EDGAR 10-K Filing

Company CIK: 1310630
Filing Year: 2021
Filename: 1310630_10-K_2021_0001493152-21-008621.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
China Foods Holdings Ltd. (the “Company” or “CFOO”) was incorporated in Delaware on January 10, 2019. On January 23, 2019, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with Trafalgar Resources, Inc., a Utah corporation (“Trafalgar”). Pursuant to the Agreement, the Company merged with Trafalgar (the “Merger”) with the Company as the surviving entity. Prior to the Merger, Trafalgar had not commenced operations for several years that had resulted in significant revenue and Trafalgar’s efforts had been devoted primarily to activities related to raising capital and attempting to acquire an operating entity.
Prior to the Merger, Trafalgar’s majority stockholder who owned 5,000,000 shares (approximately 95.2%) of the 5,251,309 outstanding shares of Trafalgar’s common stock, par value $0.0001, signed a written consent approving the Merger and the related transactions. Such approval and consent were sufficient under Utah law and Trafalgar’s Bylaws to approve the Merger. The boards of directors and shareholders of the Company and Trafalgar approved the Merger.
Pursuant to the Merger, each share of Trafalgar’s common stock was converted into one share of the Company’s common stock. After the Merger, HY (HK) Financial Investments Co., Ltd. owns 5,001,000 shares of common stock of the Company.
The Merger was effective on March 13, 2019.
On December 11, 2019, the Board of Directors approved a change to its fiscal year-end from September 30 to December 31. As a result of this change, the fiscal year is a 3 months transition period beginning October 1, 2019 through December 31, 2019. In these statements, including the notes thereto, financial results for fiscal 2019 are for a 3-month period. Corresponding results for the years ended September 30, 2019 and 2018 are both for 12-month periods.
On July 9, 2020, the Company consummated the Share Exchange Agreement (“the “Share Exchange Agreement”) with Elite Creation Group Limited, a private limited company organized under the laws of British Virgin Islands (“ECGL”). As a result of the acquisition of ECGL, the Company entered into the healthcare product distributing and marketing industry, pursuing a new strategy of developing and distributing health related products, including supplements, across the globe with a focus on mainland China, Europe and Australia.
Because the Company is a shell company, ECGL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, ECGL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of ECGL, and the Company’s assets, liabilities and results of operations will be consolidated with ECGL beginning on the acquisition date. ECGL was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting acquirer (ECGL). After completion of the Share Exchange Transaction, the Company’s consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
Effective July 9, 2020, we consummated the acquisition of ECGL, and its wholly owned subsidiary Guangzhou Xiao Xiang Health Industry Company Limited, a limited liability company organized under the laws of China on March 8, 2017. Alpha Wellness (HK) Limited, a limited liability company organized under the laws of Hong Kong on April 24, 2019, is a holding company.
Guangzhou Xiao Xiang Health Industry Company Limited
Our Products and Services
Our health products are designed to help enhance immunity and improve general wellbeing. We provide the following categories of healthcare products and customized healthcare consultation services in China: (i) Nutrition Catering (ii) Special Health Food (iii) Health Supplement and (iv) Skincare. The products target all age groups with different needs.
Our products are taken as healthcare supplements in accordance with the principles of traditional Chinese medicine including the principle complementary medicine and ideal ratios and combinations of ingredients.
Markets and Regions
The Great Health Industry refers to production, operation, service and information dissemination, maintenance, restoration, and promotions linked to health. It covers medical products, health supplements, nutritional foods, medical devices, health appliances, fitness, health management, health consulting and many other production and service areas closely related to human health. The Great Health Industry is an emerging industry with huge market potential, especially in China.
According to the “China Great Health Industry Strategic Planning and Enterprise Strategy Consulting Report” published by Qianzhan Industry Institute (前瞻產業研究院), the scale of the Great Health Industry in 2017 was USD 947.42 billion, which increased to over USD 1,069.66 billion in 2018. The report predicted USD 1,341.66 billion volume for 2019 and forecast over USD 1,528.09 billion for 2020. In the years till 2023, the average annual compound growth rate will be approximately 12.55%, and with the Great Health Industry reaching approximately USD 2,153.08 billion in 2023.
Our Strategies
We are focused on achieving long-term growth in revenues, cash flow and profit. We believe that we can achieve this by developing multiple distribution channels and strengthening our marketing and promotions, leading to better product turnover and revenue. We also expect to broaden our product range as well as product differentiation in the future. Based on the business experience accumulated over the years, we believe we can improve the efficiency of our supply chain with time-saving and cost-saving supply chain management and marketing planning for the target customer base with our one-stop service.
Our primary aims are (i) to strengthen our product salability; (ii) to cut logistics cost and time spent and (iii) to further expand the market share in China. Toward this end, we plan to pursue the following business strategies:
● Collaborate with third-party e-commerce platforms to boost product exposure, e.g. Tmall, Jingdong mall
● Deliver healthcare knowledge and consultation service via social media and We-media
● Build brand image and reputation through customer experience and word of mouth
● Increase the number of downstream distributors and wholesalers
● Strengthen the relationship with manufacturers, suppliers, drug agents and distributors
● Pursue strategic acquisitions and partnerships
We intend to develop both online and offline distribution channels to increase sales volume and revenue. We expect to partner with third party e-commerce platforms, social media and We-media such as Wechat, TikTok and Xiaohongshu to build our online presence. We believe that online channels will allow us to provide real-time nutrition and healthcare consultation services as well as increase customer engagement and retention. Starting from the second half of 2020, we have launched our “nutrition consulting” support services using a major social media software to allow customer groups to receive pre-purchase consultation and after-sales service for products anytime and anywhere.
Our current offline sales channel relies on distributors and sales agents. To enhance the visibility and marketability of our products and services and to improve brand recognition and awareness, we hope to develop store-in-shop and counter experiences. We also intend to partner with high-end gyms to form nutrition clubs and hold weight-loss training camps, health assessment and fitness training camps and other activities.
We intend to create a ‘one-stop’ solution for our customers by creating a multi-channel health product supply and retail system. We not only provide personalized consultation service to our customers, but also summarize and analyze our customer feedback and experiences through our consultation service and after-sales service. We intend to share this data with our manufacturers and supply chain partners to develop products and services that better meet the demands of our customers. By pooling and addressing the needs of downstream businesses and combining it with the Consumer to Manufacturer model for upstream transformation, we anticipate establishing a close relationship between manufacturers and suppliers. We believe this model can also reduce circulation costs and improve the efficiency of our supply chain.

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ITEM 1A. RISK FACTORS

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
The Company’s operating office is located at No. 11, Qingbo Road, Ersha Island, Yuexiu District, Guangzhuou, China, and is comprised of 250 square meters. According to the lease, we are obligated to pay a quarterly rent of RMB 159,136 (approximately US $24,000) during the term. The lease expires on December 31, 2020. The Company entered a new lease which expires on March 31, 2026. According to the new lease, we are obligated to pay a average quarterly rent of RMB118,026 (approximately US $18,100) during the term.
The Company also utilizes space on a rent-free basis in the office located at Suite 3102, Everbright Center, 108 Gloucester Road, Wanchai, Hong Kong. This arrangement is expected to continue until the foreseeable future.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
We may be subject to litigation from time to time as a result of our normal business operations. Presently, there are no material pending legal proceedings to which we are a party or as to which any of our property is subject, and no such proceedings are known to be threatened or contemplated against us.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is quoted on the OTC Markets under the symbol “CFOO” (former symbol “TFLG”). Set forth below are the high and low bid prices for the Company’s Common Stock for the respective quarters. Although the Company’s common stock is quoted on the OTC Markets it has traded sporadically with no real volume and there is currently no ask price. Consequently, the information provided below may not be indicative of the Company’s common stock price under different conditions.
All prices listed herein reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions. There is no established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained.
