onCommon Stock in a periodic basis in orderpublic offering pursuant to identify business conditions, which may indicate a possible impairment. The assessment for potential impairment is based primarily onregistration statement under the Company’s ability to recover the carrying valueSecurities Act of its long-lived assets from expected future discounted cash flows. If the total1933, as amended; (ii) a liquidation, dissolution or winding up of the expected future discounted cash flows is less thanCorporation as defined in section 2(c) above but subject to any liquidation preference required by section 2(a) above; or (iii) the total carrying valuedate specified by written consent or agreement of the assets,holders of a loss is recognized for the difference between the fair value (computed based upon the expected future discounted cash flows) and the carrying valuemajority of the assets.
The holder of each share of Series A Preferred Stock shall have the right to one vote for each share of Series A Preferred Stock, and Other Intangible Assets
On February 14, 2019, the
As of rebates and discounts and is reported onJune 30, 2019, 9,992,000 preferred shares remain outstanding, which are owned by Xingtao Zhou, CEO.
Additional paid in capital
Related party debt forgiveness resulted in an increase in additional paid in capital of $36,446. Preferred stock conversion resulted in a gross basis. The gross basis is used mainly due to the fact that the Company acts as principal$31,992 decrease in each transaction and is responsible for fulfillment and acceptability of the products purchased, the Company takes title to its products before the products are ordered by its customers, the Company has risk of inventory loss as title of the products is transferred to the Company, the Company is responsible for collection of sales and delivery of products, and the Company does not act as an agent or broker and is not compensated on a commission or fee basis.
The Company incurred $25,750 in legal expenses, the cost of advertising as incurred. Advertising costs for$16,550 in audit and accounting fees, $5,181 in OTC Market registration and Nevada state license fees and $1,300 transfer agent fees during the years ended June 30, 2009 and 2008 were insignificant.
Note 7 – Income Taxes
The Company provides for income taxes under FASB ASC 740, Accounting for Income Taxes. FASB ASC 740 requires the years ended June 30, 2010 and 2009.
F-13
CANG BAO TIAN XIA INTERNATIONAL ART TRADE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 30, 2019 and 2018
FASB ASC 740 requires the years in which those temporary differences are expected to be recovered or settled. The effect onreduction of deferred tax assets and liabilities ofby a change in tax rates is recognized in income in the period that includes the enactment date.
For the period ended June 30, |
| 2019 |
|
| 2018 |
| ||
Book loss for the year |
| $ | (48,856 | ) |
| $ | (4,017,192 | ) |
|
|
|
|
|
|
|
|
|
Temporary difference: |
|
|
|
|
|
|
|
|
Accrued expenses |
|
| 10,650 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
Tax loss for the year |
|
| (38,206 | ) |
|
| (4,017,192 | ) |
|
|
|
|
|
|
|
|
|
Estimated effective tax rate |
|
| 21 | % |
|
| 21 | % |
Deferred tax asset |
| $ | (8,023 | ) |
| $ | (843,610 | ) |
Details of dilutive ordinary equivalent shares, if any, byvaluation allowance for the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding duringlast two years are as follows:
For the period ended June 30, |
| 2019 |
|
| 2018 |
| ||
Balances at the beginning of the year |
| $ | 843,610 |
|
| $ | — |
|
Additions |
|
| 8,023 |
|
|
| 843,610 |
|
Deductions |
|
|
|
|
|
| — |
|
Balance at the end of the Year |
| $ | 851,633 |
|
| $ | 843,610 |
|
Rate Reconciliation:
For the period ended June 30, |
| 2019 |
|
| 2018 |
| ||
Federal Income Tax Rate |
| $ | (10,260 | ) |
| $ | (843,610 | ) |
Permanent Difference |
|
| 2,237 |
|
|
| — |
|
Change in Valuation Allowance |
|
| 8,023 |
|
|
| 843,610 |
|
Balance at the end of the Year |
| $ | — |
|
| $ | — |
|
Uncertain Tax Positions
Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the year. Ordinary equivalent shares consistfinancial statements. If recognized, substantially all of the ordinary shares issuable upon the conversion of the convertible preferred shares (using the if-converted method) and ordinary shares issuable upon the exercise of outstanding share options (using the treasury stock method).
