LIVING 3D HOLDINGS, INC. - Annual Report: 2018 (Form 10-K)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to __________
Commission file number: 000-01900
Living 3D Holdings, Inc.
(Exact name of registrant as specified in its charter)
Nevada | 870451230 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Rm. 1801-02, Office Tower Two, Grand Plaza, 625 Nathan Road, Mongkok, Kowloon. Hong Kong |
(Address of principal executive offices) |
(852) 3563-9280 |
(Registrant’s telephone number, including area code) |
________________________________________________________________ |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
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. Yes x No o
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 o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes x No o
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.
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
| Emerging growth company o |
If an emerging growth company, indicate by the 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 o No x
As of June 30, 2018, the aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates computed by reference to the average bid and ask price ($2.05) of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter was: $36,597,736
There were 70,697,043 shares of the registrant’s common stock issued and outstanding as of April 1, 2019.
Documents Incorporated by Reference: None.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements, as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.
Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to:
·our ability to find suitable markets for the services we provide;
·our ability to obtain additional capital in future years to fund expansion of our services, new marketing initiatives and/or acquisitions;
·economic, political, regulatory, legal and foreign exchange risks associated with our operations; or
·the loss of key members of our senior management.
Also, forward-looking statements represent our estimates and assumptions only as of the date of this annual report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future or other events occur in the future.
Use of Certain Defined Terms
Except where the context otherwise requires and for the purposes of this report only:
·"Company," "we," "us," "our," "Living 3D" and "Registrant" refer to Living 3D Holdings, Inc. (formerly known as AirWare International Corp.; formerly known as Concrete Casting Incorporated), a corporation incorporated in Nevada;
·"Exchange Act" refers to the Securities Exchange Act of 1934, as amended;
·"PRC," "China," and "Chinese," refer to the People’s Republic of China (excluding Hong Kong, Macau and Taiwan);
·"Securities Act" refers to the Securities Act of 1933, as amended;
·"U.S. dollars," "dollars" and "$" refer to the legal currency of the United States;
·"HK Dollars" refers to Hong Kong dollars, the legal currency of Hong Kong;
·"Renminbi" and "RMB" refers to the legal currency of the People’s Republic of China.
Unless otherwise stated, we have translated balance sheet amounts with the exception of equity at December 31, 2018 and 2017 at HK Dollars 7.8 to US $1.00. We have stated equity accounts at their historical rates. The average translation rates applied to income statement accounts for the years ended December 31, 2018 and 2017 were at HK Dollars 7.8. We make no representation that the HK Dollars or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or HK Dollars as the case may be, at any particular rate or at all.
For the sake of clarity, this report follows English naming convention of first name followed by last name, regardless of whether an individual’s name is Chinese or English. For example, the name of our Chief Executive Officer will be presented as "Man Wah Stephen Yip," even though, in Chinese, his name would be presented as "Yip Man Wah Stephen."
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WHERE TO OBTAIN MORE INFORMATION
We are a reporting company under the Exchange Act. You may obtain annual, quarterly, and special reports and other information that we file with the Securities and Exchange Commission (“SEC”). You may read and copy any document that we file with the SEC at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Electronic filings filed on or after July 1, 1992 are available via the Electronic Data Gathering Analysis and Retrieval System (“EDGAR”) at the public reference facility. The SEC also maintains a web site that contains reports, proxy and information statements and other materials that are filed through EDGAR which can be accessed at http://www.sec.gov.
Our filings may also be accessed through the SEC’s website (http://www.sec.gov). We will provide a copy of any or all documents incorporated by reference herein (exclusive of exhibits unless such exhibits are specifically incorporated by reference therein), without charge, to each person to whom this annual report is delivered, upon written or oral request to Living 3D Holdings, Inc., at Room. 1801-02, Office Tower Two, Grand Plaza, 625 Nathan Road, Mongkok, Kowloon, Hong Kong, our telephone number is (852-3563-9280) and our web address is ltdh-online.com.
We intend to furnish record-holders of our securities with annual reports containing financial statements, audited and reported upon by our independent auditors, and may also furnish quarterly reports containing unaudited interim financial information and such other periodic reports as we determine to be appropriate or as may be required by law.
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PART I
Item 1. Business.
With the change in control of Living 3D Holdings, Inc. in December 2015, the Company redefined its business from 3D technology development to computer software development with major operations in Hong Kong and Mainland China. Since then, the Company focused on the research and development of ecommerce platform, mobile game and virtual reality application. Our ecommerce platform sought to integrate web application with product manufacturing which would increase the productivity and efficiency of the operation. Along with the ever increasing usage of the internet, our O2O (O2O stands for “online to offline,” a term used to describe a variety of ecommerce services that provide online information, services, or discounts to consumers that enhance their offline shopping experiences) ecommerce platform was expected to bring in more business opportunities to the manufacturer.
As our business development efforts in the O2O platforms were not sufficiently mature to render us as a commercially viable player in that industry, the Company has slowed down its activities in such development and shifted its business from the development of O2O platforms to the development of an online cryptocurrency web based trading system through the acquisition of Hong Kong Cryptocurrency Exchange (“HKCCEX”) in late December 2017.
HKCCEX is a FinTech company with focus on developing no-frills software solutions that facilitate the wide spread adoption of cutting edge technological ideas. Our flagship product is a B2B cryptocurrency web based trading system featuring newsfeed, live quote, integrated CRM, agent management and accounting system. This web based trading system is then customized and provided to companies with previous experience in the financial, trading or similar fields allowing them to capture a new and existing market with minimum change to their current Modus Operandi. These companies have user right to the customized web based trading system, which allow their end-customers to trade cryptocurrencies as registered users. These companies mainly reside in Hong Kong and Singapore with many operating online with target pockets in the global market. We provide technical support to ensure that our web based trading system and customers work within the confines of their respective legal system, and we are very sensitive to any reaction of the legal system as a whole with regards to the regulation of cryptocurrencies. We provide our web based trading system with AML and KYC compliance support which we deem as an inalienable part of the web based trading system and management protocol, and we conduct thorough training sessions with our customers to ensure compliance and also the documentation and consequences of non-compliance.
The eGaming market is experiencing a rapid growth every year at an exponential rate. In 2017, worldwide revenues generated in the eGaming market amounted to 47 billion U.S. dollars. By 2020, the market is expected to generate over 59 billion U.S. dollars in revenues, which indicates an annual growth rate of 5 percent. The Company, through its subsidiary - XYZMILL.COM Limited, has started a collection of product to enable operator of the eGaming business to focus on their business without worrying the multifaceted aspect of eGaming system development.
By the end of year 2018, the Company has started the development of an online multiplayer “Mahjong” game platform, which is one of the most popular board game in Chinese culture. Our “Mahjong” game solution is available on mobile platform and is one of the few available in the eGaming industry. Our target customers are those who operate licensed online gaming company, and our turnkey solution offers them the most convenient road path to enter the market in the shortest period of time possible.
The Company will continue to expand our gaming platform to include more popular board game including “Dou dizhu (landlords)” and Texas Holdem.
Corporate History
The Company was incorporated on October 28, 1987 in the state of Nevada under the name Staco Incorporated. It was organized for the purpose of conducting business as a transfer agent. This business was unsuccessful as a transfer agent and the Company became inactive. The business remained inactive until November 30, 2001, when it acquired certain assets from Cordell Henrie, a sole proprietor doing business as "Concrete Casting" and he became its president. Staco Incorporated changed its name to Concrete Casting Incorporated on January 17, 2002. The assets acquired included drawings, plans and concepts regarding the design of replicas of antiquities to be
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cast in concrete and marketed to the U.S. landscaping market. From such point through December 31, 2007, Concrete Casting focused on concrete products through its emphasis changed from replicas of antiquities to construction applications, such as casted window wells and water features for landscaping use. Mr. Henrie eventually was no longer able to devote the time necessary to Concrete Casting’s product development and he resigned as an officer and a director as of December 31, 2007. Because Concrete Casting's development in the concrete casting business was not sufficiently mature to make it commercially viable, the decision was made to shut down development of concrete products and discontinue those operations.
In 2008, Concrete Casting hired Kevin J. Asher as its new president to locate and acquire new business opportunities. At such time, Concrete Casting was a shell company with nominal assets whose sole business was to identify, evaluate and investigate various companies with the intent to effect a reverse merger transaction in which it would acquire a target company with an operating business to continue the acquired company’s business as a publicly-held entity. On July 1, 2010, Concrete Casting changed its name to "AirWare International Corp." and on September 27, 2011, AirWare International changed its name to "Living 3D Holdings, Inc."
On December 8, 2011, certain of the prior shareholders of Living 3D Holdings, Inc. , a Nevada corporation and a publicly held and traded company (the "Company”), who were the holders of a majority of the issued and outstanding shares of capital stock of the Company (the "Selling Shareholders") and Jimmy Kent-Lam Wong, June Mon Yon, Chang Li, Kin Wah Ngai and Lin Su (each, a "Purchaser" and collectively, the "Purchasers"), entered into a stock purchase agreement (the "Stock Purchase Agreement"). Under the terms of the Stock Purchase Agreement, the Purchasers purchased from the Selling Shareholders an aggregate of 3,627,426 of the shares (the "Purchase Shares") of common stock, par value $0.001 per share, of the Company owned by the Selling Shareholders on December 8, 2011 (the “Closing Date”), for an aggregate consideration of $385,000 (the "Stock Purchase").
