Cloudweb, Inc. - Quarter Report: 2018 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES   ¨ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ YES    x NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ YES   x NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ¨ YES ¨ NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

20,786,082 common shares issued and outstanding as of October 31, 2018.                                                

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CLOUDWEB, INC.

(formerly Data Backup Solutions, Inc.)

FINANCIAL STATEMENTS INDEX

CLOUDWEB, INC.

(formerly Data Backup Solutions, Inc.)

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited consolidated financial statements.

CLOUDWEB, INC.

(formerly Data Backup Solutions, Inc.)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these unaudited consolidated financial statements.

CLOUDWEB, INC.

(formerly Data Backup Solutions, Inc.)

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of these unaudited consolidated financial statements.

CLOUDWEB, INC.

(formerly Data Backup Solutions, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS

Cloudweb, Inc. (the “Company”) is a Florida corporation incorporated on May 25, 2014 as Formigli, Inc. In December, 2015 the Company changed its name to Data Backup, Inc., and on November 4, 2016, the Company changed its name to Data Backup Solutions Inc. On October 1, 2017, the Company changed its name to Cloudweb, Inc.

We were previously engaged in the global exclusive distribution of Formigli Bicycles.

On December 3, 2015 the Company increased its authorized share capital from 100,000,000 shares to 500,000,000 shares, no par value, and completed a 100 for 1 forward split for all issued and outstanding shares. All share and per share values have been retroactively impacted to reflect the forward split.

On January 28, 2016, Data Backup concluded a Share Exchange Agreement entered into with Mr. Liao, whereby Data Backup issued 2,500,000 shares of its common stock to Mr. Liao in exchange for 100% of the issued and outstanding equity interests of Data Cloud Inc. a Nevada corporation (“Data Cloud”). Data Cloud owned 100% of the issued and outstanding equity interests of Web Hosting Solutions Ltd., a United Kingdom company (“WHS”), which it purchased from James Holland for US$72,000 (GBP 47,000) on November 25, 2015.

At the time WHS had been providing web hosting solutions for approximately ten (10) years and became a UK private limited company in 2012. In connection with the Share Exchange Agreement, Data Backup elected to enter into the web hosting industry and discontinue its former business operations.

As a result of the Share Exchange Agreement, Mr. Liao became the Company’s sole executive officer and sole member of the Board of Directors. Concurrently, Mr. Liao, through his controlled entity, Letterston Investments Ltd., acquired 250,000,000 shares of common stock from our former sole officer and director Ms. Amy Chaffe. As a result, on the transaction date, Mr. Liao effectively controlled approximately 81% of the Company’s issued and outstanding shares of common stock.

On February 1, 2016, our former officer and director Amy Chaffe entered into a Waiver, Release and Indemnity Agreement with the Company whereby under she agreed to forgive certain debt in the amount of $167,000 due and payable at January 31, 2016 in exchange for $39,229 and the return of all assets related to the Formigli bicycles, including the sales operations thereunder. As a result of this divestiture, the Company reflected the operations of Formigli Bicycle as discontinued operations as at the fiscal year ended December 31, 2015. In the current financial statement presentation, operations of the parent company, Data Backup, have all been allocated to retained earnings and additional paid in capital as at the January 28, 2016 transaction date.

The business combination as a result of the Share Exchange Agreement described above is deemed to be a reverse acquisition pursuant to SEC guidance, ASC 805-40-25-1, which provides that the merger of a private operating company into a public corporation with nominal net assets typically results in the owners and management of the private company having actual or effective operating control of the combined company after the transaction, with shareholders of the former public entity continuing only as passive investors. These transactions are considered to be capital transactions in substance, rather than business combinations. That is, the transaction is equivalent to the issuance of stock by the private company for the net monetary assets of the public corporation, accompanied by a recapitalization. The accounting is identical to that resulting from a reverse acquisition, except that no goodwill or other intangible should be recorded.

