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 September 30, 2016,

 

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 As of November 10, 2016
Common stock, par value $0.001		19,920,876

 

 

 

TABLE OF CONTENTS

 

	Page
PART I-FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	2
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3
Item 4. Controls and Procedures	3
PART II-OTHER INFORMATION	4
Item 1. Legal Proceedings	4
Item 1A. Risk Factors	4
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4
Item 3. Defaults Upon Senior Securities	4
Item 4. Mine Safety Disclosures	4
Item 5. Other Information	4
Item 6. Exhibits	4
SIGNATURES	5

 

Throughout this Quarterly Report on Form 10-Q, the “Company”, “we,” “us,” and “our,” refer to Wave Sync Corp., 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.  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

 

INDEX TO FINANCIAL STATEMENTS

 

Contents

 

	Page(s)
Report of Independent Accountant	F-1
Condensed Consolidated Balance Sheets	F-2
Condensed Consolidated Statements of Operations and Comprehensive Loss	F-3
Condensed Consolidated Statements of Cash Flows	F-4
Notes to Condensed Consolidated Financial Statements	F-5 – F-16

 

 

REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

 

To:	The Board of Directors and Stockholders of
	Wave Sync Corp.

 

We have reviewed the accompanying interim consolidated balance sheets of Wave Sync Corp. (the “Company”) as of September 30, 2016 and December 31, 2015, and the related statements of operations and comprehensive loss and statements of cash flows for the three and nine month periods ended September 30, 2016 and 2015. These interim consolidated financial statements are the responsibility of the Company's management.

 

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company had incurred substantial losses in previous years, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 10. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

 

San Mateo, California	WWC, P.C.
November 14, 2016	Certified Public Accountants

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 AS OF SEPTEMBER 30, 2016 AND DECEMBER 31, 2015

(Stated in US Dollars)

 

		At September 30,				At December 31,
		2016				2015
						(Audited)
ASSETS
Current assets
Cash and cash equivalents		$	857,719			$	141,437
Accounts receivable, net			5,998				6,163
Other receivables			41,541				-
Related party receivables			1,500,679				1,541,956
Prepaid expenses			7,903				7,775
Prepaid taxes			3,143				47
Total Current Assets			2,416,983				1,697,378
Non-current Assets
Property, plant and equipment, net			14,857				21,037
Intangible asset, net			322				828
Deposits			9,700				9,700
Total Non-Current Assets			24,879				31,565
Total Assets		$	2,441,862			$	1,728,943
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	180,380			$	184,863
Taxes payable			1,236,575				1,234,888
Other payables			1,806,913				307,365
Related party payables			1,121,043				892,131
Accrued expenses			6,500				35,000
Capital lease – current portion			17,432				9,280
Total Current Liabilities			4,368,843				2,663,527
Non-current Liabilities
Capital lease			2,433				10,005
		$	4,371,276			$	2,673,532
Commitment and contingencies
Stockholders' Equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 19,920,325 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively			19,920				19,920
Additional paid in capital			15,822,988				15,822,988
Accumulated deficit			(17,704,410	)			(16,734,254	)
Accumulated other comprehensive loss			(67,912	)			(53,243	)
Total Stockholders' (Deficit) Equity			(1,929,414	)			(944,589	)
Total Liabilities and Stockholders' Equity		$	2,441,862			$	1,728,943

 

The accompanying notes are an integral part of these financial statements

 

 

WAVE SYNC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(Stated in US Dollars)

(Unaudited)

 