Also on the Closing Date, the Company, Living 3D Holdings, Limited, a British Virgin Islands corporation and a privately held company (“L3D-BVI”), and all of the shareholders of L3D-BVI (the “L3D-BVI Shareholders”) entered into a share acquisition and exchange agreement (the "Share Exchange Agreement"). Under the terms of the Share Exchange Agreement, the Company acquired from the L3D-BVI Shareholders all of the issued and outstanding shares of common stock of L3D-BVI (the "L3D-BVI Shares"), making L3D-BVI a wholly-owned subsidiary of the Company, and, in exchange for all of the L3D-BVI Shares (the “Share Exchange”), the Company issued to the L3D-BVI Shareholders an aggregate of 62,590,880 shares (the “Exchange Shares”) of its common stock. L3D-BVI was incorporated on June 23, 2008 under the laws of the British Virgin Islands and was, at the time of the Stock Purchase and Share Exchange, a privately held company, while the Company was a publicly held and traded company on the OTC Bulletin Board under the symbol "CCSG."
Upon the completion of the Stock Purchase and the Share Exchange, our business became that of L3D-BVI, our wholly-owned subsidiary. As prior to the Stock Purchase and the Share Exchange, the Company had no operating activities, the financial statements and Management’s Discussion and Analysis reflect the activity of L3D-BVI for all periods presented. Upon the closing of the Stock Purchase and the Share Exchange, the shareholders of the Company retained an aggregate of 3,485,174 shares of common stock and the former L3D-BVI Shareholders acquired an aggregate of 66,218,306 shares of common stock, for a total of 69,703,480 shares of common stock issued and outstanding. Accordingly, the former L3D-BVI Shareholders owned approximately 95% of the Company's total issued and outstanding common stock. The foregoing descriptions of the terms of the Stock Purchase Agreement and the Share Exchange Agreement are qualified in their entirety by reference to the provisions of such documents included as exhibits in our filings with the SEC.
On November 30, 2015, Jimmy Kent-Lam Wong, who was the holder of a majority of the issued and outstanding shares of the capital stock of the Company (“Wong”), and Man Wah Stephen Yip (“Yip”) entered into a stock purchase agreement (the “Wong-Yip Stock Purchase Agreement”). Under the terms of the Wong-Yip Stock Purchase Agreement, Yip purchased from Wong an aggregate of 37,883,841 of the shares (the “Wong-Yip Purchase Shares”) of common stock, par value $0.001 per share, of the Company owned by Wong, for a nominal consideration of $100.
By a separate Stock Purchase Agreement dated November 30, 2015, the Company had disposed all of its subsidiary companies, namely, Living 3D Holdings, Limited, Living 3D International (HK) Limited, Colombia College Hollywood International Limited and Living 3D Technology Group Limited to Jimmy Kent-Lam Wong at a
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nominal consideration of $100. The disposal was effective as of October 1, 2015.
On October 19, 2016, the Company filed a Certificate of Amendment with the Secretary of State of the State of Nevada to effect a 1-for-100 reverse stock split of its common stock and an increase of its authorized shares of common stock from 90,000,000 to 290,000,000.
Effective on the opening of business on December 2, 2016, the Financial Industry Regulatory Authority granted market effectiveness to the 1-for-100 reverse stock split.
On December 30, 2016, the Company entered into a share acquisition and exchange agreement (the "Share Acquisition and Exchange") with Sugar Technology Group Holdings Corporation (“Sugar”), a company incorporated in the British Virgin Islands (the “BVI”) on February 26, 2016 and has a wholly owned subsidiary, XYZMILL.COM Limited, which was incorporate on May 9, 2016. Under the Share Acquisition and Exchange, the Company issued an aggregate of 30,000,000 shares of its common stock at par value of $0.001 each to all of the shareholders of Sugar in exchange for all of the issued and outstanding stock of Sugar on January 4, 2017. The Share Acquisition and Exchange was closed on January 5, 2017. As a result of the Share Acquisition and Exchange, Sugar became the Company’s wholly-owned subsidiary.
Recent Developments
On December 4, 2017, the Company entered into a share acquisition and exchange agreement (the "Share Acquisition and Exchange") with HKCCEX, a company incorporated in the Hong Kong Special Administrative Region. Under the Share Acquisition and Exchange, the Company issued an aggregate of 40,000,000 shares of its common stock at par value of $0.001 each to the sole shareholder of HKCCEX in exchange for all of the issued and outstanding stock of HKCCEX. The Share Acquisition and Exchange was closed on December 28, 2017. As a result of the Share Acquisition and Exchange, HKCCEX became the Company’s wholly-owned subsidiary.
The Company has completed the development of a cryptocurrency exchange platform and granted its customers the right to use the platform which offers a wide range of tools that improve users’ experience and investment options, including an affiliation with a network of major cryptocurrencies and international trading platforms, real time market quotes, professional statistical analysis and graphs, up to the minute financial news, 72 hours of interest free margin trading, wide range of buy and sell options for cryptocurrency trading, vast portfolio of investment products, and many more financial tools to enrich our users’ experience.
Competition
The Cryptocurrency trading and eGaming markets in which we compete are not dominated by a single company or a small number of companies. A substantial number of companies offer services that overlap and are competitive with those we offer.
We have responded to the changing market conditions with new capabilities, partnerships and offerings that are intended to position us favorably in high-growth markets for cryptocurrency and eGaming.
Our ability to obtain new business and retain existing business is dependent upon our ability to offer improved strategic frameworks, better value, quicker responses, increased flexibility, superior quality, a higher level of experience, or a combination of these factors. Management believes that our lines of business are positioned to compete effectively in the cryptocurrency market based on our technology and systems expertise and management skills.
Intellectual Property, Patents, Trademarks and Trade Secrets
We rely on certain intellectual property rights which consist principally of trade secrets and know-how. We can offer no assurance that we will be able to obtain future licenses on terms acceptable to us. We have not registered any trademarks or copyrights and there can be no assurance that we will be able to protect any trademarks and copyrights from infringement or third party claims, if any. We have not filed for any patents on our technologies. Lastly, no assurance can be given that third parties will not independently develop substantially equivalent proprietary
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information and techniques or otherwise gain access to our trade secrets and know-how.
Research and Development
We have not engaged in research and development activities during each of the last three fiscal years ended December 31, 2018.
Insurance
We do not carry any kind of product liability or other business insurance.
Legal and Administrative Proceedings
We are not a party to any material legal or administrative proceedings, and we are not aware of any threatened material legal or administrative proceedings against us.
Facilities
Our office is located at Room S, 2/F, Block D East Sun Industrial Center, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong. We have another office which is situated at 10th Floor, Si Toi Commercial Building, 32 Queen Street, Sheung Wan, Hong Kong.
Employees
As of December 31, 2018, we had no full-time employees as all the services rendered are outsourced.
Corporate Information
The Company's principal executive office is located at Room 1801-02, Office Tower Two, Grand Plaza, 625 Nathan Road, Mongkok, Kowloon, Hong Kong.
Item 1A. Risk Factors.
Any of the following risks could materially and adversely affect our business, financial condition and results of operations and the actual outcome of matters as to which forward-looking statements are made in this Form-10K. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect our business, financial condition, results of operations or the price of our common stock in the future. Past performance may not be a reliable indicator of future financial performance, and historical trends should not be used to anticipate results or trends in future periods.
·Achieving our growth objectives may prove unsuccessful. We may be unable to identify future attractive acquisitions and strategic partnerships, which may adversely affect our growth. In addition, if we are unable to consummate acquisition or other agreements we enter into or fail to achieve anticipated revenue improvements and cost reductions, our profitability may be materially and adversely affected.
·Our ability to implement solutions to incorporate new developments and improvements in technology that translate into productivity improvements for our customers and to develop service offerings that meet current and prospective customers' needs are critical to our success. The markets we serve are highly competitive. Our competitors may develop solutions or services that make our offerings obsolete. Our ability to develop and implement up to date solutions utilizing new technologies that meet evolving customer will impact our future revenues growth and earnings.
·Security breaches, cyber attacks or service interruptions could expose us to liability or impair our reputation, which could cause significant financial loss. As a provider of cryptocurrency trading platform, we store and process increasingly large amounts of sensitive data for our clients. At the same time, the continued
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occurrence of high-profile data breaches provides evidence of an external environment increasingly hostile to information security. We rely on internal and external information and technological systems to manage our operations and are exposed to risk of loss resulting from breaches in the security or other failures of these systems. We collect and store certain personal and financial information from customers. Security breaches could expose us to a risk of loss of this information, regulatory scrutiny, actions and penalties, extensive contractual liability litigation, reputational harm and a loss of customer confidence that could potentially have an adverse impact on future business with current and potential customers.
·Our ability to raise additional capital for future needs may impact our ability to compete in the markets we serve. Historically, we have financed operations primarily through the issuance of debt. In the near future, as additional capital is needed, we expect to rely primarily on loans from our major shareholders and the sale of equity securities. There can be no assurance that additional funds will be available on terms acceptable to us or at all. If adequate funds are not available, we may have to materially curtail our operations. Any inability to raise adequate funds could have a material adverse effect on our business, results of operation and financial condition.
·Our indebtedness may adversely affect our business, financial condition and results of operations, as well as our ability to meet our payment obligations under our debt.
·Our ability to meet our payment depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. There can be no assurance that our business will generate sufficient cash flow from operations or that current or future borrowings will be sufficient to meet our current debt obligations and other liquidity needs.
·Our business may be adversely impacted as a result of changes in demand for our services. Current weakness in worldwide economic conditions and political uncertainty may adversely impact our customers' demand for our services in the markets in which we compete. If we are unable to compete in these highly competitive markets, our results of operations may be materially and adversely affected.
·Our business operations are subject to various and changing federal, state, local and foreign laws and regulations that could result in costs or sanctions that adversely affect our business and results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our office in Hong Kong consists of approximately 400 square feet located at Room S, 2/F, Block D East Sun Industrial Center, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong. This office is furnished to us by our CEO at no charge.
We have another office which is situated at 10th Floor, Si Toi Commercial Building, 32 Queen Street, Sheung Wan, Hong Kong. This office is furnished to the Company by Mr. Wai Tak Edward Lau, who was appointed as a director of the Company on February 7, 2018, at no charge.
