| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States of America generally
accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission
(“SEC”) regarding interim financial reporting. The
interim condensed consolidated financial information as of September 30, 2023 and for the three and nine months ended September 30, 2023
and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures,
which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted
pursuant to such rules and regulations. The interim condensed consolidated financial information should be read in conjunction with the
Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2022, previously filed with the SEC on March 29, 2023. In
the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair
statement of the Company’s interim condensed consolidated financial position as of September 30, 2023, its interim condensed consolidated
results of operations and cash flows for the three and nine months ended September 30, 2023 and 2022, as applicable, have been made.
The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods. Use
of Estimates The
preparation of these financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing
basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Recently
Adopted Accounting Standards In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires
entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current
conditions, and reasonable and supportable forecasts. ASU 2016-13 replaces the existing incurred loss model and is applicable to the
measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 is to be adopted on a modified retrospective
basis. As a smaller reporting company, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning
after December 15, 2022. The Company adopted these ASUs on January 1, 2023, and these amendments were applied prospectively. In
March 2022, the FASB issued ASU 2022-02, Topic 326. The ASU eliminates the accounting guidance for trouble debt restructurings by creditors
in Subtopic 310-40, and enhances the disclosure requirements for modifications of loans to borrowers experiencing financial difficulty.
Additionally, the ASU requires disclosure of gross writeoffs of receivables by year of origination for receivables within the scope of
Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. This ASU is effective for periods beginning after
December 15, 2022. The Company adopted this ASU on January 1, 2023, and these amendments were applied prospectively. Recently
Issued Accounting Standards In
October 2021, the FASB issued ASU No. 2021-08, “‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract
Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize
and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business
combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business
combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for the Company
beginning after December 15, 2023, and are applied prospectively to business combinations that occur after the effective date. The Company
does not expect the adoption of ASU 2021-04 to have a material effect on the condensed consolidated financial statements. 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 condensed consolidated financial statements upon adoption. Basis
of Consolidation and Noncontrolling Interests The
condensed consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant
inter-company balances and transactions within the Company have been eliminated upon consolidation. A
subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the
Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the
meeting of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an
agreement among the shareholders or equity holders. Leases
The
Company determines if an arrangement is a lease or contains a lease at inception of the arrangement. Operating lease liabilities are
recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement
date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental
borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating
lease right-of-use (“ROU assets”) assets represent the Company’s right to control the use of an identified asset for
the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets
are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line
basis over the lease term. The Company elected the package of practical expedients permitted under the transition guidance to combine
the lease and non-lease components as a single lease component for operating leases associated with the Company’s office space
lease, and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments
in the condensed consolidated statements of income on a straight-line basis over the lease term. ROU
assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject
to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets. ROU
assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent
from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used,
which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets
and liabilities. The
Company recognized no impairment of ROU assets as of September 30, 2023 and December 31, 2022. The
operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current
on the Company’s condensed consolidated balance sheets. Cash
and Cash Equivalents For
purposes of the statement of cash flows, the Company considers cash, money market funds, investments in interest bearing demand deposit
accounts, time deposits and all highly liquid investments placed with banks or other financial institutions with an original maturity
of three and nine months or less to be cash equivalents. As
of September 30, 2023, cash held in accounts managed by online payment platforms such as Alipay and WeChat Pay amounted to $2,599 (as
at December 31, 2022: $2,717), which have been classified as cash and cash equivalents in the condensed consolidated balance sheets. Accounts
receivable Accounts
receivables are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns. The allowance for doubtful
accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivables.
The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. Outstanding
accounts receivable balances are reviewed individually for collectability. Account balances are charged off against the allowance after
all means of collection have been exhausted and the potential for recovery is considered remote. Plant
and equipment Plant
and equipment are recorded at cost less accumulated depreciation and accumulated impairment. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
Estimated
Motor vehicle 4 – 5
Office equipment 3 The
gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the lower of the carrying value
or fair value less cost to sell the relevant assets and is recognized in general and administrative expenses in the condensed consolidated
statements of comprehensive income. Impairment
of Long-lived Assets In
accordance with ASC 360-10-35, we review the carrying values of long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The Company assesses the recover-ability of the assets based on
the non-discounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future
cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than
the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated
fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. No impairment has
been recorded by the Company for the three and nine months ended September 30, 2023 and 2022. Revenue
Recognition The
Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which it expects to receive in exchange for those goods. The Company recognizes revenues following the five step model prescribed under
ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues
when (or as) we satisfy the performance obligation. The
Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or net
basis. The Company is acting as the principal if it obtains control over the goods and services before they are transferred to customers.
