U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
DONGFANG CITY HOLDING GROUP COMPANY LIMITED
(Exact name of registrant as specified in its charter)
Delaware | 84-3505117 | |
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) | |
Incorporation or Organization) | ||
14 Wall Street, 20 FL, Suite 2052, New York, New York 10005 | 10005 | |
(Address of Principal Executive Offices) | (Zip Code) |
Issuer’s telephone number: 212-625-8648
Copies and correspondences to
Ling Cheng
52 East Broadway, 5FL, Suite 501,
New York, NY 10002
Tel: 917-554-0226
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which | |
to be so registered | each class is to be registered | |
None. | None. |
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value per share |
(Title of Class) |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
EXPLANATORY NOTE
We are voluntarily filing this General Form for Registration of Securities on Form 10 to register our common stock, par value $0.0001 per share (the “Common Stock”), pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
This registration statement will become effective automatically by lapse of time 60 days from the date of the original filing pursuant to Section 12(g)(1) of the Exchange Act. As of the effective date we will be subject to the requirements of Regulation 13(a) under the Exchange Act and will be required to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act.
Unless otherwise noted, references in this registration statement to the “Registrant,” the “Company,” “we,” “our” or “us” means Dongfang City Holding Group Company Limited. Our principal place of business is located at 14 Wall Street, 20 FL, New York, NY 10005.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue our operations. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this General Form for Registration of Securities on Form 10. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained herein will in fact occur.
TABLE OF CONTENTS
PAGE | ||
Item 1. | Business | 1 |
Item 1A. | Risk Factors | 4 |
Item 2. | Financial Information | 10 |
Item 3. | Properties | 12 |
Item 4. | Security Ownership of Certain Beneficial Owners and Management | 12 |
Item 5. | Directors and Executive Officers | 13 |
Item 6. | Executive Compensation | 15 |
Item 7. | Certain Relationships and Related Transactions, and Director Independence | 15 |
Item 8. | Legal Proceedings | 15 |
Item 9. | Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters | 16 |
Item 10. | Recent Sales of Unregistered Securities | 17 |
Item 11. | Description of Registrant’s Securities to be Registered | 17 |
Item 12. | Indemnification of Directors and Officers | 18 |
Item 13. | Financial Statements and Supplementary Data | 19 |
Item 14. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 19 |
Item 15. | Financial Statements and Exhibits | 19 |
Signatures | 20 |
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Organization and Business Operations
The Company was originally incorporated in Delaware on October 25, 2019 under the name Dongfang City Holding Group Company Limited. Since its inception, the Company has been in the development stage and has conducted virtually no business operations, other than organizational activities and preparation of this registration statement on Form 10 (the “Report”). The business strategy of the Company is to identify and complete a business combination with a company that meets the criteria of strong growth record, potential for further growth, leading technology position and proven management team prepared for being a public company. The Company currently has no full-time employee and owns no real estate or personal property. None of its officers, directors, promoters and other affiliates has engaged in any substantive discussions on its behalf with representatives of other companies regarding the possibility of a potential business combination with us. As the date of this Report, the Company has not conducted negotiations or entered into a letter of intent concerning any target business or opportunities. The Company selected October 31 as its fiscal year end.
Business of Issuer
Plan of Operation
The Company, based on proposed business activities, is a “blank check” company. The U.S. Securities and Exchange Commission (the “SEC”) defines those companies as “any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies.” Under SEC Rule 12b-2 under the Securities Act of 1933, as amended (the “Securities Act”), the Company also qualifies as a “shell company,” because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of “blank check” companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.
The Company was organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. There is no assurance that following an acquisition we will be eligible to trade on a national securities exchange, or be quoted on the Over-the-Counter Bulletin Board.
We intend to either retain an equity interest in any private company we engage in a business combination or we may receive cash and/or a combination of cash and common stock from any private company we complete a business combination with. Our desire is that the value of such consideration paid to us would be beneficial economically to our stockholders though there is no assurance of that happening.
Potential Target Companies
A business entity, if any, which may be interested in a business combination with the Company, may include the following:
● | a company for which a primary purpose of becoming public is the use of its securities for the acquisition of assets or businesses; | |
● | a company which is unable to find an underwriter of its securities or is unable to find an underwriter of securities on terms acceptable to it; |
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● | a company which wishes to become public with less dilution of its common stock than would occur upon an underwriting; | |
● | a company which believes that it will be able to obtain investment capital on more favorable terms after it has become public; | |
● | a foreign company which may wish an initial entry into the United States securities market; and | |
● | a company seeking one or more of the other perceived benefits of becoming a public company. |
The analysis of new business opportunities will be undertaken by or under the supervision of our management. Our company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In its efforts to analyze business opportunities, we will consider the following factors:
● | potential for growth, indicated by new technology, anticipated market expansion or new products; | |
● | competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole; | |
● | strength and diversity of management, either in place or scheduled for recruitment; | |
● | capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources; | |
● | the cost of participation by our company as compared to the perceived tangible and intangible values and potentials; | |
● | the extent to which the business opportunity can be advanced; | |
● | the accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and | |
● | other relevant factors. |
In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Additionally, management will investigate an entity to engage a potential acquisition through reviewing available financial statements, interviewing a potential acquisition’s primary vendors and customers as well as financial advisors.
Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the Company’s limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
Any private company could seek to become public by filing their own registration statement with the Securities and Exchange Commission and avoid compensating us in any manner and therefore there may be no perceived benefit to any private company seeking a business combination with us as we are obligated under SEC Rules to file a Form 8-K with the SEC within four (4) days of completing a business combination which would include information required by Form 10 on the private company. It is possible that, prior to the Company successfully consummating a business combination with an unaffiliated entity, that entity may desire to employ or retain one or a number of members of our management for the purposes of providing services to the surviving entity. However, the offer of any post-transaction employment to members of management will not be a consideration in our decision whether to undertake any proposed transaction. As a result we may not be able to complete a business combination.
No assurances can be given that the Company will be able to enter into a business combination, as to the terms of a business combination, or as to the nature of the target company.
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Emerging Growth Company Status
As a company with less than $1.07 billion in revenue during our last fiscal year, the Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
● | being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our SEC filings; |
● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; |
● | reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements; and |
● | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
The Company may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended. However, if certain events occur before the end of such five-year period, including if the Company becomes a “large accelerated filer,” its annual gross revenues exceed $1.07 billion or it issues more than $1.00 billion of non-convertible debt in any three-year period, the Company will cease to be an emerging growth company before the end of such five-year period.
In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. The Company has elected to take advantage of the extended transition period for complying with new or revised accounting standards and acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act.
Facilities/Properties
Our principal executive office is located at 14 Wall Street, Suite 2052, New York, New York 10005.
We entered into a sublease agreement with TroyEstate LLC (over-tenant) and Regus (landlord) on November 4, 2019 to rent premises located at 14 Wall Street, Suite 2052, New York, New York 10005, as our the executive office at an annual rent of $12,000. The term of the lease is one year from November 1, 2019 to October 30, 2020.
Employees
As of the date of this Report, we do not have any full time employees.
Legal Proceedings
Except for the disclosure below, we are not currently a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business, operating results, cash flows or financial condition.
Smaller Reporting Company
To the extent that we continue to qualify as a “smaller reporting company”, as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, certain exemptions are available to the Company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years.
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Available Information about the Company
The public may read and copy this registration statement, including the exhibits and schedules thereto, as well as any other materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers, like the Company, that file electronically with the SEC. The address of the SEC’s website is www.sec.gov.
Upon the effectiveness of this Registration Statement, the Company will become subject to the reporting and information requirements of the Exchange Act, and as a result will file periodic reports and other information with the SEC. These periodic reports and other information will be available for inspection and copying at the SEC’s public reference room and the website of the SEC referred to above.
Our business is difficult to evaluate because we have no operating history.
As the Company has no operating history or revenue and only minimal assets, there is a risk that we will be unable to continue as a going concern and consummate a business combination. The Company has had no recent operating history nor any revenues or earnings from operations since inception. We have no significant assets or financial resources. With our limited resources, we are faced with significant administrative costs of being a reporting company, additionally, our accountant’s report has raised substantial doubt about our ability to continue as a going concern. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. Our President, Chief Executive Officer and Chairman of the Board, Zhenggui Wang, has resources committed to funding our operations; we anticipate that we can continue as a going concern without obtaining additional working capital for five years. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.
There is competition for those private companies suitable for a merger transaction of the type contemplated by our management.
The Company is in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
Future success is highly dependent on the ability of our management to locate and attract a suitable acquisition.
The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we complete a business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control.
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Control by management
As of the date of this registration statement, the management of the Company owns 100% of the Company’s outstanding shares. Future investors will own a minority percentage of the Company’s Common Stock will have voting rights even if they will not control the votes of the board of directors or stockholders.
Our principal stockholder may engage in a transaction to cause the company to repurchase their shares of common stock
In order to provide an interest in the Company to a third party, our stockholder may choose to cause the Company to sell Company securities to third parties, with the proceeds of such sale being utilized by the Company to repurchase shares of common stock held by the stockholder. As a result of such transaction, our management, principal stockholder and Board of Director may change.
The Company has no existing agreement for a business combination or other transaction.
We have no arrangement, agreement or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. No assurances can be given that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. Management has not identified any particular industry or specific business within an industry for evaluation, or parameters for a potential business combination, and stockholders may be exposed to unknown risks following a merger if the merger partner is a development stage company or financially unstable. We cannot guarantee that we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that funds allocated to the purchase of our shares will not be invested in a company with active business operations.
Management intends to devote only a limited amount of time to seeking a target company which may adversely impact our ability to identify a suitable acquisition candidate.
While seeking a business combination, management anticipates devoting no more than twenty five (25) hours per week to the Company’s affairs in total. Our officer has not entered into a written employment agreement with us and is not expected to do so in the foreseeable future. This limited commitment may adversely impact our ability to identify and consummate a successful business combination.
Management has other business activities which may compete with time commitments and potential business opportunities allocated toward the Company.