Accordingly, Data Backup (the legal acquirer) is considered the accounting acquiree and Data Cloud (the legal acquire) is considered the accounting acquirer. The consolidated financial statements of the combined entity are in substance those of Data Cloud, with assets and liabilities, and revenues and expenses, of Data Backup being included effective from the date of completion of the Share Exchange Transaction, as Data Backup is deemed to be a continuation of the business of Data Cloud. The outstanding stock of Data Backup prior to the Share Exchange Transaction has been accounted for at its net book value and no goodwill has been recognized. All outstanding shares of Data Backup at the transaction date have been restated to reflect the effect of the business combination. As a result of the aforementioned transactions a total of 310,013,800 shares of Data Backup common stock issued and outstanding at December 31, 2015 are reflected as part of the recapitalization transactions impacted at January 28, 2016 in our Statements of Stockholder’s Equity (Deficit). The shares issued as part of the Share Exchange Transaction are the reported opening equity balance.

On April 1, 2017, Data Backup Solutions, Inc. a Florida corporation (the “Company” or “Data Backup”), entered into a Purchase Agreement (the “ Purchase Agreement”) with Yui Daing, an individual residing in Kuala Lumpur, Malaysia (the “Purchaser”), Data Cloud Inc., a Nevada corporation (hereinafter referred to as (“Data Cloud”), and Web Hosting Solutions Ltd., a United Kingdom private company limited by shares (hereinafter referred to as “WHS”). The transactions under the Purchase Agreement were completed on April 1, 2017 (hereinafter referred to as the “Closing”). Prior to the Closing, Data Backup owned 100% of the issued and outstanding equity interests of Data Cloud which owns 100% of the issued and outstanding equity interests of Web Hosting Solutions Ltd., a United Kingdom private company limited by shares (“WHS”). Due to the continued consolidated losses experienced by the Company as the result of the losses of the Company’s indirect wholly-owned subsidiary, WHS, which included $50,083 USD for the fiscal year ended December 31, 2016 and $22,755 USD for the first three (3) months ended March 31, 2017, the Company entered into the Purchase Agreement and transferred 100% of the issued and outstanding equity interests of Data Cloud to a third party for nominal consideration in return. The Company’s only operations were carried on by WHS, and upon the Company transferring 100% of the issued and outstanding equity interests of Data Cloud to a third party, the Company will likely become a shell company as defined in the rules promulgated under the Securities and Exchange Act of 1934. The Company is party to an existing Employment Agreement with James Holland, who is the former owner of WHS.

The Purchase Agreement was approved by the shareholders of the Company owning a majority of the voting stock of the Company on April 1, 2017. The Closing of the Purchase Agreement occurred on April 1, 2017. In connection with the closing of the Purchase Agreement, the employment agreement with James Holland was terminated and Mr. Holland was removed from the positions of Chief Operating Officer and Chief Technology Officer.

On October 27, 2017, a majority of stockholders of the Company and board of directors approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to four hundred (400) old shares for one (1) new share of common stock. On November 30, 2017, FINRA approved the reverse stock split. The outstanding shares have been restated retroactively.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2017 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2017 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on April 2, 2018.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

ASC 820 “Fair Value Measurements and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

These tiers include:

Level 1: defined as observable inputs such as quoted prices in active markets;

Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying value of cash, prepayments and the Company’s loan from shareholder approximates its fair value due to their short-term maturity.

Revenue Recognition

The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:

Step 1: Identify the contract(s) with customers

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to performance obligations

Step 5: Recognize revenue when the entity satisfies a performance obligation

The Company recognizes revenue when it satisfies its obligation by transferring control of the good or service to the customer. A performance obligation is satisfied over time if one of the following criteria are met:

 Share-based Expenses

ASC 718 “Compensation – Stock Compensation” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity – Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

There were $35,200,000 and $0 of share-based expenses for the nine months ended September 30, 2018 and 2017, respectively (see Note 4).

Basic and Diluted Income (Loss) Per Share

The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

No potentially dilutive debt or equity instruments were issued or outstanding during the nine months ended September 30, 2018 or 2017.

