UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the quarterly period ended June 30, 2015, or

 

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the transition period from  ___________ to _____________

 

Commission File Number: 001-34113

 

WAVE SYNC CORP.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware		74-2559866
(State of Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
40 Wall Street, 28th Floor, New York, NY		10005
(Address of Principal Executive Offices)		(ZIP Code)

 

646-512-5855

(Registrant’s Telephone Number, Including Area Code)

 

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

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

	Large accelerated filer	☐	Accelerated filer	☐
	Non-accelerated filer	☐	Smaller reporting company	☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

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

 

Class		Outstanding at October 28, 2015
Common stock, par value $0.001		98,405,005

 

 

 

TABLE OF CONTENTS

 

	Page
PART I—FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Condensed Balance Sheets	3
Condensed Statements of Operations and Comprehensive Loss	4
Condensed statements of Cash Flows	5
Notes to Condensed Financial Statements	6
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18
Item 4. Controls and Procedures	19
PART II—OTHER INFORMATION	19
Item 1. Legal Proceedings	19
Item 1A. Risk Factors	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3. Defaults Upon Senior Securities	20
Item 4. Mine Safety Disclosures	20
Item 5. Other Information	20
Item 6. Exhibits	20
SIGNATURES	21

 

Throughout this Quarterly Report on Form 10-Q, the “Company”, “we,” “us,” and “our,” refer to Wave Sync Corp. (formerly known as “China Bio-Energy Corp.”, which was amended effective as of September 3, 2015), a Delaware corporation, and its subsidiaries, unless otherwise indicated or the context otherwise requires.

 

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  The statements herein which are not historical reflect our current expectations and projections about the Company’s future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and our interpretation of what we believe to be significant factors affecting our business, including many assumptions about future events.  Such forward-looking statements include statements regarding, among other things:

 

●

our ability to produce, market and generate sales of our products and services;

 

●

our ability to develop and/or introduce new products and services;

 

●

our projected future sales, profitability and other financial metrics;

 

●

our future financing plans;

  

●

our anticipated needs for working capital;

 

●

the anticipated trends in our industry;

  

●

our ability to expand our sales and marketing capability;

  

●

acquisitions of other companies or assets that we might undertake in the future;

   

●

competition existing today or that will likely arise in the future; and

 

●

other factors discussed elsewhere herein.

 

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “will,” “plan,” “could,” “target,” “contemplate,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these or similar words.  Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue the Company’s operations.  These statements may be found under Part I, Item 2—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Quarterly Report on Form 10-Q generally.  Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, matters described in this Quarterly Report on Form 10-Q.  

 

 

In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Quarterly Report on Form 10-Q will in fact occur.

 

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q.  Such statements are presented only as a guide about future possibilities and do not represent assured events, and we anticipate that subsequent events and developments will cause our views to change.  You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q. 

 

This Quarterly Report on Form 10-Q also contains estimates and other statistical data prepared by independent parties and by us relating to market size and growth and other data about our industry. These estimates and data involve a number of assumptions and limitations, and potential investors are cautioned not to give undue weight to these estimates and data. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Quarterly Report on Form 10-Q. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk.

 

Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

 

 

 

PART I.

 

FINANCIAL INFORMATION

  

ITEM 1.  FINANCIAL STATEMENTS

 

Wave Sync Corp. (f/k/a China Bio-Energy Corp.)

 

Unaudited Financial Statements

 

As of June 30, 2015 and December 31, 2014

 

(Stated in US Dollars)

 

 

Wave Sync Corp. (f/k/a China Bio-Energy Corp.)

 

INDEX TO FINANCIAL STATEMENTS

 

Contents

 

	Page(s)
Condensed Balance Sheets	3
Condensed Statements of Operations and Comprehensive Loss	4
Condensed Statements of Cash Flows	5
Notes to Condensed Financial Statements	6 – 16

 

 

Wave Sync Corp. (f/k/a China Bio-Energy Corp.)