Our President, Chief Executive Officer, and Chairman of the Board, Zhenggui Wang, is involved in other business activities and may, in the future, become involved in other business opportunities that become available. Mr. Wang’s other business activities may compete with time commitments allocated toward the Company. A potential conflict may arise if Mr. Wang’s other business activities coincide with an event of the Company. Mr. Wang may face a conflict in selecting between the Company and his other business interests. There can be no assurances made that in the event Mr. Wang’s other business activities or opportunities come into conflict that it will not diminish, or impact his role with the Company which would result in a loss of opportunity for the Company. The Company has not formulated a policy for the resolution of such conflicts. Mr. Wang has intentions of organizing additional blank-check companies in the future. No specific time or date has been established, however.
The time and cost of preparing a private company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private companies.
Target companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require reporting companies to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.
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The Company may be subject to further government regulation which would adversely affect our operations.
Although we will be subject to the reporting requirements under the Exchange Act, management believes we will not be subject to regulation under the Investment Company Act of 1940, as amended since we will not be engaged in the business of investing or trading in securities. If we engage in business combinations which result in our holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act. If so, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the SEC as to our status under the Investment Company Act and, consequently, violation of the Investment Company Act could subject us to material adverse consequences.
Any potential acquisition or merger with a foreign company may subject us to additional risks.
If we enter into a business combination with a foreign concern, we will be subject to risks inherent in business operations outside of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.
Our stockholders may have a minority interest in the Company following a business combination.
If we enter into a business combination with a company with a value in excess of the value of our Company, and issue shares of our Common Stock to the stockholders of such company as consideration for merging with us, our stockholders will likely own less than 50% of the Company after the business combination. The stockholders of the acquired company would therefore be able to control the election of our board of directors and control our Company.
There is currently no trading market for our common stock, and liquidity of shares of our common stock is limited.
All of the presently outstanding shares of common stock (100,000) are “restricted securities” as defined under Rule 144 promulgated under the Securities Act and may only be sold pursuant to an effective registration statement or an exemption from registration, if available. The SEC has adopted final rules amending Rule 144 which became effective on February 15, 2008. These final rules may be found at: www.sec.gov/rules/final/2007/33-8869.pdf. Pursuant to the new Rule 144, one year must elapse from the time a “shell company”, as defined in Rule 405, ceases to be “shell company” and files Form 10 information with the SEC, before a restricted stockholder can resell their holdings in reliance on Rule 144. Form 10 information is equivalent to information that a company would be required to file if it were registering a class of securities on Form 10 under the Securities and Exchange Act of 1934 (the “Exchange Act”). Under the amended Rule 144, restricted or unrestricted securities, that were initially issued by a reporting or non-reporting shell company or an Issuer that has at anytime previously a reporting or non-reporting shell company as defined in Rule 405, can only be resold in reliance on Rule 144 if the following conditions are met: (1) the issuer of the securities that was formerly a reporting or non-reporting shell company has ceased to be a shell company; (2) the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (3) the issuer of the securities has filed all reports and material required to be filed under Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding twelve months (or shorter period that the Issuer was required to file such reports and materials), other than Form 8-K reports and (4) at least one year has elapsed from the time the issuer filed the current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
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Our stock is not listed on an exchange or quoted on an OTC market, it is not anticipated that this will occur prior to the completion of an acquisition of a private company, and there is no guarantee that this will ever occur. At the present time, the Company is classified as a “shell company” as defined in Rule 12b-2 of the Securities and Exchange Act of 1934. As such, all restricted securities presently held by the founders of the Company may not be resold in reliance on Rule 144 until: (1) the Company files Form 10 information with the SEC when it ceases to be a “shell company”; (2) the Company has filed all reports as required by Section 13 and 15(d) of the Securities Act for twelve consecutive months; and (3) one year has elapsed from the time the Company files the current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
There can be no assurance that we will ever meet these conditions and any purchases of our shares are subject to these restrictions on resale. A purchase of our shares may never be available for resale as we cannot be assured we will ever lose our shell company status.
Risks of ownership of “Penny Stocks” under SEC regulations
Penny stocks have less visibility and transparency than higher priced securities. Companies that are quoted as penny stocks have risks that are inherently greater than securities that are higher priced due to such factors as less disclosure, lower investor interest and uncertain financial conditions of the issuer. The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities may be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC 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 other quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statement showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must 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. These disclosure and suitability requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our stock.
There are issues impacting liquidity of our securities with respect to the SEC’s review of a future resale registration statement.
Since our shares of common stock issued prior to a business combination or reverse merger cannot currently, nor will they for a considerable period of time after we complete a business combination, be available to be offered, sold, pledged or otherwise transferred without being registered pursuant to the Securities Act, we will likely file a resale registration statement on Form S-1, or some other available form, to register for resale such shares of common stock. We cannot control this future registration process in all respects as some matters are outside our control. Even if we are successful in causing the effectiveness of the resale registration statement, there can be no assurances that the occurrence of subsequent events may not preclude our ability to maintain the effectiveness of the registration statement. Any of the foregoing items could have adverse effects on the liquidity of our shares of common stock.