Item 3. Legal Proceedings
There are no claims, actions, suits, proceedings or investigations that are currently pending or, to our knowledge, threatened by or against us, or with respect to our operations or assets, by or against any of our officers, directors or affiliates.
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Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The common stock of the Company is quoted on the OTC Markets under the symbol “LTDH”. Although our common stock is quoted on the OTC Markets, it has traded sporadically with no significant volume. Consequently, the information provided below may not be indicative of the price of our common stock under different conditions. The high/low closing prices of our common stock were as follows for the periods below. The quotations below reflect inter-dealer bid prices without retail markup, markdown, or commission and may not represent actual transactions:
| High Close | Low Close |
Year Ended December 31, 2018 |
|
|
1st Quarter | $ 2.51 | $ 2.51 |
2nd Quarter | $ 2.55 | $ 1.00 |
3rd Quarter | $ 2.05 | $ 1.75 |
4th Quarter | $ 1.75 | $ 1.75 |
|
|
|
Year Ended December 31, 2017 |
|
|
1st Quarter | $13.00 | $ 13.00 |
2nd Quarter | $13.00 | $ 13.00 |
3rd Quarter | $13.00 | $ 8.00 |
4th Quarter | $ 8.00 | $ 5.10 |
Holders of Common Stock
As of April 1, 2019, we had approximately 141 stockholders of record for our common stock.
Dividend Policy
To date, we have not declared or paid cash dividends on our shares of common stock. The holders of our common stock will be entitled to non-cumulative dividends on the shares of common stock, when and as declared by our board of directors, in its sole discretion. We intend to retain all future earnings, if any, for our business and do not anticipate paying cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and such other factors as our board of directors may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
As of April 1, 2019, the Company does not have in place any equity compensation plans.
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Plan category | Number of securities to of outstanding and rights | Weighted average | Number of securities |
Equity compensation plans approved by shareholders | -0- | $ -0- | -0- |
Equity compensation plans not approved by shareholders | -0- | -0- | -0- |
|
|
|
|
Total | -0- | $ -0- | -0- |
Recent Issuances of Unregistered Securities
None.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this annual report, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this annual report will, in fact, transpire or prove to be accurate.
Factors that could cause or contribute to our actual results to differ materially from those discussed herein or for our stock price to be adversely affected include, but are not limited to: (i) our lack of significant operating history results; (ii) our independent registered public accountants have expressed a going concern opinion; (iii) our ability to raise additional working capital that we may require and, if available, that such working capital will be on terms acceptable to us; (iv) our ability to implement our business plan; (v) uncertainties regarding our ability to increase revenues and penetrate our market; (vi) economic and general risks relating to business; (vii) our ability to manage our costs of production; (viii) our ability to protect our intellectual property through patents and other intellectual property protection; (ix) our dependence on key personnel; (x) increased competition or our failure to compete successfully; (xi) our ability to keep pace with technological advancements in our industry; (xii) our ability to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as required; (xiii) our nonpayment of dividends and lack of plans to pay dividends in the future; (xiv) future sale of a substantial number of shares of our common stock that could depress the trading price of our common stock, if it trades, lower our value and make it more difficult for us to raise capital; (xv) our additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock; (xvi) our ability to have our common stock trade in an active public market; (xvii) the price of our common stock, if it trades, is likely to be highly volatile because of several factors, including a relatively limited
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public float; and (xviii) indemnification of our officers and directors.
General
The following discussion should be read in conjunction with our Financial Statements and notes thereto. The following discussion contains forward-looking statements, including, but not limited to, statements concerning our plans, anticipated expenditures, the need for additional capital and other events and circumstances described in terms of our expectations and intentions. You are urged to review the information set forth under the captions for factors that may cause actual events or results to differ materially from those discussed below.
Overview
Despite the change in control of the Company in December 2015, the Company is still in the early stage of its computer software development and the operation of a cryptocurrency trading platform. The following discussion summarizes the material changes in our results of operations and our financial condition for the years ended December 31, 2018 and 2017.
Operating Results
For the Years Ended December 31, 2018 and 2017
The Consolidated Statements of Operations is included in the Financial Statements attached to this annual report. Please refer to this Consolidated Statements of Operations.
Results from Operations
Revenue. For the years ended December 31, 2018 and 2017, revenues were $4,095 and $8,205 respectively, a decrease of $4,110. The decrease in revenue was attributable to the decrease in sales. The Company has shifted to the business of the development of a cryptocurrency web based trading system which was to grant a customer the right to use in April 2018. The Company has managed to generate minimal revenue there from. As the Company’s business in cryptocurrency web based trading system is still in the early stage of development, its sales fluctuate. Management believes that the revenue of the Company will increase substantially when more customers are acquired.
By the end of year 2018, XYZMILL.COM Limited has started the development of an online multiplayer “Mahjong” game platform, which is one of the most popular board game in Chinese culture. Our “Mahjong” game solution is available on mobile platform and is one of the few available in the eGaming industry. Our target customers are those who operate licensed online gaming company, and our turnkey solution offers them the most convenient road path to enter the market in the shortest period of time possible. The Company will continue to expand our gaming platform to include more popular board game including “Dou dizhu (landlords)” and Texas Holdem.
Cost of Revenue. The cost of revenue for the years ended December 31, 2018 and 2017 amounted to $49,886 and $5,128, respectively, an increase of $44,758. The increase in the cost of revenue is mainly attributable to the increase in the amortization and associated cloud servers expenses of the web based trading system which was put into operation in April 2018. No such expenses were incurred for the year ended December 31, 2017.
Gross Profit (Loss). For the year ended December 31, 2018, the gross profit (loss) was $(45,791) compared with $3,077 for the same period in 2017, a decrease of $48,868. The decrease was because of the decrease in sales and the increase in cost of revenue as discussed above.
General and Administrative Expenses. For the years ended December 31, 2018 and 2017, general and administrative expenses were $177,552 and $181,278, respectively, a decrease of $3,726. The decrease was attributable to the decrease in legal fee and the decrease in consultancy fee for the development of the web based trading system of cryptocurrency. All the costs at the planning stage were expensed as incurred in the year 2017 and no such costs incurred during the year ended December 31, 2018.
The above decrease was offset by the increase in salaries accrued to the directors of $90,000 and the increase
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in general administrative expenses. Effective from October 1, 2018, a monthly salary of $10,000 has been accrued to three out of the four directors of the Company. Such salaries will only be paid after the Company has shown its ability to operate on a profitable basis for a period of time, in the judgment of the Board of Directors.
The increase in general administrative expenses was further explained by the increase in amortization of the web based trading system in cryptocurrency. The web based trading system is to be amortized over a period of three years on a straight-line method starting from January 2018 when it is ready for use. The amortization has been allocated to the cost of revenue starting April 2018 when the web based trading system was put into use. No such expense has incurred for the year ended of December 31, 2017.
Net Loss. For the year ended December 31, 2018, the net loss was $(223,343) and, for the same period ended December 31, 2017, the net loss was $(178,201), an increase of $45,142. The increase of net loss between the years was explained by the increase in gross loss as discussed above.
Liquidity and Capital Resources. Cash and cash equivalents as of December 31, 2018 and 2017 were $893 and $50,668, respectively. The decrease is mainly attributable to the repayment to related parties. Apart from this, there were no substantial movements in the funds used in operating activities as almost all the expenses of the Company were paid by Man Wah Stephen Yip and So Ka Yan on behalf of the Company.
Liquidity and Capital Resources
Current and Expected Liquidity
Historically, we have financed operations primarily through the issuance of debt. In the near future, as additional capital is needed, we expect to rely primarily on loans from our major shareholder and the sale of equity securities. We financed operations by increasing the amount due to related parties to $519,267 at December 31, 2018 from $441,197 at December 31, 2017, an increase of $78,070. The increase is due principally to professional fees paid by related parties on behalf of the Company for the services rendered for the year ended December 31, 2018.
Our cash flows provided by operating activities decreased by $15,864 from $1,863 for the year ended December 31, 2017 to $(14,001) for the year ended December 31, 2018, due principally to a decrease in accounts receivable of $3,162, an increase in accrued liabilities and other payables of $158,482, and depreciation and amortization expenses of $52,855, offset by net loss of $223,343, a decrease in account payable of $5,128, and an increase in other receivable of $29.
Our cash flows provided by financing activities decreased by $83,912 from $48,138 for the year ended December 31, 2017 to $(35,774) for the year ended December 31, 2018, due principally to repayments to related party of $37,056, offset by proceeds from related party of $1,282.
We will require substantial additional capital to develop a market for cryptocurrency online trading platform and implement our business plan. We plan to pursue financing from private investors and institutions in and outside the PRC. We do not have any commitments for additional financing. Such new financing could include equity, which would likely be dilutive to our shareholders, or debt, which would likely restrict our ability to borrow from other sources. In addition, such securities may contain rights, preferences or privileges senior to the rights of our current shareholders.
There can be no assurance that additional funds will be available on terms acceptable to us or at all. If adequate funds are not available, we may have to materially curtail our operations. Any inability to raise adequate funds could have a material adverse effect on our business, results of operation and financial condition.
Due to the uncertainties related to these matters, there exists substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.
Capital Commitments
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We had no material commitments for capital expenditures.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements at December 31, 2018.
Critical Accounting Policies and Estimates
Accounting Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates.
Fair Value of Financial Instruments. The carrying value of financial instruments including cash and cash equivalents, accounts receivable, account payable and accrued liabilities and other payables approximates their fair value due to the relatively short-term nature of these instruments.
Management believes it is not practical to determine the fair value of due to related party because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
Property and Equipment. The Company’s property and equipment consists primarily of a motor vehicle and is initially recognized at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation of motor vehicle is calculated using the straight-line method to allocate its depreciable amount over its estimated useful life of three years.