The following table sets forth, for the fiscal quarters indicated, the high and low bid information for our common stock, as reported on the OTC Markets “Pink”. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Quarter Ended High Bid Low Bid
December $ 1.25 $ 1.25
September $ 1.25 $ 1.25
June $ 1.25 $ 1.25
March $ 1.25 $ 1.25
December $ 1.25 $ 1.25
September $ 1.25 $ 1.25
June $ 1.25 $ 1.25
March $ 1.25 $ 1.25
December $ 1.25 $ 1.25
September $ 1.50 $ 1.50
June $ 1.20 $ 1.05
March $ 1.05 $ 0.55
December $ 1.01 $ 0.55
Holders
At March 30, 2021, the Company had approximately 227 shareholders of record of our common stock. Such number does not include any shareholders holding shares in nominee or “street name”.
Dividends
Holders of our common stock are entitled to receive such dividends as may be declared by our board of directors. We paid no dividends during the periods reported herein, nor do we anticipate paying any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
The Company had no sales of securities in 2020 and 2019.
Securities authorized for issuance under equity compensation plans
The Company does not have securities authorized for issuance under any equity compensation plans.
Performance graph
Not applicable to smaller reporting companies.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company did not repurchase any shares of the Company’s common stock during 2020.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to a smaller reporting company.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
This Form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
Plan of Operation
We are a health and wellness company that develops, markets, promotes and distributes a variety of customized health and wellness care products and services, including supplements, healthy snacks, meal replacements, skincare products, and nutritional consultation services to consumers in China. We work with certain licensed healthcare food factories to develop and manufacture products and services that are distributed conventionally through sales agents and also through a network of e-commerce and social media platforms.
In addition to products, we are committed to providing customized science based wellness consultation and service programs to customers. Our diverse products and services target health conscious customers and differentiate based upon age and gender and seek to manage different conditions. We reach out to customers fitting certain health and lifestyle profiles through our offline and online consultation services, and track eating habits and health indicators to provide customized products such as supplements. We believe this will facilitate the ability of customers to monitor, understand and adjust their health practices and lifestyle anytime and anywhere for increased customer engagement and retention.
We conduct our business through our wholly owned subsidiary Guangzhou Xiao Xiang Health Industry Company Limited, a limited liability company organized under the laws of China on March 8, 2017. Alpha Wellness (HK) Limited, a limited liability company organized under the laws of Hong Kong on April 24, 2019, and Elite Creation Group, a limited liability company formed under the laws of the British Virgin Islands formed on September 5, 2018, are holding companies without operations.
Our Products and Services
Our health products are designed to help enhance immunity and improve general wellbeing. We provide the following categories of healthcare products and customized healthcare consultation services in China: (i) Nutrition Catering (ii) Special Health Food (iii) Health Supplement and (iv) Skincare. The products target all age groups with different needs.
Product category
Representative Products
Description
Nutrition Catering Series
Jasmine Beauty
Meal replacement and healthy snacks
Special Health Food Series
Power Centinent
Products that support a healthy active lifestyle and enhance Immunity
Health Supplement Series
Fuli Fruit Juice
Functional fruit beverages and dietary and nutritional supplements containing resveratrol, anthocyanin, superoxide enzyme
Skincare Series
Tightness
Facial skin care and recovery
Our products are taken as healthcare supplements in accordance with the principles of traditional Chinese medicine including the principle complementary medicine and ideal ratios and combinations of ingredients.
Markets and Regions
The Great Health Industry refers to production, operation, service and information dissemination, maintenance, restoration, and promotions linked to health. It covers medical products, health supplements, nutritional foods, medical devices, health appliances, fitness, health management, health consulting and many other production and service areas closely related to human health. The Great Health Industry is an emerging industry with huge market potential, especially in China.
According to the “China Great Health Industry Strategic Planning and Enterprise Strategy Consulting Report” published by Qianzhan Industry Institute (前瞻產業研究院), the scale of the Great Health Industry in 2017 was USD 947.42 billion, which increased to over USD 1,069.66 billion in 2018. The report predicted USD 1,341.66 billion volume for 2019 and forecast over USD 1,528.09 billion for 2020. In the years till 2023, the average annual compound growth rate will be approximately 12.55%, and with the Great Health Industry reaching approximately USD 2,153.08 billion in 2023.
Our Strategies
We are focused on achieving long-term growth in revenues, cash flow and profit. We believe that we can achieve this by developing multiple distribution channels and strengthening our marketing and promotions, leading to better product turnover and revenue. We also expect to broaden our product range as well as product differentiation in the future. Based on the business experience accumulated over the years, we believe we can improve the efficiency of our supply chain with time-saving and cost-saving supply chain management and marketing planning for the target customer base with our one-stop service.
Our primary aims are (i) to strengthen our product saleability; (ii) to cut logistics cost and time spent and (iii) to further expand the market share in China. Toward this end, we plan to pursue the following business strategies:
● Collaborate with third-party e-commerce platforms to boost product exposure, e.g. Tmall, Jingdong mall
● Deliver healthcare knowledge and consultation service via social media and We-media
● Build brand image and reputation through customer experience and word of mouth
● Increase the number of downstream distributors and wholesalers
● Strengthen the relationship with manufacturers, suppliers, drug agents and distributors
● Pursue strategic acquisitions and partnerships
We intend to develop both online and offline distribution channels to increase sales volume and revenue. We expect to partner with third party e-commerce platforms, social media and We-media such as Wechat, TikTok and Xiaohongshu to build our online presence. We believe that online channels will allow us to provide real-time nutrition and healthcare consultation services as well as increase customer engagement and retention. Starting from the second half of 2020, we have launched our “nutrition consulting” support services using a major social media software to allow customer groups to receive pre-purchase consultation and after-sales service for products anytime and anywhere.
Our current offline sales channel relies on distributors and sales agents. To enhance the visibility and marketability of our products and services and to improve brand recognition and awareness, we hope to develop store-in-shop and counter experiences. We also intend to partner with high-end gyms to form nutrition clubs and hold weight-loss training camps, health assessment and fitness training camps and other activities.
We intend to create a ‘one-stop’ solution for our customers by creating a multi-channel health product supply and retail system. We not only provide personalized consultation service to our customers, but also summarize and analyze our customer feedback and experiences through our consultation service and after-sales service. We intend to share this data with our manufacturers and supply chain partners to develop products and services that better meet the demands of our customers. By pooling and addressing the needs of downstream businesses and combining it with the Consumer to Manufacturer model for upstream transformation, we anticipate establishing a close relationship between manufacturers and suppliers. We believe this model can also reduce circulation costs and improve the efficiency of our supply chain.
Competition
We operate in a highly competitive and fragmented industry that is sensitive to price and service. We compete with leading e-commerce companies such as Alibaba (China) which may offer substantially the same or similar product offerings as us. We also compete with businesses that focus on particular merchant categories or markets such as UNI HEALTH (HK stock code: 02211) and ALI HEALTH (HK stock code:0241). We also compete with traditional cash payments and other popular online shopping websites and apps, and other traditional media companies that provide discounts on products and services. We believe the principal competitive factors in our market include the following:
● Breadth of member base and the products and services featured.
● Close and fast pre-sales and after-sales service response.
● Ability to reduce the product turnover time and inventory cost.
● Relationship and bargaining power with supplier and manufacturer.
● Healthcare product effectiveness and acceptance from customer.
● Local presence and understanding of local business trends.
● Ability to deliver a high volume of relevant services and information to consumers.
● Ability to produce high purchase rates for products and services among members.
● Strength and recognition of our brand.
Although we believe we compete favorably on the factors described above, many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, larger product and services offerings, larger customer base and greater brand recognition. These factors may allow our competitors to benefit from their existing customer base with lower development costs or to respond more quickly than we can to new or emerging technologies and changes in customer requirements. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build a larger customer base more effectively than us. Our competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services. In addition, although we do not believe that customer payment terms are a principal competitive factor in our market, they may become such a factor, and we may be unable to compete on such terms.