In addition, the SEC has recently disclosed that it has developed internal informal guidelines concerning the use of a resale registration statement to register the securities issued to certain investors in private investment in public equity (PIPE) transactions, where the issuer has a market capitalization of less than $75 million and, in general, does not qualify to file a Registration Statement on Form S-3 to register its securities. The SEC has taken the position that these smaller issuers may not be able to rely on Rule 415 under the Securities Act (“Rule 415”), which generally permits the offer and sale of securities on a continued or delayed basis over a period of time, but instead would require that the issuer offer and sell such securities in a direct or “primary” public offering, at a fixed price, if the facts and circumstances are such that the SEC believes the investors seeking to have their shares registered are underwriters and/or affiliates of the issuer. Staff members also have indicated that an issuer in most cases will have to wait until the later of six months after effectiveness of the first registration or such time as substantially all securities registered in the first registration are sold before filing a subsequent registration on behalf of the same investors. Since, following a reverse merger or business combination, we may have little or no tradable shares of common stock, it is unclear as to how many, if any, shares of common stock the SEC will permit us to register for resale. The SEC may require as a condition to the declaration of effectiveness of a resale registration statement that we reduce or “cut back” the number of shares of common stock to be registered in such registration statement. The result of the foregoing is that a stockholder’s liquidity in our common stock may be adversely affected in the event the SEC requires a cut back of the securities as a condition to allow the Company to rely on Rule 415 with respect to a resale registration statement, or, if the SEC requires us to file a primary registration statement.
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We have never paid dividends on our common stock.
We have never paid dividends on our Common Stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy.
The Company may be subject to certain tax consequences in our business, which may increase our cost of doing business.
We may not be able to structure our acquisition to result in tax-free treatment for the companies or their stockholders, which could deter third parties from entering into certain business combinations with us or result in being taxed on consideration received in a transaction. Currently, a transaction may be structured so as to result in tax-free treatment to both companies, as prescribed by various federal and state tax provisions. We intend to structure any business combination so as to minimize the federal and state tax consequences to both us and the target entity; however, we cannot guarantee that the business combination will meet the statutory requirements of a tax-free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes that may have an adverse effect on both parties to the transaction.
Our business will have no revenues unless and until we merge with or acquire an operating business.
We are a development stage company and have had no revenues from operations. We may not realize any revenues unless and until we successfully merge with or acquire an operating business.
The Company intends to issue more shares in a merger or acquisition, which will result in substantial dilution to existing stockholders.
Our Certificate of Incorporation authorizes the issuance of a maximum of 300,000,000 shares of common stock. Any merger or acquisition effected by us may result in the issuance of additional securities without stockholder approval and may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, the common stock issued in any such merger or acquisition transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our board of director (the “Board of Directors”) has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock are issued in connection with a business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holders of common stock might be materially and adversely affected.
The Company has conducted no market research or identification of business opportunities, which may affect our ability to identify a business to merge with or acquire.
The Company has neither conducted nor have others made available to us results of market research concerning prospective business opportunities. Therefore, we have no assurances that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination or other transactions for formal evaluation by us, such that it may be expected that any such target business or transaction will present such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available. There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our stockholders.
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Because we may seek to complete a business combination through a “reverse merger,” following such a transaction we may not be able to attract the attention of major brokerage firms.
Additional risks may exist since we will assist a privately held business to become public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of our Company since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of our post-merger company in the future.
We cannot assure you that following a business combination with an operating business, our common stock will be listed on NASDAQ or any other securities exchange.
Following a business combination, we may seek the listing of our common stock on NASDAQ or the NYSE Amex Equities. However, we cannot assure you that following such a transaction, we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange. After completing a business combination, until our common stock is listed on the NASDAQ or another stock exchange, we expect that our common stock would be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the “pink sheets,” where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, we would be subject to an SEC rule that, if it failed to meet the criteria set forth in such rule, imposes various practice requirements on broker-dealers who sell securities governed by the rule to persons other than established customers and accredited investors. Consequently, such rule may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital following a business combination.
We will be deemed a blank check company under Rule 419 of the Securities Act of 1933. In any subsequent offerings, we will have to comply with Rule 419.
If we publicly offer any securities as a condition to the closing of any acquisition or business combination while we are a blank check or shell company, we will have to fully comply with SEC Rule 419 and deposit all funds in escrow pending advice about the proposed transaction to our stockholders fully disclosing all information required by Regulation 14 of the SEC and seeking the vote and agreement of investment of those stockholders to whom such securities were offered; if no response is received from these stockholders within 45 days thereafter or if any stockholder elects not to invest following our advice about the proposed transaction, all funds that must be held in escrow by us under Rule 419, as applicable, will be promptly returned to any such stockholder. All securities issued in any such offering will likewise be deposited in escrow, pending satisfaction of the foregoing conditions. This is only a brief summary of Rule 419.
9
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this registration statement. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Report.
The Company was organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
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 without recompense from additional money contributed by the management, our stockholders or other investors.
During the next 12 months we anticipate incurring costs related to:
(i) | filing of Exchange Act reports, and | |
(ii) | investigating, analyzing and consummating an acquisition. |
The Company may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.
Our management has not had any preliminary contact or discussions with any representative of any other entity regarding a business combination with us. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.
Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing, and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.
The Company anticipates that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital that we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.