		For the nine months ended September 30,								For the three months ended September 30,
		2016				2015				2016				2015
Revenue		$	-			$	160,746			$	-			$	-
Cost of revenues			-				579				-				-
Gross profit		$	-			$	160,167			$	-			$	-
Operating expenses
General and administrative expenses			985,281				978,867				451,358				260,405
			985,281				978,867				451,358				260,405
Operating income		$	(985,281	)		$	(818,700	)		$	(451,358	)		$	(260,405	)
Other income (expenses)
Interest income			2,346				121				2,135				95
Interest expense			(1,113	)			(1,719	)			(367	)			(1,719	)
Other income			16,500				941				9,000				941
Other expense			(2,608	)			-				(2,608	)			-
Total other income/(expenses)			15,125				(657	)			8,160				(683	)
Loss before income taxes			(970,156	)			(819,357	)			(443,198	)			(261,088	)
Income tax			-				-				-				-
Net loss		$	(970,156	)		$	(819,357	)		$	(443,198	)		$	(261,088	)
Other comprehensive loss
Foreign currency translation adjustment			(14,669	)			44,502				(2,271	)			35,925
Comprehensive loss		$	(984,825	)		$	(774,855	)		$	(445,469	)		$	(225,163	)
Net loss per share
Basic		$	(0.04	)		$	(0.04	)		$	(0.02	)		$	(0.01	)
Diluted		$	(0.04	)		$	(0.04	)		$	(0.02	)		$	(0.01	)
Weighted average number of common shares outstanding
Basic			19,920,325				19,920,325				19,920,325				19,920,325
Diluted			19,920,325				19,920,325				19,920,325				19,920,325

 

The accompanying notes are an integral part of these financial statements

 

 

WAVE SYNC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(Stated in US Dollars)

(Unaudited)

 

		For the nine months ended September 30,
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(970,156	)		$	(819,357	)
Depreciation and amortization			7,747				7,187
Adjustments to reconcile net loss to net cash provided by operating activities and changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable			165				-
(Increase)/decrease in other receivable			(41,541	)			1,982
(Increase)/decrease in related party receivable			41,277				56,491
(Increase)/decrease in prepaid expenses			(3,225	)			(18,298	)
Increase/(decrease) in accounts payable			(4,483	)			(81,986	)
Increase/(decrease) in accrued liabilities			(27,919	)			(223,984	)
Increase/(decrease) in other payable			1,499,548				(140,291	)
Increase/(decrease) in related party advances			228,912				311,962
Increase/(decrease) in taxes payable			1,687				504,296
Net cash (used in)/provided by operating activities			732,012				(401,998	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment			(1,798	)			-
Purchase intangible asset			-				(1,158	)
Increase in deposits			-				(4,700	)
Net cash generated from investing activities			(1,798	)			(5,858	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock for cash			-				500,000
Net cash generated from financing activities			-				500,000
Net increase in cash and cash equivalents			730,214				92,144
Effect of foreign currency translation on cash and cash equivalents			(13,932	)			(44,311	)
Cash and cash equivalents, beginning balance			141,437				71,405
Cash and cash equivalents, ending balance		$	857,719			$	119,236
SUPPLEMENTAL DISCLOSURES:
Interest received		$	2,346			$	121
Interest paid		$	1,113			$	1,719
Income tax paid		$	-			$	-

 

The accompanying notes are an integral part of these financial statements

 

 

 

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, whereby 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. (“WFOE”), 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, among other things, (i) to terminate the VIE Agreements, and (ii) that the litigation fee in the amount of RMB10,000 (approximately $1,610.50) 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.

 

Share Purchase Agreement

 