CONDENSED BALANCE SHEETS

AS OF JUNE 30, 2015 AND DECEMBER 31, 2014

(Stated in US Dollars)

 

		June 30,				December 31,
		2015				2014
		(Unaudited)				(Audited)
ASSETS
Current Assets
Cash and cash equivalents			264,851				200
Prepaid expenses			3,004				-
Prepaid taxes			14,051				-
Total Current Assets			281,906				200
Non-current Assets
Deposits			4,700				-
Total Non-Current Assets			4,700				-
Total Assets			286,606				200
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Taxes and other payable		$	1,376,565			$	1,044,000
Wages payable			24,719				-
Accrued expenses			150,000				250,000
Total Current Liabilities			1,551,284				1,294,000
Commitment and contingencies
Stockholders' Equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 98,405,005 and 58,405,005 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively.			98,405				58,405
Additional paid in capital			14,115,439				13,655,439
Accumulated deficit			(15,478,522	)			(15,007,644	)
Total Stockholders' Equity			(1,264,678	)			(1,293,800	)
Total Liabilities and Stockholders' Equity		$	286,606			$	200

 

The accompanying notes are an integral part of these financial statements

 

 

Wave Sync Corp. (f/k/a China Bio-Energy Corp.)

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(Stated in US Dollars)

(Unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30
		2015				2014				2015				2014
Revenue		$	-			$	-			$	-			$	-
Operating expenses:
General and administrative expenses			79,591				15,625				470,878				340,850
Total operating expenses			79,591				15,625				470,878				340,850
Loss before income taxes			(79,591	)			(15,625	)			(470,878	)			(340,850	)
Provision for income tax			-				-				-				-
Net loss		$	(79,591	)		$	(15,625	)			(470,878	)			(340,850	)
Other comprehensive loss - foreign currency translation adjustment			-				-				-				-
Comprehensive loss		$	(79,591	)		$	(15,625	)			(470,878	)			(340,850	)
Net loss per share
Basic		$	(0.00	)		$	(0.00	)			(0.00	)			(0.01	)
Diluted		$	(0.00	)		$	(0.00	)			(0.00	)			(0.01	)
Weighted average number of common shares outstanding
Basic			98,405,005				38,405,005				94,668,741				38,405,005
Diluted			98,405,005				38,405,005				94,668,741				38,405,005

  

The accompanying notes are an integral part of these financial statements

 

 

Wave Sync Corp. (f/k/a China Bio-Energy Corp.)

CONDENSED STATEMENTS OF CASH FLOW

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(Stated in US Dollars)

(Unaudited)

 

		Six Months Ended June 30,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(470,878	)		$	(340,850	)
Adjustments to reconcile net loss to net cash provided by operating activities and Changes in operating assets and liabilities:
Increase in prepaid taxes			(3,004	)			-
Increase in prepaid expense			(14,051	)			-
Increase in deposit			(4,700	)			-
Increase in wage payable			24,719				-
Increase in taxes payable			180,000				180,000
Increase in other payables			152,565				129,600
(Decrease)/increase in accrued expense			(100,000	)			31,250
Net cash used in operating activities			(235,349	)			-
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock			500,000				-
Net cash generated from financing activities			500,000				-
Net increase in cash and cash equivalents			264,651				-
Cash and cash equivalents, beginning balance			200				-
Cash and cash equivalents, ending balance		$	264,851			$	-
SUPPLEMENTAL DISCLOSURES:
Interest received		$	-			$	-
Interest paid		$	-			$	-
Income tax paid		$	-			$	-

 

The accompanying notes are an integral part of these financial statements

 

  

Note 1 – THE COMPANY AND PRINCIPAL BUSINESS ACTIVITIES

 

Wave Sync Corp. formerly known as China Bio-Energy Corp. (the “Company”), and prior to that known as China INSOnline Corp., was incorporated on December 23, 1988 as Lifequest Medical, Inc., a Delaware corporation.

 

In June 2010, the Company ceased all operations conducted by its then subsidiaries: Ever Trend Investment Limited, Run Ze Yong Cheng (Beijing) Technology, San Teng Da Fei Technology, and Guang Hua Insurance Agency (“Ever Trend Group”); on January 27, 2015, the Company announced the completion of the disposition of the aforementioned subsidiaries. Accordingly, the Company has excluded the accounts of Ever Trend Group in these financial statements and the accompanying notes contained herein.