10
Results of Operations
We currently engage in any business activities that provide cash flow and has not earned any revenues from operations to date. These operations raise substantial doubts about our ability to continue as a going concern. Currently, our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going concern is also dependent on our ability to find a suitable target company and consummate a business combination. Management’s plan includes obtaining additional funds by equity financing through related party advances, however, there is no assurance of additional funding being available.
We have neither engaged in any operations nor generated any revenues to date. For the period from inception (October 25, 2019) through October 31, 2019, we had a net loss of $20,329, representing the advances from certain stockholders to pay for operating expenses for operating expenses. These funds have been advanced interest free and are due on demand. We will not generate any revenues until after the completion of a merger with a target company. Once this report is declared effective, we will become a report company. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
Liquidity and Capital Resources
As of October 31, 2010, the Company had a total of $10,100 in assets and no liabilities. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.
The following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities for the period from inception
From inception (October 25, 2019) through October 31, 2019 | ||||
Net Cash (Used in) Operating Activities | $ | (20,329 | ) | |
Net Cash (Used in) Investing Activities | $ | 0 | ||
Net Cash Provided by Financing Activities | $ | 30,429 | ||
Net Increase (Decrease) in Cash and Cash Equivalents | $ | 10,429 |
The Company has nominal assets and has generated no revenues since inception. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. In addition, the Company is dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.
Quantitative and Qualitative Disclosures About Market Risk.
We have not utilized any derivative financial instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. We believe that adequate controls are in place to monitor any hedging activities. We do not have any borrowings and, consequently, we are not effected by changes in market interest rates. We do not currently have any sales or own assets and operate facilities in countries outside the United States and, consequently, we are not effected by foreign currency fluctuations or exchange rate changes. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material to our financial condition or results of operations.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
11
Our principal executive office is located at 14 Wall Street, Suite 2052, New York, New York 10005.
We entered into a sublease agreement with TroyEstate LLC (over-tenant) and Regus (landlord) on November 4, 2019 to rent premises located at 14 Wall Street, Suite 2052, New York, New York 10005 as our executive office for an annual rent of $12,000. The term of the lease is one year from November 1, 2019 to October 30, 2020.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information as to the number and percentage of shares of Common Stock beneficially owned as of December 31, 2019, (i) by each person known by the Company to own beneficially more than 5% of the Company’s outstanding shares of Common Stock, (ii) by each of the Company’s directors and executive officers, and (iii) by all directors and executive officers as a group. As of December 31, 2019, there were 100,000 shares of Common Stock outstanding and percentages are based on such total of shares outstanding.
Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of the date of the respective table. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of the date of the respective table is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.
Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.
Securities Ownership of Officers and Directors
Name and Address of Beneficial Owner (2) | Amount and Nature of Beneficial Ownership | Percent of Class (1) | ||||||
Zhenggui Wang (3) | 90,000 | 90 | % | |||||
Ling Cheng (4) | 10,000 | 10 | % | |||||
All 5% or more beneficial owners, directors and executive officers as a group (two individuals) | 100,000 | 100 | % |
(1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of Common Stock actually outstanding on the date of this Information Statement. As of December 31, 2019, the Company had 100,000 shares of Common Stock issued and outstanding. |
(2) | Unless otherwise indicated, the business address of each of the individuals is 14 Wall Street, Suite 2052, New York, New York 10005. |
(3) | Mr. Zhenggui Wang is Chief Executive Officer, President and Chairman. |
(4) | Ms. Ling Cheng is Chief Financial Officer, Treasurer and Secretary. |
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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers
(a) Identification of Directors and Executive Officers.
Our officer and directors and additional information concerning each of them are as follows:
Name | Age | Position(s) | ||
Zhenggui Wang | 57 | Chief Executive Officer, President, Chairman of the Board | ||
Ling Cheng | 55 | Chief Financial Officer, Director, Secretary, Treasurer |
Zhenggui Wang, Chief Executive Officer/President/Chairman of the Board.
Zhenggui Wang, 57, has served as the Chairman of the Board since the inception of the Company, and Chief Executive Officer and President of the Company since November 2019. From February 2012 to September 2019, he served as the chairman of the board at Beijing Financial Street Registration Investment Consulting Company, an entity providing consulting service of corporate listing, equity investment, and fund management. From March 2002 to November 2011, Mr. Wang founded an international trade company named Sino-Russia Zhengtong International Trading Co. Ltd. to conduct business of small commodity border trade between China and Russia, where he served as the chairman of the board. From March 1993 to November 2001, he founded Beijing Chuangban Technology Consulting Company to promote the cultivation of ground beetles in Chinese traditional medicinal materials and seedling sales, and served as the chairman of the board. From February 1986 to October 1992, he served as the chairman of the board at Hefei Tonghe Technology Co., Ltd in Anhui, China, a company transferring and selling the cultivation technology and seedlings of medicinal Evodia Fruit, a Chinese traditional medicinal material. Mr. Wang received his bachelor degree in law from China University of Political science and Law in 1985. Mr. Wang’s qualifications to serve as Chairman of the Board, Chief Executive Officer, and President include his substantial experience in corporate management as well as his expertise and resources in financing and deal sourcing.
Ling Cheng, Chief Financial Officer/Secretary/Treasurer/Director.