Government and Industry Regulations
We are subject to the general laws in China governing businesses including labor, occupational safety and health, general corporations, intellectual property and other similar laws.
Product Liability and Consumers Protection
Product liability claims may arise if any of our healthcare products have a harmful effect on a consumer, who may make a claim for damages or compensation as an injured party. The General Principles of the Civil Law of the PRC, which became effective in January 1987, state that manufacturers and sellers of defective products causing property damage or injury shall incur civil liabilities for such damage or injuries.
The Product Quality Law of the PRC was enacted in 1993 and amended in 2000 to strengthen the quality control of products and protect consumers’ rights and interests. Under this law, manufacturers and distributors who produce or sell defective products may be subject to confiscation of earnings from such sales, revocation of business licenses and imposition of fines, and in severe circumstances, may be subject to criminal liability.
The Law of the PRC on the Protection of the Rights and Interests of Consumers was promulgated on October 31, 1993 and became effective on January 1, 1994 to protect consumers when they purchase or use goods or services. All business operators must comply with this law when they manufacture or sell goods and/or provide services to customers. In extreme situations, product manufacturers and distributors may be subject to criminal liability if their goods or services lead to the death or injuries of customers or other third parties.
Summary of Financial Information
We have been significantly impacted by COVID-19 global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. China and many other countries have issued policies intended to stop or slow the further spread of the disease.
COVID-19 and China’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business or our operations.
The following table sets forth certain operational data for the years ended December 31, 2020 and 2019:
STATEMENT OF OPERATIONS DATA:
For the Year Ended December 31, 2020
For the Year Ended December 31, 2019
Revenues $ 1,013,141 $ 3,382,513
Cost of revenue (596,530 ) (2,662,292 )
Gross profit 416,611 720,221
Total operating expenses (887,426 ) (631,750 )
Total other income 9,554
(Loss) income before income taxes (461,261 ) 89,105
Income tax expense (8,215 ) (6,346 )
Net (loss) income (469,476 ) 82,759
Revenue. We generated revenues of $1,013,141 and $3,382,513 for the fiscal years ended December 31, 2020 and 2019. All the major customers are located in the PRC. The significant decreases in the revenue due to the outbreak of COVID-19, we expected the revenue would be increased in the future once an efficacious COVID-19 vaccine emerges.
During the years ended December 31, 2020, and 2019, the following customers accounted for 10% or more of our total net revenues:
Year ended December 31, 2020
December 31, 2020
Revenues Percentage of revenues
Accounts receivable
Guangdong Hualian Health Industry Co., Ltd. $ 394,158 　39 %
$ -
Huaye Little Elephant Health Industry Co., Ltd. 　234,547 %
　-
TOTAL $ 628,705 　62 %
Total
$ -
Year ended December 31, 2019
December 31, 2019
Revenues
Percentage of revenues
Accounts receivable
Guangdong Hualian Health Industry Co., Ltd.
$ 1,441,357
43 %
$ 530,196
Guangzhou Hualian Gome Technology Co., Ltd.
　1,192,672
35 %
　-
Shenzhen Tengfengtai Trade Co., Ltd.
　565,986
17 %
　-
TOTAL
$ 3,200,015
95 % Total
$ 530,196
Cost of Revenue. Cost of revenue as a percentage of net revenue was approximately 58.88% for the fiscal year ended December 31, 2020. Cost of revenue as a percentage of net revenue was approximately 78.71% for the fiscal year ended December 31, 2019. The decrease of cost of revenue as a percentage of net revenue is attributable to a decrease in import of product from supplier and manufacturer due to the COVID-19 global pandemic.
During the years ended December 31, 2020 and 2019, the following vendors accounted for 10% or more of our purchases:
Year ended December 31, 2020
December 31, 2020
Vendor Purchases Percentage of purchases
Accounts payable
Zhejiang Hongshiliang Group Tiantai Mountain Wuyao Co., Ltd. $ 219,007 37 %
$ -
Tengfeng (China) Trading Co., Ltd. 71,616 12 %
-
Guangzhou Zeli Pharmaceutical Technology Co., Ltd. 61,222 10 %
-
Total: $ 351,845 59 % Total: $ -
Year ended December 31, 2019
December 31, 2019
Vendor Purchases Percentage of purchases
Accounts payable
Heilongjiang Hengyuan Food Co., Ltd. $ 514,856 31 %
$ -
Guangzhou Meichuntang Medical Technology Co., Ltd. 269,262 16 %
-
Guangzhou Fancai Packaging and Printing Co., Ltd. 263,621 16 %
-
Guangzhou Zeli Pharmaceutical Technology Co. , Ltd. 262,462 16 %
-
Guangzhou Kinton FSMP Co., Ltd. 251,510 15 %
-
Total: $ 1,561,711 94 % Total: $ -
Gross Profit. We achieved a gross profit of $416,611 and $720,221 for the fiscal years ended December 31, 2020, and 2019, respectively. The decrease in gross profit is primarily attributable to the decrease in revenue.
General and Administrative Expenses (“G&A”). We incurred G&A expenses of $728,994 and $490,865 for the fiscal years ended December 31, 2020, and 2019, respectively. The increase in G&A is primarily attributable to operation and business model restructuring.
Other Income, net. We incurred net other income of $9,554 for the fiscal year ended December 31, 2020, as compared to a net income of $634 for the fiscal year ended December 31, 2019. Our net other income for the year ended December 31, 2020 consisted of the subsidy funds from Government.
Income Tax Expense. We recorded income tax expense of $8,215 and $6,346 for the fiscal years ended December 31, 2020 and 2019. The increase in our income tax expenses is primarily attributable to our increase in revenues from Hong Kong.
Net (Loss) Income. During the year ended December 31, 2020, we incurred a net loss of $469,476, as compared to a net income $82,759 for the year ended December 31, 2019.The significant decreases due to a significant decrease in the revenue due to the outbreak of COVID-19, and increase in G&A is primarily attributable to operation and business model restructuring.
Liquidity And Capital Resources
As of December 31, 2020, we had cash and cash equivalents of $1,006,394, inventories of $206,272, and prepayments and other receivables of $121,501.
As of December 31, 2019, we had cash and cash equivalents of $634,492, accounts receivable of $530,196, inventories of $111,617, prepayments and other receivables of $320,818, amount due from a director of $11,744 and operating right-of-use assets of $70,819.
We believe that our current cash and other sources of liquidity discussed below are adequate to support general operations for at least the next 12 months.
Years Ended December 31,
Net cash generated from operating activities $ 343,657 $ 705,972
Net cash used in investing activities (67,862 ) (123,919 )
Net cash generated from financing activities 45,862 19,351
Net Cash Generated From Operating Activities.
For the year ended December 31, 2020, net cash generated from operating activities was $343,657, which consisted primarily of the decrease in prepayment and other receivables of $199,317, decrease in accounts receivables of $530,196, increase in accrued liabilities and other payables of $2,316, increase in accounts payables of $7,827, increase in tax payables of $8,219, increase in inventories of $94,655, an increase in lease liabilities of $47, and increase in customer deposit of $13,044.
For the year ended December 31, 2019, net cash generated from operating activities was $705,972, which consisted primarily of the decrease in prepayment and other receivables of $455,091, increase in accounts receivables of $484,998, decrease in accrued liabilities and other payables of $1,120, offset by an decrease in inventories of $789,290, a decrease in lease liabilities of $81,864 and decrease in customer deposit of $177,761.
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities, however, to finance our operations and future acquisitions.
Net Cash Used In Investing Activities.
For the year ended December 31, 2020, net cash used in investing activities was $67,862, consisted primarily of purchase of plant and equipment of $75,060, and cash from acquisition of legal acquirer of $7,198.