On October 19, 2015, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with EGOOS Mobile Technology Company Limited, a British Virgin Islands holding company (“EGOOS BVI”), which owns 100% of EGOOS Mobile Technology Company Limited, a Hong Kong company (“EGOOS HK”), which owns 100% of Move the Purchase Consulting Management (Shenzhen) Co., Ltd. (“WFOE”), a foreign investment enterprise organized under the laws of the PRC, and which has, through various contractual agreements known as variable interest entity (“VIE”) agreements. These VIE agreements provide the WFOE management control and the rights to the profits of Guangzhou Yuzhi Information Technology Co., Ltd., a corporation organized under the laws of the PRC as a variable interest entity (“GZYZ”), which owns 100% of Shenzhen Qianhai Exce-card Technology Co., Ltd., a Chinese corporation (“SQEC”), which owns 100% of Guangzhou Rongsheng Information Technology Co., Ltd., a Chinese corporation (“GZRS”) and the sole shareholder of EGOOS BVI. The VIE agreements include: (1) an Exclusive Service Agreement between WFOE and GZYZ, which entitles WFOE to receive substantially all of the economic benefits of GZYZ in consideration for services provided by WFOE to GZYZ, (2) a Call Option Agreement with the shareholders of GZYZ, Yang Wenbin and Li Ping, allowing the WFOE to acquire all the shares of GZYZ as permitted by PRC laws, (3) a Voting Rights Proxy Agreement that provides WFOE with the all voting rights of the GZYZ’s shareholders, and (4) an Equity Pledge Agreement that pledges the shares in GZYZ to WFOE.

 

SQEC was incorporated on November 11, 2013. The Company is in the business of design, development, and proliferation of next generation debit and credit cards for financial institutions employing innovative secured encryption technology transmitted via audio wave technology; the Company intends to work with China Union Pay and China Construction Bank under a potential pilot program to develop and market to end user bank customers and business operators to adopt these next generation of cards by developing point of sale and commercial interfaces via software and other solutions to generate demand for these cards as a value-added alternative to current generation debit and credit cards.

 

On January 28, 2015, ownership of SQEC’s was transferred from Bao, Shanshan to Xiang, Zuyue for a consideration of approximately $1,629,062 (RMB 10,000,000). Simultaneously, Xiang, Zuyue transferred 40% of ownership to Li, Na for a consideration of $651,625 (RMB 4,000,000). On July 24, 2015, SQEC entire ownership was collectively transferred from Xiang, Zuyue and Li, Na to Guangzhou Yuzhi Information Technology Co. Ltd. for a consideration of approximately $1,629,062 (RMB 10,000,000).

 

On March 16, 2015, the GZRS was incorporated as a wholly-owned subsidiary of SQEC. GZRS has an authorized capital of RMB 1,000,000. As of the date of this report, GZRS has not been capitalized.

 

Pursuant to the Share Purchase Agreement the Company issued a convertible note to EGOOS BVI’s sole shareholder for 100% equity interest in EGOOS BVI. The note is convertible into 15,000,000 shares of the Company’s common stock contingent on the following conditions: (i) the Company has effectuated a reverse split of all of the issued and outstanding Common Stock as of the date of the issuance of the note (the “Reverse Split”) and (ii) the average closing price of the common stock for 3 business days within any period of 10 consecutive business days exceeds $1.00 per share (the “Conversion Conditions”). Upon conversion of the note, the existing shareholders of the Registrant will own an aggregate of 24.7% of the post-acquisition entity. The note was issued at Par, it is unsecured, interest free, and is due on the second anniversary of the issuance date of the note. In accounting for the note, the Company has assumed that the note does not carry any discount from face that requires accretion as interest expense to its results of operations, including any potential beneficial conversion features. On January 26, 2016, the reverse split was effectuated, and subsequently, on February 4, 2016, the convertible promissory note was converted into 15 million newly issued shares of the Company’s common stock. The conversion of the promissory note has been recognized retroactively to the first period presented as a component of the reverse takeover transactions detailed below.

 

The consolidated financial statements were prepared assuming that the Company has controlled EGOOS BVI and its intermediary holding companies, operating subsidiaries, and variable interest entities: EGOOS HK, WFOE, GZYZ, SQEC, and GZRS from the first period presented. The transactions detailed above have been accounted for as reverse takeover transactions and a recapitalization of the Company, including the conversion of the convertible promissory note; accordingly, the Company (the legal acquirer) is considered the accounting acquiree and EGOOS BVI (the legal acquiree) is considered the accounting acquirer. No goodwill has been recorded. As a result of this transaction, the Company is deemed to be a continuation of the business of EGOOS BVI and SQEC.