 

On November 12, 2010, the Company entered into a share exchange agreement with Ding Neng Holdings Ltd, an investment holdings company incorporated in the British Virgin Islands (“Ding Neng Holdings”); the share exchange agreement was amended on December 6, 2010, where by the Company, under the share exchange agreement and its related amendment, would have contemplated acquiring 100% of Ding Neng Holdings in exchange for the issuance of 26,162,505 shares of the Company’s common stock, par value $0.001. Under the share exchange agreement, the Company would have contemplated owning and operating Ding Neng Holdings and Ding Neng Holdings’ directly, and indirectly held subsidiaries: Ding Neng Bio-technology Co., Ltd. (“Ding Neng HK”), Zhangzhou Fuhua Biomass Energy Technology Co., Ltd. (“WOFE”), and Ding Neng Bio-tech. Ding Neng HK was incorporated under the laws of Hong Kong on September 10, 2010. Ding Neng HK did not have any operations. Ding Neng HK has been delinquent with its annual regulatory filings in Hong Kong, and should be considered dormant and defunct. Ding Neng HK was wholly-owned by Ding Neng Holdings. Zhangzhou Fuhua Biomass Energy Technology Co., Ltd. (“WFOE”) was incorporated as a wholly-foreign owned entity under the laws of the People’s Republic of China (“PRC”), on November 2, 2010. WFOE was wholly-owned by Ding Neng HK. Ding Neng Bio-tech was incorporated under the laws of the PRC on December 8, 2006. It was located in Zhangzhou city Fujian Province of PRC. Ding Neng Bio-tech was engaged in the production, refinement and distribution of bio-diesel fuel in Southern China. Ding Neng Bio-tech operated a biodiesel manufacturing facility in Zhangzhou city. On October 28, 2010, WFOE and Ding Neng Bio-tech entered into a set of variable interest entity agreements that included: (1) a Consulting Service Agreement with Ding Neng Bio-tech, which entitled WFOE to receive substantially all of the economic benefits of Ding Neng Bio-tech in consideration for services provided by WFOE to Ding Neng Bio-tech, (2) an Option Agreement with Xinfeng Nie, Sanfu Huang, and Shunlong Hu (the shareholders of Ding Neng Bio-tech) allowing the WFOE to acquire all the shares of Ding Neng Bio-tech as permitted by PRC laws, (3) a Voting Rights Proxy Agreement that provides WFOE with the all voting rights of the Ding Neng Bio-tech shareholders, and (4) an Equity Pledge Agreement that pledges the shares in Ding Neng Bio-tech to WFOE (VIE Agreements). These VIE Agreements granted effective control of Ding Neng Bio-tech to WFOE. On June 4, 2015, WFOE filed a civil action in Haicang District People’s Court of Xiamen, Fujian, PRC (the “Court”) against Ding Neng Bio-tech, alleging that the purposes of those certain executed VIE Agreements entered into by WFOE and Ding Neng Bio-Tech on October 28, 2010, had been frustrated, and that these VIE Agreements should be terminated. WFOE alleged that Ding Neng Bio-Tech did not make any payment of service fees to WFOE, and that Ding Neng Bio-Tech failed to perfect the security interest in the pledged stocks. On July 14, 2015, this case was settled via in-court mediation directed by the Court. As a result, WFOE and Ding Neng Bio-Tech entered into binding settlement (i) to terminate the VIE Agreements, (ii) that WFOE and Ding Neng Bio-Tech do not have any other disputes over this case, and (iii) that the litigation fee in the amount of RMB10,000 (approximately $1,610.5) would be borne by Ding Neng Bio-Tech. Ding Neng Holdings is delinquent with its regulatory filings and annual fees to the British Virgin Islands; accordingly, the Ding Neng Holdings should be considered dormant and defunct.

 

 

Given that the Company has not been able to exercise effective control over Ding Neng Bio-Tech or to access Ding Neng Bio-tech’s financial information since 2011, and the VIE Agreements were terminated, the Company has excluded the accounts of Ding Neng Bio-Tech’s in these financial statements and the accompanying notes contained herein; the exclusion of such accounts is considered as a type two material subsequent event that occurred prior to the issuance of the financial statements but after the balance sheets dates that required material adjustments to the financial statements presented. Ding Neng Holdings is delinquent and defunct; the Company has determined that the Company was never registered as the sole shareholder of Ding Neng Holdings pursuant to the share exchange agreement dated November 12, 2010, and amended December 6, 2010; accordingly, the Company has excluded the accounts of Ding Neng and its subsidiaries in these financial statements and the accompanying notes as contained herein; the exclusion of such accounts is considered as a type two material subsequent event that occurred prior to the issuance of the financial statements but after the balance sheets dates that required material adjustments to the financial statements presented. The Company accounted for the issuance of shares to the shareholders of Ding Neng Holdings under the contemplated share exchange transaction as a recapitalization of the Company under reverse take-over accounting; accordingly, the Company’s historical stockholders’ equity has been retroactively restated to the first period presented; as a result of the Company not being updated to Ding Neng Holdings shareholder register, and that Ding Neng Holdings being defunct, the Company has written off all investments made in Ding Neng as loss on investment in subsidiary.