For the year ended December 31, 2019, net cash used in investing activities was $123,919, consisted primarily of purchase of plant and equipment of $120,622, and purchase of intangible assets of $3,297.
Net Cash Generated From Financing Activities.
For the year ended December 31, 2020, net cash generated from financing activities was $45,862, consisting primarily of advance from a related company of $125,257, and repayment of lease liabilities of $79,395.
For the year ended December 31, 2019, net cash generated from financing activities was $19,351, consisting primarily of advance from a related company.
Material Commitments
As of the date of this Annual Report, we do not have any material commitments.
Off-Balance Sheet Arrangements.
The Company does not have any off-balance sheet arrangements and it is not anticipated that the Company will enter into any off-balance sheet arrangements.
Summary of Significant Accounting Policies
Basis of presentation and consolidation
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). All adjustments considered necessary for a fair presentation have been included. These adjustments consist of normal and recurring accruals, as well as non-recurring charges.
The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. The results of subsidiaries acquired or disposed of during the periods are included in the consolidated statements of operations from the effective date of acquisition or up to the effective date of disposal.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Accounts receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2020 and December 31, 2019, there was no allowance for doubtful accounts.
Inventories
Inventories are stated at the lower of cost or market value (net realizable value), cost being determined on a first-in-first-out method. Costs include material and manufacturing overhead costs. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. As of December 31, 2020 and 2019, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs.
Plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
Expected useful lives
Residual value
Furniture, fixture and equipment
3 years
5%
Motor vehicle
3.33 to 4 years
5%
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
Intangible assets
Intangible assets represented trademarks of their products and are stated at cost less accumulated amortization and any recognized impairment loss. Amortization is provided over the term of their registrations on a straight-line basis, which is 10 years and will expire in 2028.
Amortization expense for the years ended December 31, 2020 and 2019 was $487 and $208, respectively.
Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment, as well as intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
Revenue recognition
The Company adopted Accounting Standards Codification (“ASC”) 606 - Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
● identify the contract with a customer;
● identify the performance obligations in the contract;
● determine the transaction price;
● allocate the transaction price to performance obligations in the contract; and
● recognize revenue as the performance obligation is satisfied.
The Company recognizes revenue from the sale of their healthcare products upon delivery to the customers, whereas the title and risk of loss are fully transferred to the customers. The Company records its revenues, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on the majority of the products at the rate of 17% on the invoiced value of sales. The Company experienced no product returns and recorded no reserve for sales returns for the years ended December 31, 2020 and 2019.
Income taxes
The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
The reporting currency of the Company is United States Dollar (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong SAR and the People’s Republic of China and maintain its books and record in its local currency, Hong Kong Dollars (“HK$”) and Renminbi (“RMB”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholder’s equity.
Net loss per share
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service is provided.
Leases
The Company adopted Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2019 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.
The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.
Related parties
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and contingencies
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Recently Adopted Accounting Standards
In June 2016, the FASB issued guidance that affects loans, trade receivables and any other financial assets that have the contractual right to receive cash. Under the new guidance, an entity is required to recognize expected credit losses rather than incurred losses for financial assets. The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted the new guidance effective January 1, 2020, with no material impact to the Company’s consolidated financial position, results of operations or cash flows.
In August 2018, the FASB issued guidance which modifies certain disclosure requirements over fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019, including all interim periods within that fiscal year. The Company adopted the new guidance effective January 1, 2020. The Company does not currently classify any of its derivative contracts or restoration plan assets as Level 3 assets or liabilities, nor did the Company have any transfers amongst fair value levels during the year ended December 31, 2020. As a result, the guidance did not have an impact on Company’s the fair value measurement disclosures upon adoption.
In January 2017, the FASB issued guidance which eliminates the second step from the traditional two-step goodwill impairment test. Under current guidance, an entity performed the first step of the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount; if an impairment loss was indicated, the entity computed the implied fair value of goodwill to determine whether an impairment loss existed, and if so, the amount to recognize. Under the new guidance, an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value (the Step 1 test), with no further testing required. Any impairment loss recognized is limited to the amount of goodwill allocated to the reporting unit. The new guidance is effective for public companies that are Securities and Exchange Commission (“SEC”) registrants for fiscal years beginning after December 15, 2019. The Company adopted the new guidance on January 1, 2020, and applied the guidance prospectively to its goodwill impairment tests.
Accounting Standards Not Yet Adopted as of December 31, 2020
In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The new guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In March 2020, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based on matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
China Foods Holdings Ltd
Index to
Consolidated Financial Statements
Pages
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive (Loss) Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the board of directors of
China Foods Holdings Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of China Foods Holdings Limited (the “Company”) as of December, 31 2020 and 2019 (restated) and the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity, and cash flows for the years ended December 31, 2020 and 2019 (restated), and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019 (restated), and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019 (restated), in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial report. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinions.
/s/ HKCM CPA& Co.
Certified Public Accountants
We have served as the Company’s auditor since 2020.
Hong Kong, China
April 13, 2021
China Foods Holdings Ltd.
Consolidated Balance Sheets
(Currency expressed in United States Dollars (“US$”), except for number of shares)
December 31, 2020 December 31, 2019
(Restated)
ASSETS
Current Assets
Cash and cash equivalents $ 1,006,394 $ 634,492
Accounts receivable - 530,196
Prepayments and other receivables 121,501 320,818
Inventories 206,272 111,617
Amount due from a director
- 11,744
Right-of-use assets - 70,819
Total Current Assets 1,334,167 1,679,686
Non-Current Assets
Plant and equipment 193,621 181,309
Intangible assets 4,353 4,564
Total Non-Current Assets 197,974 185,873
TOTAL ASSETS $ 1,532,141 $ 1,865,559
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 7,827 $ -
Accrued liabilities and other payables 2,316 -
Customer deposits 409,924 389,922
Lease liabilities - 75,304
Amount due to a director 68,953 -
Amount due to a related company 199,964 3,038
Tax payable 8,319 -
Total Liabilities 697,303 468,264
Commitment and contingents
- -
Shareholders’ Equity
Common stock $0.0001 par value, 100,000,000 shares authorized, 20,252,309 and 15,000,000 shares issued and outstanding as of December 31, 2020 and 2019 respectively 2,025 1,500
Additional paid-in capital 1,290,355 1,290,355
Accumulated other comprehensive income (loss) 5,244 (54,001 )
(Accumulated deficit) retained earnings (462,786 ) 159,441
Total Shareholders’ Equity 834,838 1,397,295
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,532,141 $ 1,865,559
The accompanying notes are an integral part of these consolidated financial statements
China Foods Holdings Ltd.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Years ended December 31,
(Restated)
Revenue, net $ 1,013,141 $ 3,382,513
Cost of revenue (596,530 ) (2,662,292 )
Gross profit 416,611 720,221
Operating expenses
Selling and distribution expenses 158,432 140,885
General and administrative expenses 728,994 490,865
Total operating expenses 887,426 631,750
(Loss) income from operation (470,815 ) 88,471
Other income:
Interest income 2,602
Sundry income 6,952
Total other income 9,554
(Loss) income before income tax (461,261 ) 89,105
Income tax expenses (8,215 ) (6,346 )
NET (LOSS) INCOME $ (469,476 ) $ 82,759
Other comprehensive loss
Foreign currency adjustment gain (loss) 59,245 (16,680 )
Comprehensive (loss) income $ (410,231 ) $ 66,079
Net (loss) income per common share
Basic and diluted $ (0.03 ) $ 0.01
Weighted average number of common share
Basic and diluted 17,525,701 15,000,000
The accompanying notes are an integral part of these consolidated financial statements.
CHINA FOODS HOLDINGS LTD.