 

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A.

Method of Accounting

 

The Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements.

 

B.

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”).

 

C.

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of those wholly-owned subsidiaries.

 

As of September 30, 2016, the detailed identities of the consolidating subsidiaries are as follows:

 

	Name of Company		Place of incorporation		Attributable equity interest %				Registered capital
	EGOOS Mobile Technology Company Limited (“EGOOS BVI”)		BVI			100	%		$	1
	EGOOS Mobile Technology Company Limited (“EGOOS HK”)		Hong Kong			100	%			1,290
	Move the Purchase Consulting Management (Shenzhen) Co., Ltd. (“WFOE”)		P.R.C. (WFOE)			100	%			-
	Guangzhou Yuzhi Information Technology Co., Ltd. (“GZYZ”)		P.R.C.			100	%			150,527
	Shenzhen Qianhai Exce-card Technology Co., Ltd. (“SQEC”)		P.R.C.			100	%			150,527
	Guangzhou Rongsheng Information Technology Co., Ltd. (“GZRS”)		P.R.C.			100	%			1,505,267

 

D.

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.

 

E.

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.

 

 

F.

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.

 

G.

Accounts receivable

 

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

 

H.

Other receivables

 

Other receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is made when recovery of the full amount is doubtful.

 

I.

Property, plant and equipment

 

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method with a salvage value of 10%. Estimated useful lives of the plant and equipment are as follows:

 

	Computer equipment			3 years
	Office furniture			5 years

 

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

 

J.

Accounting for the Impairment of Long-lived assets

 

The long-lived assets held by the Company are reviewed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 360-10-35, “Accounting for the Impairment or Disposal of Long-Lived Assets,” for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Impairment is present if carrying amount of an asset is less than its undiscounted cash flows to be generated.

 

If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company believes no impairment has occurred to its assets during 2016.

 

K.

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.

 

L.

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 three and nine month periods ended September 30, 2016 and 2015, no stock-based compensation has been recognized.

 

 

M.

Foreign currency translation

 

The accompanying financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB) and Hong Kong dollar (HKD). 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		9/30/2016				12/31/2015				9/30/2015
	Year-end RMB : US$ exchange rate			6.6694				6.4907				6.3538
	Average annual RMB : US$ exchange rate			6.5792				6.2175				6.1606
	Year-end HKD : US$ exchange rate			7.7547				7.7504				7.7499
	Average annual HKD : US$ exchange rate			7.7632				7.7521				7.7527

 

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.

 

N.

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.

 

O.

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.

 

P.

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.

 

Q.

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.

 

R.

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.

 

 

S.

Recent accounting pronouncements

 

On January 5, 2016, the FASB issued ASU No. 2016-01 "Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities", which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity's accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017.

 

On February 25, 2016, the FASB issued ASU No. 2016-02 "Leases (Topic 842)", its new standard on accounting for leases. ASU 2016-02 introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB's new revenue recognition standard (e.g., those related to evaluating when profit can be recognized).

 

Furthermore, the ASU addresses other concerns related to the current leases model. For example, the ASU eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The new model represents a wholesale change to lease accounting. As a result, entities will face significant implementation challenges during the transition period and beyond, such as those related to:

 

	●	Applying judgment and estimating.
	●	Managing the complexities of data collection, storage, and maintenance.
	●	Enhancing information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting requirements.
	●	Refining internal controls and other business processes related to leases.
	●	Determining whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations.
	●	Addressing any income tax implications.

 

The new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar periods beginning on January 1, 2019), and interim periods therein.

 

On March 15, 2016, the FASB issued ASU No. 2016-07 "Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting", which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity method (as a result of an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional interest in the investee would be added to the current basis of the investor's previously held interest and the equity method would be applied subsequently from the date on which the investor obtains the ability to exercise significant influence over the investee. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the investment qualifies for the equity method.

