| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States of America generally
accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission
(“SEC”) regarding interim financial reporting. The unaudited condensed consolidated financial statements include the financial
statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. The
interim condensed consolidated financial information as of September 30, 2021 and for the three and nine months periods ended September
30, 2021 and 2020 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote
disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed
or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10/A
for the fiscal year ended December 31, 2020, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2020
included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures,
including notes, required by GAAP. In
the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to
fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all
adjustments contained herein are of a normal recurring nature. The results of operations for the interim periods presented are not necessarily
indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021. Use
of Estimates The
preparation of these financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing
basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Identified below are the accounting policies that reflect the Company’s most significant estimates and judgments, and those that
the Company believes are the most critical to fully understanding and evaluating its condensed consolidated financial statements. The COVID-19 pandemic
has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns
or shutdowns, depress demand for the Company’s business, and adversely impact its results of operations. During the nine months
ended September 30, 2021 and 2020, the Company faced increasing uncertainties around its estimates of revenue collectability and accounts
receivable credit losses. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the
duration and degree of impact associated with the COVID-19 pandemic. Its estimates may change as new events occur and additional
information emerges, and such changes are recognized or disclosed in its condensed consolidated financial statements. Recently
Adopted Accounting Standards In
December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income
taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent
application among reporting entities. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all
periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained
earnings as of the beginning of the fiscal year of adoption. The Company applied the new standard beginning January 1, 2021. In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number
of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models. As a result,
a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features
require bifurcation and recognition as derivatives. For contracts in an entity’s own equity, the type of contracts primarily affected
by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure
to meet the settlement conditions of the derivative scope exception. This update simplifies the related settlement assessment by removing
the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required
to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if adopted as of the beginning of
such fiscal year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the
Company’s unaudited condensed consolidated financial statement presentation or disclosures. Recently
Issued Accounting Standards In
May 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-05, which is an update to ASU Update No. 2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected
credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous
incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several
consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which
must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30,
Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this ASU address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized
cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing
an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce
the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful
information. ASU 2019-05 is effective for the Company for fiscal year beginning after December 15, 2022. The Company is currently evaluating
the impact of this new standard on its condensed consolidated financial statements and related disclosures. Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until
a future date are not expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption. Basis
of Consolidation and Noncontrolling Interests The
unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant
inter-company balances and transactions within the Company have been eliminated upon consolidation. A
subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the
Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the
meeting of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an
agreement among the shareholders or equity holders. Leases
The
Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on
the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the
rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate
based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use
(“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and
lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized
based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the
lease term. The Company elected the package of practical expedients permitted under the transition guidance to combine the lease and
non-lease components as a single lease component for operating leases associated with the Company’s office space lease, and to
keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated
statements of income on a straight-line basis over the lease term. The
operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current
on the Company’s condensed consolidated balance sheets. Cash
and Cash Equivalents For
purposes of the statement of cash flows, the Company considers cash, money market funds, investments in interest bearing demand deposit
accounts, time deposits and all highly liquid investments placed with banks or other financial institutions with an original maturity
of three months or less to be cash equivalents. As
of September 30, 2021, cash held in accounts managed by online payment platforms such as Alipay and WeChat Pay amounted to $232,768 (as
at December 31, 2020: Nil Accounts
receivable Accounts
receivable are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns. The allowance for doubtful
accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable.
The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. Outstanding
accounts receivable balances are reviewed individually for collectability. Account balances are charged off against the allowance after
all means of collection have been exhausted and the potential for recovery is considered remote. Debt
products All
debt products are carried at fair value at the end of each reporting period. Changes in the carrying amount of debt products relating
to interest income calculated using the effective interest method are recognized in consolidated statement of profit or loss. Other changes
in the carrying amount of these products, net of any related tax effects, are excluded form earnings and are included in other comprehensive
income or loss and reported as a separate component of stockholders’ equity or deficit until realized. Realized gains and losses
and declines in value judged to be other than temporary, if any, on debt products are included in other income (expense), net. The
Company regularly reviews all of its investments for other-than-temporary declines in estimated fair value. Its review includes the consideration
of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss
position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it
is more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. When
the Company determines that the decline in estimated fair value of an investment is below the amortized cost basis and the decline is
other-than-temporary, it reduces the carrying value of the security and record a loss for the amount of such decline. The Company has
not recorded any declines in value judged to be other than temporary on its investments in debt securities. Plant
and equipment Plant
and equipment are recorded at cost less accumulated depreciation and accumulated impairment. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
Estimated useful lives
Motor vehicle 4 - 5 The
gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the lower of the carrying value
or fair value less cost to sell the relevant assets and is recognized in general and administrative expenses in the condensed consolidated
statements of comprehensive income. Impairment
of Long-lived Assets In
accordance with ASC 360-10-35, we review the carrying values of long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The Company assesses the recover-ability of the assets based on
the non-discounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future
cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than
the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated
fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. No impairment has
been recorded by the Company for the three and nine months ended September 30, 2021 and 2020. Revenue
Recognition The
Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which it expects to receive in exchange for those goods. The Company recognizes revenues following the five step model prescribed under
ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues
when (or as) we satisfy the performance obligation. The
Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or net
basis. The Company is acting as the principal if it obtains control over the goods and services before they are transferred to customers.