Revenue Recognition. The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price, which is allocated to the respective performance obligation, when the performance obligation is satisfied.
Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are recognized and carried at original invoice less an allowance for any uncollectible amounts. An estimate for doubtful account is made when collection of the full amount becomes questionable.
Foreign Currency Translation. The reporting currency of the Company is the USD. The functional currency of Sugar and HKCCEX is the Hong Kong Dollar (“HKD”). For financial reporting purposes, the financial statements of Sugar and HKCCEX which are prepared in Hong Kong Dollar are translated into United States Dollars. Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in the owners' equity.
We follow FASB ASC 830-30, “Foreign Currency Translation”, for the translation of balance sheet and income statement items into U.S. dollars. Resulting translation adjustments are reported as a separate component of
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accumulated comprehensive income (loss) in stockholders’ equity. In fact, the exchange rate for HKD to US dollars has varied by very little during the periods reported. A consistent exchange rate of 7.80 HKD per each US dollar has been used. Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss
Website Development Costs. The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred. Costs associated with the website consist of service fees paid to a website development company.
All capitalized costs associated with the website will be subject to straight-line amortization over its expected useful life of three years when the website is ready for its intended use.
The Company reviews its website development costs for impairment whenever events or changes in circumstances indicate that the carrying amount of the website development costs may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the website development costs to the estimated undiscounted future cash flows expected to result from the use of the website development costs and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the website development costs, the Company would recognize an impairment loss based on the fair value of the website development costs.
Income Taxes. Taxes are calculated in accordance with taxation principles currently effective in Hong Kong. We account for income taxes using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Related Parties. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one of more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. Also see the recently issued accounting pronouncements included in Note 2 to our audited financial statements included elsewhere in this report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
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Item 8. Financial Statements and Supplementary Data.
The financial statements of the Company are included as an exhibit to this annual report on Form 10-K commencing on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on his evaluation as of December 31, 2018, the end of the period covered by this annual report on Form 10-K, he concluded that our disclosure controls and procedures were not effective at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Exchange Act, including this annual report, were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
·Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
·Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the filing of our annual report on Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on our assessment using those criteria, management believes that, as of December 31, 2018, our internal control over financial reporting is not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
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We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending December 31, 2019: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written policies and procedures for accounting and financial reporting; and (iii) appoint additional independent directors that can serve as members of an audit committee. The remediation efforts will be largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
Except as noted above, there have been no changes in our internal controls over financial reporting during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names, positions and ages of our directors and executive officers. Our directors are typically elected at each annual meeting and serve for one year and until their successors are elected and qualify. Officers are appointed by our Board of Directors and their terms of office are at the discretion of our Board of Directors.
Name | Age | Position |
Man Wah Stephen Yip | 39 | Chairman of the Board of Directors and Chief Executive Officer |
So Ka Yan | 35 | Secretary and Director |
Sze Cheong Eric Ng | 59 | Chief Financial Officer, Treasurer and Director |
Wai Tak Edward Lau | 33 | Director(1) |
(1)Appointed on February 7, 2018
Man Wah Stephen Yip, Chief Executive Officer and Chairman of the Board of Directors. Mr. Yip joined the Group in November 2015. He is the Chairman of the Board of Directors, the Chief Executive Officer and the Chief Technology Officer of the Group. Before joining the Group, Mr. Yip was the Chairman of Sugar Computing Limited. Prior to that, he served in a number of senior positions in selected IT companies in Hong Kong. Mr. Yip is now responsible for the product development of the Group. Mr. Yip has over 16 years of experience in business IT system and video game development and has developed well established connections in the industry through his extensive experience. Mr. Yip holds a LLB degree from University of London and both a BS and MS degree from Fairleigh Dickinson University in New Jersey, United States.
So Ka Yan, Secretary and Director. Ms. So joined the Group as a Director and Secretary in November 2015. Ms. So is responsible for the overall corporate strategy and the daily operations of the Group, including business development and overall management. She graduated from the Chinese University in Hong Kong and holds a law degree from University of London. She has over 10 years of experience in the market development in Mainland China and Hong Kong. Ms. So is the wife of Mr. Yip.
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Sze Cheong Eric Ng, Chief Financial Officer and Director. Mr. Ng joined the Group in 2012 as a senior consultant. He has been appointed as a Director and the Chief Financial Officer in November 2015. Mr. Ng is one of the Group’s key China specialists, having spent well over a decade representing a number of listed Chinese companies in the United States. He initially served as a manager at KPMG Peat Marwick from 1980 to 1986, responsible for audit and taxation affairs of listed companies in Hong Kong. Through his experiences at KPMG, Mr. Ng developed an expertise in mergers and acquisitions.
In the early 1990s, Mr. Ng acted as CFO/Finance Director for a US-listed company that became public through a reverse merger. He was responsible for fund raising, private placement transactions, and dealing with merchant bankers and the SEC. Mr. Ng was also responsible for various mergers and acquisitions for the listed company. Since then, Mr. Ng has acted as an investment consultant for numerous Chinese companies, guiding them through the complex path toward the United States public listing.
In the late 1990s, he assisted a biotech company get listed in the United States through a reverse takeover and acted as CFO/Finance Director for that company. Before joining the Group, Mr. Ng acted as an advisor to Chinese enterprises seeking growth through possible United States public listings.
Wai Tak Edward Lau, Director. Mr. Edward Lau joined the Company in January 2018. Mr. Lau is the founder and CEO of Pareto International Holding Limited and Home Medical Group where he has gained substantial experience in the sale and marketing in the business of technology and healthcare. Prior to that, he served in Li Ka Shing Foundation and has successfully curated a number of projects in Mainland China. Mr. Lau is now responsible for the marketing of the Company. Mr. Lau has over 9 years of experience in the curating and marketing of business in technology and finance and has developed well established connections in the industries through his extensive experience. Mr. Lau was graduated from the University of London with an honors degree in Law.
None of the current executive officers and directors, nor any of their affiliates, beneficially owns any equity securities or rights to acquire any securities of the Company except as otherwise described in this report, and no such persons have been involved in any transaction with the Company or any of our directors, executive officers or affiliates that is required to be disclosed pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), other than with respect to the transactions that have been described in this report or in any prior reports filed by the Company with the SEC.
None of the current officers and directors has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor have they been a party to any judicial or administrative proceeding during the past five years, except for matters that were dismissed without sanction or settlement, that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
Board of Directors and Committee Meetings
Our Board of Directors held two meetings during the fiscal year ended December 31, 2018. Each of our directors attended 100% of the meetings of the Board of Directors and the committees on which they served in the fiscal year ended December 31, 2018. Our directors are expected, absent exceptional circumstances, to attend all board meetings and meetings of any committees on which they serve.
Committees of the Board of Directors
We do not have Audit, Compensation or Nominating and Governance Committees. Our full Board of Directors discharges the duties that such committees would normally have. We do not have such committees because of our stage of development and because our Board of Directors consists of only four members. Mr. Yip is our Chairman of the Board of Directors.
Our full Board is currently comprised of four Directors, none of whom is independent, as defined by the rules and regulations of the SEC. The four members of our Board of Directors are Man Wah Stephen Yip, So Ka Yan, Sze Cheong Eric Ng and Wai Tak Edward Lau. The Board of Directors determined that Mr. Ng qualifies as an “audit committee financial expert,” as defined under the rules and regulations of the SEC. He is not independent, as noted
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above; however, we do not believe that independence is required at this juncture given our early stage of development. We intend to have an independent person in this role as we grow and expand our operations.
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the Company’s independent accountants must be approved in advance by the Board to assure that such services do not impair the accountants’ independence from the Company. Our full Board of Directors performs the equivalent functions of an audit committee; therefore, no policies or procedures other than those required by SEC rules on auditor independence have been implemented.
Report of the Board of Directors Serving the Equivalent Functions of an Audit Committee
Review and Discussion with Management
Our Board has reviewed and discussed with management our audited financial statements for the fiscal year ended December 31, 2018, the process designed to achieve compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and our assessment of internal control over financial reporting.
Review and Discussions with Independent Registered Public Accounting Firm
Our Board has discussed with MaloneBailey, LLP, our independent registered public accounting firm for fiscal year 2018, the matters the Board, serving the equivalent functions of an audit committee, is required to discuss pursuant to Statement on Auditing Standards No. 114 (Communications with Audit Committees), which includes, among other items, matters related to the conduct of the audit of our financial statements.
Our Board also has received the written disclosures and the letter from MaloneBailey, LLP required by Public Company Accounting Oversight Board Ethics and Independence Rules and Standards (Rule 3526. Communication with Audit Committees Concerning Independence) and has discussed with MaloneBailey, LLP any relationships that may impact its independence, and satisfied itself as to the independent registered public accounting firm’s independence.
Conclusion
Based on the review and discussions referred to above, the Board, serving the equivalent functions of the audit committee, approved our audited financial statements for the fiscal year ended December 31, 2018 to be included in this annual report on Form 10-K for the fiscal year ended December 31, 2018 for filing with the SEC.
Director Independence
The members of our Board of Directors are Man Wah Stephen Yip, So Ka Yan, Sze Cheong Eric Ng and Wai Tak Edward Lau. None of these persons is considered “independent” in accordance with Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Our common stock is currently traded on the OTC Bulletin Board, which does not require that a majority of the Board be independent. If we ever become an issuer whose securities are listed on a national securities exchange or on an automated inter-dealer quotation system of a national securities association, which has independent director requirements, we intend to comply with all applicable requirements relating to director independence.
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Board of Directors’ Role in the Oversight of Risk Management
We face a variety of risks, including credit, liquidity and operational risks. In fulfilling its risk oversight role, our Board of Directors focuses on the adequacy of our risk management process and overall risk management system. Our Board of Directors believes that an effective risk management system will (i) adequately identify the material risks that we face in a timely manner; (ii) implement appropriate risk management strategies that are responsive to our risk profile and specific material risk exposures; (iii) integrate consideration of risk and risk management into our business decision-making; and (iv) include policies and procedures that adequately transmit necessary information regarding material risks to senior executives and, as appropriate, to the Board or relevant committee.