Recent accounting pronouncements

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 3 – GOING CONCERN

For the nine months ended September 30, 2018, the Company had a working capital deficit as of September 30, 2018 of $236,659. The Company believes that its existing capital resources may not be adequate to enable it to execute its business plan. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company estimates that it will require additional cash resources during 2018 based on its current operating plan and condition. The Company expects cash flows from operating activities to improve, primarily as a result of the disposition of subsidiaries and decreases in operating expenses. The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.

NOTE 4 – RELATED PARTY TRANSACTIONS

On January 23, 2018, the Company issued 16,000,000 shares of restricted common stock valued at $35,200,000 based on stock trading price at $2.2 per share to Letterston Investments Limited, a BVI corporation controlled by the Company’s Chief Executive Officer, as compensation for the payment of the Chief Executive Officer’s salary for the years 2017 and 2018.

On January 1, 2017, the Company entered into an agreement with an entity controlled by Mr. Liao, the Company’s sole executive officer and sole member of the Board of Directors, to issue a promissory note for $137,316 to replace the full amount of related party advances that had been provided to the Company between January 1, 2016 and December 31, 2016. The promissory note bears interest at 28% per annum, and is payable on December 31, 2019. On July 1, 2017, the holder of the promissory note entered into an Interest Purchase Agreement with four non-affiliated assignees whereby each assignee was assigned with a promissory note at the principal amount of $34,000 and accrued interest of $4,806.

NOTE 5 – PROMISSORY NOTES

On November 2, 2017, the Company issued to an unaffiliated party a promissory note at $2,160 for paying operating expenses on behalf of the Company. The note bears interest at 60% per annum and is due on demand.

On December 31, 2017, the Company issued to the same unaffiliated party a promissory note at $17,033 for paying operating expenses on behalf of the Company. The note bears interest at 60% per annum and is due on demand.

On March 31, 2018, the Company issued to the same unaffiliated party a promissory note at $15,296 for paying operating expenses on behalf of the Company. The note bears interest at 30% per annum and is due on March 30, 2028.

On June 30, 2018, the Company issued to the same unaffiliated party a promissory note at $12,249 for paying operating expenses on behalf of the Company. The note bears interest at 30% per annum and is due on June 29, 2028.

On September 30, 2018, the Company issued to the same unaffiliated party a promissory note at $5,408 for paying operating expenses on behalf of the Company. The note bears interest at 30% per annum and is due on September 29, 2028.

As of September 30, 2018, the accrued interest on the promissory notes was $12,025.

NOTE 6 – CONVERTIBLE NOTES

On July 1, 2017, the Company replaced the promissory notes held by the four non-affiliated assignees with convertible notes at principal amount of $34,000, for total note principal amount of $136,000. The convertible notes bear interest at 4% per annum, expire on June 30, 2019 and are convertible at $0.005 per share for the Company common stock.

The Company assessed the note amendment for a debt extinguishment or modification in accordance with ASC 470-50. The addition of a substantive conversion feature that is not bifurcated indicates the note amendment is regarded as a note extinguishment. As a result of note extinguishment, we recognized $73,140 and $11,896 as discount on note from beneficial conversion feature and fair value difference and gain on extinguishment of debt, respectively, for the year ended December 31, 2017.

On January 2, 2018, the four non-affiliated holders of the convertible notes at principal amount of $34,000 issued on July 1 2017 elected to convert $5,000 principal portion of their notes for 1,000,000 shares of common stock at $0.005 per share. An aggregate $20,000 principal amount of the four convertible notes were converted for 4,000,000 common shares.

During the nine months ended September 30, 2018 and 2017, the Company recognized amortization of debt discount and beneficial conversion feature of $23,400 and $9,144 respectively.

As of September 30, 2018, the convertible notes payable was $92,616, net of note discount of $23,384, and accrued interest payable was $25,513.

NOTE 7 - EQUITY

Authorized Stock

The Company’s authorized common stock consists of 500,000,000 shares with no par value. Transactions described herein reflect the impact of the reverse acquisition and re-capitalization completed on January 28, 2016.

Common Shares

On October 27, 2017, a majority of stockholders of the Company and board of directors approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to four hundred (400) old shares for one (1) new share of common stock. On November 30, 2017, FINRA approved the reverse stock split. The outstanding shares have been restated retroactively.

