EDGAR 10-K Filing

Company CIK: 723533
Filing Year: 2024
Filename: 723533_10-K_2024_0001017386-24-000060.json

---

ITEM 1. BUSINESS
Item 1. Description of Business.
Organization and Corporate History
Longwen Group Corp. (the “Company”), was originally incorporated as Expertelligence, Inc in the State of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of various name changes, the Company amended its Articles of Incorporation (“Charter Amendment”) to affect the current name change of Longwen Group Corp with trading symbol of “LWLW”.
The Company underwent a change of control on January 21, 2016, at which time Harold Minsky resigned in all officer positions. G. Reed Petersen and White Rim Cattle Company LLC each purchased 25,000,000 shares of common stock of the Company from Harold Minsky. Mr. Petersen is the Member Manager of White Rim Cattle Company, LLC and thus can be considered a control person of all 50,000,000 shares of stock of the Company. Pursuant to a Board of Directors meeting, Mr. Petersen was elected to and accepted all the officer positions previously held by Harold Minsky.
On or about April 5, 2016, the Company affected a 1 for 750 share reverse split of its issued and outstanding common stock. On such date, the Company’s common stock was reduced from 95,164,140 to 127,061 shares outstanding.
Effective November 29, 2016, G. Reed Peterson sold 66,667 shares of common stock of the Company to Longwen Group Corporation (Cayman Island), a Cayman Island company (“Longwen Cayman”). All of the shares held by Longwen Cayman are restricted securities. As a result of the transactions, Mr. Petersen no longer owns any of the Company’s capital stock or securities and he and his affiliates waived all loans and other amounts due to the Company. In addition, on such date, Mr. Petersen resigned in all officer capacities from the Company, and Mr. Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the Company and President and Chief Executive Officer and Chief Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of Board.
From August 2018 to June 2021, the Company was seeking potential business mergers and acquisitions in order to increase its value of the common stock. However, due to the impact of the Covid-19 pandemic, the progress was delayed and the target was not successfully achieved.
On June 9, 2021, Anthony Lombardo (“Lombardo”) filed an Application for Appointment of Custodian (“Application”) with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Company’s non-response and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary custodian of the Company. Subsequently after Lombardo’s custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (“Joseph”) as CEO, CFO and Secretary and resigned from all positions in the Company, On October 25, 2021, Mr. Xizhen Ye (“Ye”), who was the officer and director of the Company prior to Lombardo’s custodianship, and Longwen Group Corporation, a Cayman Island corporation, filed a Motion to Dissolve Custodianship (“Motion”) with the Eighth Judicial District Court of Nevada State. On January 12, 2022, in accordance with a Settlement Agreement regarding Lombardo’s custodianship, Mr. Ye was reinstated his positions as the officer and director of the Company, along with the reinstatement of the other Company’s director, Lizhong Lu, who was also in place prior to Lombardo’s custodianship. On February 9, 2022, pursuant to the Settlement Agreement, Joseph transferred 65,000,000 common stocks of the Company owned by him to Mr. Ye. On February 17, 2022, the Eighth Judicial District Court formally dismissed Lombardo’s custodianship for the Company.
On February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Wenyuan Enterprise Management Co., Ltd. (“Hangzhou Wenyuan”) (FKA: Hangzhou Longwen Enterprise Management Co., Ltd or “Hangzhou Longwen”), a wholly foreign-owned enterprise (“WOFE”) in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Wenyuan became the Company’s wholly owned subsidiary in the PRC. Hangzhou Wenyuan was originally registered on January 4, 2012 and has minimum operations since its inception. The Company recognize $993 goodwill upon consummated the acquisition. On February 27, 2024, Hangzhou Longwen Enterprise Management Co., Ltd changed its name to Hangzhou Wenyuan Enterprise Management Co., Ltd. through Hangzhou Market Supervision and Administration Bureau in China.
On October 11, 2022, the Company and its subsidiary, Hangzhou Wenyuan entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Yusu Trading Co., Ltd. (“HZYS”), a limited liability company in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated HZYS became Hangzhou Wenyuan’s wholly owned subsidiary in the PRC. HZYS was originally registered on April 20, 2020 and has minimum operations since its inception.
On March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management intended to change its operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to sell certain assets and liabilities of HWF. HWF has been identified as discontinued operations with aquacultural products. Such assets and liabilities are classified as assets and liabilities held for sale, and its management’s intention to complete the sales on Mach 27, 2024. From the first quarter of year 2024, the Company began to sell cultural and health products through its subsidiary HZYS. The management expects this newly added business segment will become a new driving force for the Company’s revenue growth in 2024.
The following diagram illustrates our corporate structure as of March 29, 2024.
· Longwen Group Corp., a Nevada holding company, was originally incorporated as Expertelligence, Inc in the State of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005.
· Hangzhou Wenyuan Enterprise Management Co., Ltd. (“Hangzhou Wenyuan” or the “WOFE”), a wholly foreign-owned enterprise established in the PRC on January 4, 2012, and now is 100% directly owned by Longwen Group Corp.
· On October 11, 2022, the Company and its subsidiary, Hangzhou Wenyuan entered into an Acquisition Agreement with a third-party individual to acquire 100% ownership of Hangzhou Yusu Trading Co., Ltd. ("HZYS"), a limited liability company in Hangzhou, the People's Republic of China (the "PRC"). Upon consummated, HZYS became Hangzhou Wenyuan's wholly owned subsidiary in the PRC. HZYS was originally registered on April 20, 2020 and has minimum operations since its inception.
· On March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management intended to change its operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to sell certain assets and liabilities of HWF.
General Business Plan
The Company’s primary objective is to engage in cultural and health product sales, as well as to provide project development and management in culture fields, including antique project promotion and development, traditional magazine project cooperation and development, the marketing and development of audio and visual products and etc. Since the fourth quarter of 2022, the Company also entered into the E-commerce market and the aquaculture product sales industry but the aquaculture sales segment of the Company was subsequently discontinued by the decision of the management on March 27, 2024, due to the change of the economic situation and the sales of aquacultural products is not as expected. From the first quarter of year 2024, the Company began to sell cultural and health products through its subsidiary HZYS.
1. On March 15, 2022, Hangzhou Wenyuan, the Company’s 100% controlled subsidiary, entered into a Consulting Service Agreement (the “Service Agreement”) with Yunnan Yusu Import and Export Trading Co., Ltd (China) (“Yunnan Yusu”). Pursuant to the Service Agreement, Hangzhou Wenyuan will provide a series of consulting services to Yunnan Yusu including to assist in the preparation of jadeite sales and purchase agreement, assist with tax filing, assist with financial report preparation, assist with jadeite business negotiation and business website maintenance. As of June 30, 2023, the Company has terminated the consulting agreements with Yunnan Yusu due to the Company’s business strategy adjustment.
2. On September 2, 2022, Hangzhou Wenyuan entered into a Consulting Service Agreement with Linhai Dingji Auto Service Co., Ltd (China) (“Linhai Dingji”), pursuant to which, Hangzhou Wenyuan will provide a series of consulting services to Linhai Dingji, including to assist in the preparation of member sales and purchase agreement, assist with tax filing, assist with financial report preparation, assist with auto parts business negotiation and auto parts valuation. As of June 30, 2023, the Company has terminated the consulting agreements with Linhai Dingji due to the Company’s business strategy adjustment.
3. On September 5, 2022, Hangzhou Wenyuan entered into a Consulting Service Agreement with Linhai Aodiluo Ecotourism Development Co., Ltd (China) (“Linhai Aodiluo”), pursuant to which, Hangzhou Wenyuan will provide a series of consulting services to Linhai Aodiluo, including to assist in the preparation of member sales and purchase agreement, assist with tax filing, assist with financial report preparation, assist with ecotourism business negotiation and business website content publicity. The service agreement was terminated in December 2022 due to the company dissolvement of Linhai Aodiluo.
4. In December 2022, the Company’ subsidiary, HZYS, worked with a third-party platform developer, formally launched our online store, Huanyumeiyuan Mall (the “HYMY”), through Tencent’s Wechat platform. During the year ended December 31, 2023, we have total sales of USD $6,082. We expect our online store sales to become an important section of the Company’s total revenues in the year of 2024.
.
5. On March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management intended to change its operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to sell certain assets and liabilities of HWF. HWF has been identified as discontinued operations with aquacultural products.
6. From the first quarter of year 2024, the Company began to sell cultural and health products through its subsidiary HZYS. The management expects this newly added business segment will become a new driving force for the Company’s revenue growth in 2024.
Sales and Marketing
During the year 2023, our main revenues are mainly derived from the discontinued business of aquacultural products sales through HWF. Beginning from the first quarter of year 2024, our business strategy has changed to cultural and health product sales through our subsidiary HZYS, and HZYS has generated revenues from the cultural and health product sales in the first quarter of 2024. Our President, Mr. Ye is an excellent industry professional in the cultural and health product sales and project management and development field for more than 20 years. We believe he has the wealth of experience and contacts to help the Company to expand our business.
Competition
The cultural and health product market is highlight competitive and many large companies of same type or chain stores may provide more products or after-sales services than we do currently. In order to successfully compete in our industry, we will need to:
· Retain more experienced employees of the cultural and health product market;
· Raise funds to support our business plan;
· Set up an effective platform and sales channel to promote our business strategy;
However, there can be no assurance that even if we do these things, we will be able to compete effectively with the other companies in our industry. We believe that we have the required management expertise in the cultural and health industry with good marketing strategy and compatible service package.
Government Regulations
Our wholly owned subsidiary, Hangzhou Wenyuan, HZYS and HWF, are incorporated and operating in mainland China. Hangzhou Wenyuan, HZYS and HWF have received all permission required to obtain from Chinese authorities to operate its current business in China, including Business License and Bank Account Open Permit.
Intellectual Property
We own no intellectual property as of December 31, 2023.
Employees
As of March 29, 2024, we have eight employees in China. Meanwhile, we have also engaged accounting, legal, consultant and other part-time and occasional services.
Reports to Security Holders
The Company’s documents filed with the Securities and Exchange Commission may be inspected at the Commission’s principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the Company’s filings may be located under the CIK number 00011596.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
An investment in our common stock is highly speculative and should only be made by persons who can afford to lose their entire investment in us. You should carefully consider the following risk factors and other information in this Form 10-K before deciding to become a holder of our common stock. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent.
Risks Related to Doing Business in the People’s Republic of China (“PRC”)
Because all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. The Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our common stock.
As a business operating in China, we are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly. The PRC government has the power to exercise significant oversight and discretion over the conduct of our business, and the regulations to which we are subject may change rapidly and with little notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices. New laws, regulations, and other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may:
· Delay or impede our development;
· Result in negative publicity or increase our operating costs;
· Require significant management time and attention; and
· Subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices.
The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we conduct our business and could require us to change certain aspects of our business to ensure compliance, which could reduce revenues, increase costs and require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected as well as materially decrease the value of our common stock.
Furthermore, if the PRC government determines that our corporate structure does not comply with PRC regulations, or if these regulations change or are interpreted different in the future, our securities may decline in value or become worthless if the determinations, changes or interpretations result in our inability to assert control over the assets of our PRC subsidiaries that accordingly conduct all or substantially all of our operations.
PRC regulations relating to investments in foreign companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits.
As an U.S. holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries or may make additional capital contributions to our PRC subsidiaries, subject to satisfaction of applicable governmental registration and approval requirements.
Any loans we extend to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, cannot exceed the statutory limit and must be registered with the local counterpart of the State Administration of Foreign Exchange (“SAFE”).
In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaces the previous SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC individuals and PRC corporate entities, to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may make in the future.
Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of SAFE to reflect any material change. If any PRC resident shareholder of such SPV fails to make the required registration or to update the registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary in China. In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those required under SAFE Circular 37, must be filed with qualified banks instead of SAFE. Qualified banks should examine the applications and accept registrations under the supervision of SAFE. We have used our best efforts to notify PRC residents or entities who directly or indirectly hold shares in our U.S. holding company and who are known to us as being PRC residents to complete the foreign exchange registrations. However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. We cannot assure you that all other shareholders or beneficial owners of ours who are PRC residents or entities have complied with, and will in the future make, obtain or update any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, and limit our PRC subsidiary’s ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.