When the Company is primarily obligated in a transaction, is generally subject to inventory risk, has latitude in establishing prices,
or has several but not all of these indicators, the Company acts as the principal and revenue is recorded on a gross basis. When the
Company is not primarily obligated in a transaction, does not generally bear the inventory risk and does not have the ability to establish
the price, the Company acts as the agent and revenue is recorded on a net basis The
Company derives its revenue primarily from consultancy services, sourcing and marketing services, and digital training related services. Consultancy
services The
Company generates the majority of its revenues by providing consulting services to its clients. Performance-based
arrangements Sourcing
and marketing services The
Company provides agency-based sourcing and marketing services to connect marketplace operators and merchants. Agency-based
sourcing and marketing services The
post-sale services, goods return and other kinds of product issue are responsibilities of the merchants. Upon successful delivery to
ultimate customers by the merchants, there is no unfulfilled obligation that could affect the marketplace operators’ and merchants’
acceptance of the services provided. The acceptance provisions have lapsed, or the Company has objective evidence that all criteria for
acceptance have been satisfied. Digital
training related services Fixed-fee
digital training related services The
Company derived services revenues of $353,775 and $702,371 for the three months ended September 30, 2023 and 2022, respectively;
and $1,146,176 and $2,207,029 for the nine months ended September 30, 2023 and 2022, respectively, from provision of certain
consultancy services and sourcing and marketing services through the program application (“App”) platform managed by a related
company, Xi’an Chuangyetianxia Network Technology Co., Ltd. (“Xian CNT”). The Company CEO, Mr. Tao, has significant
influence over Xian CNT. Practical
expedients and exemption The
Company has not occurred any costs to obtain contracts, and does not disclose the value of unsatisfied performance obligations for contracts
with an original expected length of one year or less. Revenue
by major service line
Three months ended Nine months ended
2023 2022 2023 2022
Consultancy services 1,714,786 699,257 4,591,688 2,211,307
Sourcing and marketing services - 102,527 5,976 372,475
Digital training related services - - - 267,874
$ 1,714,786 $ 801,784 $ 4,597,664 $ 2,851,656 Revenue
by recognition over time vs point in time
Three months ended Nine months ended
2023 2022 2023 2022
Revenue recognized at a point in time 1,714,786 801,784 4,597,664 2,851,656
Revenue recognized over time - - - -
$ 1,714,786 $ 801,784 $ 4,597,664 $ 2,851,656 Revenue
recorded on a gross vs net basis
Three months ended Nine months ended
2023 2022 2023 2022
Revenue recorded on a gross basis 1,714,786 699,257 4,591,688 2,479,181
Revenue recorded on a net basis - 102,527 5,976 372,475
$ 1,714,786 $ 801,784 $ 4,597,664 $ 2,851,656 Contract
liabilities The
Company’s contract liabilities consist of deferred revenue associated with consultancy fees and provision of fixed-fee training
related services. The table below presents the activity of the deferred consultancy services revenue during the nine months ended September
30, 2023 and the year ended December 31, 2022, respectively:
September 30, December 31,
Balance at beginning of period $ - $ 216,142
Service fees collected - 220,183
Refunded - (149,992 )
Service revenue earned - (262,799 )
Exchange realignment - (23,534 )
Balance at end of period $ - $ - Cost
of revenue Cost
of revenues consists primarily of employee compensation, service fees, agency fees, and the related IT expenses, which are directly attributable
to the revenues Employee
benefits Full
time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension
benefits, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require
that the PRC subsidiary of the Company make contributions to the government for these benefits based on certain percentages of the employees’
salaries, up to a maximum amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions
made. Total amounts of such employee benefit expenses, which were expensed as incurred, were approximately $18,773 and $17,744 for
the three months ended September 30, 2023 and 2022, respectively; and $64,921 and $47,963 for the nine months ended September
30, 2023 and 2022, respectively. Foreign
Currency and Foreign Currency Translation The
reporting currency of the Company is the United States dollar (“US dollar”). The financial records of the Company’s
PRC operating subsidiaries are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency.
The financial records of the Company’s Hong Kong operating subsidiary are maintained in its local currency, the Hong Kong Dollar
(“HKD”), which is the functional currency. Assets and liabilities of the subsidiaries are translated into the reporting currency
at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates, and income and expense
items are translated using the average rate for the period. The translation adjustments are recorded in accumulated other comprehensive
loss under shareholders’ equity. Monetary
assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies
at the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable
functional currencies at historical exchange rates. Transactions in currencies other than the applicable functional currencies during
the period are converted into the functional currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction
gains and losses are recognized in the condensed consolidated statements of operations. RMB
is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People’s
Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted
for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand.