Ling Cheng, 55, has served as a director of the Board since the inception of the Company, and the Chief Financial Officer and the Secretary and Treasurer of the Company since November 2019. Since May 2004, Ms. Cheng has served as a director and the Chief Financial Officer of American Sasky Group Inc., a company located in New York providing consulting service in immigration. From September 1981 to April 2004, she served as the director and the Chief Financial Officer of Cheng’s Family Nursery, a plant nursery conducting flower planting and selling business. Ms. Cheng graduated from San Jose State University with a bachelor degree in mathematics in 1989. Ms. Cheng’s qualifications to serve as the Chief Financial Officer, a director of the Board, the Secretary, and the Treasurer include her experience as the Chief Financial Officer and a board member of companies in various industries.
(b) Significant Employees.
None.
(c) Family Relationships.
None.
(d) Business Experience.
As disclosed in Item (a) above.
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(e) Involvement in Certain Legal Proceedings
To the best of the Company’s knowledge, none of the following events occurred during the past ten years that are material to an evaluation of the ability or integrity of any of our executive officers, directors or promoters
(1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
(2) Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) Subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
(4) Subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described by such activity;
(5) Found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6) Found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
(7) Subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
(i) Any Federal or State securities or commodities law or regulation; or
(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8) Subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S. C 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
14
Director Independence
Presently, we are not currently listed on a national securities exchange or in an inter-dealer quotation system and therefore are not required to comply with the director independence requirements of any securities exchange. In determining whether our directors are independent, however, we intend to comply with the rules of NASDAQ. The board of directors will also consult with counsel to ensure that the boards of director’s determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors, including those adopted under the Sarbanes-Oxley Act of 2002 with respect to the independence of audit committee members. Nasdaq Listing Rule 5605(a)(2) defines an “independent director” generally as a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. At this time, we do not have any independent directors.
ITEM 6. EXECUTIVE COMPENSATION
The Company’s officers and directors have not received any cash remuneration since inception. They will not receive any remuneration until the consummation of an acquisition. No remuneration of any nature has been paid for on account of services rendered by a director in such capacity. Our officers and directors intend to devote very limited time to our affairs.
It is possible that, after the Company successfully consummates a business combination with an unaffiliated entity, that entity may desire to employ or retain one or a number of members of our management for the purposes of providing services to the surviving entity. However, the Company has adopted a policy whereby the offer of any post-transaction employment to members of management will not be a consideration in our decision whether to undertake any proposed transaction.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees.
There are no understandings or agreements regarding compensation our management will receive after a business combination that is required to be included in this table, or otherwise.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Except as described elsewhere in the document, none of the directors, officers, or owners of record or beneficial owner of more than 5% of the Company’s Common Stock, in the last two years, had any material interest, direct or indirect, in any transaction with the Company or in any presently proposed transaction that has or will materially effect the Company.
We are not a party to any pending legal proceedings and to the best of our knowledge, no such proceedings by or against us have been threatened or is pending against us.
15
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
The Company’s common stock does not trade, nor is it admitted to quotation, on any stock exchange or other trading facility. Management has no present plan, proposal, arrangement or understanding with any person with regard to the development of a trading market in any of our securities. We cannot assure you that a trading market for our common stock will ever develop. The Company has not registered its class of common stock for resale under the blue sky laws of any state and current management does not anticipate doing so. The holders of shares of common stock, and persons who may desire to purchase shares of our common stock in any trading market that might develop in the future, should be aware that significant state blue sky law restrictions may exist which could limit the ability of stockholders to sell their shares and limit potential purchasers from acquiring our common stock.
The Company is not obligated by contract or otherwise to issue any securities and there are no outstanding securities which are convertible into or exchangeable for shares of our common stock, furthermore, there are currently no outstanding warrants on any of our securities. All outstanding shares of our common stock are “restricted securities,” as that term is defined under Rule 144 promulgated under the Securities Act of 1933, because they were issued in a private transaction not involving a public offering. Accordingly, none of the outstanding shares of our common stock may be resold, transferred, pledged as collateral or otherwise disposed of unless such transaction is registered under the Securities Act of 1933 or an exemption from registration is available. In connection with any transfer of shares of our common stock other than pursuant to an effective registration statement under the Securities Act of 1933, the Company may require the holder to provide to the Company an opinion of counsel to the effect that such transfer does not require registration of such transferred shares under the Securities Act of 1933.
Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, shell companies, like us, unless the following conditions are met:
● | the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
● | the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934; |
● | the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and |
● | at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company. |
Neither the Company nor its officer and director has any present plan, proposal, arrangement, understanding or intention of selling any unissued or outstanding shares of common stock in the public market subsequent to a business combination.
Nevertheless, in the event that a substantial number of shares of our common stock were to be sold in any public market that may develop for our securities subsequent to a business combination, such sales may adversely affect the price for the sale of the Company’s common stock securities in any such trading market. We cannot predict what effect, if any, market sales of currently restricted shares of common stock or the availability of such shares for sale will have on the market prices prevailing from time to time, if any.
16
(b) Holders.
As of the date of this Report, there was two (2) record holder of an aggregate of 100,000 shares of our Common Stock issued and outstanding.
(c) Dividends
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company’s business.
(d) Securities Authorized for Issuance under Equity Compensation Plans.