Furthermore, as these foreign exchange and outbound investment related regulations are relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border investments and transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. We cannot assure you that we have complied or will be able to comply with all applicable foreign exchange and outbound investment related regulations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from our future offering and to fund our PRC may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may impact us to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises, or FIEs, in China, capital contributions to our PRC subsidiary are subject to the approval of or filing with the Ministry of Commerce, or MOFCOM or its local branches and registration with a local bank authorized by the State Administration of Foreign Exchange, or SAFE. In addition, any medium or long-term loan to be provided by us to our PRC operating subsidiaries, must be registered with certain authorities. If we fail to complete such registrations, our ability to use the proceeds of our future offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. The SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective in June 2016. Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-affiliated entities. As this circular is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange related rules. Violations of these Circulars could result in severe monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to use Renminbi converted from loans or capital contributions of the Company to fund our PRC operating subsidiary, to invest in or acquire any other PRC companies through our PRC Subsidiary, which may adversely affect our business, financial condition and results of operations.
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.
Substantially all of our assets and operations are located in the PRC. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in the PRC generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over the PRC’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in the PRC, in the policies of the Chinese government or in the laws and regulations in the PRC could have a material adverse effect on the overall economic growth of the PRC. Such developments could adversely affect our business and operating results, lead to a reduction in demand for our consulting services and adversely affect our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in the PRC, which may adversely affect our business and operating results.
Non-compliance with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.
We have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract Law, that became effective in January 2008 and its implementing rules that became effective in September 2008 and was amended in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations. We believe our current practice complies with the Labor Contract Law and its amendments. However, the relevant governmental authorities may take a different view and impose fines on us.
As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment practice does not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations could be materially and adversely affected.
PRC laws and regulations governing our current business operations are sometimes vague and uncertain. Uncertainties with respect to the PRC legal system, including those regarding the enforcement of laws, and sudden or unexpected changes, with little advance notice, in laws and regulations in China could adversely affect us and limit the legal protections available to you and us.
There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement could be unpredictable, with little advance notice. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.
Our subsidiaries, Hangzhou Wenyuan, HZYS and HWF are formed under and governed by the laws of the PRC. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference, but have limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules involves uncertainties.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation and trade. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties and sudden changes, sometimes with little advance notice. As a significant part of our business is conducted in China, our operations are principally governed by PRC laws and regulations, which may limit legal protections available to us. Uncertainties due to evolving laws and regulations could also impede the ability of a China-based company, such as our company, to obtain or maintain permits or licenses required to conduct business in China. In the absence of required permits or licenses, governmental authorities could impose material sanctions or penalties on us. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other PRC government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.
The PRC government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.
Furthermore, if China adopts more stringent standards with respect to certain areas such as environmental protection or corporate social responsibilities, we may incur increased compliance costs or become subject to additional restrictions in our operations. Certain areas of the law, including intellectual property rights and confidentiality protections in China may also not be as effective as in the United States or other countries. In addition, we cannot predict the effects of future developments in the PRC legal system on our business operations, including the promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof. These uncertainties could limit the legal protections available to us and our investors, including you.
We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. We may be liable for improper use or appropriation of personal information provided by our customers.
We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other user data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions.
We expect to obtain information about various aspects of our operations as well as regarding our employees and third parties. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.
The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal information obtained during the course of performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing Committee of the National People’s Congress of China (SCNPC) issued the Cyber Security Law of the PRC, or Cyber Security Law, which became effective on June 1, 2017.
Pursuant to the Cyber Security Law, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.
The Civil Code of the PRC (issued by the PRC National People’s Congress on May 28, 2020 and effective from January 1, 2021) provides main legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection.
The PRC regulatory requirements regarding cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including the Cyberspace Administration of China, the Ministry of Public Security and the SAMR, have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.
In November 2016, the SCNPC passed China’s first Cybersecurity Law (“CSL”), which became effective in June 2017. The CSL is the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits. In April 2020, the Cyberspace Administration of China and certain other PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments (“Draft Measures”), which required that, in addition to “operator of critical information infrastructure,” any “data processor” carrying out data processing activities that affect or may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments,” The cybersecurity review will also investigate the potential national security risks from overseas IPOs. On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect on September 1, 2021. The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits. The costs of compliance with, and other burdens imposed by, CSL and any other cybersecurity and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business. Further, if the enacted version of the Measures for Cybersecurity Review mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.
On August 20, 2021, the SCNPC promulgated the PRC Personal Information Protection Law, which will take effect in November 2021. The Personal Information Protection Law provides that any entity involving processing of personal information (“Personal Information Processer”)shall take various measures to prevent the disclosure, modification or losing of the personal information processed by such entity, including, but not limited to, formulating a related internal management system and standard of operation, conducting classified management of personal information, taking safety technology measures to encrypt and de-identify the processed personal information, providing regular safety training and education for staff and formulating a personal information safety emergency accident plan. The Personal Information Protection Law further provides that a Personal Information Processer shall conduct a prior evaluation of the impact of personal information protection before the occurrence of various situations, including, but not limited to, processing of sensitive personal information (personal information that, once leaked or illegally used, may lead to discrimination against an individual or serious harm to an individual’s personal or property safety, including information on an individual’s ethnicity, religious beliefs, personal biological characteristics, medical health, financial accounts, personal whereabouts), using personal information to make automated decisions and providing personal information to any overseas entity.
On November 14, 2021, the Cyberspace Administration of China released the Regulations on Network Data Security (draft for public comments) and accepted public comments until December 13, 2021. The draft Regulations on Network Data Security provide that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. If a data processor that processes personal data of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year. On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and took effect on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. As advised by our PRC legal counsel, Zhejiang TaoTeng, neither we nor our subsidiaries Hangzhou Wenyuan, HZYS and HWF are among the “operator of critical information infrastructure” or “data processor” as mentioned above.
The Company, through Hangzhou Wenyuan, HZYS and HWF, is to engage in project development and management in cultural fields, as well as aquacultural product industry in China, and neither the Company nor its subsidiaries are engaged in data activities as defined under the Personal Information Protection Law, which includes, without limitation, collection, storage, use, processing, transmission, provision, publication and deletion of data. In addition, neither the Company nor its subsidiary is an operator of any “critical information infrastructure” as defined under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure. However, Measures for Cybersecurity Review (2021 version) was recently adopted and the Regulations on Network Data Security (draft for comments) is in the process of being formulated and the Opinions remain unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities.
There remains uncertainties as to when the final measures will be issued and take effect, how they will be enacted, interpreted or implemented, and whether they will affect us. If we inadvertently conclude that the Measures for Cybersecurity Review (2021 version) do not apply to us, or applicable laws, regulations, or interpretations change and it is determined in the future that the Measures for Cybersecurity Review (2021 version) become applicable to us, we may be subject to review when conducting data processing activities, and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices. We may incur substantial costs in complying with the Measures for Cybersecurity Review (2021 version), which could result in material adverse changes in our business operations and financial position. If we are not able to fully comply with the Measures for Cybersecurity Review (2021 version), our ability to offer or continue to offer securities to investors may be significantly limited or completely hindered, and our securities may significantly decline in value or become worthless.
The CSRC has released the Trial Administrative Measures of Overseas Securities Offering and Listing by domestic companies and five guidelines, which will come into effect on March 31, 2023. The Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our common stock to investors and could cause the value of our common stock to significantly decline or become worthless
On December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures”, and collectively with the Draft Administrative Provisions, the “Draft Rules Regarding Overseas Listing”), which stipulate that Chinese-based companies, or the issuer, shall fulfill the filing procedures after the issuer makes an application for initial public offering and listing in an overseas market, and certain overseas offering and listing such as those that constitute a threat to or endanger national security, as reviewed and determined by competent authorities under the State Council in accordance with law, may be prohibited under the Draft Rules Regarding Overseas Listing. On February 17, 2023, with the approval of the State Council, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which will come into effect on March 31, 2023. According to the Trial Measures, among other requirements, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures with the CSRC; if a domestic company fails to complete the filing procedures, such domestic company may be subject to administrative penalties; and (2) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and such filings shall be submitted to the CSRC within three business days after the submission of the overseas offering and listing application. On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which clarifies that (1) on or prior to the effective date of the Trial Measures, domestic companies that have already submitted valid applications for overseas offering and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may reasonably arrange the timing for submitting their filing applications with the CSRC, and must complete the filing before the completion of their overseas offering and listing; (2) a six-month transition period will be granted to domestic companies which, prior to the effective date of the Trial Measures, have already obtained the approval from overseas regulatory authorities or stock exchanges, but have not completed the indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-month transition period, they shall file with the CSRC according to the requirements; (3) the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies with contractual arrangements which duly meet the compliance requirements, and support the development and growth of these companies; and (4) domestic companies that are already listed on overseas exchanges by or before March 31, 2023 are not required to make any filings with CSRC unless they raise additional equity financing.
As of the date of this Annual Report, neither we nor any of the PRC subsidiaries have been subject to any investigation, or received any notice, warning, or sanction from the CSRC or other applicable government authorities related to our listing. If we are required to file with the CSRC for our future offering, there is no assurance that we can complete such filing in a timely manner or even at all. Any failure by us to comply with such filing requirements may result in an order to rectify, warnings and fines against us and could materially hinder our ability to offer or continue to offer our securities.
We are a holding company and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent company expenses or pay dividends to holders of our common stocks.
We are a holding company and conduct substantially all of our business through our PRC subsidiaries. We may rely on dividends to be paid by our PRC subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our PRC subsidiaries incur debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.
Under PRC laws and regulations, our PRC directly owned subsidiary, Hangzhou Wenyuan, may pay dividends only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital.
Our PRC subsidiaries generate primarily all of their revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their Renminbi revenues to pay dividends to us. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
In addition, the Enterprise Income Tax Law, or EIT, and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
Because our business is conducted in RMB and the price of our common stock is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments.
Our business is conducted in the PRC, our books and records are maintained in RMB, which is the currently of the PRC, and the financial statements that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between the RMB and dollar affect the value of our assets and the results of our operations in United States dollars. The value of the RMB against the United States dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue and financial condition.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the Renminbi depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China.
This depreciation halted in 2017, and the RMB appreciated approximately 7% against the U.S. dollar during this one-year period. The Renminbi in 2018 depreciated approximately by 5% against the U.S. dollar. Starting from the beginning of 2019, the Renminbi has depreciated significantly against the U.S. dollar again. In early August 2019, the PBOC set the Renminbi’s daily reference rate at RMB7.0039 to US$1.00, the first time that the exchange rate of Renminbi to U.S. dollar exceeded 7.0 since 2008. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
There remains significant international pressure on the Chinese government to adopt a flexible currency policy to allow the Renminbi to appreciate against the U.S. dollar. Significant revaluation of the Renminbi may have a material and adverse effect on your investment. Substantially all of our revenues and costs are denominated in Renminbi. Any significant revaluation of Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our common stock in U.S. dollars.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.
Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our net revenues in RMB. Under our current corporate structure, our Company in the United States relies on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our Company who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
In light of the flood of capital outflows of China in 2016 due to the weakening RMB, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.
Under the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.
The EIT Law and its implementing rules provide that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” under PRC tax laws. The implementing rules promulgated under the EIT Law define the term “de facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. In April 2009, the State Administration of Taxation, or SAT, issued the Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in accordance with the Actual Standards of Organizational Management, known as Circular 82, which has provided certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled enterprise that is incorporated offshore is located in China. However, there are no further detailed rules or precedents governing the procedures and specific criteria for determining “de facto management body.” Although our board of directors and management are located in the PRC, it is unclear if the PRC tax authorities will determine that we should be classified as a PRC “resident enterprise.”
If we are deemed as a PRC “resident enterprise,” we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed to us from our existing PRC subsidiary and any other PRC subsidiary which we may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered a PRC “resident enterprise”, any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our common stock may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty). It is unclear whether holders of our common stock would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse effect on the value of your investment in us and the price of our common stock.
Changes in international trade policies, trade dispute or the emergence of a trade war, may have a material adverse effect on our business.
Political events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and could have a material adverse effect on us and our customers, service providers and other partners.
International trade disputes could result in tariffs and other protectionist measures that could adversely affect our business. Tariffs could increase the cost of the goods and products which could affect consumers’ discretionary spending levels and therefore adversely impact our business. In addition, political uncertainty surrounding international trade disputes and the potential of the escalation to trade war and global recession could have a negative effect on consumer confidence, which could adversely affect our business.
U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.
Any disclosure of documents or information located in China by foreign agencies may be subject to jurisdiction constraints and must comply with China’s state secrecy laws, which broadly define the scope of “state secrets” to include matters involving economic interests and technologies. There is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect our operations will be honored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements, especially as those entities are located in China.