Translation of amounts from RMB into US dollars has been made at the following exchange rates for the respective periods:
Nine months ended September 30, 2023
Balance sheet, except for equity
accounts RMB 7.2948 to US$1.00
Income statement and cash flows RMB 7.0313 to US$1.00
Nine months ended September 30, 2022
Balance sheet, except for equity accounts RMB 7.1160 to US$1.00
Income statement and cash flows RMB 6.6013 to US$1.00 During
the periods presented, HKD is pegged to the U.S. dollar within a narrow range which is around HKD 7.8 to USD 1.00 for both periods. Income
Taxes Income
taxes are accounted for using an asset and liability approach which requires the recognition of income taxes payable or refundable for
the current period and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the
Company’s financial statements or tax returns. Deferred income taxes are determined based on the differences between the accounting
basis and the tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws. Deferred tax assets
are reduced by a valuation allowance, if based on available evidence, it is considered that it is more likely than not that some portion
of or all of the deferred tax assets will not be realized. In making such determination, the Company considers factors including future
reversals of existing taxable temporary differences, future profitability, and tax planning strategies. If events were to occur in the
future that would allow the Company to realize more of its deferred tax assets than the presently recorded net amount, an adjustment
would be made to the deferred tax assets that would increase income for the period when those events occurred. If events were to occur
in the future that would require the Company to realize less of its deferred tax assets than the presently recorded net amount, an adjustment
would be made to the valuation allowance against deferred tax assets that would decrease income for the period when those events occurred.
Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. The
Company conducts business in the US, the PRC and Hong Kong and is subject to tax in these jurisdictions. As a result of its business
activities, the Company will file tax returns that are subject to examination by the respective tax authorities. Uncertain
Tax Positions Management
reviews regularly the adequacy of the provisions for taxes as they relate to the Company’s income and transactions. In order to
assess uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for tax position measurement
and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution
of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more
than 50% likely to be realized upon settlement. In subsequent periods, any interest and penalties related to uncertain tax positions
will be recognized as a component of income tax expense. As of September 30, 2023 and December 31, 2022, the Company had not recorded
any liability for uncertain tax positions. Net
income per Share of Common Stock The
Company has adopted ASC Topic 260, “Earnings per Share,” (“EPS”) which requires presentation of basic EPS on
the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation. In the accompanying financial statements, basic earnings per share is computed by dividing
net income by the weighted average number of shares of common stock outstanding during the period.
Three months ended Nine months ended
2023 2022 2023 2022
Net income (loss) $ 741,170 $ (31,999 ) $ 1,863,074 $ 625,024
Weighted average number of common stock outstanding
- basic and diluted 1,701,181,423 1,701,181,423 1,701,181,423 1,701,181,423
Net income per share
- basic and diluted $ 0.00 * $ 0.00 * $ 0.00 * $ 0.00 * * Less than $0.01 per share The
calculation of basic net income per share of common stock is based on the net income (loss) for the three and nine months ended September
30, 2023 and 2022 and the weighted average number of ordinary shares outstanding. For
the three and nine months ended September 30, 2023 and 2022, the Company has no potentially dilutive securities, such as options or warrants,
currently issued and outstanding. Segments The
Company uses the “management approach” in determining reportable operating segments. The management approach considers the
internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing
performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision
maker, reviews operating results solely by monthly revenue of marketing consultation services and operating results of the Company and,
as such, the Company has determined that the Company has one operating segment (provision of consulting, sourcing and marketing services,
and digital training related services in China) as defined by ASC Topic 280 “Segment Reporting”. Fair
Value of Financial Instruments ASC
Topic 820, Fair Value Measurement and Disclosures
● Level 1 inputs to the valuation
methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 inputs to the valuation
methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets
or liability, either directly or indirectly, for substantially the full term of the financial instruments.
● Level 3 inputs to the valuation
methodology are unobservable and significant to the fair value measurement. Valuation
of debt products depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future
interest rates, and other relevant terms of the debt. Other factors that may be considered include the borrower’s ability to adequately
service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral
securing the Company’s debt investments. The fair value of these debt products classified as Level 2 are established by reference
to the prices quoted by respective fund administrators. The
carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, other receivables, accounts
payable and other payables, amounts due to a director and a shareholder and borrowings approximate their fair values because of the short
maturity of these instruments or the rate of interest of these instruments approximate the market rate of interest. Comprehensive
Income Comprehensive
income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding
transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income includes cumulative
foreign currency translation adjustment. |