Our Board of Directors oversees risk management for us. Accordingly, the Board schedules time for periodic review of risk management, in addition to its other duties. In this role, the Board receives reports from management, certified public accountants, outside legal counsel, and to the extent necessary, from other advisors, and strives to generate serious and thoughtful attention to our risk management process and system, the nature of the material risks we face, and the adequacy of our policies and procedures designed to respond to and mitigate these risks.
Board Leadership Structure
Our Board of Directors does not have a policy on whether or not the roles of Chief Executive Officer and Chairman of the Board of Directors should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee. Our Board of Directors believes that it should be free to make a choice from time to time in any manner that is in the best interests of us and our shareholders. The Board of Directors believes that Mr. Yip's service as both Chief Executive Officer and Chairman of the Board is in the best interest of the Company and its shareholders. Mr. Yip possesses detailed and in-depth knowledge of the issues, opportunities and challenges we face and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability, and enhances our ability to communicate our message and strategy clearly and consistently to our shareholders, employees, customers and suppliers.
Shareholder Communications with the Board of Directors
Shareholders may communicate with the Board of Directors by writing to us as follows: Living 3D Holdings, Inc., attention: Corporate Secretary, Room. 1801-02, Office Tower Two, Grand Plaza, 625 Nathan Road, Mongkok, Kowloon. Hong Kong. Shareholders who would like their submission directed to a particular member of the Board of Directors may so specify and the communication will be forwarded as appropriate.
Process and Policy for Director Nominations
Our full Board will consider candidates for Board membership suggested by Board members, management and our shareholders. In evaluating the suitability of potential nominees for membership on the Board, the Board members will consider the Board's current composition, including expertise, diversity, and balance of inside, outside and independent directors. The Board considers the general qualifications of the potential nominees, including integrity and honesty; recognized leadership in business or professional activity; a background and experience that will complement the talents of the other board members; the willingness and capability to take the time to actively participate in board and committee meetings and related activities; the extent to which the candidate possesses pertinent technological, political, business, financial or social/cultural expertise and experience; the absence of realistic possibilities of conflict of interest or legal prohibition; the ability to work well with the other directors; and the extent of the candidate's familiarity with issues affecting our business.
While the Board considers diversity and variety of experiences and viewpoints to be important factors, it does not believe that a director nominee should be chosen solely or mainly because of race, color, gender, national origin or sexual identity or orientation. Thus, although diversity may be a consideration in the Board's process, it does not have a formal policy regarding the consideration of diversity in identifying director nominees.
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Shareholder Recommendations for Director Nominations. Our Board of Directors does not have a formal policy with respect to consideration of any director candidate recommendation by shareholders. While the Board of Directors may consider candidates recommended by shareholders, it has no requirement to do so. To date, no shareholder has recommended a candidate for nomination to the Board. Given that we have not received director nominations from shareholders in the past and that we do not canvass shareholders for such nominations, we believe it is appropriate not to have a formal policy in that regard. We do not pay a fee to any third party to identify or evaluate or assist in identifying or evaluating potential nominees.
Shareholder recommendations for director nominations may be submitted to the Company at the following address: Living 3D Holdings, Inc., attention: Corporate Secretary, Room. 1801-02, Office Tower Two, Grand Plaza, 625 Nathan Road, Mongkok, Kowloon. Hong Kong. Such recommendations will be forwarded to the Board for consideration, provided that they are accompanied by sufficient information to permit the Board to evaluate the qualifications and experience of the nominees, and provided that they are in time for the Board to do an adequate evaluation of the candidate before the annual meeting of shareholders. The submission must be accomplished by a written consent of the individual to stand for election if nominated by the Board of Directors and to serve if elected and to cooperate with a background check.
Shareholder Nominations of Directors. The bylaws of the Company provide that in order for a shareholder to nominate a director at an annual meeting, the shareholder must give timely, written notice to the Secretary of the Company and such notice must be received at the principal executive offices of the Company not less than 120 days before the date of its release of the proxy statement to shareholders in connection with its previous year’s annual meeting of shareholders. Such shareholder’s notice shall include, with respect to each person whom the shareholder proposes to nominate for election as a director, all information relating to such person, including such person’s written consent to being named in the proxy statement as a nominee, serving as a director, that is required under the Exchange Act, and cooperating with a background investigation. In addition, the shareholder must include in such notice the name and address, as they appear on the Company’s records, of the shareholder proposing the nomination of such person, and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, the class and number of shares of capital stock of the Company that are owned beneficially and of record by such shareholder of record and by the beneficial owner, if any, on whose behalf the nomination is made, and any material interest or relationship that such shareholder of record and/or the beneficial owner, if any, on whose behalf the nomination is made may respectively have in such business or with such nominee. At the request of the Board of Directors, any person nominated for election as a director shall furnish to the Secretary of the Company the information required to be set forth in a shareholder’s notice of nomination which pertains to the nominee.
To be timely in the case of a special meeting or if the date of the annual meeting is changed by more than thirty (30) days from such anniversary date, a shareholder’s notice must be received at the principal executive offices of the Company no later than the close of business on the tenth day following the earlier of the day on which notice of the meeting date was mailed or public disclosure of the meeting date was made.
Code of Ethics and Conduct
Our Board of Directors has adopted a Code of Ethics and Conduct that is applicable to all of our employees, officers and directors. Our Code of Ethics and Conduct is intended to ensure that our employees act in accordance with the highest ethical standards. A copy of our Code of Ethics and Conduct may be obtained by sending a written request to us at Living 3D Holdings, Inc., attention: Corporate Secretary, Room 1801-02, Office Tower Two, Grand Plaza, 625 Nathan Road, Mongkok, Kowloon. Hong Kong. The Code of Ethics and Conduct is filed as an exhibit to this annual report on Form 10-K.
Item 11. Executive Compensation.
The table below sets forth all cash compensation paid or proposed to be paid by the Company to the chief executive officer and the most highly compensated executive officers, and key employees for services rendered in all capacities to the Company during fiscal years ended December 31, 2018 and 2017.
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Summary Compensation Table
|
|
|
|
|
| Non-Equity Incentive Plan Compensation | All Other |
|
Man Wah Stephen Yip | 2018 | 30,000 | - | - | - | - | - | 30,000 |
- | - | - | - | - | - | - | ||
So Ka Yan | 2018 | 30,000 | - | - | - | - | - | 30,000 |
- | - | - | - | - | - | - | ||
Sze Cheong Eric Ng | 2018 | 30,000 | - | - | - | - | - | 30,000 |
- | - | - | - | - | - | - | ||
Wai Tak Edward Lau | 2018 | - | - | - | - | - | - | - |
- | - | - | - | - | - | - |
Compensation Policy. Our executive compensation plan is based on attracting and retaining qualified professionals who possess the skills and leadership necessary to enable us to achieve earnings and profitability growth to satisfy our shareholders. We must, therefore, create incentives for these executives to achieve both our and their individual performance objectives through the use of performance-based compensation programs.
No one component is considered by itself, but all forms of the compensation package are considered in total. Wherever possible, objective measurements will be utilized to quantify performance, but many subjective factors still come into play when determining performance.
Compensation Components. Because we are still in the early stages of our revenue operations, the main elements of our compensation package will consist of base salary and bonus.
Base Salary. In general, the base salary for our executive officers will be reviewed and compared to the prior year, with considerations given for increase. As we continue to grow and financial conditions continue to improve, base salaries will be reviewed for possible adjustments. Base salary adjustments will be based on both individual and our performance and will include both objective and subjective criteria specific to each executive’s role and responsibility with us.
Bonuses. To date, no bonuses have been granted because we have not achieved a profitable level of operations. As we continue to grow and provided we generate profits, we will create more defined bonus programs to attract and retain our employees at all levels.
Other. At this time, we have no profit sharing plan in place for employees. However, this is another area of consideration to add such a plan to provide yet another level of compensation to the compensation package.
Outstanding Equity Awards at Fiscal Year-End
The Company did not issue any options or stock awards to any of our officers, directors or employees in 2018 and 2017.
Stock Option Plan
Our board of directors has not adopted a stock option plan.
20
Compensation of Directors
In 2018, our directors received no compensation for serving as members of our Board of Directors.
Outstanding Equity Awards at Fiscal Year-End
|
| Option Awards
|
| Stock Awards
| |||||
Name
| Number of
| Number of Unexercised
| Equity Number of
| Option
| Option
| Number
| Market
| Equity Plan Awards: (i)
| Equity Plan Awards: (j)
|
Man Wah Stephen Yip, CEO and Chairman of the Board | No outstanding equity awards | ||||||||
So Ka Yan, Secretary and Director | No outstanding equity awards | ||||||||
Sze Cheong Eric Ng, CFO and Director | No outstanding equity awards | ||||||||
Wai Tak Edward Lau, Director | No outstanding equity awards | ||||||||
The table above indicates that no options were granted to directors and officers in fiscal 2018.
Employment Contracts; Termination of Employment and Change-in-Control Arrangements
None of our executive officers has entered into any employment or change-in-control agreements with the Company.
None of our current officers and directors, nor any of their affiliates, currently beneficially owns any equity securities or rights to acquire any securities of the Company except as otherwise described in this report, and no such persons have been involved in any transaction with the Company or any of its directors, executive officers or affiliates that is required to be disclosed pursuant to the rules and regulations of the SEC , other than with respect to the transactions that have been described in this report or in any prior reports filed by the Company with the SEC.