 

In connection with the share exchange agreement with the shareholders of Ding Neng Holdings that contemplated the acquisition of Ding Neng Holdings and its subsidiaries, the Company elected to adopt the fiscal year used by Ding Neng Holdings, which was a calendar year; accordingly, the Company’s financial statements presented herein have been, and on a go-forward basis, will be prepared using a December 31 year end date, and each operating period will cover twelve full calendar months.

 

Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A.

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

 

B.

Use of estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, impairment, inventory allowance, taxes and contingencies.

 

C.

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’s management 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’s management 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.

 

 

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 potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.

 

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

 

D.

Cash and cash equivalents

 

The Company classifies the following instruments as cash and cash equivalents: cash on hand, unrestricted bank deposits, and all highly liquid investments purchased with original maturities of three months or less.

 

E.

Income taxes

  

The Company uses the accrual method of accounting to determine income taxes for the year. The Company has implemented FASB ASC 740 Accounting for Income Taxes. Income tax liabilities computed according to the United States, People’s Republic of China (PRC), and Hong Kong tax laws provide for the tax effects of transactions reported in the financial statements and consists of taxes currently due, plus deferred taxes, related primarily to differences arising from the recognition of expenses related to the depreciation of plant and equipment, amortization of intangible assets, and provisions for doubtful accounts between financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes.

 

A valuation allowance is recognized for deferred tax assets if it is more likely than not, that the deferred tax assets will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

 

F.

Stock-based compensation

 

The Company has elected to use the Black-Scholes-Merton (“BSM”) pricing model to determine the fair value of stock options on the dates of grant. Also, the Company recognizes stock-based compensation using the straight-line method over the requisite service period.

 

The Company values stock awards using the market price on or around the date the shares were awarded and includes the amount of compensation as a period compensation expense over the requisite service period.

 

For the six months ended June 30, 2015 and 2014, no stock-based compensation has been recognized.

 

G.

Foreign currency translation

 

The accompanying financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

 

 

	Exchange Rates		6/30/2015		3/31/2015		12/31/2014		6/30/2014		3/31/2014
	Year-end RMB : US$ exchange rate		6.0888		6.1091		6.1535		6.1552		6.1619
	Average 12-month RMB : US$ exchange rate		6.1128		6.1358		6.1482		6.1397		6.1156

 

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US Dollar at the rates used in translation.

 

H.

Revenue recognition

 

In accordance to FASB ASC 605-10, The Company recognizes revenue net of value added tax (VAT) when persuasive evidence of an arrangement exists, delivery of the goods has occurred, customer acceptance has been obtained, which means the significant risks and ownership have been transferred to the customer, the price is fixed or determinable and collectability is reasonably assured. No return allowance is made as products returns are insignificant based on historical experience. Costs of distributing products to the Company’s customers are included in selling expenses.

 

I.

Cost of revenue

  

Cost of goods sold consists primarily of raw materials, utility and supply costs consumed in the manufacturing process, manufacturing labor, depreciation expense and direct overhead expenses necessary to manufacture finished goods as well as warehousing and distribution costs such as inbound freight charges, shipping and handling costs, purchasing and receiving costs.

 

J.

Earnings per share

 

Basic earnings per share is computed on the basis of the weighted average number of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted average number of common stock and common stock equivalents outstanding. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.

 

Dilution is computed by applying the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

 

K.

Comprehensive income

 

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company presents components of comprehensive income with equal prominence to other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

 

L.

Subsequent events

 

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.

 

 

 

M.