On January 2, 2018, the four non-affiliated holders of the convertible notes at principal amount of $34,000 issued on July 1, 2017 elected to convert $5,000 principal portion of their notes for 1,000,000 shares of common stock at $0.005 per share. An aggregate $20,000 principal amount of the four convertible notes were converted for 4,000,000 common shares.

On January 23, 2018, the Company issued 16,000,000 shares of restricted common stock valued at $35,200,000 based on stock trading price at $2.20 per share to Letterston Investments Limited, a BVI corporation controlled by the Company’s Chief Executive Officer, as compensation for the payment of the Chief Executive Officer’s salary for the years 2017 and 2018.

As at September 30, 2018 and December 31, 2017, we had a total of 20,786,082 and 786,082 shares issued and outstanding, respectively. The outstanding shares have been restated retroactively for the reverse stock split.

NOTE 8 – DISCONTINUED OPERATIONS

On April 1, 2017, the Company disposed of its fully owned subsidiaries, Data Cloud and Web Hosting Solutions, Ltd.

At the time of sale, the combined subsidiaries had assets of $100,926, liabilities of $182,401, and stockholders’ deficit of $81,475. As a result of the disposition of the subsidiaries, the Company recorded a loss from discontinued operations of $96,216, consisting of the net loss of the subsidiaries for the three months ended April 1, 2017 of $22,755, and a write-down of intercompany receivables of $73,461. No proceeds were received in the disposition transaction.

NOTE 9 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to the September 30, 2018 to the date these consolidated financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.

In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.

The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

As used in this quarterly report, the terms “we”, “us”, “our”, and “our company” means Cloudweb, Inc., unless otherwise indicated.

General Overview

Our company was incorporated on May 25, 2014 under the name “Formigli, Inc.

Our headquarters are located at 12A, Greenhill Street, Dept. 106, Stratford Upon Avon, Warwickshire, United Kingdom CV37 6LF.

Our company was originally formed with the intent to engage in the worldwide distribution of custom handmade Italian road bikes, made by Renzo Formigli.

On December 3, 2015, we filed Articles of Amendment to our Articles of Incorporation with the Florida Department of State whereby we amended our Articles of Incorporation by (i) changing our name to “Cloudweb, Inc.”, (ii) increasing our company’s authorized number of shares of common stock from 100 million to 500 million, and (iii) increasing our total issued and outstanding shares of common stock by conducting a forward split of such shares at the rate of 100 shares for every one (1) share currently issued and outstanding and made submission to FINRA with respect to the corporate action and requested a change of ticker symbol to “CLOU”. Our common stock is quoted on the Pink Sheets of the OTC Markets, under the symbol "CLOW", and first traded on the OTC Markets in November 2015.

On January 28, 2016, our company concluded a Share Exchange Agreement (“Share Exchange Agreement”) entered into with Zhi De Liao (“Mr. Liao”), whereby our company issued 2,500,000 shares of common stock to Mr. Liao in exchange for 100% of the issued and outstanding equity interests of Data Cloud Inc. a Nevada corporation (“Data Cloud”). Data Cloud owned 100% of the issued and outstanding equity interests of Web Hosting Solutions Ltd., a United Kingdom company (“WHS”), which it purchased from James Holland for US$72,000 (GBP 47,000) on November 25, 2015.

At the time WHS had been providing web hosting solutions for approximately ten (10) years and became a UK private limited company in 2012. In connection with the Share Exchange Agreement, the Company elected to enter into the web hosting industry and discontinue its former business operations.

As a result of the Share Exchange Agreement, Mr. Liao became our sole executive officer and sole member of the Board of Directors. Concurrently, Mr. Liao, through his controlled entity, Letterston Investments Ltd., acquired 250,000,000 shares of common stock from our former sole officer and director Ms. Amy Chaffe. As a result, on the transaction date, Mr. Liao effectively controlled approximately 81% of our company’s issued and outstanding shares of common stock.