 

The guidance in the ASU is effective for all entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years; early adoption is permitted for all entities. Entities are required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring after the ASU's effective date. Additional transition disclosures are not required upon adoption.

 

On March 17, 2016, the FASB issued ASU No. 2016-08 "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)", which amends the principal-versus-agent implementation guidance and illustrations in the Board's new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified by stakeholders, including those related to (1) determining the appropriate unit of account under the revenue standard's principal-versus-agent guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard's control principle. Among other things, the ASU clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service is "a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer." Therefore, for contracts involving more than one specified good or service, the entity may be the principal for one or more specified goods or services and the agent for others.

 

The ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard.

 

 

On March 30, 2016, the FASB issued ASU No. 2016-09 "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods.

 

On August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)". Stakeholders indicated that there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. As a result, the Company has elected to early adopt this Update prospectively as of September 30, 2016 and prior periods have not been retrospectively adjusted.

 

As of September 30, 2016, 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.

 

T.

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 September 30, 2016:		Quoted in				Significant
			Active Markets				Other				Significant
			for Identical				Observable				Unobservable
			Assets				Inputs				Inputs
			(Level 1)				(Level 2)				(Level 3)				Total
	Financial assets:
	Cash		$	857,719			$	-			$	-			$	857,719
	Total financial assets		$	857,719			$	-			$	-			$	857,719
	Financial liabilities:
	Capital lease		$	19,865			$	-			$	-			$	19,865
	Total financial assets		$	19,865			$	-			$	-			$	19,865

  

 

	As of December 31, 2015:		Quoted in				Significant
			Active Markets				Other				Significant
			for Identical				Observable				Unobservable
			Assets				Inputs				Inputs
			(Level 1)				(Level 2)				(Level 3)				Total
	Financial assets:
	Cash		$	141,437			$	-			$	-			$	141,437
	Total financial assets		$	141,437			$	-			$	-			$	141,437
	Financial liabilities:
	Capital lease		$	19,285			$	-			$	-			$	19,285
	Total financial assets		$	19,285			$	-			$	-			$	19,285

 

3.

RELATED PARTY RECEIVABLES AND PAYABLES

 

Related party receivable consisted of the following:

 

			9/30/2016				12/31/2015
	Xiang, Zuyue, director of SQEC		$	1,500,679			$	1,541,956
				1,500,679				1,541,956

 

The amounts are unsecured, interest-free and due on demand.

 

Related party payable consisted of the following:

 

			9/30/2016				12/31/2015
	Beijing Xinyu Shangfang Technology Co., Ltd.		$	155,659			$	470,532
	Lim, Jehn Ming, shareholder of EGOOS BVI			1,289				1,289
	Xiang, Zuyue, director of SQEC			-				7,102
	Wang, Yue, director of EGOOS HK			163,117				163,208
	Wang, Zaixian, director of Wave Sync Corp.*			800,000				250,000
	Wang, Zhenyu, employee of Wave Sync Corp.			500				-
	Li, Ping, director of WFOE			478				-
			$	1,121,043			$	892,131

 

The amounts are unsecured, interest-free and due on demand.

 

* The Company obtained Schuldschein loans from its director which are due between six months and one year.

 

4.

PROPERTY, PLANT AND EQUIPMENT

 

Property, plant, and equipment consisted of the following as of September 30, 2016 and December 31, 2015:

 

			9/30/2016				12/31/2015
	At Cost:
	Office equipment			18,888				19,408
	Office furniture			12,721				11,104
			$	31,609			$	30,512
	Less: Accumulated depreciation			(16,752	)			(9,475	)
			$	14,857			$	21,037

 

Depreciation expense for the period ended September 30, 2016 and 2015 was $7,747 and $7,187, respectively.

 

 

5.

ACCRUED EXPENSES

 

Accrued expenses consisted of the followings as of September 30, 2016 and December 31, 2015:

 

			9/30/2016				12/31/2015
	Audit fee			6,500				35,000
			$	6,500			$	35,000

 

6.