None of our current officers and directors has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor have such persons been a party to any judicial or administrative proceeding during the past five years, except for matters that were dismissed without sanction or settlement, that resulted in a judgment, decree or final order enjoining such persons from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
21
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding our common stock beneficially owned on April 1, 2019 for (i) each shareholder known to be the beneficial owner of 5% or more of our outstanding common stock, (ii) each executive officer and director, and (iii) all executive officers and directors as a group. Unless otherwise indicated, each person in the table has sole voting and investment power with respect to the shares shown. The table assumes a total of 70,697,043 shares of our common stock outstanding as of April 1, 2019.
Name and address of beneficial owner
| Amount and
| Percent
|
Man Wah Stephen Yip, CEO and Director(1)(2) | 40,439,489 | 57.20% |
So Ka Yan, Secretary and Director(1)(2) | 40,439,489 | 57.20% |
Sze Cheong Eric Ng, CFO and Director | 0 | 0% |
Wai Tak Edward Lau, Director(1)(5) | 9,537,800 | 13.49% |
|
|
|
|
|
|
All executives officers and directors as a group (four persons)(2) | 49,977,289 | 70.69% |
No other shareholders known to be the beneficial owner of 5% or more of our common stock. |
|
|
(1)The address of these persons is Room S, 2/F, Block D East Sun Industrial Center, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong
(2)Man Wah Stephen Yip and So Ka Yan are husband and wife. Man Wah Stephen Yip is deemed to own the same shares which are beneficially owned by So Ka Yan.
(3)The foregoing beneficial owners hold investment and voting power in their shares.
(4)The percent of common stock owned is calculated using the sum of (A) the number of shares of common stock owned and (B) the number of warrants and options of the beneficial owner that are exercisable within sixty days, as the numerator, and the sum of (Y) the total number of shares of common stock outstanding and (Z) the number of warrants and options of the beneficial owner that are exercisable within sixty days as the denominator.
(5)Appointed on February 7, 2018.
Change of Control
None
Item 13. Certain Relationships and Related Transactions, and Director Independence.
During the year ended December 31, 2018, Man Wah Stephen Yip and So Ka Yan paid expenses in the amount of $83,319 and $30,525, respectively, on behalf of the Company to support the Company’s operations. The Company had obtained advances of $1,282 from So Ka Yan and repaid $37,056 to So Ka Yan during the year ended December 31, 2018. The amounts due to Man Wah Stephen Yip and So Ka Yan are unsecured, bear no interest and are repayable on demand.
The Company’s office in Hong Kong consists of approximately 400 square feet located at Room S, 2/F, Block D East Sun Industrial Center, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong. This office is furnished to the Company by the CEO at no charge.
The Company has another office which is situated at 10th Floor, Si Toi Commercial Building, 32 Queen Street, Sheung Wan, Hong Kong. This office is furnished to the Company by Mr. Wai Tak Edward Lau who was appointed a director of the Company on February 7, 2018 at no charge.
22
Item 14. Principal Accounting Fees and Services.
The following table is a summary of the fees billed to us by MaloneBailey, LLP for professional services for the fiscal years ended December 31, 2018 and 2017:
Fee Category: |
| Fiscal |
| Fiscal |
Audit Fees |
| $36,900 |
| $28,500 |
Audit-Related Fees |
| - |
| 5,500 |
Tax Fees |
| - |
| - |
All Other Fees |
| - |
| - |
Total Fees |
| $36,900 |
| $34,000 |
|
|
|
|
|
Audit Fees. Such amount consists of fees billed for professional services rendered in connection with the audit of our annual financial statements and review of the interim financial statements included in our quarterly reports. It also includes services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include accounting consultations in connection with acquisitions, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.
Tax Fees. Tax fees consist of fees billed for professional services related to tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, tax audit defense, customs and duties, mergers and acquisitions, and international tax planning.
All Other Fees. All other fees consist of fees for products and services other than the services reported above. In fiscal 2018 and 2017, there were no fees related to this category.
We do not have a separate audit committee. Our full board of directors performs the functions of an audit committee, therefore, no policies or procedures other than those required by SEC rules on auditor independence have been implemented. We have the pre-approval process for the foregoing services and fees for our board of directors. All of the above services and fees were reviewed and approved by the entire board of directors before the respective services were rendered.
The audit report of MaloneBailey, LLP on the financial statements of the Company for the year ended December 31, 2018 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that it contained an explanatory paragraph regarding the Company's ability to continue as a going concern. The audit report for the year ended December 31, 2017 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that it contained an explanatory paragraph regarding the Company's ability to continue as a going concern.
During our fiscal years ended December 31, 2018 and 2017, there were no disagreements with MaloneBailey, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to MaloneBailey, LLP’s satisfaction would have caused it to make reference to the subject matter of such disagreements in connection with its reports on the financial statements for such periods.
During our fiscal years ended December 31, 2018 and 2017, there were no reportable events (as described in Item 304(a) (1) (v) of Regulation S-K).
23
Item 15. Exhibits, Financial Statement Schedules.
Exhibit
| Description
| Incorporated
|
2.1 | Exhibit 2.1 to the Company's Form 8-K, filed December 14, 2011. | |
2.2 | Exhibit 2.2 to the Company's Form 8-K, filed December 14, 2011. | |
3.1 | Exhibit 3.1 to the Company's Form 8-K, filed December 14, 2011. | |
3.2 | Exhibit 3.2 to the Company's Form 8-K, filed December 14, 2011. | |
3.3 | Exhibit 3.3 to the Company's Form 8-K, filed December 14, 2011. | |
4.1 | Exhibit 4.1 to the Company's Form 8-K, filed December 14, 2011. | |
14.1 | Exhibit 14.1 to the Company's Form 10-K filed April 16, 2012. | |
21.1 | Exhibit 21.1 to the Company's Form 8-K, filed December 14, 2011. | |
31.1 | Filed herewith. | |
31.2 | Filed herewith. |
24
32 | Filed herewith. | |
99.1 | Audited Financial Statements of Living 3D Holdings, Inc. as of December 31, 2018 and 2017. | Filed herewith. |
101.INS* | XBRL Instance Document. | Filed herewith. |
101.SCH* | XBRL Taxonomy Extension Schema Document. | Filed herewith. |
101.CAL* | XBRL Calculation Linkbase Document. | Filed herewith. |
101.LAB* | XBRL Taxonomy Labels Linkbase Document. | Filed herewith. |
101.PRE* | XBRL Taxonomy Presentation Linkbase Document. | Filed herewith. |
* XBRL related information in Exhibit 101 to this annual report on Form 10-K shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act, except as shall be expressly set forth by specific reference in such filing or document.
25
LIVING 3D HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
Index to Consolidated Financial Statements
|
| Page (s)
| ||
Report of Independent Registered Public Accounting Firm |
| F-1 | ||
|
|
|
| |
Financial Statements: |
|
| ||
|
|
|
| |
| Consolidated Balance Sheets - December 31, 2018 and 2017 |
| F-2 | |
|
|
|
| |
| Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017 |
| F-3 | |
|
|
|
| |
| Consolidated Statements of Changes in Shareholders’ Deficit for the Years Ended December 31, 2018 and 2017 |
| F-4 | |
|
|
|
| |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017 |
| F-5 | |
|
|
|
| |
Notes to Consolidated Financial Statements |
| F-6 to F-13 | ||
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Living 3D Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Living 3D Holdings, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company's auditor since 2011.