The PRC Securities Law was promulgated in December 1998 and was subsequently revised in October 2005, June 2013, August 2014 and December 2019. According to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While there is no detailed interpretation regarding the rule implementation under Article 177, it will be difficult for an overseas securities regulator to conduct investigation or evidence collection activities in China.
The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.
We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings or any of our other public pronouncements.
The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our registration statement. In the event it is later determined that the PCAOB is unable to inspect or investigate completely the Company’s auditor, then such lack of inspection could cause trading in the Company’s securities to be prohibited under the HFCAA, and ultimately result in a determination by a securities exchange to delist the Company’s securities.
On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.
On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national securities exchange or in the over the counter trading market in the U.S. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.
On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.
On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if enacted, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.
Pursuant to the HFCAA, the PCOAB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China, because a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. In addition the PCOAB’s report identified the specific registered public accounting firms which are subject to these determinations. Our registered public accounting firm, Simon & Edward, LLP, is not headquartered in mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB’s determination.
On August 26, 2022, the China Securities Regulatory Commission, or CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement of Protocol, or the Protocol, governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant to the Protocol, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC.
The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors in their stock to lose confidence in their audit procedures and reported financial information and the quality of their financial statements.
Our auditor, Simon & Edward, LLP (“S&E”), the independent registered public accounting firm that issues the audit report included elsewhere in this Annual Report as an auditor registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. S&E is headquartered in the United States and is subject to inspection by the PCAOB on a regular basis.
While the Company’s auditor is based in the U.S. and is registered with PCAOB and subject to PCAOB inspection, in the event it is later determined that the PCAOB is unable to inspect or investigate completely the Company’s auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in the Company’s securities to be prohibited under the Holding Foreign Companies Accountable Act, and ultimately result in a determination by a securities exchange to delist the Company’s securities. In addition, the recent developments would add uncertainties to our registration statement and we cannot assure you whether regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. It remains unclear what the SEC’s implementation process related to the above rules will entail or what further actions the SEC or the PCAOB will take to address these issues and what impact those actions will have on U.S. companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market). In addition, the above amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our common stock could be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense and management time.
Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
We are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. As of the date of this registration statement, we have paid and will continue to pay in the future, social insurance or housing fund contributions for all of our employees, and we have been in compliance with the requirements of relevant PRC regulations. If in the future we are determined by local authorities to fail to make adequate or sufficient contributions to any employee benefits as required by relevant PRC regulations, due to changes in regulations and requirement, we may face late fees or fines in relation to the underpaid employee benefits. As a result, our financial condition and results of operations may be materially and adversely affected.
The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated by the SCNPC effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB 2 billion, and at least two of these operators each had a turnover of more than RMB 400 million within China) must be cleared by MOFCOM before they can be completed.
Moreover, the Anti-Monopoly Law requires that MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
The M&A Rules require an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.
Our PRC legal counsel, Zhejiang TaoTeng, has advised us that, the Company and its operating entity are full compliance with the M&A Rules in China. As of the date of this Form 10-K, we have not received any notification of non-compliance. In the future, we may further grow our business by acquiring businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions. Our ability to expand our business or maintain or expand our market share through future acquisitions would be materially and adversely affected.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the registration statement based on foreign laws.
We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, all our senior executive officers reside within China for a significant portion of the time and all of them are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors as none of them currently resides in the United States or has substantial assets located in the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.
The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic
principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
On February 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets, as such persons need to determine whether their transactions are subject to these rules and whether any withholding obligation applies.
On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.
Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an “Indirect Transfer”, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who pays for the transfer is obligated to withhold the applicable taxes currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring and sale of our offshore investments. Our Company may be subject to filing obligations or taxed if our Company is transferor in such transactions, and may be subject to withholding obligations if our Company is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our Company by investors who are non-PRC resident enterprises, our PRC subsidiary may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our Company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
Risks Relating to Our Company and Our Industry
We rely entirely on the operations of our subsidiaries in the PRC. Any successes or failures of our subsidiaries’ operations will directly impact our financial condition and may cause your investment to be either positively or negatively impacted. Many very large and chain companies have or are entering into various aspects of the cultural and health product industry, and project development and management in cultural industry that we intend serve or that they are offering services that indirectly compete with businesses. These factors could result in declining revenue, or inability to grow our business.
Numerous large and chain companies have entered into various aspects of our business categories. There currently are a number of companies worldwide that have already occupied a big portion of the market in which we intend to operate. As a small, early-stage company, it is uncertain if and how we will be able to compete with the competitors and products that are already being deployed and familiar by customers. While we believe that we currently have a competitive advantage because of our experienced management team and marketing strategy. However, we cannot give any assurance that we will in fact be able to successfully compete with the existing or new competitors in this mature and evolving marketplace.
We rely substantially on our President. We may be adversely affected if we lose his services or the services of other key personnel or are unable to attract and retain additional personnel.
Our success is substantially dependent on the efforts of our senior management, particularly Mr. Xizhen Ye, our President. The loss of the services of Mr. Ye or other members of our senior management may significantly delay or prevent the achievement of our business objectives. If we lose the services of, or do not successfully recruit, key sales and marketing, technical and corporate personnel, the growth of our business could be substantially impaired. At present, we do not maintain key man insurance for any of our senior management.
The requirements of being a public company may strain our resources, divert our management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, and other applicable securities rules and regulations. Compliance with these rules and regulations have increased our legal and financial compliance costs, made some activities more difficult, time-consuming or costly and increased demand on our systems and resources. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations. We may need to hire more employees to comply with these requirements in the future, which will increase our costs and expenses.
We may require additional capital to support growth, and such capital might not be available on terms acceptable to us, if at all. This could hamper our growth and adversely affect our business.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to recruit more experienced specialist in culture field or enhance our platform, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in public or private equity, equity-linked or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business could be adversely affected.
We may have difficulty establishing adequate management, legal and financial controls in the PRC.
The PRC historically has been deficient in Western-style management and financial reporting concepts and practices, as well as in modern banking and other control systems. We may have difficulty in hiring and retaining a sufficient number of locally-qualified employees to work in the PRC who are capable of satisfying the obligations of a U.S. public reporting company. As a result of these factors, we may experience difficulty in establishing adequate management, legal and financial controls (including internal controls over financial reporting), collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices in the PRC that meet U.S. standards as in effect from time to time.
Risks Relating to the Company’s Securities
We may, in the future, issue additional shares of our common stock, which may have a dilutive effect on our stockholders.
Our Certificate of Incorporation authorizes the issuance of 550,000,000 shares of common stock, of which 79,676,232 shares are issued and outstanding, as of the date of this Annual Report. The future issuance of our common shares may result in substantial dilution in the percentage of our common shares held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
We may issue shares of preferred stock in the future that may adversely impact your rights as holders of our common stock.
Our Certificate of Incorporation authorizes us to issue up to 50,000,000 shares of preferred stock with no share issued and outstanding as of the date of this Annual Report. Accordingly, our board of directors will have the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such shares, without further stockholder approval.
Our preferred stock does not have any dividend, conversion, liquidation, or other rights or preferences, including redemption or sinking fund provisions. However, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in your interest as holders of common stock.
We do not currently intend to pay dividends on our common stock and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
The costs to meet our reporting and other requirements as a public company subject to the Exchange Act of 1934 and will be substantial, which may result in us having insufficient funds to expand our business or even to meet routine business obligations.
As a public entity, subject to the reporting requirements of the Exchange Act of 1934, we will continue to incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses for annual reports and proxy statements. We estimate that these costs will range up to $100,000 per year for the next few years and will be higher if our business volume and activity increases. As a result, we may not have sufficient funds to grow our operations.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None

---

ITEM 2. PROPERTIES
Item 2. Properties.
The Company owns an office property located in Hangzhou, Zhejiang Province, China, which the Company purchased from a third party on September 28, 2022. We currently maintain our corporate office at RM 219, No. 25, Caihe Rd., Shangcheng Dist., Hangzhou, Zhejiang Province, China. Tel: +86 0571 -85128985.

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
The Company presently is not a party to, nor is management aware of, any pending, legal proceedings.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
There has only been limited trading for the Company’s Common Stock since it began trading in September 1996 on the Over-then-Counter Exchange under the symbol “EXGP”. Over the years, as the Company grew and acquired other companies, it name changed and so did its symbol. It went from “EXGP”, to trading on the OTC Markets-PINK under “EXTL”, to “PYMB” to “DPHS” to its current symbol “LWLW”. There is no assurance that an active trading market will ever develop or, if such a market does develop, that it will continue. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of our shareholders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.
On March 29, 2024, the closing price of our common stock reported on the OTC Markets was $0.26 per share. The following table sets forth, for each of the quarterly periods indicated, the high and low closing prices of our common stock, as reported on the OTC Markets
Year 2021
Low
High
January 1, 2021 to March 31, 2021
$ 0.04
$ 4.00
April 1, 2021 to June 30, 2021
$ 0.76
$ 2.97
July 1, 2021 to September 30, 2021
$ 0.10
$ 2.10
October 1, 2021 to December 31, 2021
$ 0.20
$ 1.00
Year 2022
Low
High
January 1, 2022 to March 31, 2022
$ 0.33
$ 2.89
April 1, 2022 to June 30, 2022
$ 0.51
$ 1.00
July 1, 2022 to September 30, 2022
$ 0.51
$ 0.90
October 1, 2022 to December 31, 2022
$ 0.25
$ 0.90
Year 2023
Low
High
January 1, 2023 to March 31, 2023
$ 0.27
$ 0.65
April 1, 2023 to June 30, 2023
$ 0.16
$ 0.30
July 1, 2023 to September 30, 2023
$ 0.08
$ 0.16
October 1, 2023 to December 31, 2023
$ 0.08
$ 0.11
Year 2024
Low
High
January 1, 2024 to March 29, 2024
$ 0.11
$ 0.26
Holders
There are approximately 304 holders of the Company’s Common Stock as of March 26, 2024. This figure does not include holders of shares registered in “street name” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories.
Dividends
We have not declared any cash dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
Securities Authorized under Equity Compensation Plans
A total of 10,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under our 2022 Equity Incentive Plan. As of March 29, 2024, 8,430,000 shares of common stock have been issued from our 2022 Equity Incentive Plan.
A total of 5,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under our 2023 Equity Incentive Plan. As of March 29, 2024, no shares of common stock have been issued from our 2023 Equity Incentive Plan.
Securities Currently Outstanding
· Our Certificate of Incorporation authorizes the issuance of 550,000,000 shares of common stock, of which 79,676,232 shares were issued and outstanding, as of March 29, 2024.
· Our Certificate of Incorporation authorizes us to issue up to 50,000,000 shares of preferred stock with no share issued and outstanding as of March 29, 2024.
Repurchases of Equity Securities
None
Reports to Stockholders
We are currently subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will continue to file periodic reports, and other information with the SEC.
Transfer Agent
Our transfer agent is West Coast Stock Transfer Inc., 721 N. Vulcan Ave. Ste 106, Encinitas, CA 92024. Their telephone number is (619) 664-4780.
Recent Sales of Unregistered Securities
Issuance of Common Stock
During the year ended December 31, 2022, the Company issued 2,080,085 shares of common stocks for $334,913 in cash to certain non-U.S. investors. Issuance price ranged from $0.10 to $0.30 per share. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
On September 28, 2022, the Company and its subsidiary, Hangzhou Wenyuan closed an assets sale and purchase agreement with a third-party seller to acquire an office suite located in Hangzhou, China by issuing 2,651,780 shares of common stock of the Company, $0.10 per share with a total value of $265,178.
In May and June 2023, the Company sold a total of 336,168 shares of common stock to Forty-nine (49) non-U.S. investors at $0.20 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In December 2023, the Company sold a total of 150,000 shares of common stock to three (3) non-U.S. investors at $0.28 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In January 2024, the Company sold a total of 143,486 shares of common stock to eight (8) non-U.S. investors at $0.30 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In February 2024, the Company sold a total of 187,242 shares of common stock to four (4) non-U.S. investors at $0.30 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend. Also on February 18, 2024, the Company converted a loan in the total amount of $83,847 with a related party, to exchange issuance of 279,490 shares of the common stock of the company to the related party, at $0.30 per share.
In March 2024, the Company sold a total of 290,921 shares of common stock to four (4) non-U.S. investors at $0.30 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
Repurchase of Equity Securities
None
Additional Information
We are a reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected financial Data.