On November 4, 2016, we filed Articles of Amendment to our Articles of Incorporation with the Florida Department of State whereby we amended our Articles of Incorporation by changing our name to “Data Backup Solutions, Inc.” On November 10, 2016, we filed Articles of Amendment to our Articles of Incorporation with the Florida Department of State whereby we amended our Articles of Incorporation by decreasing our company’s total issued and outstanding shares of common stock by conducting a reverse split of such shares at the rate of 1 share for each one hundred shares (100) shares then currently issued and outstanding. The submission of the change of name to Data Backup Solutions, Inc. and the reverse stock split was not completed and the submission was closed.

On April 1, 2017, our company, entered into a Purchase Agreement (the “ Purchase Agreement”) with Yui Daing, an individual residing in Kuala Lumpur, Malaysia (the “Purchaser”), Data Cloud Inc., a Nevada corporation (hereinafter referred to as “Data Cloud”), and Web Hosting Solutions Ltd., a United Kingdom private company limited by shares (hereinafter referred to as “WHS”). The transactions under the Purchase Agreement were completed on April 1, 2017 (hereinafter referred to as the “Closing”). Prior to the Closing, Data Backup owned 100% of the issued and outstanding equity interests of Data Cloud which owns 100% of the issued and outstanding equity interests of Web Hosting Solutions Ltd. (“WHS”), a United Kingdom private company limited by shares (“WHS”). Due to the continued consolidated losses experienced by our company as the result of the losses of our company’s indirect wholly-owned subsidiary, WHS, which included $50,083 USD for the fiscal year ended December 31, 2016 and $21,818 USD for the first three (3) months ended March 31, 2017, our company entered into the Purchase Agreement and transferred 100% of the issued and outstanding equity interests of Data Cloud to a third party for nominal consideration in return.

The Purchase Agreement was approved by the shareholders of our company owning a majority of the voting stock of our company on April 1, 2017. The Closing of the Purchase Agreement occurred on April 1, 2017. As a result of the transactions under the Purchase Agreement, our company discontinued the web hosting business.

On October 1, 2017, a majority of stockholders of our company and the board of directors approved a change of name of our company from Data Backup Solutions, Inc. to the previous name, Cloudweb, Inc. Articles of Amendment to the Articles of Incorporation to change the name were filed with the Florida Secretary of State on October 18, 2017.

On October 27, 2017, a majority of stockholders of our company and board of directors approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to four hundred (400) old shares for one (1) new share of common stock. On November 30, 2017, FINRA approved the reverse stock split. The outstanding shares have been restated retroactively.

On March 29, 2018, our Board of Directors elected Mr. Chen Shi Rong as a member of our Board of Directors and also appointed him as Chief Operating Officer of our company.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

Our Current Business

We are currently seeking new business opportunities with established business entities for merger with or acquisition of a target business. In certain instances, a target business may wish to become our subsidiary or may wish to contribute assets to us rather than merge. We have not yet begun negotiations or entered into any definitive agreements for potential new business opportunities, and there can be no assurance that we will be able to enter into any definitive agreements.

Any new acquisition or business opportunities that we may acquire will require additional financing. There can be no assurance, however, that we will be able to acquire the financing necessary to enable us to pursue our plan of operation. If our company requires additional financing and we are unable to acquire such funds, our business may fail.

Currently, we do not have a source of revenue. We are not able to fund our cash requirements through our current operations. We have been reliant on loans by affiliated and non-affiliated parties to provide financial contributions and services to keep our company operating. Further, we believe that our company may have difficulties raising capital from other sources until we locate a prospective merger candidate through which we can pursue our plan of operation. If we are unable to secure adequate capital to continue our acquisition efforts, our shareholders may lose some or all of their investment and our business may fail. We currently have no written or oral agreement from our majority shareholder to continue to provide financial contributions.

Results of Operations

The following summary of our operations should be read in conjunction with our unaudited financial statements for the three and nine months ended September 30, 2018 and 2017.

Three months ended September 30, 2018 compared to three months ended September 30, 2017.