Houston, Texas
April 1, 2019
F-1
Living 3D Holdings, Inc. Consolidated Balance Sheets (Stated in US dollars) | |||||
| |||||
| |||||
|
| December 31, 2018 |
|
| December 31, 2017 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and cash equivalents | $ | 893 |
| $ | 50,668 |
Accounts receivable |
| 4,095 |
|
| 7,257 |
Other receivable |
| 29 |
|
| - |
Total Current Assets |
| 5,017 |
|
| 57,925 |
Website development costs, net |
| 102,564 |
|
| 153,846 |
Property and equipment, net |
| 524 |
|
| 2,097 |
TOTAL ASSETS | $ | 108,105 |
| $ | 213,868 |
|
|
|
|
|
|
LIABILITIES & SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Account payable | $ | - |
| $ | 5,128 |
Accrued liabilities and other payables |
| 228,707 |
|
| 184,069 |
Due to related parties |
| 519,267 |
|
| 441,197 |
Total Current Liabilities |
| 747,974 |
|
| 630,394 |
TOTAL LIABILITIES | $ | 747,974 |
| $ | 630,394 |
|
|
|
|
|
|
SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued or outstanding | $ | - |
| $ | - |
Common stock, $0.001 par value, 290,000,000 shares authorized, 70,697,043 shares issued and outstanding at December 31, 2018 and 2017 |
| 70,697 |
|
| 70,697 |
Additional paid-in capital |
| (69,215) |
|
| (69,215) |
Accumulated deficit |
| (641,351) |
|
| (418,008) |
TOTAL SHAREHOLDERS’ DEFICIT |
| (639,869) |
|
| (416,526) |
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | 108,105 |
| $ | 213,868 |
The accompanying notes are an integral part of these consolidated financial statements
F-2
Living 3D Holdings, Inc. Consolidated Statements of Operations (Stated in US dollars) |
|
|
|
| For The Years Ended December 31, | ||
|
|
| 2018 |
| 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | 4,095 | $ | 8,205 |
Cost of Revenues |
|
| 49,886 |
| 5,128 |
Gross Profit (Loss) |
|
| (45,791) |
| 3,077 |
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
General and administrative expenses |
|
| (177,552) |
| (181,278) |
Total Operating Expenses |
|
| (177,552) |
| (181,278) |
|
|
|
|
|
|
Net Loss |
| $ | (223,343) | $ | (178,201) |
|
|
|
|
|
|
Basic and Diluted Loss per Common Share |
| $ | (0.00) | $ | (0.01) |
Weighted Average Common Shares; Basic and Diluted |
|
| 70,697,043 |
| 30,697,043 |
The accompanying notes are an integral part of these consolidated financial statements
F-3
Living 3D Holdings, Inc. Consolidated Statements of Changes in Shareholders’ Deficit (Stated in US dollars) | |||||||||
|
Common Stock |
| Additional |
| Accumulated |
| Total Shareholders’ | ||
| Shares |
| Amount |
| Paid-in Capital |
| Deficit |
| Deficit |
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016 | 697,043 | $ | 697 | $ | (497) | $ | (239,807) | $ | (239,607) |
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with acquisition of subsidiaries | 70,000,000 |
| 70,000 |
| (70,000) |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
Contributed capital of subsidiary | - |
| - |
| 1,282 |
| - |
| 1,282 |
|
|
|
|
|
|
|
|
|
|
Net loss for the year | - |
| - |
| - |
| (178,201) |
| (178,201) |
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017 | 70,697,043 | $ | 70,697 | $ | (69,215) | $ | (418,008) | $ | (416,526) |
|
|
|
|
|
|
|
|
|
|
Net loss for the year | - |
| - |
| - |
| (223,343) |
| (223,343) |
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018 | 70,697,043 | $ | 70,697 | $ | (69,215) | $ | (641,351) | $ | (639,869) |
The accompanying notes are an integral part of these consolidated financial statements
F-4
Living 3D Holdings, Inc. Consolidated Statements of Cash Flows (Stated in US dollars) | |||||
|
| For The Years Ended December 31, | |||
|
| 2018 |
| 2017 | |
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| |
Net loss | $ | (223,343) | $ | (178,201) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
| |
Depreciation |
| 52,855 |
| 1,572 | |
Changes in operating assets and liabilities |
|
|
|
| |
Accounts receivable |
| 3,162 |
| (2,949) | |
Other receivable |
| (29) |
| - | |
Accrued liabilities and other payables |
| 158,482 |
| 176,313 | |
Account payable |
| (5,128) |
| 5,128 | |
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
| (14,001) |
| 1,863 | |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| |
Repayment to related party |
| (37,056) |
| (46,490) | |
Proceeds from related party |
| 1,282 |
| 93,346 | |
Capital contribution of subsidiary |
| - |
| 1,282 | |
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
| (35,774) |
| 48,138 | |
|
|
|
|
| |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| (49,775) |
| 50,001 | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | $ | 50,668 | $ | 667 | |
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 893 | $ | 50,668 | |
|
|
|
|
| |
NON-CASH TRANSACTIONS |
|
|
|
| |
Operating expenses paid by related parties | $ | 113,844 | $ | 142,076 | |
Issuance of common stock in connection with acquisition of subsidiary | $ | - | $ | 70,000 | |
Website development costs paid by related party | $ | - | $ | 153,846 | |
Supplementary Disclosure for Cash Flow Information: |
|
|
|
| |
Income taxes paid | $ | - | $ | - | |
Interest paid | $ | - | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements
F-5
LIVING 3D HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION
Living 3D Holdings, Inc. (“we”, “our”, the “Company”) is a Nevada corporation.
On December 30, 2016, the Company entered into a share acquisition and exchange agreement (the "Share Acquisition and Exchange I") with Sugar Technology Group Holdings Corporation, a company incorporated in the British Virgin Islands (the “BVI”) on February 26, 2016 and has a wholly owned subsidiary, XYZMILL.COM Limited, which was incorporated on May 9, 2016. Sugar Technology Group Holdings Corporation and its subsidiary are collectively referred as Sugar. Under the Share Acquisition and Exchange I, the Company will issue an aggregate of 30,000,000 shares of its common stock at par value of $0.001 each to all of the shareholders of Sugar in exchange for all of the issued and outstanding stock of Sugar. The Share Acquisition and Exchange I was closed on January 5, 2017 and the 30,000,000 shares of the Company’s common stock were issued on January 4, 2017. As a result of the Share Acquisition and Exchange I, Sugar became the Company’s wholly-owned subsidiary. The acquisition of Sugar by the Company has been accounted for as business combination between entities under common control since the Company and Sugar are controlled by the same group of shareholders before and after the reorganization.
Sugar is engaged in computer software development with major operations in Hong Kong and Mainland China. The Company focuses on the research and development of e-commerce platform, mobile game and virtual reality application. The e-commerce platform seeks to integrate web application with product manufacturing which will increase the productivity and efficiency of the operation. Along with the ever-increasing usage of the internet, our O2O e-commerce platform is expected to bring in more business opportunities to the manufacturer.
With a view of diversifying its existing business, the Company has entered another share acquisition and exchange agreement (the "Share Acquisition and Exchange II") on December 4, 2017 with Hong Kong Cryptocurrency Exchange Limited (the “HKCCEX”), a company incorporated in Hong Kong Special Administrative Region on April 19, 2017. Under the Share Acquisition and Exchange II, the Company will issue an aggregate of 40,000,000 shares of its common stock at par value of $0.001 each to the shareholder of HKCCEX in exchange for all of the issued and outstanding stock of HKCCEX. The Share Acquisition and Exchange II was closed on December 28, 2017 and the 40,000,000 shares of the Company’s common stock were issued on the same day. As a result of the Share Acquisition and Exchange II, HKCCEX became the Company’s wholly-owned subsidiary. The acquisition of HKCCEX by the Company has been accounted for as business combination between entities under common control since the Company and HKCCEX are controlled by the same group of shareholders before and after the reorganization.
The Company, through its subsidiary, HKCCEX, a FinTech company, focuses on developing no-frills software solution that facilitate the wide spread adoption of cutting edge technological ideas. The flagship product is a B2B cryptocurrency web based trading system featuring newsfeed, live quote, integrated CRM, agent management and accounting system. This web based trading system is then customized and provided to companies with previous experience in the financial, trading or similar fields allowing them to capture a new and existing market with minimum change to their current Modus Operandi. These companies have user right to the customized web based trading system, which allow their end-customers to trade cryptocurrency as registered users.
For the sake of clarity, this report follows the English naming convention of first name followed by last name, regardless of whether an individual’s name is Chinese or English. For example, the name of our Chief Executive Office will be presented as "Man Wah Stephen Yip," even though, in Chinese, his name would be presented as "Yip Man Wah Stephen".
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are prepared in accordance with generally accepted accounting principles used in the United States of America.
F-6
The consolidated financial statements include the accounts of the Company and its subsidiaries. All material inter-company accounts and transactions have been eliminated in consolidation.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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 of the financial statements, and the reported amounts of revenues and expenses during the reporting period including provision for income taxes. Actual results when ultimately realized could differ from those estimates.
C. CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to include cash on hand and demand deposits with banks with an original maturity of three months or less.
D. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments including cash and cash equivalents, accounts receivable, other receivable, account payable and accrued liabilities and other payables approximates their fair value due to the relatively short-term nature of these instruments.
Management believes it is not practical to determine the fair value of due to related parties because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
E. REVENUE RECOGNITION
The Company accounts for revenue arising from contracts with customers in accordance with Accounting Standards Update (ASU or Update) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), which was adopted on January 1, 2018 using the full retrospective method. The adoption of ASC 606 did not impact the Company’s previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to retained earnings.
Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price, which is allocated to the respective performance obligation, when the performance obligation is satisfied.
Generally, the Company has two revenue streams from its operations. 1) Revenue derived from the provision of website, game or advertising design services which is recognized at a point in time when the services have been delivered and the customer has obtained control of promised services. 2) Revenue derived from the contracts with customers to grant the right to use the web based trading system of cryptocurrency in exchange for the commission based on the trading transactions of the end users which is recognized at a point in time when the cryptocurrency trading transactions occur.
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F. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful account is made when collection of the full amount becomes questionable.
G. WEBSITE DEVELOPMENT COSTS
The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred. Costs associated with the website consist of service fees paid to a website development company. The Company paid $230,769 to the website development company, of which $76,923 was recognized as expense and the remaining $153,846 was capitalized.
All capitalized costs associated with the website is subject to straight-line amortization over its expected useful life of three years when the website is ready for its intended use. During the years ended December 31, 2018 and 2017, the amortization expense was $51,282 and $0, respectively.
The Company reviews its website development costs for impairment whenever events or changes in circumstances indicate that the carrying amount of the website development costs may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the website development costs to the estimated undiscounted future cash flows expected to result from the use of the website development costs and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the website development costs, the Company would recognize an impairment loss based on the fair value of the website development costs.
H. PROPERTY AND EQUIPMENT
(a)Measurement
The Company’s property and equipment consists primarily of a motor vehicle and is initially recognized at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses.
(b)Depreciation
Depreciation of motor vehicle is calculated using the straight-line method to allocate its depreciable amount over its estimated useful life of three years
I. FOREIGN CURRENCY TRANSLATION
The accompanying consolidated financial statements are presented in United Stated Dollars (“USD”). The reporting currency of the Company is the USD. The functional currency of Sugar and HKCCEX is the Hong Kong Dollar (“HKD”). For financial reporting purposes, the financial statements of Sugar and HKCCEX which are prepared in Hong Kong Dollar are translated into United States Dollars. Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in the owners' equity.
F-8
The exchange rates used for the foreign currency translation were as follows (USD$1 = HKD):
Period Covered |
| Balance Sheet Date Rates |
| Average Rates |
Years ended December 31, 2018 and 2017 |
| 7.8 |
| 7.8 |
We follow FASB ASC 830-30, “Foreign Currency Translation”, for both the translation and re-measurement of balance sheet and income statement items into U.S. dollars. The Hong Kong Monetary Authority (“HKMA”), Hong Kong's central bank, maintains a Linked Exchange Rate System since 1983. The HKMA operates Convertibility Undertakings on both the strong side and the weak side of the Linked Rate of USD$1: HKD7.8. In fact, the exchange rate for HKD to US dollars has varied by very little during 2018 and 2017. Thus, the consistent exchange rate used has been 7.80 HKD per each US dollar. Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.