TAXES PAYABLE

 

Taxes payable consisted of the followings as of September 30, 2016 and December 31, 2015:

 

			9/30/2016				12/31/2015
	Franchise tax		$	1,224,000			$	1,224,000
	Payroll tax			8,633				8,633
	Individual income tax			3,942				2,255
			$	1,236,575			$	1,234,888

 

7.

STOCKHOLDERS’ EQUITY

 

Common stock

 

As of September 30, 2016 and December 31, 2015, the Company has 100,000,000 shares of common stock authorized, 19,920,325 shares issued and outstanding at par value of $0.001 per share.

 

8.

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 nine months ended September 30, 2016 and 2015.

 

The provision for income taxes consists of the following:

 

				For the nine months ended September 30,								For the three months ended September 30,
	Current:			2016				2015				2016				2015
	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 nine months ended September 30,								For the three months ended September 30,
				2016				2015				2016				2015
	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 three and nine month periods ended September 30, 2016 and 2015, 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 September 30, 2016, 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.

  

9.

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 three and nine month periods ended September 30, 2016 and 2015.

 

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

 

			For the nine months ended September 30,								For the three months ended September 30,
			2016				2015				2016				2015
	Basic loss per share:
	Numerator:
	Net loss used in computing basic earnings per share		$	(970,156	)		$	(819,357	)		$	(443,198	)		$	(261,088	)
	Denominator:
	Weighted average common shares outstanding			19,920,325				19,920,325				19,920,325				19,920,325
	Basic loss per share		$	(0.04	)		$	(0.04	)		$	(0.02	)		$	(0.01	)
	Diluted earnings per share:
	Numerator:
	Net loss used in computing diluted loss per share		$	(970,156	)		$	(819,357	)		$	(443,198	)		$	(261,088	)
	Denominator:
	Weighted average common shares outstanding
	Diluted loss per share		$	(0.04	)		$	(0.04	)		$	(0.02	)		$	(0.01	)

 

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

 

 

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 September 30, 2016, the Company had accumulated deficits of $17,704,410 and working capital deficit of current liabilities exceeding current assets by $1,951,860 due to the substantial losses in operation in previous 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.

 

11.

COMMITMENTS

 

(a.)

On January 15, 2015, the Company entered into a lease agreement for an office space in New York. The monthly rental expense is approximately $2,939. The contract was extended during the year and expires on November 30, 2016. The Company made a rental deposit of $4,700.

 

(b.)

On November 18, 2015, the Company entered into a lease agreement for an additional office space in New York. The monthly rental expense is approximately $2,500. The contract was extended during the year and expires on October 31, 2016. The Company made a rental deposit of $5,000.

 

(c.)

On June 2, 2016, the Company entered into a lease agreement for office space in Guangzhou city, Guangdong Province, P.R.C. commencing on June 1, 2016 for a three-year lease term. The monthly rental expense is approximately $2,936 (RMB 19,579).

 

(d.)

On September 1, 2016, Mr. Zuyue Xiang entered into a lease agreement on behalf of the Company for office space in Guangdong Province, P.R.C. commencing on September 1, 2016 for a three-year lease term. The monthly rental expense is approximately $957 (RMB 6,384).

 

 

As of September 30, 2016, the outstanding lease commitments are:

 

	Year 1		$	55,093
	Year 2			46,715
	Year 3			34,972
			$	136,780

 

As of December 31, 2015, the outstanding lease commitments are:

 

	Year 1		$	98,010
	Year 2			13,560
			$	111,570

 

12.

CAPITAL LEASE

 

The Company leases certain computer equipment and furnishing under lease classified as capital lease.

 

On December 31, 2014, the Company entered into a capital lease agreement in the amount of RMB 181,050, which was approximately $ 28,494, with a related party leasing the following: eighteen computers, two mobile phones, one printer, and office furniture with an interest rate of 7.8% for a period of 36 months with an expiration date of December 31, 2017 where the title of the leased assets will be transferred to the Company at date of expiration of the lease.