When the Company is primarily obligated in a transaction, is generally subject to inventory risk, has latitude in establishing prices,
or has several but not all of these indicators, the Company acts as the principal and revenue is recorded on a gross basis. When the
Company is not primarily obligated in a transaction, does not generally bear the inventory risk and does not have the ability to establish
the price, the Company acts as the agent and revenue is recorded on a net basis The
Company derives its revenue primarily from net transaction services, including consultancy services and sourcing and marketing services. Consultancy
services The
Company generates the majority of its revenues by providing consulting services to its clients. Most of its consulting service contracts
are based on one of the following types of arrangements: Performance-based
arrangements Fixed-fee training services Fixed-fee
arrangements Sourcing
and marketing services The
Company provides agency-based sourcing and digital marketing services to connect marketplace operators and merchants. Most of its sourcing
and marketing services are based on one of the following types of arrangements: Agency-based
sourcing services Digital
marketing services The
post-sale services, goods return and other kinds of product issue are responsibilities of the merchants. Upon successful delivery to
ultimate customers by the merchants, there is no unfulfilled obligation that could affect the marketplace operators’ and merchants’
acceptance of the services provided. The acceptance provisions have lapsed, or the Company has objective evidence that all criteria for
acceptance have been satisfied. The
Company derived services revenues of $1,515,371 and $2,920,165 for the three months ended September 30, 2021 and 2020, respectively;
and $4,268,054 and $6,158,584 for the nine months ended September 30, 2021 and 2020, respectively, from provision of certain consultancy
services and sourcing and marketing services through the program application (“App”) platform managed by a related company,
Xi’an Chuangyetianxia Network Technology Co., Ltd. (“Xian CNT”). The Company CEO, Mr. Tao, has significant influence
over Xian CNT. During
the three and nine months ended September 30, 2021 and 2020, revenues generated from Xian CNT are disclosed in note 5 of the condensed
consolidated financial statements. Practical
expedients and exemption The
Company has not occurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts
with an original expected length of one year or less. Other
service income is earned when services have been rendered. Revenue
by major service line
Three months ended Nine months ended
2021 2020 2021 2020
Consultancy services 1,554,834 3,128,557 4,362,581 6,478,673
Sourcing and marketing services 67,637 120,746 116,834 169,082
$ 1,622,471 $ 3,249,303 $ 4,479,415 $ 6,647,755 Revenue
by recognition over time vs point in time
Three months ended Nine months ended
2021 2020 2021 2020
Revenue recognized at a point in time 1,622,471 3,227,405 4,479,415 6,560,282
Revenue recognized over time - 21,898 - 87,473
$ 1,622,471 $ 3,249,303 $ 4,479,415 $ 6,647,755 Revenue
recorded on a gross vs net basis
Three months ended Nine months ended
2021 2020 2021 2020
Revenue recorded on a gross basis 1,554,834 3,128,557 4,362,581 6,478,673
Revenue recorded on a net basis 67,637 120,746 116,834 169,082
$ 1,622,471 $ 3,249,303 $ 4,479,415 $ 6,647,755 Contract
liabilities The
Company’s contract liabilities consist of deferred revenue associated with consultancy fees. The table below presents the activity
of the deferred consultancy services revenue during the three and nine months ended September 30, 2021 and 2020, respectively:
Three months ended Nine months ended
2021 2020 2021 2020
Balance at beginning of period $ - $ 21,889 $ - $ 87,136
Consultancy fees collected 852,367 - 852,367 -
Consultancy income earned (848,222 ) (21,821 ) (848,222 ) (87,396 )
Exchange realignment 15 (68 ) 15 260
Balance at end of period $ 4,160 $ - $ 4,160 - Cost
of revenue Cost
of revenues consists primarily of employee compensation, service fees, agency fees, and the related IT expenses, which are directly attributable
to the provision of services. Employee
benefits Full
time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension
benefits, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require
that the PRC subsidiary of the Company make contributions to the government for these benefits based on certain percentages of the employees’
salaries, up to a maximum amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions
made. Total amounts of such employee benefit expenses, which were expensed as incurred, were approximately $31,273 and $3,852 for the
three months ended September 30, 2021 and 2020, respectively; and $78,957 and $9,678 for the nine months ended September 30, 2021 and
2020, respectively. Foreign
Currency and Foreign Currency Translation The
reporting currency of the Company is the United States dollar (“US dollar”). The financial records of the Company’s
PRC operating subsidiaries are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency.