Recent accounting pronouncements

 

In May 2014, the FASB issued Accounting Standards Update ASU No. 2014-09, “Revenue from Contracts with Customers”, a converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfil a contract with a customer, as well as enhanced disclosure requirements. ASU 2014-9 is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The adoption of ASC 2014-9 is not expected to have a material effect on the Company’s financial statements.

 

In August 2014, the FASB issued Accounting Standards Update ASU No. 2014-15, “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on the Company’s financial statements.

 

In February 2015, the FASB issued Accounting Standards Update ASU No. 2015-02, “Consolidation” (Topic 810). ASU 2015-02 changes the guidance with respect to the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. All legal entities are subject to reevaluation under the revised consolidation mode. ASU 2015-02 affects the following areas: (1) Limited partnerships and similar legal entities. (2) Evaluating fees paid to a decision maker or a service provider as a variable interest. (3) The effect of fee arrangements on the primary beneficiary determination. (4) The effect of related parties on the primary beneficiary determination. (5) Certain investment funds. ASU 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 is not expected to have any impact on the Company’s financial statements.

 

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. The accounting guidance requires that debt issuance costs related to a recognized debt liability be reported on the Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The guidance is effective for the Company retrospectively beginning in the first quarter of fiscal 2017 and early adoption is permitted. The adoption of this accounting guidance is not expected to have a material impact on the Company’s financial statements.

 

 

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, last-out (“LIFO”). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The adoption of this accounting guidance is not expected to have a material impact on the Company’s financial statements.

 

As of June 30, 2015, except for the above, there are no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.

 

O.

Unaudited Interim Financial Information

 

These unaudited interim condensed financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2015.

 

The balance sheets and certain comparative information as of December 31, 2014 are derived from the audited financial statements and related notes for the year ended December 31, 2014 (“2014 Annual Financial Statements”), included in the Company’s 2014 Annual Report on Form 10-K. These unaudited interim financial statements should be read in conjunction with the 2014 Annual Financial Statements.

 

P.

Fair Value of Financial Instruments

 

ASC 825, Financial Instruments, requires that the Company discloses estimated fair values of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

 

 

The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, loan receivables and short-term bank loans, the carrying amounts approximate fair value due to their relatively short maturities. The three levels of valuation hierarchy are defined as follows:

 

	●	Level 1 inputs to the valuation methodology are quoted prices 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 asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

 

The following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10

 

	As of June 30, 2015:		Quoted in
			Active Markets				Significant Other				Significant
			for Identical				Observable				Unobservable
			Assets				Inputs				Inputs
			(Level 1)				(Level 2)				(Level 3)				Total
	Financial assets:
	Cash		$	264,851			$	-			$	-			$	264,851
	Total financial assets		$	264,851			$	-			$	-			$	264,851

 

	As of December 31, 2014:		Quoted in
			Active Markets				Significant Other				Significant
			for Identical				Observable				Unobservable
			Assets				Inputs				Inputs
			(Level 1)				(Level 2)				(Level 3)				Total
	Financial assets:
	Cash		$	200			$	-			$	-			$	200
	Total financial assets		$	200			$	-			$	-			$	200

  

 

Note 3 – ACCRUED EXPENSES

 

Accrued expenses consisted of the followings as of June 30, 2015 and December 31, 2014:

 

			June 30, 2015				December 31, 2014
	Audit Fee		$	100,000			$	150,000
	Legal Fee			50,000				100,000
			$	150,000			$	250,000

 

Note 4 – TAXES AND OTHER PAYABLES

 

Taxes and other payables consisted of the followings as of June 30, 2015 and December 31, 2014:

 

			June 30, 2015				December 31, 2014
	Franchise Tax		$	900,000			$	720,000
	Interest and Penalties			476,565				324,000
			$	1,376,565			$	1,044,000

 

Note 5 – GENERAL AND ADMINISTRATIVE EXPENSES

 

General and Administrative Expenses consisted of the followings for the six months period ended June 30, 2015 and 2014.

 

			For the six months period ended June 30,
			2015				2014
	Audit Fee		$	-			$	18,750
	Bank charges			55				-
	Consulting Fee			40,000				-
	Franchise Tax			180,000				180,000
	Insurance			1,186				-
	Interest and Penalties			154,608				129,600
	Legal Fee			-				12,500
	Office expense			556				-
	Other expense			2,027				-
	Professional fee			4,050				-
	Rental expense			22,747				-
	Salaries and wages			62,977				-
	Stock transfer fee			2,672				-
			$	470,878			$	340,850

 

Note 6 – STOCKHOLDERS’ EQUITY

 

(a)

Common stock

 

As of June 30, 2015 and December 31, 2014, the Company has 100,000,000 shares of common stock authorized, 98,405,005 and 58,405,005 shares issued and outstanding at par value of $0.001 per share.