None.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On November 4, 2019, the Company issued an aggregate of 100,000 shares of its common stock as founder shares to Mr. Zhenggui Wang and Ms. Ling Cheng as a consideration of their capital contribution of $10,000 at $0.1 per share in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Section 4(a)(2) of the Securities Act.
ITEM 11. DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED
The Company is incorporated in the state of Delaware. The rights of the Company’s stockholders are generally covered by Delaware law and the Company’s articles of incorporation and bylaws (the “Articles of Incorporation” and the “Bylaws”).
(a) Capital Stock
The Company’s authorized capital stock consists of 300,000,000 shares of common stock, $0.0001 par value per share. As of the date of this Report, the Company had 100,000 outstanding shares of common stock.
Common Stock
We are authorized to issue a total of 300,000,000 shares of common stock. The holders of common stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders. The holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors, in its discretion, from funds legally available therefore. Upon liquidation or dissolution, the holders of our common stock are entitled to receive, pro rata, assets remaining available for distribution to stockholders. The common stock has no cumulative voting, preemptive or subscription rights and is not subject to any future calls. There are no conversion rights or redemption or sinking fund provisions applicable to the shares of common stock. All the outstanding shares of common stock are fully paid and nonassessable. There are no provisions in our Articles of Incorporation or Bylaws that would delay, defer or prevent a change in control.
(b) Debt Securities.
None.
(c) Warrants and Rights.
None.
(d) Other Securities to Be Registered.
None.
Transfer Agent
We presently serve as our own transfer agent and registrar for our common stock.
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ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with various actions, suits or proceedings, whether civil, criminal, administrative or investigative other than an action by or in the right of the corporation, a derivative action, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses including attorneys’ fees incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, agreement, a vote of stockholders or disinterested directors or otherwise.
Our bylaws provides that it will indemnify and hold harmless, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, each person that such section grants us the power to indemnify.
The Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
● | any breach of the director’s duty of loyalty to the corporation or its stockholders; |
● | acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; |
● | payments of unlawful dividends or unlawful stock repurchases or redemptions; or |
● | any transaction from which the director derived an improper personal benefit. |
Our Certificate of Incorporation provides that, to the fullest extent permitted by the Delaware General Corporation Law, none of our directors will be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
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ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information required under this section appear at the end of this Report beginning on page F-1. (See Item 15).
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Registrant and its accountants on any matter of accounting principles, practices or financial statement disclosure.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
The financial statements included in this Registration Statement on Form 10 are listed in Item 13 above.
(b) Exhibits.
Exhibit No. | Description | |
3.1* | Certificate of Incorporation | |
3.2* | Bylaws | |
4.1* | Specimen Stock Certificate |
* Previously filed.
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Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
DONGFANG CITY HOLDING GROUP COMPANY LIMITED | ||
December 31, 2019 | By: | /s/ Zhenggui Wang |
Zhenggui Wang | ||
Chief Executive Officer (Principal Executive Officer) |
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INDEX TO FINANCIAL STATEMENTS
Page | |||
Report of Independent Registered Public Accounting Firm | F-2 | ||
Financial Statements: | |||
Balance Sheet | F-3 | ||
Statements of Operations | F-4 | ||
Statement of Changes in Stockholders’ Equity | F-5 | ||
Statements of Cash Flows | F-6 | ||
Notes to Financial Statements | F-7 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Jack Shama, CPA, MA
1498 East 32nd Street
Brooklyn, NY 11234
347-481-0537
To the shareholders and the board of directors of Dongfang City Holding Group Company Limited.
Report of Independent Registered Public Accounting Firm.
Opinion on the financial statements.
I have audited the accompanying balance sheet of Dongfang City Holding Group Company Limited and the related statements of income, stockholders equity and cash flows for the year ending October 31, 2019. In my opinion based on my audit the financial statements present fairly in all material respects the financial position of the company as of October 31, 2019 and the results of its operations and its cash flows for the year then ended in conformity with principles generally accepted in the United States of America.
These financial statements are the responsibility of the company’s management. My responsibility is to express an opinion on the financial statements based on my audit. I am a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
I conducted my audit in accordance with the standards of the PCAOB. Those standards require that I 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, 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. My 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. I believe my audit provides a reasonable basis for my opinion.
/s/ Jack Shama | |
Jack Shama, CPA | |
November 18, 2019 |
I have served as the company’s auditor since November 2019
F-2
DONGFANG CITY HOLDING GROUP COMPANY LIMITED.