The financial records of the Company’s Hong Kong operating subsidiary are maintained in its local currency, the Hong Kong Dollar
(“HKD”), which is the functional currency. Assets and liabilities of the subsidiaries are translated into the reporting currency
at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates, and income and expense
items are translated using the average rate for the period. The translation adjustments are recorded in accumulated other comprehensive
loss under shareholders’ equity. Monetary
assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies
at the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable
functional currencies at historical exchange rates. Transactions in currencies other than the applicable functional currencies during
the period are converted into the functional currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction
gains and losses are recognized in the consolidated statements of operations. RMB
is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People’s
Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted
for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand.
Translation of amounts from RMB into US dollars has been made at the following exchange rates for the respective periods:
Nine months ended September 30, 2020
Balance sheet, except for equity accounts RMB 6.8484 to US$1.00
Income statement and cash flows RMB 6.9953 to US$1.00
Nine months ended September 30, 2021
Balance sheet, except for equity accounts RMB 6.4466 to US$1.00
Income statement and cash flows RMB 6.4714 to US$1.00
Year ended December 31, 2020
Balance sheet, except for equity accounts RMB 6.5401 to US$1.00 During
the periods presented, HKD is pegged to the U.S. dollar within a narrow range. Income
Taxes Income
taxes are accounted for using an asset and liability approach which requires the recognition of income taxes payable or refundable for
the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s
financial statements or tax returns. Deferred income taxes are determined based on the differences between the accounting basis and the
tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws. Deferred tax assets are reduced
by a valuation allowance, if based on available evidence, it is considered that it is more likely than not that some portion of or all
of the deferred tax assets will not be realized. In making such determination, the Company considers factors including future reversals
of existing taxable temporary differences, future profitability, and tax planning strategies. If events were to occur in the future that
would allow the Company to realize more of its deferred tax assets than the presently recorded net amount, an adjustment would be made
to the deferred tax assets that would increase income for the period when those events occurred. If events were to occur in the future
that would require the Company to realize less of its deferred tax assets than the presently recorded net amount, an adjustment would
be made to the valuation allowance against deferred tax assets that would decrease income for the period when those events occurred.
Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. Uncertain
Tax Positions Management
reviews regularly the adequacy of the provisions for taxes as they relate to the Company’s income and transactions. In order to
assess uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for tax position measurement
and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution
of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more
than 50% likely to be realized upon settlement. As of September 30, 2021 and December 31, 2020, the Company had not recorded any liability
for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized
as a component of income tax expense. Net
income per Share of Common Stock The
Company has adopted ASC Topic 260, “Earnings per Share,” (“EPS”) which requires presentation of basic EPS on
the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing
net income by the weighted average number of shares of common stock outstanding during the period.
Three months ended Nine months ended
2021 2020 2021 2020
Net income 207,551 1,929,628 $ 1,296,228 $ 3,779,762
Weighted average number of common stock outstanding
- basic and diluted 1,701,181,423 1,701,181,423 1,701,181,423 1,701,181,423
Net income per share
- basic and diluted $ 0.00 * $ 0.00 * $ 0.00 * $ 0.00 * * Less than $0.01 per share The
calculation of basic net income per share of common stock is based on the net income for the three and nine months ended September 30,
2021 and 2020 and the weighted average number of ordinary shares outstanding. For
the three and nine months ended September 30, 2021 and 2020, the Company has no potentially dilutive securities, such as options or warrants,
currently issued and outstanding. Segments The
Company uses the “management approach” in determining reportable operating segments. The management approach considers the
internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing
performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision
maker, reviews operating results solely by monthly revenue of marketing consultation services and operating results of the Company and,
as such, the Company has determined that the Company has one operating segment (provision of consulting, sourcing and marketing services
in China) as defined by ASC Topic 280 “Segment Reporting”. Concentration
of Credit Risk Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. As
of September 30, 2021 and December 31, 2020, $7,723,941 and $3,846,470 of the Company’s cash and cash equivalents, respectively
were held at financial institutions and online payment platforms located in the PRC and Hong Kong that management believes to be of high
credit quality. The Company has not experienced any losses on cash and cash equivalents to date. The Company does not require collateral
or other securities to support financial instruments that are subject to credit risk. The
Company operates principally in the PRC and Hong Kong and grants credit to its customers in these geographic regions. Although the PRC
is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations. Fair
Value of Financial Instruments ASC
Topic 820, Fair Value Measurement and Disclosures
● Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
● Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. Valuation
of debt products depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future
interest rates, and other relevant terms of the debt. Other factors that may be considered include the borrower’s ability to adequately
service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral
securing the Company’s debt investments. The fair value of these debt products classified as Level 2 are established by reference
to the prices quoted by respective fund administrators. The
carrying amounts of financial assets and liabilities, such as cash and cash equivalents, account receivables, other receivables, amount
due from a related company, loan to a related company, account payables and other payables, amounts due to a director and a shareholder
and borrowings approximate their fair values because of the short maturity of these instruments or the rate of interest of these instruments
approximate the market rate of interest. Comprehensive
Income Comprehensive
income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding
transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income includes cumulative
foreign currency translation adjustment. |