 

For the six months ended June 30, 2015, the Company issued 40,000,000 shares to an selected consultant at $0.0125 per share.

 

 

Note 7 – INCOME TAXES

 

The Company was incorporated in the United States of America (“USA”). The Company does not generate any net income from its operations for the six months ended June 30, 2015 and 2014.

 

The provision for income taxes consists of the following:

 

				For the six months ended June 30,
	Current:			2015				2014
	USA		$	-			$	-
	Deferred:
	USA			-				-
	Provision for income taxes			-				-

 

The reconciliation of USA statutory income tax rate to the Company’s effective income tax rate is as follows:

 

				For the six months ended June 30,
				2015				2014
	Income tax at USA statutory rate of 34%		$	-			$	-
	Others			-				-
	Provision for income taxes			-				-

 

Uncertain Tax Positions

 

Interest associated with unrecognized tax benefits are classified as income tax, and penalties are classified in selling, general and administrative expenses in the statements of operations.  For the six months ended June 30, 2015 and 2014, the Company had no unrecognized tax benefits and related interest and penalties expenses.  Currently, the Company is not subject to examination by major tax jurisdictions.

 

Deferred Income Tax Benefits

 

Deferred income tax benefits arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating the Company’s ability to recover the deferred tax assets, the management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates that the Company is using to manage the underlying businesses. As of June 30, 2015 and December 31, 2014, management was uncertain as to whether or not the Company would be able to utilize the potential deferred tax assets arising from net operating losses` since the Company is not currently generating any revenue; accordingly, the Company has not recognized a deferred tax assets.

  

 

Note 8 – EARNINGS PER SHARE

 

Basic loss per common share from operations attributable to the Company is based on the weighted-average common shares outstanding during the relevant period. Diluted loss per common share from continuing operations attributable to the Company is based on the weighted-average common shares outstanding during the relevant period adjusted for the dilutive effect of share-based awards. The Company did not have significant share-based awards outstanding that were antidilutive and not included in the calculation of diluted loss per common share from operations attributable to the Company for the six months ended June 30, 2015 and 2014.

 

The following table sets forth the computation of basic and diluted earnings per share of common stock:

 

			Three Months Ended June 30,								Six Months Ended June 30,
			2015				2014				2015				2014
	Basic loss per share:
	Numerator:
	Net loss used in computing basic earnings per share		$	(79,591	)		$	(15,625	)		$	(470,878	)		$	(340,850	)
	Denominator:
	Weighted average common shares outstanding			98,405,005				38,405,005				94,668,741				38,405,005
	Basic loss per share		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.01	)
	Diluted earnings per share:
	Numerator:
	Net loss used in computing diluted loss per share		$	(79,591	)		$	(15,625	)		$	(470,878	)		$	(340,850	)
	Denominator:
	Weighted average common shares outstanding			98,405,005				38,405,005				94,668,741				38,405,005
	Diluted loss per share		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.01	)

 

Dilutive securities having an anti-dilutive effect on diluted (loss) earnings per share are excluded from the calculation.

 

 

Note 9 – SUBSEQUENT EVENTS

 

No significant event occurred from June 30, 2015 to the date these financial statements are filed with the Securities Exchange Commission that would have a material impact on the Company’s financial statements.

 

Note 10 – GOING CONCERN UNCERTAINTIES

 

These financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

As of June 30, 2015, the Company had accumulated deficits of $15,478,522 and working capital deficit of current liabilities exceeding current assets by $1,264,378 due to the substantial losses in operation in previous years/periods. Management’s plan to support the Company in operations and to maintain its business strategy is to raise funds through public and private offerings and to rely on officers and directors to perform essential functions with minimal compensation. If we do not raise all of the money we need from public or private offerings, we will have to find alternative sources, such as loans or advances from our officers, directors or others. Such additional financing may not become available on acceptable terms and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. If we require additional cash and cannot raise it, we will either have to suspend operations or cease business entirely.