Not required under Regulation S-K for “smaller reporting companies.”

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
Overview
Longwen Group Corp. (the “Company”), was originally incorporated as Expertelligence, Inc in the State of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of various name changes, the Company amended its Articles of Incorporation (“Charter Amendment”) to affect the current name change of Longwen Group Corp with trading symbol of “LWLW”.
The Company underwent a change of control on January 21, 2016, at which time Harold Minsky resigned in all officer positions. G. Reed Petersen and White Rim Cattle Company LLC each purchased 25,000,000 shares of common stock of the Company from Harold Minsky. Mr. Petersen is the Member Manager of White Rim Cattle Company, LLC and thus can be considered a control person of all 50,000,000 shares of stock of the Company. Pursuant to a Board of Directors meeting, Mr. Petersen was elected to and accepted all the officer positions previously held by Harold Minsky.
On or about April 5, 2016, the Company affected a 1 for 750 share reverse split of its issued and outstanding common stock. On such date, the Company’s common stock was reduced from 95,164,140 to 127,061 shares outstanding.
Effective November 29, 2016, G. Reed Peterson sold 66,667 shares of common stock of the Company to Longwen Group Corporation (Cayman Island), a Cayman Island company (“Longwen Cayman”). All of the shares held by Longwen Cayman are restricted securities. As a result of the transactions, Mr. Petersen no longer owns any of the Company’s capital stock or securities and he and his affiliates waived all loans and other amounts due to the Company. In addition, on such date, Mr. Petersen resigned in all officer capacities from the Company, and Mr. Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the Company and President and Chief Executive Officer and Chief Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of Board.
From August 2018 to June 2021, the Company was seeking potential business mergers and acquisitions in order to increase its value of the common stock. However, due to the impact of the Covid-19 pandemic, the progress was delayed and the target was not successfully achieved.
On June 9, 2021, Anthony Lombardo (“Lombardo”) filed an Application for Appointment of Custodian (“Application”) with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Company’s non-response and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary custodian of the Company. Subsequently after Lombardo’s custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (“Joseph”) as CEO, CFO and Secretary and resigned from all positions in the Company, On October 25, 2021, Mr. Xizhen Ye (“Ye”), who was the officer and director of the Company prior to Lombardo’s custodianship, and Longwen Group Corporation, a Cayman Island corporation, filed a Motion to Dissolve Custodianship (“Motion”) with the Eighth Judicial District Court of Nevada State. On January 12, 2022, in accordance with a Settlement Agreement regarding Lombardo’s custodianship, Mr. Ye was reinstated his positions as the officer and director of the Company, along with the reinstatement of the other Company’s director, Lizhong Lu, who was also in place prior to Lombardo’s custodianship. On February 9, 2022, pursuant to the Settlement Agreement, Joseph transferred 65,000,000 common stocks of the Company owned by him to Mr. Ye. On February 17, 2022, the Eighth Judicial District Court formally dismissed Lombardo’s custodianship for the Company.
On February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Wenyuan Enterprise Management Co., Ltd. (“Hangzhou Wenyuan”) (FKA: Hangzhou Longwen Enterprise Management Co., Ltd or “Hangzhou Longwen”), a wholly foreign-owned enterprise (“WOFE”) in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Wenyuan became the Company’s wholly owned subsidiary in the PRC. Hangzhou Wenyuan was originally registered on January 4, 2012 and has minimum operations since its inception. The Company recognize $993 goodwill upon consummated the acquisition. On February 27, 2024, Hangzhou Longwen Enterprise Management Co., Ltd changed its name to Hangzhou Wenyuan Enterprise Management Co., Ltd. through Hangzhou Market Supervision and Administration Bureau in China.
On October 11, 2022, the Company and its subsidiary, Hangzhou Wenyaun entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Yusu Trading Co., Ltd. (“HZYS”), a limited liability company in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated HZYS became Hangzhou Wenyuan’s wholly owned subsidiary in the PRC.
On March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. On March 27, 2024, the Company entered into an agreement to sell certain assets and liabilities of HWF, due to the change of the economic situation and the sales of aquacultural products is not as expected. HWF has been identified as discontinued operations. From the first quarter of year 2024, the Company began to sell cultural and health products through its subsidiary HZYS. The management expects this newly added business segment will become a new driving force for the Company’s revenue growth in 2024.
Revenue
During the year 2023, the Company mainly generate revenues through the provisions of consulting services, online product sales and discontinued aquacultural product sales through its subsidiaries.
Professional Expense
Professional expenses principally consist of costs associated with our consultant.
General and Administrative Expense
General and administrative expenses include the expenses for personnel in executive and other administrative functions, other commercial costs necessary to support the commercial operation of our products and services. General and administrative expenses also include depreciation and impairments of office furniture and equipment.
Interest Expense
Interest expense primarily consists of interest expense incurred for loans received from individual third parties.
Income taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements 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 in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Results of Operations
Results of Operations for the Years Ended on December 31, 2023 and 2022
Discontinued Operations - Aquacultural product sales
On March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. During the year ended December 31, 2023, the Company generated $2,050,313 of revenue from its aquaculture product sales through HWF compared to $nil revenue for the year ended December 31, 2022. Our newly added aquaculture product sales segment has become an important source of revenue for the Company in the year 2023. However, due to the change of the economic situation and the sales of aquacultural products is not as expected, our management intended to change its operations. Subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to sell certain assets and liabilities of HWF. HWF has been identified as discontinued operations in the accompanying consolidated financial statements. Net loss from discontinued operations for 2023 and 2022 were $3,906 and $nil, respectively.
Revenue
During the year ended on December 31, 2023, the Company generated $15,004 of revenue from its consulting services compared to $36,418 for the year in 2022. As of June 30, 2023, the Company has terminated the consulting agreements with Linhai Dingji Auto Service Co., Ltd (China) (“Linhai Dingji”) and Yunnan Yusu Import and Export Trading Co., Ltd (China) (“Yunnan Yusu”) due to the Company’s business strategy shifting.
For the year ended December 31,
Increase (Decrease) Percentage Change
Consulting services $ 15,004 $ 36,418 $ (21,414 ) (59 )%
Online product sales 6,082 1,788 4,294 240 %
Offline product sales - 2,931 (2,931 ) (100 )%
$ 21,086 $ 41,137 $ (20,051 ) (49 )%
Operating Expense
For the year ended December 31, 2023, our operating expense amounts to $1,033,085, as compared to $787,173 for the year ended December 31, 2022, an increase of $245,912. The increase was mainly due to the increased share-based compensation and general and administrative expenses.
During the years ended December 31, 2023 and 2022, the Company incurred other general and administrative and professional expenses of $457,085 and $362,173, respectively. The professional expenses mainly included consulting expenses and financial advisor fees.
Net Loss
Including loss from discontinued operations, the net loss was $1,026,458 and $746,426 for the years ended December 31, 2023 and 2022, respectively. The increase in net loss in the current quarter was mainly due to the increase expenses of selling, general and administrative and professional.
Liquidity and Capital Resources
The Company had total assets in the amount of $843,723 and $405,661 as of December 31, 2023 and December 31, 2022, respectively.
As of December 31, 2023, the Company had cash of $18,449, comparing to $68,121 as of December 31, 2022. The Company had working capital deficit of $335,139 as of December 31, 2023 comparing working capital deficit of $8,172 as of December 31, 2022.
During the year ended December 31, 2023, the Company had cash used in operating activities in the amount of $338,609 comparing to $342,186 in the prior year. The change in cash used in operating activities is mainly due to the increase in operations. The cash provided by financing activities decreased to $293,640 in the current year comparing to the prior year of $426,696. The decrease is mainly due to the decreased issuance of common shares for cash.
Going Concern Assessment
The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated deficit and other adverse key financial ratios.
Management’s plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations and execute the business plan of the Company in order to meet its operating needs on a timely basis. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures and other requirements.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting policies are discussed in further detail in the notes to the accompanying audited consolidated financial statements appearing elsewhere in this prospectus. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required under Regulation S-K for “smaller reporting companies.”

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our audited financial statements are set forth in this Annual Report beginning on page.
LONGWEN GROUP CORP.
FINANCIAL STATEMENTS AND EXHIBITS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
Report of Independent Registered Public Accounting Firm (PCAPB ID NO: 2485)
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022
Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2023 and 2022
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022
Notes to Consolidated Financial Statements
17506 Colima Road, Ste 101,
City of Industry, CA 91748
Tel: +1 (626) 581-0818
Fax: +1 (626) 581-0809
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Longwen Group Corp.
Hangzhou, China
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Longwen Group Corp. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, stockholders’ (deficit) equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/Simon & Edward, LLP
We have served as the Company's auditor since 2022.
PCAOB ID: 2485
Rowland Heights, CA
April 1, 2024
LONGWEN GROUP CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 2023 December 31, 2022
ASSETS
Current assets
Cash and cash equivalents $ 18,449 $ 68,121
Inventories 40,373 -
Other current assets 45,628 58,413
Current assets from discontinued operations 480,569 -
Total current assets 585,019 126,534
Property and equipment, net 254,578 274,370
Intangible assets, net 2,994 3,625
Goodwill 1,132 1,132
TOTAL ASSETS $ 843,723 $ 405,661
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 119,469 $ 31,962
Shareholder loan 198,510 90,494
Loans from third parties 84,533 12,250
Advances from customers 33,171 -
Current liabilities from discontinued operations 484,475 -
Total current liabilities 920,158 134,706
TOTAL LIABILITIES 920,158 134,706
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $0.0001 par value, 50,000,000 authorized, nil shares issued and outstanding - -
Common stock, $0.0001 par value, 550,000,000 authorized, 78,775,094 and 74,108,926 shares issued and outstanding as of December 31, 2023 and 2022, respectively 7,878 7,411
Additional paid-in capital 19,970,306 19,285,539
Accumulated deficit (20,054,293 ) (19,027,835 )
Accumulated other comprehensive (loss) income (326 ) 5,840
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY (76,435 ) 270,955
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 843,723 $ 405,661
The accompanying notes are an integral part of these consolidated financial statements.
LONGWEN GROUP CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS
Years Ended
December 31,
Revenues
Consulting service income $ 15,004 $ 36,418
Online product sales 6,082 1,788
Offline product sales - 2,931
Total revenues 21,086 41,137
Cost of revenues
Online product sales 2,199 -
Total cost of revenues 2,199 -
Gross profit 18,887 41,137
Operating expenses:
Professional expenses 169,255 106,482
Share-based compensation 576,000 425,000
Selling, general and administrative expenses 287,830 255,691
Total operating expenses 1,033,085 787,173
Loss from operations (1,014,198 ) (746,036 )
Other income (expenses):
Interest expenses (365 ) (500 )
Other income, net (7,989 )
Total other expenses, net (8,354 ) (390 )
Net loss from continuing operations (1,022,552 ) (746,426 )
Loss from discontinued operations
(3,906 ) -
Net loss $ (1,026,458 ) $ (746,426 )
Other comprehensive income (loss)
Foreign currency translation (loss) gain (6,166 ) 5,840
Comprehensive loss $ (1,032,624 ) $ (740,586 )
Weighted average shares outstanding:
Weighted average shares outstanding: Basic and diluted 79,197,184 67,215,968
Loss per share:
Loss per share: Continuing operations
$ (0.01 ) $ (0.01 )
Loss per share: Discontinued operations
$ (0.00 ) $ -
Loss per share: Basic and diluted $ (0.01 ) $ (0.01 )
The accompanying notes are an integral part of these consolidated financial statements.