We had a net loss from continuing operations of $19,329 for the three months ended September 30, 2018 as compared to a net loss from continuing operations of $7,928 for the three months ended September 30, 2017. Due to our discontinued operations, we recorded no revenue or cost of services for the three months ended September 30, 2018 and 2017. We continue to incur professional fees. Operating expenses during the three months ended September 30, 2018 include professional fees of $5,481 with respect to the requirements for public reporting. Operating expenses during the three months ended September 30, 2017 include professional fees of $9,304. For the three months ended September 30, 2018, we incurred other expenses of $13,848 in interest expenses, compared to other income of $1,376 consisting of gain on debt extinguishment of $11,896 offset by interest expense of $10,520 for the three months ended September 30, 2017.

Nine months ended September 30, 2018 compared to nine months ended September 30, 2017.

For the nine months ended September 30, 2018 and 2017, the Company had a net loss from discontinued operations of $0 and $96,216, respectively.

We had a net loss from continuing operations of $35,275,766 for the nine months ended September 30, 2018 as compared to a net loss from continuing operations of $53,505 for the nine months ended September 30, 2017. Due to our discontinued operations, we recorded no revenue or cost of services for the nine months ended September 30, 2018 and 2017. We continue to incur professional fees. Operating expenses incurred during the nine months ended September 30, 2018 include stock based compensation of $35,200,000, professional fees of $36,880 with respect to the requirements for public reporting and administrative expenses of $150. Operating expenses during the nine months ended September 30, 2017 include professional fees of $35,657. For the nine months ended September 30, 2018, we incurred other expenses of $38,736 in interest expenses, compared to other expenses of $17,848 consisting of gain on debt extinguishment of $11,896 offset by interest expense of $29,744 for the nine months ended September 30, 2017.

Liquidity and Capital Resources

The following table provides selected financial data about our company as of September 30, 2018 and December 31, 2017, respectively.

Working Capital

Cash Flows

As at September 30, 2018 , our company’s cash balance was $0 and total assets were $0. As at December 31, 2017, our company’s cash balance was $0 and total assets were $0.

As at September 30, 2018, our company had total liabilities of $236,659, compared with total liabilities of $172,826 as at December 31, 2017.

As at September 30, 2018, our company had working capital deficiency of $236,659 compared with working capital deficiency of $91,678 as at December 31, 2017. The increase in working capital deficiency was primarily attributed to increase in promissory notes payable, convertible note payable and accrued interest.

Cash Flow from Operating Activities

During the nine months ended September 30, 2018, our company used $32,953 cash in operating activities, compared to $0 cash used in operating activities during the nine months ended September 30, 2017.

The cash used in operating activities for the nine months ended September 30, 2018 was attributed to net loss from continued operations of $35,275,766, reduced by stock based compensation of $35,200,000, amortization of debt discount of $23,400, an increase in accounts payable and accrued liabilities of $4,078 and an increase in accrued interest of $15,335.

For the nine months ended September 30, 2017, net cash flows used in operating activities was $0 consisting of a net loss from continued operations of $53,505 and net loss from discontinued of $96,216, for a total net loss of $149,721, increased by gain on debt extinguishment of $11,896, and was reduced by amortization of debt discount of $9,144, an increase in accounts payable and accrued liabilities of $35,657, a decrease in due from related party of $73,461, an increase in accrued interest of $20,600 and a change in net assets from discontinued operations of $22,755.

Cash Flow from Investing Activities

The Company did not use any funds for investing activities in the nine months ended September 30, 2018 or the nine months ended September 30, 2017.

Cash Flow from Financing Activities

Net cash provided by financing activities was $32,953 for the nine months ended September 30, 2018 derived from the issuance of promissory note to an unaffiliated party for paying operation expenses on behalf of the Company.

No funds were provided by investing activities during the nine months ended September 30, 2017.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. 

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2018. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the nine month period ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The specific material weakness identified by our management was ineffective controls over certain aspects of the financial reporting process because of a lack of a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements and inadequate segregation of duties. A "material weakness" is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements would not be prevented or detected on a timely basis.

We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

Item 1A. Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included as part of this report:

* Filed herewith. In addition, in accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

** XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.