June 30, | June 30, | |||||||
2010 | 2009 | |||||||
Gears products | $ | 1,372,326 | $ | 885,559 | ||||
Gearbox products | 1,307,940 | 680,317 | ||||||
Other | 400 | 2,569 | ||||||
Total | $ | 2,680,666 | $ | 1,568,445 |
June 30, | June 30, | |||||||
2010 | 2009 | |||||||
Manufacturing equipment | $ | 3,272,563 | $ | 2,923,420 | ||||
Office equipment and furniture | 51,306 | 56,597 | ||||||
Vehicles | 122,965 | 62,039 | ||||||
Subtotal | 3,446,834 | 3,042,056 | ||||||
Less: Accumulated depreciation | 702,871 | 379,132 | ||||||
2,743,963 | 2,662,924 | |||||||
Add: Construction in progress | 273,606 | - | ||||||
Total | $ | 3,017,569 | $ | 2,662,924 |
June 30, 2010 | June 30, 2009 | |||||||
Computer Software | $ | 3,241 | $ | 3,223 | ||||
Less: accumulated amortization | 2,790 | 1,701 | ||||||
Total | $ | 451 | $ | 1522 |
Balance as of June 30, 2008 | $ | 3,393,307 | ||
Goodwill acquired during the year | - | |||
Effect of foreign currency translation | 13,955 | |||
Impairment | - | |||
Balance as of June 30, 2009 | 3,407,262 | |||
Goodwill acquired during the year | - | |||
Effect of foreign currency translation | 18,606 | |||
Impairment | - | |||
Balance as of June 30, 2010 | $ | 3,425,868 |
June 30, | June 30, | |||||||
2010 | 2009 | |||||||
Accounts payable | $ | 3,419,595 | $ | 1,400,162 | ||||
Accrued expenses | 85,328 | 162,055 | ||||||
Total | $ | 3,504,923 | $ | 1,562,217 |
June 30, | June 30, | |||||||
2010 | 2009 | |||||||
On May 25, 2009, the Company obtained a loan from Agricultural Bank of China, which was re-paid on August 26, 2009. The annual interest was At the fixed interest rate of 4.374% and paid monthly. The loan was secured by a third party. | $ | - | $ | 776,450 | ||||
On June 15, 2009, the Company obtained a loan from Agricultural Bank of China, which was re-paid on June 10, 2010. The interest is calculated Using an annual fixed interest rate of 5.31% and paid monthly. The loan is secured by a third party. | - | 1,421,050 | ||||||
On June 10, 2010, the Company obtained a loan from Agricultural Bank of China, which is due on June 10, 2011. The interest is calculated using an annual fixed interest rate of 5.31% and paid monthly. The loan is secured by a third party. | 1,428,810 | - | ||||||
Total short-term bank loans | $ | 1,428,810 | $ | 2,197,500 |
For the Years Ended June 30, | ||||||||
2010 | 2009 | |||||||
Cash paid for interest | $ | 132,529 | $ | 3,786 | ||||
Cash paid for income taxes | $ | 166,703 | $ | 57,246 |
The Company presents earnings (loss) per share on a basicrecognizes the interest and diluted basis. Basic earnings (loss) per share have been computed by dividing net earnings by the weighted average number of shares outstanding. Diluted earnings (loss) per share has been computed by dividing net earnings by the weighted average number of shares outstanding including the dilutive effect of equity securities. All sharepenalties accrued related to unrecognized tax benefits in income tax expense. The Company did not recognize any expenses any interest and per share data have been adjusted to reflect the recapitalization of the Company after the share exchange agreement with Usunco. The weighted average number of shares calculated for Diluted EPS excludes the potential common stock that would be exercised under the options granted to employees and warrants granted to agents because of their anti-dilutive effect.
For the Year Ended June 30, | ||||||||
2010 | 2009 | |||||||
Net income (loss) | $ | 1,072,405 | $ | (1,132,190 | ) | |||
Weighted average common shares (denominator for basic loss per share) | 27,613,019 | 28,146,164 | ||||||
Effect of dilutive securities: | - | - | ||||||
Weighted average common shares (denominator for diluted loss per share) | 27,613,019 | 28,146,164 | ||||||
Basic net income (loss) per share | $ | 0.04 | $ | (0.04 | ) | |||
Diluted net income (loss) per share | $ | 0.04 | $ | (0.04 | ) |
Note 8 – Subsequent Events
Name | Position | Option Granted | Option Price | Expired On | |||||||
Rong Shi | Director | 500,000 | $ | 0.20 | 2015/07/06 | ||||||
Mengxin He | General Manager | 500,000 | $ | 0.20 | 2015/07/06 | ||||||
Xianding Ge | General Manager | 100,000 | $ | 0.20 | 2015/07/06 | ||||||
Tracy Lin | Financial Director | 100,000 | $ | 0.20 | 2015/07/06 | ||||||
Min Guo | Office Manager | 100,000 | $ | 0.20 | 2015/07/06 |
The Company evaluates events that occur after the remaining 60% ofyear-end date through the options will be vested 20% each year for next three years. Note: The closing price ofdate the stock was $0.15 and the biding price was $0.05 as of July 6, 2010.
F-14