LONGWEN GROUP CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
Cash flows from operating activities:
Net loss $ (1,026,458 ) $ (746,426 )
Adjustment to reconcile net loss used in operating activities:
Loss from discontinued operations 3,906 -
Depreciation and amortization 12,604 4,434
Bad debt expense 6,359 -
Share-based compensation 576,000 425,000
Changes in operating assets and liabilities:
Other current assets 12,130 (56,242 )
Accounts receivable (6,359 ) -
Inventories (40,495 ) -
Accounts payable and accrued liabilities 90,430 31,048
Advances from customers 33,271 -
Net cash used in operating activities from continuing operations (338,612 ) (342,186 )
Net cash used in operating activities from discontinued operations -
Net cash used in operating activities (338,609 ) (342,186 )
Cash flows from investing activities:
Purchase of property and equipment - (7,531 )
Acquisition of intangible assets - (3,517 )
Net cash used in investing activities - (11,048 )
Cash flows from financing activities:
Proceeds from third parties 87,705 287,876
Repayments to third parties - (287,876 )
Proceeds from a shareholder 142,008 91,783
Repayment to shareholder (45,307 ) -
Proceeds from issuance of common stock 109,234 334,913
Net cash provided by financing activities 293,640 426,696
Effect of exchange rate changes in cash and cash equivalents (4,700 ) (5,341 )
Net (decrease) increase in cash and cash equivalents (49,669 ) 68,121
Cash and cash equivalents, beginning balance 68,121 -
Less: cash and cash equivalents, ending balance from discontinued operations	 (3 ) -
Cash and cash equivalents, ending balance $ 18,449 $ 68,121
Supplement Disclosures:
Interest paid $ - $ -
Income tax paid $ - $ -
Supplemental Disclosures of Non-Cash Investing and Financing Activities
Acquisition Hangzhou Wenyuan Management by obtaining shareholder loan $ - $ 993
Acquisition of Yushu by other payable $ - $ 141
Repayment of commercial loan by related party on behalf of the Company $ 14,050 $ -
Common stock issued for property acquisition $ - $ 265,178
The accompanying notes are an integral part of these financial statements
LONGWEN GROUP CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock Shares Preferred Stock Amount Common Stock Shares Common Stock Amount Additional Paid-in Capital Accumulated
Deficit
Accumulated Other Comprehensive Income Total Equity (Deficit)
Balance December 31, 2021 - $ - 65,127,061 $ 6,513 $ 18,261,346 $ (18,281,409 ) $ - $ (13,550 )
Share-based compensation
Share-based compensation, shares
Common shares issued for cash - - 2,080,085 334,705 - - 334,913
Common shares issued for property acquisition - - 2,651,780 264,913 - - 265,178
Common shares issued for services - - 4,250,000 424,575 - - 425,000
Share cancellation
Share cancellation, shares
Net loss - - - - - (746,426 ) - (746,426 )
Foreign currency translation gain - - - - - - 5,840 5,840
Balance December 31, 2022 - $ - 74,108,926 $ 7,411 $ 19,285,539 $ (19,027,835 ) $ 5,840 $ 270,955
Share-based compensation - - 5,380,000 575,462 - - 576,000
Common shares issued for cash - - 486,168 109,185 - - 109,234
Share cancellation - - (1,200,000 ) (120 ) - - -
Net loss - - - - - (1,026,458 ) - (1,026,458 )
Foreign currency translation gain - - - - - - (6,166 ) (6,166 )
Balance December 31, 2023 - $ - 78,775,094 $ 7,878 $ 19,970,306 $ (20,054,293 ) $ (326 ) $ (76,435 )
The accompanying notes are an integral part of these consolidated financial statements
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES
Longwen Group Corp. (the “Company”) was originally incorporated as Expertelligence, Inc on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of various name changes, the Company amended its Articles of Incorporation (“Charter Amendment”) to affect the current name change of Longwen Group Corp. with trading symbol of “LWLW”.
On or about April 5, 2016, the Company affected a 1 for 750 share reverse split of its issued and outstanding common stocks and reduced to 127,061 shares outstanding. Effective November 29, 2016, 66,667 shares of common stock of the Company were transferred to Longwen Group Corp., a Cayman Island company (“Longwen Cayman”). All of the shares held by Longwen Cayman are restricted securities. As a result of the transactions, Mr. Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the Company, and President and Chief Executive Officer and Chief Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of Board.
On June 9, 2021, Anthony Lombardo (“Lombardo”) filed an Application for Appointment of Custodian (“Application”) with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Company’s non-response and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary custodian of the Company. Subsequently after Lombardo’s custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (“Joseph”) as CEO, CFO and Secretary and resigned from all positions in the Company.
On October 25, 2021, Mr. Xizhen Ye (“Ye”), the ex-officer and director of the Company prior to Lombardo’s custodianship, and Longwen Cayman, filed a motion to dissolve custodianship (“Motion”) with the Eighth Judicial District Court of Nevada State. Pursuant to the Settlement Agreement entered on January 12, 2022, by Longwen Cayman, Mr. Ye, Lombardo, Joseph and Deanna Johnson regarding Lombardo’s custodianship, Mr. Ye and Mr. Lizhong Lu were reinstated as the officer and directors of the Company, and 65,000,000 common stocks of the Company was transferred from Joseph to Mr. Ye on February 9, 2022. Further on February 17, 2022, the Eighth Judicial District Court officially terminated Lombardo’s custodianship over the Company.
On February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou Wenyuan Enterprise Management Co., Ltd. (“Hangzhou Wenyuan”) (FKA: Hangzhou Longwen Enterprise Management Co., Ltd or “Hangzhou Longwen”), a wholly foreign-owned enterprise (“WOFE”) in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Wenyuan became the Company’s wholly owned subsidiary in the PRC. Hangzhou Wenyuan was originally registered on January 4, 2012 and has minimum operations since its inception. The Company recognize $993 goodwill upon consummated the acquisition. On February 27, 2024, Hangzhou Longwen Enterprise Management Co., Ltd changed its name to Hangzhou Wenyuan Enterprise Management Co., Ltd. through Hangzhou Market Supervision and Administration Bureau in China.
On October 11, 2022, the Company and its subsidiary, Hangzhou Wenyuan entered into an Acquisition Agreement with a third-party individual to acquire 100% ownership of Hangzhou Yusu Trading Co., Ltd. (“Hangzhou Yushu”), a limited liability company in Hangzhou, the People’s Republic of China (the “PRC”), for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated Hangzhou Yushu became Hangzhou Wenyuan’s wholly owned subsidiary in the PRC. Hangzhou Yushu was originally registered on April 20, 2020 and has minimum operations since its inception. The Company recognize goodwill of $139 upon consummated the acquisition. Hangzhou Yushu generated revenues from online product sales and aquaculture product sales during the year ended December 31, 2022.
On March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Huzhou Wohong Fishery Co., Ltd. (“HWF”), to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management intended to change the Company’s operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to sell certain assets and liabilities of HWF. HWF has been identified as discontinued operations with aquacultural products. Such assets and liabilities are classified as assets and liabilities held for sale, and its management’s intention to complete the sales on March 27, 2024.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries as described in Note 1. All significant intercompany transactions and balances have been eliminated in the consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions. Signiant estimates are used in the useful lives and impairment of property and equipment, the valuation of deferred tax assets, share-based compensation, accounting estimates used in the business combination, among others.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, bank deposits, and highly liquid investments with maturities of three months or less at the date of origination.
Property and equipment
Depreciation on property and equipment is recognized on a straight-line basis over the estimated useful lives of the assets, for which the remaining term of the legal title for the office space and 3 years for office equipment.
Goodwill and intangible Assets
Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of the identifiable net tangible and intangible assets acquired.
Goodwill is tested for impairment, at a minimum, on an annual basis at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The Company’s policy is to perform its annual impairment test of goodwill as of December 31 of each fiscal year. Based on our most recent annual impairment assessment, we determined that no adjustment to the carrying value of goodwill of our reporting unit as required.
Intangible assets with definite use life are amortized on a straight-line basis over the estimate useful lives of the assets.
Impairment of Long-Lived Assets
The Company evaluates property and equipment and finite-lived intangible assets for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. The Company determined that the values of its long-lived assets as of December 31, 2023 and 2022, are supportable and recoverable.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Transactions
The Company’s consolidated financial statements are presented in U.S. dollars ($), which is the Company’s reporting and functional currency. The functional currency of the Company’s subsidiaries is RMB. The resulting translation adjustments are reported under other comprehensive loss in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 220 (“ASC 220”), “Reporting Comprehensive Income”. Gains and losses resulting from the translation of foreign currency transactions are reflected in the consolidated statements of operations and other comprehensive income. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency using the rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the consolidated statements of operations and other comprehensive income (loss).
The Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollars are recorded in shareholders’ equity as part of accumulated other comprehensive loss. The exchange rate used for financial statements are as follows:
　 　 Exchange rate at December 31,
　 　 　 　
Chinese Yuan (RMB)
RMB 7.0978
RMB 6.8972
United States Dollar ($)
1.000
$ 1.000
　 　 Average exchange rate
　 　 　 　
For the year ended December 31, 　 　 　 　 　 　 　
Chinese Yuan (RMB)
RMB 7.0764
RMB 6.7940
United States Dollar ($)
1.000
$ 1.000
　
Revenue Recognition
The Company recognizes revenue when a customer obtains control of promised products or services, in an amount that reflects the consideration expected to be received in exchange for those products or services. The Company follows the five-step model prescribed under Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies each performance obligation. Revenues are presented net of any sales or value added taxes collected from customers and remitted to the government.
The Company’s consulting service income consists of the delivery of focused insights and recommendations that assist customers with their challenges in developing and executing strategies around their trade business and financial reporting processes. The consulting services provided are fixed-fee arrangements that are generally in one-year term. The Company has concluded that each contract represents a single performance obligation as each is a single promise to deliver a customized engagement and deliverable. For the majority of these services, either practically or contractually, the work performed and delivered to the customer has no alternative use to the Company. Additionally, the Company maintains an enforceable right to payment at all times throughout the contract.
The Company’s online product sales consists of selling products to end customers through online channel, such as apps embedded in Wechat. Revenue is recognized at a point in time when the product is delivered to and accepted by end customers.
The Company’s aquaculture product sales consist of selling aquacultural products to customers through offline channel. Revenue is recognized at a point in time when the products are delivered to and accepted by end customers. The Company concludes the presentation of revenue generated from selling of aquaculture products is at a gross basis as the Company acts as a principal by controlling sales transactions provided to their customers. Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management intended to change the Company’s operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to sell certain assets and liabilities of HWF. HWF has been identified as discontinued operations with aquacultural products.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements 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 in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Business Combination
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination.
Share-based Compensation
The Company accounts for stock options and other equity-based compensation issued in accordance with ASC 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees’ requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported.
Earnings Per Share
Basic earnings per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number of shares includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued. As of December 31, 2023 and 2022, the Company does not have any potentially dilutive instrument.
Fair Value Measurements
Fair value accounting establishes a framework for measuring fair value and expands disclosure about fair value measurements. Fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurements (continued)
As of December 31, 2023 and 2022, the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis. The carrying amounts of the Company’s cash, accounts receivable, prepaid expenses and other current assets, shareholder loan, commercial loans, accounts payable and accrued liabilities, and deferred revenue approximate fair value because of the short maturity of these items.
Related Parties
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
Segment Reporting
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. During the years ended December 31, 2023 and 2022, the Company had one single segment based on management structure located in Hangzhou, PRC.
Accounting Standards Issued Recently Adopted
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts, rather than the “incurred loss” model. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. The effective date of ASU No. 2016-13 for smaller reporting companies is postponed to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company believes the adoption of ASU No. 2016-13 will not have a material impact on its financial position and results of operations.
Accounting Standards Issued but Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amended guidance requires incremental reportable segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. The amendments will be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact this amended guidance may have on the footnotes to its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amended guidance enhances income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid information. This guidance requires disclosure of specific categories in the effective tax rate reconciliation and further information on reconciling items meeting a quantitative threshold. In addition, the amended guidance requires disaggregating income taxes paid (net of refunds received) by federal, state, and foreign taxes. It also requires disaggregating individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amended guidance is effective for fiscal years beginning after December 15, 2024. The guidance can be applied either prospectively or retrospectively. The Company is currently in the process of evaluating the impact this amended guidance may have on the footnotes to our consolidated financial statements.
There were also other updates recently issued and the management does not believe that other than disclosed above, accounting pronouncements the recently issued but not yet adopted will have a material impact on its financial position results of operations or cash flows.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - GOING CONCERN
The Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. During the year ended December 31, 2023, the Company incurred a net loss of $1,026,458 and had an accumulated deficit of $20,054,293 as of December 31, 2023. The Company also had a negative working capital as of December 31, 2023. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s future success is dependent upon its ability to acquire or expand businesses with profitable operations, generate cash from operating activities and obtain additional financing. The Company intends to raise funds from the issuance of equity and/or debt securities, but there is no assurance that additional funds from the issuance of equity will be available for the Company to finance its operations on acceptable terms, or at all. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 - OTHER CURRENT ASSETS
As of December 31, 2023 and 2022, prepaid expenses and other current assets comprised as follows:
December 31,
December 31, 2022
Prepaid consulting fee $ - $ 38,000
Prepaid OTC fee 16,713 -
Prepaid rent and parking lot 2,788 14,903
Prepayments to suppliers and other 26,127 5,510
Total $ 45,628 $ 58,413
NOTE 5 - PROPERTY AND EQUIPMENT, NET
As of December 31, 2023 and 2022, property and equipment consisted of the following:
December 31, 2023 December 31, 2022
Equipment $ 7,209 $ 7,419
Property 263,651 271,319
Less: accumulated depreciation (16,282 ) (4,368 )
Total property and equipment, net $ 254,578 $ 274,370
On September 28, 2022, the Company consummated an office suite purchase agreement with a third party. Pursuant to the agreement, the Company issued 2,651,780 common stocks of the Company to purchase a 118-square-meter office suite located in Hangzhou City, Zhejiang Province, China. The cost of the office suite was measured at the fair value of the issued common stocks on the closing date of $265,178 less value-added tax of $2,108. The difference of $8,249 between the addition of $263,070 and the cost as of December 31, 2022 is due to the fluctuation of foreign exchange rate. The difference of $581 between the addition of $263,070 and the cost as of December 31, 2023 is due to the fluctuation of foreign exchange rate. The office space is intended for internal use.