J. INCOME TAXES
Income tax expense is based on reported income before income taxes. The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
K. RELATED PARTIES
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
L. IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss based on the fair value of the assets.
M. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. Under ASU 2016-02, lessees will be required to recognize all leases (with the exception of short-term leases) at the commencement date including a lease
F-9
liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (ROU) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. In December 2017, January 2018, July 2018 and December 2018, the FASB issued ASU 2017-13, ASU 2018-01, ASU 2018-10 & 11 and ASU 2018-20 respectively, which contain modifications and improvements to ASU 2016-02. The amendments provide entities with an additional (and optional) transition method to adopt the new leases standard. Entities that elect to utilize the Optional Transition Method would not apply the provision of ASU No. 2016-02, as amended, to comparative periods presented in the financial statements.
The standard will be effective for the Company beginning January 1, 2019, with early adoption permitted. The Company plans to adopt the standard effective January 1, 2019, utilizing the Optional Transition Method. The Company does not expect adoption will have a material impact on the Company’s consolidated balance sheets and consolidated statements of operations.
NOTE 3 – GOING CONCERN
The Company has a working capital deficit of $742,957 as of December 31, 2018 and has generated negative cash flows from operations for the year ended December 31, 2018. The Company also suffered recurring losses from operations. The Company is primarily funded by its Chief Executive Officer ("CEO") and principal shareholder. The Company will have to raise additional capital, including through the sale of equity securities, to support its operation and expansion.
These conditions and uncertainties raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 – RELATED PARTY TRANSACTIONS
The related parties consist of the following:
Man Wah Stephen Yip, the Company’s CEO, a director and principal shareholder;
So Ka Yan, the Company’s Secretary, a director, principal shareholder and the wife of Man Wah Stephen Yip;
Wai Tak Edward Lau, a director and principal shareholder.
Due to Related Parties
Due to related parties consists of the following:
|
| Man Wah Stephen Yip |
|
So Ka Yan |
|
Total |
|
|
|
|
|
|
|
Balance at December 31, 2016 | $ | 82,496 | $ | 15,923 | $ | 98,419 |
Expenses paid on behalf of the Company |
| 40,924 |
| 101,152 |
| 142,076 |
Website development costs paid on behalf of the Company |
|
- |
|
153,846 |
|
153,846 |
Advances to the Company |
| - |
| 93,346 |
| 93,346 |
Less: Repayment received from the Company |
| - |
| (46,490) |
| (46,490) |
Balance at December 31, 2017 | $ | 123,420 | $ | 317,777 | $ | 441,197 |
Expenses paid on behalf of the Company |
| 83,319 |
| 30,525 |
| 113,844 |
Advances to the Company |
| - |
| 1,282 |
| 1,282 |
Less: Repayment received from the Company |
| - |
| (37,056) |
| (37,056) |
Balance at December 31, 2018 | $ | 206,739 | $ | 312,528 | $ | 519,267 |
The amounts due to related parties represent expenses paid on behalf and advances received to support the operation of the Company. They are unsecured, bear no interest and are repayable on demand.
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Office Furnished by Related Party
The Company’s office in Hong Kong consists of approximately 400 square feet located at Room S, 2/F, Block D East Sun Industrial Center, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong. This office is furnished to the Company by the CEO at no charge.
The Company has another office which is situated at 10th Floor, Si Toi Commercial Building, 32 Queen Street, Sheung Wan, Hong Kong. This office is furnished to the Company by Mr. Wai Tak Edward Lau, who was appointed as a director of the Company on February 7, 2018, at no charge.
Service Provided by Related Party
Harris Yeung, a personal assistant of CEO, provided non-compensated book keeping service to the Company during the years ended December 31, 2018 and 2017.
NOTE 5 – CONCENTRATION OF CREDIT RISKS AND MAJOR CUSTOMERS
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:
For the year ended December 31, 2018, customers B and E accounted for 63% and 37% of the Company’s total revenues, respectively. For the year ended December 31, 2017, customers A and B accounted for 64% and 36% of the Company’s total revenues, respectively.
At December 31, 2018, customers B and E accounted for 63% and 37% of the Company’s total outstanding accounts receivable, respectively. At December 31, 2017, the customers B and D accounted for 41% and 59% of accounts receivable.
For the year ended December 31, 2018, the Company’s cost of revenues primarily consisted of amortization of website development costs. For the year ended December 31, 2017, subcontractor A accounted for 100% of the Company’s cost of revenues.
Subcontractor A accounted for 100% of the Company’s account payable for the year ended December 31, 2017.
NOTE 6 – INCOME TAXES
Living 3D Holdings, Inc. is incorporated in the State of Nevada, United States and is subject to US Corporate
Income Tax (“CIT”) on the taxable income in accordance with the relevant US income tax laws. No provision for income taxes in the US has been made as the Company had no US taxable income for the years ended December 31, 2018 and 2017.
Sugar Technology Group Holdings Corporation is registered in the BVI and under the current laws of the BVI is not subject to income taxes.
XYZMILL.COM Limited and Hong Kong Cryptocurrency Exchange Limited are registered in Hong Kong and Hong Kong profits tax is calculated at 8.25% on assessable profits up to $256,410 (HK$2,000,000) and 16.5% on any part of assessable profits over $256,410 for the year ended December 31, 2018, and 16.5% of the estimated assessable profit for the year ended December 31, 2017.
No provision for income taxes has been made for XYZMILL.COM Limited and Hong Kong Cryptocurrency Exchange Limited as both entities have suffered losses from their inception through December 31, 2018.
As of December 31, 2018 and 2017, the Company has deferred tax asset of $8,932 and $2,937, respectively, arising from net operating loss from XYZMILL.COM Limited and Hong Kong Cryptocurrency Exchange Limited. Net
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operating loss carry forward amounted to $161,482 and $26,195 for the years ended December 31, 2018 and 2017, respectively. In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management believes that the net loss is significant negative evidence that deferred tax assets would not be realizable. Therefore, the deferred tax asset is covered by a full valuation allowance.
A reconciliation of the income tax computed at the U.S. statutory rate and the Company's provision for income tax is as follows:
|
| For the years ended December 31, | ||
|
| 2018 |
| 2017 |
U.S. statutory rate |
| 21.0% |
| 34.0% |
Foreign income not recognized in the U.S. |
| (21.0%) |
| (34.0%) |
Hong Kong corporate income tax rate |
| 8.25% |
| 16.5% |
Effect of expenses not deductible for tax purposes |
| (0.0%) |
| (8.2 %) |
Effect of valuation allowance on deferred income tax assets |
| (3.08%) |
| (1.7%) |
Effect of income tax difference under different tax jurisdictions |
| (5.17%) |
| (6.6%) |
Provision for income tax |
| 0.0% |
| 0.0% |
Accounting for Uncertainty in Income Taxes
The Company adopted the provisions of Accounting for Uncertainty in Income Taxes. The provision clarify the accounting for uncertainty in income taxes recognized in an Enterprise's financial statements in accordance with the standard "Accounting for Income Taxes,", and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of Accounting for Uncertainty in Income Taxes also provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company has evaluated and concluded that there is no significant uncertain tax positions required recognition in its consolidated financial statements.
The Company may from time to time be assessed interest or penalties by major tax jurisdictions. In the event it receives an assessment for interest and/or penalties, it will be classified in the consolidated financial statements as tax expense.
The U.S. Tax Cuts and Jobs Act (the “2017 Act”) was enacted on December 22, 2017. The 2017 Act among other changes, reduces the U.S. federal corporate tax rate from 34% to 21%. The Company recognized provisional tax impacts related to the revaluation of deferred tax assets and liabilities and corresponding valuation allowances in its consolidated financial statements for the year ended December 31, 2018. There was no impact of the revaluation to the current net income because it was fully offset by the valuation allowance that was recorded against the deferred tax asset. In addition, the 2017 Act implements a modified territorial tax system that includes a one-time transition tax on deemed repatriation of previously untaxed accumulated earnings and profits of certain foreign subsidiaries, and creates new taxes on certain foreign-sourced earnings. Taxpayer may elect to pay the one-time transition tax over eight years or in a single lump sum. The 2017 Act also includes provisions for a new tax on Global Intangible Low-taxed Income (“GILTI”) effective for tax years of foreign corporations beginning after December 31, 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of controlled foreign corporations, subject to the possible use of foreign tax credits and a deduction equal to 50 percent to offset the income tax liability, subject to some limitations.
The Company has suffered recurring losses from operations and retained an accumulated deficit of $641,351 and
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$418,008 as of December 31, 2018 and 2017, respectively. As such, the Company did not recognize any one-time transition tax for the year ended December 31, 2017 and there was no provision of the tax on GILTI for the year ended December 31, 2018.
NOTE 7 – SHAREHOLDERS’ DEFICIT
On January 4, 2017 and December 28, 2017 the Company issued an aggregate of 30,000,000 and 40,000,000 shares of its common stock at par value of $0.001 each to all of the shareholders of Sugar and HKCCEX, respectively, in exchange for all of the issued and outstanding stock of Sugar and HKCCEX. The shares were recorded at par value with a decrease to additional paid-in capital of $30,000 and $40,000, respectively, as the transactions were accounted for as business combination between entities under common control.
F-13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LIVING 3D HOLDINGS, INC. |
|
/s/ Man Wah Stephen Yip Name: Man Wah Stephen Yip Title: Chief Executive Officer and Chairman of the Board of Directors |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
/s/ Man Wah Stephen Yip Name: Man Wah Stephen Yip Title: Chief Executive Officer and Chairman of the Board of Directors |
|
/s/ Sze Cheong Eric Ng Name: Sze Cheong Eric Ng Title: Chief Financial Officer and Director |
26
Index to Exhibits
|
|
31.1 | |
31.2 | |
32 |
27