Consolidated Statements of Changes in Shareholders’ Equity
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Common Stock Additional paid-in Retained earnings (accumulated Accumulated other comprehensive Total
shareholders’
Share Amount capital deficit) (loss) income equity
Balances at December 31, 2018 (restated) 15,000,000 $ 1,500 $ 1,290,355 $ 76,682 $ (37,321 ) $ 1,331,216
Foreign currency translation adjustment - - -
(16,680 ) (16,680 )
Net income for the year - - - 82,759 - 82,759
Balances at December 31, 2019 15,000,000 $ 1,500 $ 1,290,355 $ 159,441 $ (54,001 ) $ 1,397,295
Foreign currency translation adjustment - - - - 59,245 59,245
Shares issued for acquisition of legal acquirer 5,252,309 - (152,751 ) - (152,226 )
Net loss for the year - - - (469,476 ) - (469,476 )
Balances at December 31, 2020 20,252,309 $
2,025 $ 1,290,355 $ (462,786 ) $ 5,244 $ 834,838
The accompanying notes are an integral part of these consolidated financial statements.
China Foods Holdings Ltd
Consolidated Statements of Cash Flows
(Currency expressed in United States Dollars (“US$”))
Years ended December 31,
Cash flow from operating activities:
Net (loss) income $ (469,476 ) $ 82,759
Adjustments to reconcile net (loss) income to net cash generated from operating activities
Depreciation 71,472 38,018
Amortization
Non-cash lease expense 74,863 86,349
(322,654 ) 207,334
Change in operating assets and liabilities:
Accounts receivable 530,196 (484,998 )
Prepayments and other receivables 199,317 455,091
Inventories (94,655 ) 789,290
Accounts payable 7,827 -
Accrued liabilities and other payables 2,316 (1,120 )
Customer deposits 13,044 (177,761 )
Tax payable 8,219 -
Lease liabilities (81,864 )
Net cash generated from operating activities 343,657 705,972
Cash flow from investing activities
Purchase of plant and equipment (75,060 ) (120,622 )
Cash from acquisition of legal acquirer 7,198 -
Purchase of intangible assets - (3,297 )
Net cash used in investing activities (67,862 ) (123,919 )
Cash flow from financing activities:
Repayment of lease liabilities (79,395 ) -
Advance from a related company
125,257 19,351
Net cash generated from financing activities 45,862 19,351
Foreign currency translation adjustment 50,245 (17,352 )
Net change in cash and cash equivalents 371,902 584,052
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 634,492 50,440
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,006,394 $ 634,492
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ 6,346
The accompanying notes are an integral part of these consolidated financial statements.
China Foods Holdings Ltd
Notes to Consolidated Financial Statements
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE 1 - ORGANIZATION AND BUSINESS BACKGROUND
China Foods Holdings Ltd. (the “Company” or “CFOO”) was incorporated in Delaware on January 10, 2019. On January 23, 2019, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with Trafalgar Resources, Inc., a Utah corporation (“Trafalgar”). Pursuant to the Agreement, the Company merged with Trafalgar (the “Merger”) with the Company as the surviving entity. Prior to the Merger, Trafalgar had not commenced operations for several years that had resulted in significant revenue and Trafalgar’s efforts had been devoted primarily to activities related to raising capital and attempting to acquire an operating entity.
Prior to the Merger, Trafalgar’s majority stockholder who owned 5,000,000 shares (approximately 95.2%) of the 5,251,309 outstanding shares of Trafalgar’s common stock, par value $0.0001, signed a written consent approving the Merger and the related transactions. Such approval and consent were sufficient under Utah law and Trafalgar’s Bylaws to approve the Merger. The boards of directors and shareholders of the Company and Trafalgar approved the Merger.
Pursuant to the Merger, each share of Trafalgar’s common stock was converted into one share of the Company’s common stock. After the Merger, HY (HK) Financial Investments Co., Ltd. owned 5,001,000 shares of common stock of the Company.
The Merger was effective on March 13, 2019.
On December 11, 2019, the Board of Directors approved a change to its fiscal year-end from September 30 to December 31. As a result of this change, the fiscal year is a 3 months transition period beginning October 1, 2019 through December 31, 2019. In these statements, including the notes thereto, financial results for fiscal 2019 are for a 3-month period. Corresponding results for the years ended September 30, 2019 and 2018 are both for 12-month periods.
On July 9, 2020, the Company consummated the Share Exchange Agreement (“the “Share Exchange Agreement”) with Elite Creation Group Limited, a private limited company organized under the laws of British Virgin Islands (“ECGL”). As a result of the acquisition of ECGL, the Company entered into the healthcare product distributing and marketing industry, and then pursue a new strategy of developing and distributing health related products, including supplements, across the globe with a focus on mainland China, Europe and Australia.
Because the Company is a shell company, ECGL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, ECGL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of ECGL, and the Company’s assets, liabilities and results of operations will be consolidated with ECGL beginning on the acquisition date. ECGL was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting acquirer (ECGL). After completion of the Share Exchange Transaction, the Company’s consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and consolidation
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). All adjustments considered necessary for a fair presentation have been included. These adjustments consist of normal and recurring accruals, as well as non-recurring charges.
The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. The results of subsidiaries acquired or disposed of during the periods are included in the consolidated statements of operations from the effective date of acquisition or up to the effective date of disposal.
The following table depicts the identity of the Company’s subsidiaries:
Name Place of incorporation
and kind of
legal entity Principal activities Particulars of registered/
paid up share capital Effective interest
held
Elite Creation Group Limited BVI, a limited liability company Investment holding 50,000 issued shares of US$1each 100 %
Alpha Wellness (HK) Limited Hong Kong, a limited liability company Investment holding 300,000 issued shares of HK$300,000 100 %
Guangzhou Xiao Xiang Health Industry Company Limited The PRC, a limited liability company Sales of healthcare products RMB8,300,000 100 %
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Accounts receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2020 and December 31, 2019, there was no allowance for doubtful accounts.
Inventories
Inventories are stated at the lower of cost or market value (net realizable value), cost being determined on a first-in-first-out method. Costs include material and manufacturing overhead costs. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. As of December 31, 2020 and 2019, the Company did not record an allowance for obsolete inventories, nor have there been any write-offs.
Plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
Expected useful lives Residual value
Furniture, fixture and equipment years 5%
Motor vehicle 3.33 to 4 years 5%
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
Intangible assets
Intangible assets represented trademarks of their products and are stated at cost less accumulated amortization and any recognized impairment loss. Amortization is provided over the term of their registrations on a straight-line basis, which is 10 years and will expire in 2028.
Amortization expense for the years ended December 31, 2020 and 2019 was $487 and $208, respectively.
Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment, as well as intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
Revenue recognition
The Company adopted Accounting Standards Codification (“ASC”) 606 - Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
● identify the contract with a customer;
● identify the performance obligations in the contract;
● determine the transaction price;
● allocate the transaction price to performance obligations in the contract; and
● recognize revenue as the performance obligation is satisfied.
The Company recognizes revenue from the sale of their healthcare products upon delivery to the customers, whereas the title and risk of loss are fully transferred to the customers. The Company records its revenues, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on the majority of the products at the rate of 17% on the invoiced value of sales. The Company experienced no product returns and recorded no reserve for sales returns for the years ended December 31, 2020 and 2019.
Income taxes
The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
The reporting currency of the Company is United States Dollar (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong SAR and the People’s Republic of China and maintain its books and record in its local currency, Hong Kong Dollars (“HK$”) and Renminbi (“RMB”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholder’s equity.
Translation of amounts from HK$ and RMB into US$ have been made at the following exchange rates for the years ended December 31, 2020 and 2019.
Years ended December 31, 2020 and 2019
Year-end HK$:US$ exchange rate 0.12899 0.12842
Annual average HK$:US$ exchange rate 0.12893 0.12764
Year-end RMB:US$ exchange rate 0.15307 0.14354
Annual average RMB:US$ exchange rate 0.14503 0.14478
Net loss per share
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service is provided.
Leases
The Company adopted Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2019 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.
The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.