Depreciation expenses were $12,074 and $4,434 for the years ended December 31, 2023 and 2022, respectively, which was included in selling, general and administrative expenses on the consolidated statements of operations and other comprehensive income. The difference with change in accumulated depreciation was due to fluctuation in exchange rate.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INTANGIBLE ASSETS, NET
During the year ended December 31, 2022, Hanzhong Yushu paid developing fee of $3,517 in cash to a third party in designing and developing an application which can be embedded in certain large online platform. The Company intends to use the application for online product sales, with an estimated useful life of 5 years. As of December 31, 2023 and 2022, the application was ready for use and the carrying value of the intangible assets totaled $2,994 and $3,625, respectively.
NOTE 7 - LOANS FROM THIRD PARTIES
The Company’s loans from third parties consisted of the following as of December 31, 2023 and 2022:
December 31, 2023 December 31, 2022
Loan from a third-party lender; the loan bears a fixed interest at $500 per annum and due on demand $ - $ 12,250
Loan from a third-party lender; unsecure, bearing an interest rate of 0.5% per annum, and due in one year 84,533 -
Loan from two third-party lenders - discontinued operations; unsecure, non-interest-bearing, and due on December 30, 2023 - -
Total loans 84,533 12,250
Less: current portion (84,533 ) (12,250 )
Total non-current portion $ - $ -
On December 31, 2019, the Company entered into a loan agreement of $12,250 with a third-party individual with three-year term. The borrowing bears interest of $300 at the effective date of the contract and fixed rate at $500 per annum, which matured on December 31, 2022 and immediately became due on demand. The loan will be paid off in a single payment of the outstanding balance of principal and accrued interest on or before the expiration date of the loan agreement. As of December 31, 2022, the outstanding balance of the borrowing was $12,250, and the interest payable was $1,800, respectively. During the three months ended March 31, 2023, the loan and interest payable in the total amount of $14,050 was repaid by the wife of the President, on behalf of the Company (Note 10). Total interest expenses for the loan were $nil and $500, respectively, for the year ended December 31, 2023 and 2022.
In the first quarter of 2023, the Company borrowed $46,776 (RMB 320,000) from two third-party individuals through HWF. The loans were unsecure, non-interest-bearing, and due on December 30, 2023. After the first quarter of 2023, the Company borrowed additional $76,934 (RMB 550,000) and repaid $123,710 (RMB 870,000) to the two individuals. As of December 31, 2023, the loans are fully paid off.
In the first quarter of 2023, the Company borrowed $87,705 (RMB 600,000) from a third-party individual. The loans are unsecure, bearing an interest rate of 0.5% per annum, and due in one year. As of December 31, 2023, the total amount owed to this third party is $84,533, with a difference of $3,172 due to foreign exchange fluctuation. During the year ended December 31, 2023, the Company accrued interest expense of $398, respectively.
NOTE 8 - INCOME TAX
As of December 31, 2023 and 2022, the Company has incurred an accumulated net loss of approximately $20.0 million and $19.0 million which resulted in a net operating loss for income tax purposes. NOLs can carry forward indefinitely up to offset 80 percent of taxable income after CARES Act effect on December 31, 2017. The deferred tax asset has been fully reserved for valuation allowance as the Company believes they will most-likely-than-not realize the benefits.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAX (CONTINUED)
Significant components of the deferred tax assets and liabilities for income taxes as of December 31, 2023 and 2022 consisted of the following:
December 31, 2023
December 31, 2022
Deferred tax assets
Net operating loss carry-forward
$ 846,531
$ 630,975
Total
$ 846,531
$ 630,975
Valuation allowance
(846,531)
(630,975)
Net deferred tax assets - noncurrent
$ -
$ -
Reconciliation of income tax provision and the accounting profit multiplied by U.S. federal income tax rate for the years ended December 31, 2023 and 2022:
For the year ended December 31,
Loss at 21% statutory tax rate
$ (215,556)
$ (156,749)
Permanent differences
-
89,250
Increase (decrease) in income taxes resulting from:
-
-
Net operating loss carry forward
-
-
Change in valuation allowance
215,556
67,499
$ -
$ -
NOTE 9 - STOCKHOLDERS’ EQUITY
As of December 31, 2023 and 2022, the Company had 78,775,094 and 74,108,926 shares of common stock issued and outstanding, respectively.
During the year ended December 31, 2022, the Company issued 2,080,085 shares of common stocks for $334,913 in cash to certain non-U.S. investors. Issuance price ranged from $0.10 to $0.30 per share. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
On September 28, 2022, the Company and its subsidiary, Hangzhou Wenyuan closed an assets sale and purchase agreement with a third-party seller to acquire an office suite located in Hangzhou, China by issuing 2,651,780 shares of common stock of the Company, $0.10 per share with a total value of $265,178. Also see Note 5.
In May and June 2023, the Company sold a total of 336,168 shares of common stock to forty-nine (49) non-U.S. investors at $0.20 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In December 2023, the Company sold a total of 150,000 shares of common stock to three (3) non-U.S. investors at $0.28 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - STOCKHOLDERS’ EQUITY (CONTINUED)
2022 Equity Incentive Plan
On November 7, 2022, the Board adopted an equity incentive plan to increase stockholder value and to advance the interests of the Company by furnishing a variety of economic incentives (“Incentives”) designed to attract, retain and motivate employees, certain key consultants and directors of the Company (the “2022 Equity Incentive Plan”). Under the 2022 Equity Incentive Plan, the Company can issue up to 10,000,000 shares of common stock of the Company. Incentives may be granted in any one or a combination of: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; and (e) performance shares. Such incentives may be subject to vesting conditions determined by the Board of Directors at grant. The maximum term of options or other stock-based award granted is ten years or such lesser time as determined by the Board of Directors at the time of grant.
On November 10, 2022, the Company granted total 4,250,000 shares of common stock of the Company to four individual consultants, under the 2022 Equity Incentive Plan, vesting immediately upon grant. The fair value of the shares granted totaled $425,000 which was recorded as share-based compensation on the consolidated statement of operations and other comprehensive income for the year ended December 31, 2022.
On January 19, 2023, the Company granted total 5,000,000 shares of common stock of the Company to six employees and one consultant pursuant to the Company’s 2022 Equity Incentive Plan and vested upon grant. The fair value of the shares totaled of $500,000 on the grant date. On December 2023, 1,200,000 shares of common stock were returned by one employee for no consideration, and cancelled upon receipt. In January 2024, 1,200,000 shares of common stock were returned by another one employee for no consideration, and cancelled upon receipt.
On June 29, 2023, the Company granted a total of 200,000 shares of common stock of the Company to two employees pursuant to the Company’s 2022 Equity Incentive Plan. The fair value of the shares totaled of $40,000 on the grant date, which was recorded in share-based compensation on the consolidated statement of operations. On the same date, the Company granted 550,000 common stocks issuable to four individuals at a fair value of $0.20 per share, subject to vesting condition in three tranches within six months, with 180,000 vested immediately. During the three months ended September 30, 2023, the vesting of the remaining traches was suspended and subject to further performance review, therefore, no further share-based compensation has been recorded. During the year ended December 31, 2023, the Company recognized share-based compensation of $36,000 as a result of the grant of these 550,000 common stocks. As of December 31, 2023, 180,000 common stocks have been issued. During the fourth quarter of the year ended December 31, 2023, the 370,000 unvested common stocks were forfeited.
As of December 31, 2023 and 2022, the Company’s common shares issuable under the 2022 Equity Incentive Plan totaled 1,570,000 and 5,750,000, respectively.
The following table represents the restricted stock award activities during the year ended December 31, 2023.
Non-vested Restricted Stock Awards Weighted Average Grant Date Fair Value
Non-vested at January 1, 2023 - $ -
Granted 550,000 0.20
Vested (180,000 ) 0.20
Forfeited (370,000 ) 0.20
Non-vested at December 31, 2023 - -
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2022, the Company borrowed total $82,107 from the President of the Company for its normal business operations and the acquisition of Hangzhou Wenyuan. From July 2022 to December 2022, the Company borrowed additional $9,676 from the President of the Company. As of December 31, 2022, the total amount owed to the President was $90,494, with a difference of $1,289 due to the foreign exchange fluctuation. During the year ended December 31, 2023, the Company repaid $16,977 (RMB 123,000) to the President. As of December 31, 2023, the balance of the loan due to our President was $71,165. The difference of $2,350 is due to the fluctuation in foreign exchange. The borrowing is unsecured, non-interest-bearing and due on demand.
During the three months ended March 31, 2023, the wife of President of the Company, repaid commercial loan and accrued interest in the total amount of $14,050 on behalf of the Company. In addition, during 2023, the Company received advances of $156,058 in cash from and repaid $28,330 to the wife of President of the Company. As of December 31, 2023, the amount due to this related party was $127,345, with difference of $383 due to the fluctuation in foreign exchange.
During the year ended December 31, 2023, the Company recognized compensation expenses of $30,976, $16,166 and $22,045 to the President, his wife and daughter, respectively. As of December 31, 2023, the compensation payable to these related parties totaled $31,446, which was included in accounts payable and accrued liabilities on the consolidated balance sheet.
During the year ended December 31, 2023, the Company purchased inventory in the total amount of $40,373 from Hangzhou Longwen Culture Media Ltd. (“HZLWCM”), an entity under the control by the daughter of the President of the Company. As of December 31, 2023, the amount payable to HZLWCM totaled $40,373, which was included in accounts payable and accrued liabilities on the consolidated balance sheet.
NOTE 11 - DISCONTINUED OPERATIONS
Management intended to change its operation focus and entered into an agreement with a counterparty to sell certain assets and liabilities of HWF subsequently on March 27, 2024. By selling off these assets and liabilities, management is signaling a shift away from aquaculture trading, which meets the criteria to be reported as a discontinued operation and HWF has been identified as discontinued operations as a result. Such assets and liabilities are classified as assets and liabilities held for sale, and its management’s intention to complete the sales on March 27, 2024.
Total assets and liabilities from discontinued operations as of December 31, 2023 and 2022, are as below:
December 31, 2023 December 31, 2022
ASSETS
Current assets
Cash and cash equivalents $ 3 $ -
Other receivable
Assets held for sales - accounts receivable and other 480,390 -
Total current assets $ 480,569 -
TOTAL ASSETS FROM DISCONTINUED OPERATIONS $ 480,569 $ -
LIABILITIES
Current liabilities:
Liabilities held for sale - accounts payable and accrued liabilities $ 483,794 $ -
Other accrued liabilities -
Total current liabilities 484,475 -
TOTAL LIABILITIES FROM DISCONTINUED OPERATIONS $ 484,475 $ -
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - DISCONTINUED OPERATIONS (CONTINUED)
For the year ended, results of operations from HWF are as below: Years Ended
December 31,
Revenues
Aquaculture product sales $ 2,050,313 $ -
Total revenues 2,050,313 -
Cost of revenues
Cost of Aquaculture product 1,913,524 -
Total cost of revenues 1,913,524 -
Gross profit 136,789 -
Operating expenses:
Selling, general and administrative expenses 136,234 -
Total operating expenses 136,234 -
Income from operations of discontinued operations -
Other expenses:
Other expenses, net 1,271 -
Total other expenses, net 1,271 -
Net loss before income tax from discontinued operations (716 ) -
Income tax expense (3,190 ) -
Net loss from discontinued operations, net of taxes before loss from sale of discontinued operations (3,906 ) -
Loss from sale of discontinued operations, net of taxes - -
Loss from discontinued operations $ (3,906 ) -
For the years ended December 31, 2023 and 2022, net cash from discontinued operations, are as below:
Years Ended
December 31,
Cash flow of discontinued operations:
Net cash provided by operating activities $ 3 $ -
Net cash provided by discontinued operations $ 3 -
NOTE 12 - COMMITMENTS AND CONTINGENCIES
During the year ended December 31, 2022, the Company entered into leases with third parties for office spaces and a parking spot in Hangzhou, PRC, all with a lease term of 12 months. The remaining minimum lease payments under the three leases as of December 31, 2023 was approximately $nil.