 

The following is a schedule showing the future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of September 30, 2016:

 

	Year 1		$	17,432
	Year 2			2,433
	Total minimum lease payments			19,865
	Less: Amount representing interest			(1,098	)
	Present value of net minimum lease payments		$	18,767

 

Reflected in the balance sheet as current and noncurrent obligations under capital leases of $17,432 and $2,433, respectively.

 

As of September 30, 2016, the present value of minimum lease payments due within one year is $18,767.

 

13.

CONCENTRATION OF RISKS

 

A.

Major Vendors and Accounts Payable

 

The Company had certain vendors who represented 10% or more of the Company’s total cost of sales or expenses, or whose accounts payable balances individually represented 10% or more of the Company’s total accounts payable. For the nine month period ended September 30, 2016, three vendors accounted for 30%, 8%, and 62% of accounts payable, respectively. For the nine month period ended September 30, 2015, three vendors accounted for 30%, 10%, and 60% of accounts payable, respectively.

 

 

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

 

The following discussion and analysis of our results of operations and financial condition since the Company’s inception should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this quarterly report. All statements, other than statements of historical facts, included in this report are forward-looking statements. When used in this report, the words “may,” “will,” “should,” “would,” “anticipate,” “estimate,” “possible,” “expect,” “plan,” “project,” “continuing,” “ongoing,” “could,” “believe,” “predict,” “potential,” “intend,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, availability of additional equity or debt financing, changes in sales or industry trends, competition, retention of senior management and other key personnel, availability of materials or components, ability to make continued product innovations, adverse results of lawsuits against us and currency exchange rates. Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Readers of this report are cautioned not to place undue reliance on these forward-looking statements, as there can be no assurance that these forward-looking statements will prove to be accurate and speak only as of the date hereof. Management undertakes no obligation to publicly release any revisions to these forward-looking statements that may reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. This cautionary statement is applicable to all forward-looking statements contained in this report.

 

Overview of Business

 

The Company is a development stage in the business of design, development, and proliferation of next generation debit and credit cards for financial institutions employing innovative secured encryption technology transmitted via audio wave technology; the Company has partnered with China Union Pay and China Construction Bank under a pilot program to develop and market to the to end using bank customers and business operators to adopt these next generation of cards by developing point of sale and commercial interfaces via software and other solutions to generate demand for these cards as a value-added alternative to current generation debit and credit cards.

 

Critical Accounting Policies

 

We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the consolidated financial statements are prepared. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions.  On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our consolidated financial statements. 

 

While we believe that the historical experience, current trends and other factors considered support the preparation of our consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.

 

Results of Operations

 

We are a development stage company and have generated minimal revenues from operations since our inception on November 11, 2013 to September 30, 2016.  As of September 30, 2016, we had total assets of $2,441,862 and total liabilities of $4,371,276. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

We are in the process of developing our products and services. Consequently, we generated minimal revenues as of the date of this report. We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue during 2016.

 

Revenue

 

Revenues for the three months ended September 30, 2016 were $0, due to the waiting period for security test on the card. So we have no revenue in this quarter. Revenues for the nine months ended September 30, 2016 were $0 compared to $160,746 for the period to September 30, 2015.

 

Expenses

 

During the three month period ended September 30, 2016, we incurred general and administrative expenses and professional fees of $451,358.  General and administrative and professional fee expenses were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting, developmental costs, and marketing expenses.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures and to service our debt. We expect to finance our operations through advances from related parties, the sale of equity or debt securities until we generate positive cash flows. We may need additional debt or equity capital in order to remain solvent. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

 

The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Recent Accounting Pronouncements

 

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to our company.  Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on our company's present or future consolidated financial statements.

 

Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.  

 

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, as of September 30, 2016, 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 September 30, 2016, 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed on April 13, 2016. 

 

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 Quarterly Report on 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.
November 14, 2016	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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