(A Development Stage Company)
OCTOBER 31, 2019
ASSETS | ||||
CURRENT ASSETS: | ||||
Cash | $ | 10,100 | ||
Total Current Assets | $ | 10,100 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
LIABILITIES | ||||
Loan From Shareholder | $ | 20,429 | ||
COMMITMENTS AND CONTINGENCIES | ||||
STOCKHOLDERS’ EQUITY: | ||||
Common stock, $.0001 par value, 300,000,000 shares authorized, 100,000 shares issued and outstanding | 1,000 | |||
Additional paid-in capital | 9,000 | |||
(Deficit) accumulated during development stage | (20,329 | ) | ||
Total Stockholders’ Equity | -10,329 | |||
$ | 10,100 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
DONGFANG CITY HOLDING GROUP COMPANY LIMITED
(A Development Stage Company)
For the Period From October 25, 2019 to October 31, 2019 | Cumulative from October 25, 2019 (Inception) To October 31, 2019 | |||||||
REVENUE | $ | — | $ | — | ||||
EXPENSES | 20,329 | 20,329 | ||||||
NET (LOSS) | $ | (20,329 | ) | $ | (20,329 | ) | ||
NET (LOSS) PER COMMON SHARE - BASIC | $ | * | ||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 100,000 |
* | Less than $.01 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
DONGFANG CITY HOLDING GROUP COMPANY LIMITED
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM OCTOBER 25, 2019 (INCEPTION)
TO OCTOBER 31 2019
(Deficit) | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||
Additional | During | Total | ||||||||||||||||||
Common Stock | Paid-in | Development | Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Stage | Equity | ||||||||||||||||
Balances, October 25, 2019 | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
Sale of common stock on October 31, 2019 at $.0001 per share | 100,000 | 10 | 9,900 | — | 10000 | |||||||||||||||
Net (loss) | — | — | — | (20,329 | ) | (20,329 | ) | |||||||||||||
Balances October 31, 2019 | 100,000 | $ | 10 | $ | 9,900 | $ | (20,329 | ) | $ | (10,329 | ) |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
DONGFANG CITY HOLDING GROUP COMPANY LIMITED
(A Development Stage Company)
For the Period From October 25, 2019 to October 31, 2019 | Cumulative from October 25, 2019 (Inception) To October 31, 2019 | |||||||
CASH FLOWS FROM (TO) OPERATING ACTIVITIES: | ||||||||
Net (loss) | $ | (20,329 | ) | $ | (20,329 | ) | ||
Adjustments to reconcile net (loss) to net cash (used in) operating activities: | ||||||||
Changes in: | ||||||||
Accrued expenses | 0 | 0 | ||||||
Net Cash (Used In) Operating Activities | (20,329 | ) | (20,329 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Common stock issued for cash | 10,000 | 10,000 | ||||||
Loan from shareholder | 20,429 | 20,429 | ||||||
Net Cash Provided by Financing Activities | 30,429 | 30,429 | ||||||
NET CHANGE IN CASH AND ENDING BALANCE | $ | 10,100 | $ | 10,100 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-6
DONGFANG CITY HOLDING GROUP COMPANY LIMITED
(A Development Stage Company)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History
Dongfang City Holding Group Company Limited (the “Company”), a development stage company, was organized under the laws of the State of Delaware on October 25, 2019. The company complies with the reporting requirements of ASC915, “Development Stage Entities” and has adopted Accounting Standards Update (“ASU”) 2014-10. The fiscal year end is October 31.
Going Concern and Plan of Operation
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is in the development stage and has not earned any revenues from operations to date. These conditions raise substantial doubt about its ability to continue as a going concern.
The Company is currently devoting its efforts to acquire a target company or business seeking the perceived advantages of being a publicly held corporation. The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Income Taxes
The Company uses the liability method of accounting for income taxes pursuant to Statement of Financial Accounting Standards No. 109. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year end.
For federal income tax purposes, substantially all expenses must be deferred until the Company commences business and then they may be written off over a 60-month period. These expenses will not be deducted for tax purposes and will represent a deferred tax asset. The Company will provide a valuation allowance in the full amount of the deferred tax asset since there is no assurance of future taxable income. Tax deductible losses can be carried forward for 20 years until utilized.
Deferred Offering Costs
Deferred offering costs, consisting of legal, accounting and filing fees relating to the offering will be capitalized. The deferred offering costs will be offset against offering proceeds in the event the offering is successful. In the event the offering is unsuccessful or is abandoned, the deferred offering costs will be expensed.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash in banks, cash on hand and highly liquid investments with original maturities of 90 days or less.
Concentrations of Credit Risk
The Company maintains all cash in deposit accounts, which at times may exceed federally insured limits. The Company has not experienced a loss in such accounts.
F-7
DONGFANG CITY HOLDING GROUP COMPANY LIMITED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share
A basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
Recently Issued Accounting Pronouncements
The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements is not anticipated to have a material effect on the operations of the Company.
NOTE 2 - STOCKHOLDERS’ EQUITY
During October 2019, the Company sold for $10,000 cash 100,000 shares of its $.0001 par value common stock to various investors.
NOTE 3 - RELATED PARTY TRANSACTIONS
Most office services such as printing, mailing and other basic office administrative services are provided without charge by the president. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
NOTE 4 - SUBSEQUENT EVENTS
The Company is currently filing a Form 10 registration statement with the Securities and Exchange Commission (“SEC”) pursuant to Section 12(g) of the Securities Exchange Act of 1934. Once the registration statement has been declared effective, Dongfang City Holding Group Company Limited. will become a reporting company.
The Company entered into a sublease agreement with TroyEstate LLC, the over-tenant and Regus, the landlord, on November 4, 2019 to rent premises located at 14 Wall Street, Suite 2052, New York, New York 10005, as the Company’s executive office with an annual rent of $12,000. The term of the lease is one year from November 1, 2019 to October 30, 2020.
F-8