LONGWEN GROUP CORP. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - CREDIT RISKS
The Company is subject to credit risks on its cash and cash equivalents. The Company mitigates credit risks on cash and cash equivalents by placing cash and cash equivalents with financial institutions of high credit worthiness.
NOTE 14 - SUBSEQUENT EVENT
In January 2024, the Company sold a total of 143,486 shares of common stock to eight (8) non-U.S. investors at $0.30 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
On January 19, 2023, the Company granted total 5,000,000 shares of common stock of the Company to six employees and one consultant pursuant to the Company’s 2022 Equity Incentive Plan. In January 2024, 1,200,000 shares of common stock were returned by one of the six employees to the Company for no consideration and cancelled upon receipt.
In February 2024, the Company sold a total of 187,242 shares of common stock to four (4) non-U.S. investors at $0.30 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend. Also on February 18, 2024, the Company converted a loan in the total amount of $83,847 with a related party, to exchange issuance of 279,490 shares of the common stock of the company to the related party, at $0.30 per share.
On February 27, 2024, Hangzhou Longwen Enterprise Management Co., Ltd (“Hangzhou Longwen”) changed its name to Hangzhou Wenyuan Enterprise Management Co., Ltd. (“Hangzhou Wenyuan”) through Hangzhou Market Supervision and Administration Bureau in China.
In March 2024, the Company sold a total of 290,921 shares of common stock to four (4) non-U.S. investors at $0.30 per share for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management intended to change its operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to sell certain assets and liabilities of HWF for consideration of $nil, which resulted in a disposal gain of $3,404 (RMB24,162). HWF has been identified as discontinued operations with aquacultural products.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On April 13, 2022, we appointed Simon & Edward, LLP of Los Angeles, California as our new independent auditors.
There have been no disagreements with the independent registered public accounting firm regarding accounting and financial disclosure.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order to allow timely consideration regarding required disclosures.
The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including our Chief Executive Officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were significant deficiency in our internal controls over Financial reporting as of December 31, 2023 and they were therefore not as effective as they could be to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The significant deficiency in our controls and procedure were lack of evidences for proper approval and review of disbursements. Management does not believe that any of these significant deficiencies materially affected the results and accuracy of its consolidated financial statements. However, in view of this discovery of such weaknesses, management has begun a review to improve them.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework that was issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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. Management identified a lack of segregation of duties.
Management’s assessment of the effectiveness of the small business issuer’s internal control over financial reporting is as of the year ended December 31, 2023. We believe that internal controls over financial reporting as set forth above shows material weaknesses and are not effective. We have identified material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.
Subsequent to the end of the period covered by this report, and in light of the weakness described above, management is in the process of designing and implementing improvements in its internal control over financial reporting and we currently plan tom hire an independent third-party consultant to assist in identifying and determining the appropriate accounting procedures and controls to implement.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The following table presents information with respect to our officers, directors and significant employees as of March 29, 2024:
Name
Age
Position(s)
Xizhen Ye
Director
Lili Ye
Director
Tianhui Luan
Director
Xianrong Liu
Director
Songhua Wang
Director
Chunrong Yao
Director
Yinong Zhao
Director
Xizhen Ye has been the Company’s Chief Executive Officer and Chief Financial Officer since November 29, 2016. Mr. Ye is also the President of Longwen Group Corporation (Cayman Island), a Cayman Island company since year 2015 which is also a shareholder of the Company. From February 2016 to August 2018, he served as the President of Zhejiang Longwen Investment Management Co., Ltd. (China), and his job duties include to supervise the management team, review the financial performance and etc. Moreover, Mr. Ye is the General Manager of Hangzhou Longwen Culture & Media Co., Ltd. (China) since year 2011.He has a BS degree in Journalism of Bijing Institute of Humanities (China). Mr. Ye’s business background led to the decision to appoint him to the Company’s Board of Directors.
Lili Ye was born in Zhejiang Province, China, She was graduated from the Cod College of Capital Normal University in 2013 with Education Bachelor degree. Ms. Ye is the daughter of Mr. Xizhen Ye, the President and CEO of the Company, and she has served as the Chairman of Longwen Media Co., Ltd. since 2011. Ms. Ye has many years of successful writing, editing and directing experiences, and she is also a member of Zhejiang Writers Association. Ms. Ye has published novels “The Curse of Love”, “My Heart Will Let You Hear”, “The Rose of Sassland” (upper and lower parts) and a collection of essays “Yinghuo”, “Insect’s Lover Heart” and so forth. In 2011, her novella "Green Lotus Snow, Dreams Fleeing Years" and "Stay With Me Like Clothes" participated in the first "Spark Burning Winter" and the second session held by Cinderella "Dream of Midsummer" national literature competition, both won the second place. In 2013, she became a director of the World Chinese Poetry Association.
Tianhui Luan was born in Mudsanjiang, Heilongjiang Province, China. She was graduated from Tianjin Normal University with a bachelor’s degree in Management. From March 2014 to March 2015, she worked in Huideng International Travel Agency, engaged in planning and planning. From March 2015 to September 2016, she worked in Beijing Times Feilu Culture Communication Co., Ltd., as a marketing editor. From September 2016 to March 2023, she worked in Houlang Publishing Company, as a marketing manager. During her inauguration, she successfully planned and marketed the million-dollar best-selling book "Lifetime Growth", and planned and marketed many best-selling books: "642 Things to Write", "Micro Habits", "Reasons to Live", "What Kind of Life Do You Want to Live", Wu Lei's first personal photo "Flying on the Ground", and Mayday guitarist Stone's prose "Because I Can't Stay". At the same time, she is fond of writing. In 2010, she participated in the first "Midsummer Painting Dream" National Literary Competition held by Cinderella, and her work "Singing Love Songs is worse than Falling in Love with Me" won the third prize. In 2011, her novella "Love Songs Didn't Tell My Business" and "Cute Pet Family" participated in the first "Spark Burning Winter" and the second "Midsummer Painting Dream" National Literary Competition held by Cinderella, and both won the second place.
Xianrong Liu was born in Hangzhou, Zhejiang Province, China, high school degree. Mr. Liu has many years of management experiences and organizational capabilities. From November 1983 to 2001, he worked for Hangzhou Electronic Instrument Industry Company. From October 2002 to 2023, he has been engaged in administrative management at West Lake Times Square.
Songhua Wang was graduated from Zhejiang Institute of Finance and Economics Education. From 2002 to 2005, she worked at Hangzhou Xingbao Auto Parts Co., Ltd. as the head of finance department. From 2005 to 2007, she worked at Sinopharm Holding Branch as the Chief Accountant. From 2007 to 2011, she was the financial director at Hangzhou Cultural Communication Company. From 2011 to 2016, Mrs. Wang worked as a self-accounting business and engaged in accounting works. Mrs. Wang has comprehensive financial management capabilities such as budget management, process control, accounting, cost control, financial analysis, internal audit, SASAC audit, listing audit, training management and taxation management. She is also familiar with various national tax laws and regulations in China.
Chunrong Yao was born in Chong Qing City, China. She used to be the chairman of the trade union of the Second Construction and Installation Company of the 12th Bureau of China Hydropower Bureau and an associate research librarian. Member of Chinese Musicians Association, honorary director of Zhejiang Musicians Association. He has composed more than 3,000 songs, 9 dance music pieces, and 4 TV music pieces, 89 of which won national awards. "56 Strings Connecting Beijing" won the highest award of the national "Five One Project" in 1997, "China Sings to the World" won the first prize in the fifth "China Art Festival" festival song evaluation and was designated as a festival song, " Dear People" won the highest award of the Stars Award in the 10th "China Art Festival". "Ode" won the United Nations Millennium Development Goals Contribution Award in 2015, "My Family Lives by the Canal", "Stories of Spring and Autumn", "Love in July", "Communist", "Voice of Power Builders", "Song of Youth" ", "Pearls in Hands for You", "Tent, Tent", "Fragrant Four Seas", "Three Gorges of the Yellow River", "Green Zhejiang", "Gold and Silver for You", "The Story of Watermelon Peel", "Mei Pai Dozens of works such as "Little Biography" and "After School Time" have won the first prize of the National Song Competition. "In 2010, the "Shanka Works Concert" was successfully held in Zhejiang. In 2000, "Shanka Songs" (211 songs) was published by People's Music Publishing House and distributed nationwide. In 1995, he was awarded the National Employee Self-taught Award (51 people in total), and was jointly commended by five ministries and commissions including the All-China Federation of Trade Unions, the Ministry of Education, and the Ministry of Labor.
Yinong Zhao was graduated from: Beijing Technology and Business University (Beijing Institute of Light Industry), director and researcher of the Smart City Research Institute of the Chinese Academy of Management Sciences, and has been engaged in the media industry for more than 20 years, served as the editor-in-chief of "China United Business Daily", concurrently served as the deputy secretary-general of the Capital Youth Journalists Association, the deputy secretary-general of the China International Exchange Promotion Association, the deputy secretary-general of the Beijing Human Resources Association, and the executive of the China International City Case Study Committee Secretary-General and Advisor to the People's Government of Zigong City, Sichuan Province, Executive Director of CDM Global Environmental Protection Fund, Director of Taihu Cultural Forum, etc. In 2004, he began to study urbanization and urban development. In 2010, he served as the deputy secretary-general of the Chinese Academy of Management Sciences. In 2017, he served as the vice president of the Chinese Academy of Management Sciences. In 2011, he began to enter the field of smart city research. In 2015, entrusted by the People's Government of Jiexiu City, Shanxi Province, he led the compilation of the Outline of the 13th Five-Year Plan for Jiexiu City, Shanxi Province. In 2017, he served as the vice president of the Chinese Academy of Management Sciences. In 2019, he served as an expert editorial board member of "Digital China - Selected High-Quality Cases of Smart City". In 2021, entrusted by the People's Government of Yushe County, Shanxi Province, he lead the compilation of the "Outline of the Tenth, Fourth, and Fifth Plans of Yushe County, Shanxi Province".
Each of our director’s primary qualification to serve as such involves his or her extensive experience with different aspects of business management, financial management and/or aquacultural operating.
Term of office
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified or until removed from office in accordance with our bylaws. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
Family Relationships
Mrs. Lili Ye is the daughter of Mr. Xizhen Ye. There are no other family relationships between or among the above Directors, executive officers or persons nominated or charged by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
Except as disclosed below, to our knowledge, none of our current directors or executive officers has, during the past ten (10) years:
● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two (2) years prior to that time;
● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his or her involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
● been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Director Independence
We use the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of our Company or any other individual having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ rules provide that a director cannot be considered independent if:
● the director is, or at any time during the past three years was, an employee of our Company;
● the director or a family member of the director accepted any compensation from our Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
● a family member of the director is, or at any time during the past three years was, an executive officer of our Company;
● the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which our Company made, or from which our Company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
● the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of our Company served on the compensation committee of such other entity; or
●
the director or a family member of the director is a current partner of our Company’s outside auditor, or at any time during the past three years was a partner or employee of our Company’s outside auditor, and who worked on our Company’s audit.
Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based on this review, our Board of Directors has determined that Mr. Xianrong Liu, Mrs. Songhua Wang, Mr. Chunrong Yao and Mr. Yinong Zhao are “independent directors” as defined in the NASDAQ Listing Rules and Rule 10A-3 promulgated under the Exchange Act. As such, all four independent directors serve on all three of our standing Board Committees, with Mrs. Songhua Wang, Mr. Xianrong Liu and Mr. Yinong Zhao, members of the Audit Committee, Mr. Xianrong Liu, Mrs. Songhua Wang and Mr. Chunrong Yao, members of the Compensation Committee and Mr. Xianrong Liu, Mr. Chunrong Yao and Mr. Yinong Zhao, members of the Nominating and Corporate Governance Committee.
Meetings of the Board
During our fiscal year ended December 31, 2023, the Board met from time to time informally and acted by written consent on numerous occasions.