Related parties
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and contingencies
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level Pricing inputs that are generally observable inputs and not corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, approximate their fair values because of the short maturity of these instruments.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Recently Adopted Accounting Standards
In June 2016, the FASB issued guidance that affects loans, trade receivables and any other financial assets that have the contractual right to receive cash. Under the new guidance, an entity is required to recognize expected credit losses rather than incurred losses for financial assets. The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted the new guidance effective January 1, 2020, with no material impact to the Company’s consolidated financial position, results of operations or cash flows.
In August 2018, the FASB issued guidance which modifies certain disclosure requirements over fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019, including all interim periods within that fiscal year. The Company adopted the new guidance effective January 1, 2020. The Company does not currently classify any of its derivative contracts or restoration plan assets as Level 3 assets or liabilities, nor did the Company have any transfers amongst fair value levels during the year ended December 31, 2020. As a result, the guidance did not have an impact on Company’s the fair value measurement disclosures upon adoption.
In January 2017, the FASB issued guidance which eliminates the second step from the traditional two-step goodwill impairment test. Under current guidance, an entity performed the first step of the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount; if an impairment loss was indicated, the entity computed the implied fair value of goodwill to determine whether an impairment loss existed, and if so, the amount to recognize. Under the new guidance, an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value (the Step 1 test), with no further testing required. Any impairment loss recognized is limited to the amount of goodwill allocated to the reporting unit. The new guidance is effective for public companies that are Securities and Exchange Commission (“SEC”) registrants for fiscal years beginning after December 15, 2019. The Company adopted the new guidance on January 1, 2020, and applied the guidance prospectively to its goodwill impairment tests.
Accounting Standards Not Yet Adopted as of December 31, 2020
In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The new guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In March 2020, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based on matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
NOTE 3: PREPAYMENTS AND OTHER RECEIVABLES
Prepayments and other receivable consisted of the following:
December 31, 2020 December 31, 2019
Prepayments $ 7,712 $ 13,704
Purchase deposits - 273,018
Other deposits 23,421
Other receivables 113,670 10,675
$ 121,501 $ 320,818
Purchase deposits represented deposit payments made to vendors for procurement, which are interest-free, unsecured and relieved against accounts payable when goods are received by the Company.
NOTE 4: INVENTORIES
Inventories consisted of the following:
December 31, 2020 December 31, 2019
Packing materials $ 21,527 $ 67,001
Finished goods 184,745 44,616
$ 206,272 $ 111,617
For the years ended December 31, 2020 and 2019, no allowance for obsolete inventories was recorded by the Company.
NOTE 5: LEASE
The Company leased office and warehouse facilities under various non-cancelable operating leases expiring at the term of 2 to 2.5 year, through December 31, 2020.
Right of use assets and lease liability - right of use are as follows:
December 31, 2020 December 31, 2019
Right-of-use assets $ - $ 70,819
The lease liability - right of use is as follows:
December 31, 2020 December 31, 2019
Current portion $ - $ 75,304
Non-current portion - -
Total $ - $ 75,304
As of December 31, 2020, the Company has a new lease agreement leased office and warehouse facilities under various non-cancelable operating leases expiring at the term of 5.25 years effective from January 1, 2021.
NOTE 6: PLANT AND EQUIPMENT
December 31, 2020 December 31, 2019
Motor vehicle $ 311,343 $ 241,289
Furniture, fixture and equipment 15,465 10,445
Foreign translation difference, net 10,471 (5,846 )
337,279 245,888
Less: accumulated depreciation (137,546 ) (66,147 )
Foreign translation difference, net (6,112 ) 1,568
Plant and equipment, net $ 193,621 $ 181,309
Depreciation expense for the years ended December 31, 2020 and 2019 were $71,472 and $38,018, respectively.
NOTE 7: CUSTOMER DEPOSITS
Customer deposits represented cash paid to the Company from the customer, for which the Company has an obligation to deliver the orders to satisfy with the customers, or to return the funds.
As of December 31, 2020 and 2019, the deposit received from customers was $409,924 and $389,922, respectively.
NOTE 8: AMOUNTS DUE TO A DIRECTOR AND A RELATED COMPANY
As of December 31, 2020, the amounts represented temporary advances to the Company by its director and its related company which were unsecured, interest-free and have no fixed terms of repayments.
As of December 31, 2019, the amounts represented temporary advances made to the Company’s director, which were unsecured, interest-free and repayable on demand.
NOTE 9: SHAREHOLDERS’ (DEFICIT) EQUITY
Common Stock
The Company is authorized, subject to limitations prescribed by Delaware law, to issue up to 100,000,000 shares of common stock with a nominal par value of $0.0001.
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and only then at the times and in the amounts that our board of directors may determine.
Voting Rights
Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Under our Certificate of Incorporation, stockholders do not have the right to cumulate votes for the election of directors.
No Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights and is not subject to conversion, redemption or sinking fund provisions.
Right to Receive Liquidation Distributions
Upon our dissolution, liquidation or winding-up, the assets legally available for distribution to our stockholders are distributable ratably among the holders of our common stock, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
On July 9, 2020, the Company consummated the Share Exchange Agreement (“the “Share Exchange Agreement”) with Elite Creation Group Limited, a private limited company organized under the laws of British Virgin Islands (“ECGL”), and the shareholders of ECGL. Pursuant to the Share Exchange Agreement, we purchased Fifty Thousand (50,000) shares of ECGL (the “ECGL Shares”), representing all of the issued and outstanding shares of common stock of ECGL. As consideration, the Company agreed to issue to the shareholders of ECGL Fifteen Million (15,000,000) shares of its common stock, at a value of US $0.32 per share, for an aggregate value of $4,800,000.
As of December 31, 2020, a total of 20,252,309 outstanding shares of common stock were issued.
Preferred Stock
The Company is not currently authorized to issue shares of preferred stock. The Certificate of Incorporation however, allows the board of directors to authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock in the event that shares of preferred stock are authorized in the future. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and may adversely affect the market price of our common stock and the voting and other rights of the holders of common stock. The Company has no current plans to issue any shares of preferred stock.
NOTE 10: NET (LOSS) INCOME PER SHARE
Basic net (loss) income per share is computed using the weighted average number of common shares outstanding during the year. The dilutive effect of potential common shares outstanding is included in diluted net (loss) income per share. The following table sets forth the computation of basic and diluted net (loss) income per share for the years ended December 31, 2020 and 2019:
Years ended December 31,
Net (loss) income attributable to common shareholders $ (469,476 ) $ 82,759
Weighted average common shares outstanding - Basic and diluted 17,525,701 15,000,000
Net (loss) income per share - Basic and diluted $ (0.03 ) $ 0.01
NOTE 11: INCOME TAXES
The provision for income taxes consisted of the following:
Years ended December 31,
Current tax $ 8,215 $ 6,346
Deferred tax - -
Income tax expense $ 8,215 $ 6,346
The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in various countries: United States of America, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
CFOO is registered in the State of Delaware and is subject to US federal corporate income tax. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the years presented.
For the years ended December 31, 2020 and 2019, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2020 and 2019, the Company has not accrued any penalties on uncertain tax positions.
As of December 31, 2020, the operation in the United States incurred $149,783 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2041, if unutilized.
BVI
Under the current BVI law, the Company is not subject to tax on income.