 

The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 11 – COMMITMENTS

 

On January 15, 2015, the Company entered into a lease agreement for office space in New York. The monthly rental expense is approximately $2,831. The contract expires on January 31, 2016. The Company made a rental deposit of $4,700. At June 30, 2015, the Company’s outstanding lease commitments for 2015 and 2016 were $20,573 and $2,939, respectively.

  

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

 

The following discussion of the results of our operations and financial condition should be read in conjunction with our consolidated financial statements and the related notes thereto, which appear elsewhere in this Quarterly Report on Form 10-Q. Except for the historical information contained herein, the following discussion, as well as other information in this report, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the “safe harbor” created by those sections. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events. Actual results and the timing of the events may differ materially from those contained in these forward looking statements due to a number of factors, including those discussed in the “Forward-Looking Statements” set forth elsewhere in this Quarterly Report on Form 10-Q.

 

Liquidity and Capital Resources

 

At June 30, 2015, we had current assets of 281,906, current liabilities of 1,551,284, and a working capital deficiency of 1,269,378.  We have no credit facilities. 

 

Results of Operations

 

Three and Six months ended June 30, 2015 and 2014

 

Revenues for the three months ended June 30, 2015 and June 30, 2014 were 0. Revenues for the six months ended June 30, 2015 and six months ended June 30, 2014 were 0. Gross loss for the three months ended June 30, 2015 was 79,591, an increase of $63,966 or 400.9%, as compared to three months ended June 30, 2014. The increased loss was due to more general and administrative expenses. Gross loss for the six months ended June 30, 2015 was approximately $470,000, an increase of approximately $130,000, or 38% operating expenses for the six months ended June 30, as compared to six months ended June 30, 2014. The increase in gross loss reflected increased general and administrative expenses. Operating expenses for the three months ended June 30, 2015 increased 79,591, or 400.9%, as compared to the three months ended June 30, 2014. Operating expenses for the six months ended June 30, 2015 increased by approximately $130,000, or 38%. Operating expenses for the six months ended June 30, 2015 and 2014 were approximately $470,000 and $340,000. Our principal operating expense for the three and six months ended June 30, 2015 was administrative expenses. As a result of the foregoing, we sustained a net loss of $79,591 or $0.00 per share (basic and diluted), for the three months ended June 30, 2015 and a net loss of $470,878, or $0.00 per share (basic and diluted), for the six months ended June 30, 2015, as compared to net loss of $15,625, or $0.00 per share (basic and diluted), and $340,850, or $0.00 per share (basic and diluted), for the three and six months ended June 30, 2014, respectively.

 

 

Going Concern

 

As of June 30, 2015, the Company had accumulated deficits of $15,398,931 and working capital deficit of current liabilities exceeding current assets by $1,269,378 due to the substantial losses in operation in previous years/periods. Management’s plan to support the Company in operations and to maintain its business strategy is to raise funds through public and private offerings and to rely on officers and directors to perform essential functions with minimal compensation. If we do not raise all of the money we need from public or private offerings, we will have to find alternative sources, such as loans or advances from our officers, directors or others. Such additional financing may not become available on acceptable terms and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. If we require additional cash and cannot raise it, we will either have to suspend operations or cease business entirely. The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Significant Accounting Policies

 

The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our 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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2015, the end of the period covered by this Quarterly Report. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer concluded that, due to our limited internal audit function, our disclosure controls were not effective as of June 30, 2015, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 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 the president and treasurer, as appropriate to allow timely decisions regarding disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II

 

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

   

ITEM 1A. RISK FACTORS

 

There have been no material changes for the risk factors disclosed in the “Risk Factors” section of our current report on Company’s Form 8-K filed on October 20, 2015, which updated the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed on August 31, 2015.

 

 

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

We have not made any issuance of unregistered securities in the period covered by this Form 10-Q.

 

ITEM 3. DEFAULT UPON SENIOR SECURITIES.

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURE.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS

 

The following exhibits are filed herewith:

 

Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		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

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

 

	WAVE SYNC CORP.
October 28, 2015	By:	/s/ Zuyue Xiang
		Zuyue Xiang
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Ming Yi
		Ming Yi
		Chief Financial Officer
		(Principal Finance and Accounting Officer)

 

 

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