Board Leadership
Our Company is led by Mr. Xizhen Ye, who has served as our Chief Executive Officer, Chief Financial Officer and Chairman of the Board since our incorporation in 2016. Our Board leadership structure is the traditional one most commonly utilized by other public companies in the United States, and we believe that this leadership structure has been effective for our Company. We believe that having a combined Chief Executive Officer/Chief Financial Officer/Chairman of the Board provides the right form of leadership and balance for our Company, given our small size. This structure provides us with a single leader for our company to ensure continuity of our operational, executive and Board functions.
Committees of the Board of Directors
The board of directors has created three committees - the audit committee, the compensation committee and the nominating and corporate governance committee. Each of the committees has a charter which we believe meets the NASDAQ requirements and will be composed of three independent directors.
Audit Committee
Our Audit Committee is comprised of three individuals including Mrs. Songhua Wang, Mr. Xianrong Liu and Mr. Yinong Zhao, each of whom is an independent director and at least one of whom is an “audit committee financial expert,” as defined in Item 407(d)(5)(ii) of Regulation S-K. Mrs. Songhua Wang is appointed as the Chair of the Audit Committee.
Our Audit Committee oversees our corporate accounting, financial reporting practices and the audits of financial statements. For this purpose, the Audit Committee does have a charter (which is reviewed annually) and perform several functions. The Audit Committee performs the following:
● evaluate the independence and performance of, and assess the qualifications of, our independent auditor and engage such independent auditor;
● approve the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services and approve in advance any non-audit service to be provided by our independent auditor;
● monitor the independence of our independent auditor and the rotation of partners of the independent auditor on our engagement team as required by law;
● review the financial statements to be included in our future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and review with management and our independent auditor the results of the annual audit and reviews of our quarterly financial statements; and
● oversee all aspects our systems of internal accounting control and corporate governance functions on behalf of the Board of Directors.
Compensation Committee
Our Compensation Committee is comprised of three individuals including Mrs. Songhua Wang, Mr. Xianrong Liu and Mr. Chunrong Yao, three of the members are independent directors. Mr. Xianrong Liu is appointed as the Chair of the Compensation Committee.
The Compensation Committee does review or recommend the compensation arrangements for our management and employees and also assist our Board of Directors in reviewing and approving matters such as company benefit and insurance plans, including monitoring the performance thereof. The Compensation Committee has a charter (which is reviewed annually) and perform several functions.
The Compensation Committee does have the authority to directly engage, at our expense, any compensation consultants or other advisers as it deems necessary to carry out its responsibilities in determining the amount and form of employee, executive and director compensation.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee is comprised of three individuals including Mr.Xianrong Liu, Mr. Chunrong Yao and Mr. Yinong Zhao, each of whom is an independent director. Mr. Yinong Zhao is appointed as the Chair of the Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee is charged with the responsibility of reviewing our corporate governance policies and with proposing potential director nominees to the Board of Directors for consideration. This committee has the authority to oversee the hiring of potential executive positions in our Company. The Nominating and Corporate Governance Committee has a charter (which will be reviewed annually) and performs several functions.
Code of Ethics
Our Board has adopted a written code of business conduct and ethics (“Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller or persons performing similar functions. We intend to post on our website a current copy of the Code and all disclosures that are required by law in regard to any amendments to, or waivers from, any provision of the Code.
Indemnification of Officers and Directors
The Company’s articles of incorporation and bylaws provide that, to the fullest extent permitted by the laws of the State of Nevada, any officer or director of the Company, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of the Company as a director, officer, employee or agent of the Company, or while serving as a director or officer of the Company, is or was serving or has agreed to serve at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, partner or manager or similar capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity. For the avoidance of doubt, the foregoing indemnification obligation includes, without limitation, claims for monetary damages against Indemnitee to the fullest extent permitted under Section 78.7502 of the Nevada Revised Statutes as in existence on the date hereof.
The indemnification provided shall be from and against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnitee or on the indemnitee’s behalf in connection with such action, suit or proceeding and any appeal therefrom, but shall only be provided if the indemnitee acted in good faith and in a manner the indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe the indemnitee’s conduct was unlawful.
At present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required or permitted. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Communications with the Board
Shareholders and any interested parties may send correspondence to the Board or to any individual director, by mail to Corporate Secretary, Longwen Group Corp.., RM 219, No. 25, Caihe Rd., Shangcheng Dist., Hangzhou, Zhejiang Province, China or by e-mail to yxz_0099@163.com.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The Summary Compensation Table shows certain compensation information for services rendered in all capacities for the fiscal years ended December 31, 2023, 2022 and 2021. Other than as set forth herein, no executive officer’s salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred.
Summary Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock Awards
($)
Option Awards
($)
Non-equity incentive
plan
compensation
($)
Non-qualified deferred
compensation
earnings
($)
All other compensation
($)
Total
($)
Xizhen Ye
30,976
-
-
-
-
-
-
30,976
22,373
-
-
-
-
-
-
22,373
Chief Executive Officer/Chief Financial Officer/Director
-
-
-
-
-
-
-
-
Lili Ye, Director
22,045
-
-
-
-
-
-
22,045
Employment Agreements
The Company currently has no employment agreements with its executive officers.
Director Compensation
For the years ended December 31, 2023, 2022 and 2021, the directors were not awarded any options or paid any cash for director compensation.
Stock Equity Plan
A total of 10,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under our 2022 Equity Incentive Plan. As of March 26, 2024, 8,430,000 shares of common stock have been issued from our 2022 Equity Incentive Plan.
A total of 5,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under our 2023 Equity Incentive Plan. As of March 26, 2024, no shares of common stock have been issued from our 2023 Equity Incentive Plan.
Director Compensation
The following table provides information regarding the total compensation that was earned by or paid to each person who served as our directors during the year ended December 31, 2023. Mr. Xizhen Ye and Mrs. Lili Ye are not included in the table below as their compensation information are provided in the “Summary Compensation Table” above.
Name
Fees earned or paid in cash($)
Stock awards($)
Option awards($)
Non-equity incentive plan compensation($)
Nonqualified deferred compensation earnings($)
All other compensation($)
Total($)
Tianhui Luan
-
-
-
-
-
-
-
Xianrong Liu
-
-
-
-
-
-
-
Songhua Wang
-
-
-
-
-
-
-
Chunrong Yao
-
-
-
-
-
-
-
Yinong Zhao
-
-
-
-
-
-
-

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth as March 29, 2024 the number and percentage of the outstanding shares of common stock, which, according to the information available to us, were beneficially owned by:
(i) each person who is currently a director,
(ii) each executive officer,
(iii) all current directors and executive officers as a group, and
(iv) each person who is known by us to own beneficially more than 5% of our outstanding common stock.
Except as indicated below, each of the stockholders listed below possesses sole voting and investment power with respect to their shares. The percentage of ownership set forth below is based upon 79,676,232 shares of common stock issued and outstanding as of March 29, 2024. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company.
Name and Address
Amount and
Nature of
Beneficial
Ownership
Percentage of
Common Stock(1)
Xizhen Ye
President, Chief Executive Officer,
Chief Financial Officer, Director
Rm 219, No. 25, Caihe Rd., Shangcheng Dist.,
Hangzhou City, Zhejiang Province, China
54,715,755 (2)(3)(4)
68.7 %
Lili Ye(5)
Director
Rm 219, No. 25, Caihe Rd., Shangcheng Dist.,
Hangzhou City, Zhejiang Province, China
6,729,500 (6)
8.4 %
Tianhui Luan
Director
Rm 219, No. 25, Caihe Rd., Shangcheng Dist.,
Hangzhou City, Zhejiang Province, China
*
Xianrong Liu
Independent Director
Rm 219, No. 25, Caihe Rd., Shangcheng Dist.,
Hangzhou City, Zhejiang Province, China
1,271,271 (7)
1.6 %
Songhua Wang
Independent Director
Rm 219, No. 25, Caihe Rd., Shangcheng Dist.,
Hangzhou City, Zhejiang Province, China
*
Chunrong Yao
Independent Director
Rm 219, No. 25, Caihe Rd., Shangcheng Dist.,
*
Hangzhou City, Zhejiang Province, China
Yinong Zhao
Independent Director
Rm 219, No. 25, Caihe Rd., Shangcheng Dist.,
*
Hangzhou City, Zhejiang Province, China
Yonggang Wang(8)
Beijing, China
6,729,500 (9)
8.4 %
Officers and Directors as a Group (7 Persons)
62,716,526
78.7 %
* less than 1%
(1) Based upon 79,676,232 shares outstanding as of March 29, 2024.
(2) Includes 52,573,448 shares owned by Mr. Xizhen Ye.
(3) Includes Mr. Ye’s beneficial ownership of 63.46% of Longwen Cayman, which owns 66,667 shares of the Company’s common stock.
(4) Includes 2,100,000 shares owned by Mr. Ye’s wife
(5) Mrs. Lili Ye is the daughter of Mr. Xizhen Ye, the CEO of the Company.
(6) Includes 4,729,500 shares owned by Mrs. Lili Ye’s husband,
(7) Includes 1,271,271 shares owned by Mr. Liu’s wife.
(8) Mr. Wang is the son-in-law of Mr. Xizhen Ye, and the husband of Mrs. Lili Ye.
(9) Includes 2,000,000 shares owned by Mr. Wang’s wife, Mrs. Lili Ye.
Changes in Control
There are no arrangements, to our knowledge, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions
Family Relationships
Mrs. Lili Ye is the daughter of Mr. Xizhen Ye. There are no other family relationships between or among the above Directors, executive officers or persons nominated or charged by us to become directors or executive officers.
Related Party Transactions
During the three months ended March 31, 2022, the Company borrowed total $82,107 from the President of the Company for its normal business operations and the acquisition of Hangzhou Wenyuan. From July 2022 to December 2022, the Company borrowed additional $9,676 from the President of the Company. As of December 31, 2022, the total amount owed to the President was $90,494, with a difference of $1,289 due to the foreign exchange fluctuation. During the year ended September 30, 2023, the Company repaid $16,977 (RMB 123,000) to the President. As of December 31, 2023, the balance of the loan due to our President was $71,165. The difference of $2,350 is due to the fluctuation in foreign exchange. The borrowing is unsecured, non-interest-bearing and due on demand.
During the three months ended March 31, 2023, the wife of President of the Company, repaid commercial loan and accrued interest in the total amount of $14,050 on behalf of the Company. In addition, during 2023, the Company received advances of $156,058 in cash from and repaid $28,330 to the wife of President of the Company. As of December 31, 2023, the amount due to this related party was $127,345, with difference of $383 due to the fluctuation in foreign exchange.
During the year ended December 31, 2023, the Company recognized compensation expenses of $30,976, $16,166 and $22,045 to the President, his wife and daughter, respectively. As of December 31, 2023, the compensation payable to these related parties totaled $31,446, which was included in accounts payable and accrued liabilities on the consolidated balance sheet.
During the year ended December 31, 2023, the Company purchased inventory in the total amount of $40,373 from Hangzhou Longwen Culture Media Ltd. (“HZLWCM”), an entity under the control by the daughter of the President of the Company. As of September 30, 2023, the amount payable to HZLWCM totaled $40,373, which was included in accounts payable and accrued liabilities on the consolidated balance sheet.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
During 2023 and 2022, Simon & Edward, LLP, the Company’s independent auditors have billed for their services as set forth below. In addition, fees and services related to the audit of the consolidated financial statements of the Company for the period ended December 31, 2023, as contained in this Report, are estimated and included for the fiscal year ended December 31, 2023.
Year ended
December 31,
Audit Fees $ 32,500 $ 23,500
Audit-Related Fees $ -0- $ -0-
Tax Fees $ -0- $ 2,500
All Other Fees $ -0- $ -0-
Pre-Approval Policy
Our Board as a whole pre-approves all services provided by Simon & Edward, LLP. For any non-audit or non-audit related services, the Board must conclude that such services are compatible with the independence as our auditors.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
3.1* Articles of Incorporation (filed as Exhibit 3.1 to the Form 10 filed with the SEC on June 10, 2022)
3.2* By-laws (filed as an Exhibit 3.2 to Form 10 filed with the SEC on June 10, 2022)
21.1** List of Subsidiaries of the Registrant
24.1** Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K)
31.1** Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended.
31.2** Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended.
32.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS** Inline XBRL Instance Document
101.SCH** Inline XBRL Taxonomy Extension Schema Document
101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Incorporated by reference to the Company’s Registration Statement on Form 10 as filed with the SEC on June 10, 2022.
** Filed herewith