Hong Kong
The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the years ended December 31, 2020 and 2019 is as follows:
Years ended December 31,
Income (loss) before income taxes $ 170,555 $ (3,032 )
Statutory income tax rate 8.25 % 8.25 %
Income tax expense at statutory rate 14,070 (250 )
Tax adjustments (3,277 ) -
Tax concession (2,578 ) -
Net operating loss -
Income tax expense $ 8,215 $ -
The PRC
The Company’s subsidiary operating in the PRC is subject to the Corporate Income Tax Law of the People’s Republic of China at a unified income tax rate of 25%. The reconciliation of income tax rate to the effective income tax rate for the years ended December 31, 2020 and 2019 is as follows:
Years ended December 31,
(Loss) income before income taxes $ (482,014 ) $ 92,128
Statutory income tax rate 25 % 25 %
Income tax expense at statutory rate (120,503 ) 23,032
Tax deduction - (16,686 )
Net operating loss 120,503 -
Income tax expense $ - $ 6,346
The following table sets forth the significant components of the deferred tax assets of the Company as of December 31, 2020 and 2019:
As of December 31,
Deferred tax assets:
Net operating loss carryforwards
- United States $ 31,454 $ -
- Hong Kong - -
- PRC 120,503 -
151,957 -
Less: valuation allowance (151,957 ) -
Deferred tax assets, net $ - $ -
NOTE 12: PENSION COSTS
The Company is required to make contributions to their employees under a government-mandated defined contribution pension scheme for its eligible full-times employees in the People’s Republic of China. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. During the years ended December 31, 2020 and 2019, $12,284 and $23,221 contributions were made accordingly.
NOTE 13: RELATED PARTY TRANSACTIONS
From time to time, the Company’s director and related company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.
As of December 31, 2020, the Company owed the balance of $68,953 and $199,964 to its director and a related company, respectively.
As of December 31, 2019, the director owed the balance of $11,744 to the Company and the Company owed the balance of $3,038 to a related company.
The Company has been provided free office space by its stockholder. The management determined that such cost is nominal and did not recognize the rent expense in its consolidated financial statements.
The Company purchased motor vehicles from a related company at the carrying value of $58,296 for the year ended December 31, 2020.
Apart from the transactions and balances detailed elsewhere in these accompanying consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
NOTE 14: CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the years ended December 31, 2020 and 2019, the customers who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at year-end dates, are presented as follows:
Year ended December 31, 2020
December 31, 2020
Customer Revenues Percentage of revenues
Accounts receivable
　
　
Customer A $ 394,158 39 %
$ -
Customer B 234,547 23 %
-
　 　　　 　　　
　　　　
Total: $ 628,705 62 % Total: $ -
Year ended December 31, 2019
December 31, 2019
Customer Revenues Percentage of revenues
Accounts receivable
　 　
Customer A $ 1,441,357 43 %
$ 530,196
Customer C 1,192,672 35 %
-
Customer D 565,986 17 %
-
　　　　 　　　
　　
Total: $ 3,200,015 95 % 　 Total: $ 530,196
All of the Company’s customers are located in the People’s Republic of China.
(b) Major vendors
For the years ended December 31, 2020 and 2019, the vendor who accounts for 10% or more of the Company’s purchases and its outstanding payable balances as at year-end dates, are presented as follows:
Year ended December 31, 2020
December 31, 2020
Vendor Purchases Percentage of purchases
Accounts payable
　 　
　
Vendor A $ 219,007 37 %
$ -
Vendor B 71,616 12 %
-
Vendor C 61,222 10 %
-
　 　
　
Total: $ 351,845 59 % Total: $ -
Year ended December 31, 2019
December 31, 2019
Vendor Purchases Percentage of purchases
Accounts payable
　 　
　
Vendor D $ 514,856 31 %
$ -
Vendor E 269,262 16 %
-
Vendor F 263,621 16 %
-
Vendor C 262,462 16 %
-
Vendor G 251,510 15 %
-
　 　 　
　
Total: $ 1,561,711 94 % Total: $ -
All of the Company’s vendors are located in the People’s Republic of China.
(c) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
(d) Economic and political risk
The Company’s major operations are conducted in the People’s Republic of China. Accordingly, the political, economic, and legal environments in PRC, as well as the general state of PRC’s economy may influence the Company’s business, financial condition, and results of operations.
(e) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD and RMB converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
NOTE 15: COMMITMENTS AND CONTINGENCIES
As of December 31, 2020 and 2019, the Company has no material commitments or contingencies.
NOTE 16: SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2020, up through the date the Company issued the audited consolidated financial statements. During the period, the Company did not have any material recognizable subsequent events.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no disagreements with its principal independent accountants with respect to accounting practices or procedures or financial disclosure.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, including our CEO and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our CEO and Principal Financial Officer concluded that due to the small size of the Company and lack of segregation of duties, our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. However, management believes the controls and procedures provide a reasonable basis for the conclusions.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO - 2013”) in Internal Control - Integrated Framework. Further, our management considered the lack of segregation of duties could result in inadequate implementation and review financial reporting control procedures. Based on this evaluation, our management concluded that, as of December 31, 2020, our internal control over financial reporting was not effective.
Management believes that the material weakness set forth above did not have an effect on our financial results.
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 since the Company is not an accelerated or larger accelerated filer.
Evaluation of Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that occurred during the last fiscal quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth as of December 31, 2020, the name, age, and position of each executive officer and director and the term of office of each director of the Company.
Name
Age
Position
Kong Xiao Jun
Chief Executive Officer, Chief Financial Officer and Director
Liu Yang
Director
Cheng Ni Hu
Director
Yunsi Liu
Director
Set forth below is a brief description of the background and business experience of our sole executive officer and director:
Xiao Jun Kong, age 46, has served as our Chief Executive Officer, Chief Financial Officer and Director since July 13, 2019. He currently serves as the Chief Executive Officer of Guangdong HY Capital Management CO., LTD and has served in that role since 2011. From 2007 to 2011, Mr. Kong was the Executive Director of the Asia Aluminum Group. Mr. Kong has experience in leading large-scale M&A and investment projects in different industries such as agriculture, film and media, and cultural tourism. Mr. Kong holds a bachelor degree in accounting from Southwestern University of Finance and Economics in Chengdu, Sichuan, China. He is also qualified as Chinese Certified Public Accountant, Certified Tax Agent and Fellow of the Institute of Financial Accountants UK. Mr. Kong brings to our board his experience in business development, strategic planning, and management.
Yunsi Liu, age 31, has been a President and director of China Foods, prior to the Merger, since January 15, 2019. She currently serves as the General Manager of Dray Alliance (a venture-backed, technology startup in the trucking industry) and has served in that role since 2019. Concurrently, she is the Managing Partner of Craft and Swan, LLC. From 2015 to 2020, Ms. Yunsi Liu served in executive capacities for various startups in the Southern California region. Ms. Liu graduated from the University of Pennsylvania with a Bachelor of Science in Economics degree from the Wharton School, and a Bachelor of Arts in Philosophy degree from the College of Arts and Sciences. Ms. Liu brings to the Board her experience in finance, management and operation.
Liu Yang, age 33, has been a director to hold office since May 13, 2019. She currently serves as the Investment Director of Guangdong HY Capital Management Co., Ltd and has served in that role since 2015. Ms. Liu has experience in M&A and investment projects in different industries such as consumer goods, agriculture, cultural tourism, and education. Ms. Liu holds a bachelor degree in Economics from Southern China University of Technology in Guangzhou, Guangdong, China.
Cheng Ni Hu, age 30, was appointed to serve as our director in July 9, 2020. She currently serves as the Marketing director of KangHuaGuoYao (GuangDong) Tech Pty. Ltd. for formulating the company’s strategy in marketing, branding and producing, and has served in that role since December 2018. From 2016 to 2018, she served as restore and relocate project manager in North Sydney Railway. Ms. Hu graduated from the University of Sydney with a Bachelor degrees in Commerce and Combined Commerce (Marketing) and Public Affair from Southern California University. Ms. Hu brings to the Board her experience in marketing and operations.
Except as indicated below, to the knowledge of management, during the past five years, no present or former director, or executive officer of the Company:
(1) filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting, the following activities:
(i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
(4) was the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity;
(5) was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated.
(6) was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers, and the persons who beneficially own more than 10% of the Common Stock and securities convertible into shares of Common Stock (together with the Common Stock, “Subject Shares”), to file with the SEC initial reports of ownership and reports of changes in ownership of Subject Shares. Directors, officers and greater than 10% beneficial owners of the Subject Shares are required by the SEC’s regulations to furnish us with copies of all forms they file with the SEC pursuant to Section 16(a) of the Exchange Act. Based solely on the reports received by us and on the representations of the reporting persons, we believe that these persons have complied with all applicable filing requirements during the fiscal year ended December 31, 2020.
Code of Ethics
We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. We intend to adopt a code of ethics in the immediate future.
Corporate Governance
There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors. We do not have a nominating committee, however we intend to appoint one in the immediate future.
Audit Committee
Our board of directors has an Audit Committee consisting of Mr. Kong. The Audit Committee does not at the present time have an audit committee financial expert serving on its Audit Committee; however, our board intends to appoint an audit committee financial expert in the immediate future.
Family Relationships
There are no family relationships between any of our directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors, executive officers and control persons has been involved in any of the following events during the past ten years:
● Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
● Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
● Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
● Being found by a court of competent jurisdiction (in a civil action), 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;
● Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or 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, fraud, wire fraud or fraud in connection with any business entity; or
● Being 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.
Conflicts of Interest
Except as provided for in Article XI of the Company’s By-Laws: Board Director Compensation, no officer, director or security holder of the company may be involved in pecuniary interest in any investment acquired or disposed of by the registrant or in any transaction to which the registrant or any of its subsidiaries is party or has an interest.
None of the directors, officers, security holders or affiliates of the registrant may engage, for their own account, business activities of the types conducted by the registrant and its subsidiaries.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following tables set forth, for each of the last two completed fiscal years of the Company, the total compensation awarded to, earned by or paid to any person who was a principal executive officer during the preceding fiscal year and every other highest compensated executive officers earning more than $100,000 during the last fiscal year (together, the “Named Executive Officers”). The tables set forth below reflect the compensation of the Named Executive Officers.
Summary Compensation Table
Name and Principal
Position Year Salary Bonus Stock Awards Option Awards Non- Equity Incentive Plan Compensation All
Other Compensation
Total
Kong Xiao Jun CEO -0- -0- -0- -0-
-0- -0- -0- -0-
(1) Xiao Jun Kong has served as our Chief Executive Officer, Chief Financial Officer, and director since July 13, 2018.
Cash Compensation - No cash compensation was paid to any director or executive officer of the Company during the fiscal years ended December 31, 2020, and 2019.
Bonuses and Deferred Compensation - None
Compensation Pursuant to Plans - None
Pension Table - None
Other Compensation - None
Compensation of Directors
During our fiscal year ended December 31, 2020, we did not provide compensation to any of our employee directors for serving as our director. We currently have no formal plan for compensating our employee directors for their services in their capacity as directors, although we may elect to issue stock options to such persons from time to time. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
Non-Employee Director Fees
Our Board determines the form and amount of compensation for our non-employee directors based on informal surveys of similar companies and the amount necessary to attract and retain such directors. For the fiscal year ended December 31, 2020, we paid each of our non-employee directors as follows:
Name Fees earned or paid in cash*
($)
Stock awards
($)
Option awards
($) Non-equity incentive plan compensation
($) Change in pension value and nonqualified deferred compensation earnings All other compensation
($) Total
($)
(a) (b) (c) (d) (e) (f) (g) (h)
Yunsi Liu (1) $ 12,000 - - - - - $ 12,000
(1) Ms. Liu was appointed to her position on our Board of Directors effective January 15, 2019.
* All fees were paid in United States Dollars.
Directors who are residents of China do not receive compensation. Ms. Liu, our director who is a U.S. resident, receives a quarterly retainer in the amount of $2,000 in accordance with the terms of a Director Retainer Agreement effective from January 1, 2020. All directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. Our Board may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person named in Cash Compensation set out above which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person’s employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person’s responsibilities following a changing in control of the Company.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of April 9, 2021 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors and each of our named executive officers (as defined under Item 402(m)(2) of Regulation S-K), and (iii) officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
Name of Beneficial Owner (2) Amount and Nature of Beneficial Ownership (1) Percent of Class
Officers and Directors
Xiao Jun Kong (3) 18,951,000 93.57 %
Cheng Ni Hu (4) 675,000 3.33 %
All executive officers and directors as a group (2 persons) 19,626,000 96.90 %
Shareholders Holding In Excess of 5%
HY (HK) Financial Investments Co., Ltd. (3) 5,001,000 24.69 %
(1) Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of July 9, 2020. Applicable percentage ownership is based on 20,252,309 shares of common stock outstanding as of July 9, 2020, and any shares that such person or persons has the right to acquire within 60 days of July 9, 2020, is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.
(2) Unless otherwise noted, the business address of each beneficial owner listed is 17/F, 80 Gloucester Road, Wanchai, Hong Kong. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.
(3) Mr. Kong is deemed to be the beneficial owner of these 5,001,000 shares held by HY (HK) Financial Investments Co., Ltd. Mr. Kong is the Chief Executive Officer and majority shareholder of HY (HK) Financial Investments Co., Ltd.
(4) Ms. Hu was appointed to serve on our board of directors effective July 9, 2020.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Transactions with management and others
From time to time, the Company’s director and related company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand. As of December 31, 2020, the Company owed the balance of $68,953 and $199,964 to its director and a related company, respectively. As of December 31, 2019, the director owed the balance of $11,744 to the Company and the Company owed the balance of $3,038 to a related company.
The Company has been provided free office space by its stockholder. The management determined that such cost is nominal and did not recognize the rent expense in its consolidated financial statements.
The Company purchased motor vehicles from a related company at the carrying value of $58,296 for the year ended December 31, 2020.
Indebtedness of Management
During the year ended December 31, 2020, there were transactions, or series of similar transactions, since the beginning of the Company’s last fiscal year, or any currently proposed transactions, or series of similar transactions, to which the Company was or is to be a party, in which the amount involved exceeds $60,000 and in which any director or executive officer, or any security holder who is known to the Company to own of record or beneficially more than 5% of any class of the Company’s common stock, or any member of the immediate family of any of the foregoing persons, has an interest. Please see Note 13 above.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) Audit Fees - The aggregate fees billed in each of the last two fiscal years for professional services rendered by the Company’s auditor for the audit of the annual financial statements and review of financial statements included in the Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are: $35,900 for 2020 and $22,000 for 2019.
(2) Audit-Related Fees - The aggregate fees billed in each of the last two fiscal years for assurance and related services by the Company’s principal accountant that are reasonably related to the performance of the audit or review of the financial statements and are not reported in (1) Audit-related Fees: $0 for 2020 and $0 for 2019.
(3) Tax Fees - The aggregate fees billed in each of the last two fiscal years for professional services rendered by the Company’s principal accountant for tax compliance, tax advice, and tax planning: $0 for 2020 and $0 for 2019.
(4) All Other Fees - The aggregate fees billed in each of the last two fiscal years for products and services provided by the Company’s principal accountant, other than the services reported in (1) Audit Fees; (2) Audit-Related Fees; and (3) Tax Fees: $3,000 for 2020 and $300 for 2019.
(5) The Company does not have an audit committee.
(6) Not Applicable.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1)
List of Financial statements included in Part II hereof
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheet:
December 31, 2020 and 2019
Consolidated Statements of Operations and Comprehensive (Loss) Income:
For the years ended December 31, 2020 and 2019
Consolidated Statements of Changes in Shareholders’ (Deficit) Equity:
For the years ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows:
For the years ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements:
For the years ended December 31, 2020 and 2019
(a)(2)
List of Financial Statement schedules included in Part IV hereof: None
(a)(3)
Exhibits
The following exhibits are included herewith:
Exhibit No.
Description
31.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Following are a list of exhibits which we previously filed in other reports which we filed with the SEC, including the Exhibit No., description of the exhibit and the identity of the Report where the exhibit was filed.