UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2019
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 333-179130
J.E.M.
Capital, Inc.
(Exact
name of registrant as specified in its charter)
|
|
Delaware
|
46-0525801
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
5B,
Prat Building, 13 Prat Avenue, Tsim Sha Tsui, Kowloon, Hong Kong
(Address
of principal executive offices)
+
(852) 3957 0379
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
|
Name
of each exchange on which registered
|
None
|
None
|
Securities
registered pursuant to Section 12(g) of the Act:
|
|
Title
of each class
|
Name
of each exchange on which registered
|
None
|
None
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☒ No ☐
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
|
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☒
|
(Do
not check if a smaller reporting company)
|
|
|
Emerging
growth company ☐
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☒ No ☐
Applicable
Only to Registrants Involved in Bankruptcy Proceedings During the Preceding Five Years:
Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No
☐
Indicate
the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of
March 27, 2020, there were 14,032,400 shares of common stock, par value $0.0001, issued and outstanding.
Documents
Incorporated by Reference
List
hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3)
Any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described
for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.
PART
I
This
Annual Report on Form 10-K contains forward-looking statements. These statements may relate to, but are not limited to, expectations
of potential target businesses and future operating results or financial performance, as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.
In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should,"
"could," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"intend," "potential," "might," "would," "continue" or the negative of these
terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
There
may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements. Except as required by applicable law, including
the securities laws of the United States and the rules and regulations of the SEC, we do not plan to publicly update or revise
any forward-looking statements contained in this Annual Report on Form 10-K after we file it, whether as a result of any new information,
future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee future results, levels of activity, performance or achievements.
As
used herein, except as otherwise indicated by context, references to "we,", "us," "our," or the
"Company" refer to J.E.M. Capital, Inc.
ITEM
1 – BUSINESS
Corporate
History
We
were incorporated on September 14, 2011 in Delaware as "Eco Planet Corp." On October 21, 2013, we effected a 1-for-200
reverse stock split of our common stock, $0.0001 par value per share (the "Common Stock"), and changed our name to "Zosano,
Inc." On October 31, 2013, we entered into a Stock Purchase Agreement with Zosano Pharma Corporation (formerly known as ZP
Holdings, Inc.) pursuant to which we issued and sold 10,016,973 shares of Common Stock (the "Shares") to Zosano Pharma
Corporation. As a result of our issuance and sale of the Shares to Zosano Pharma Corporation, a change in control of the Company
occurred and Zosano Pharma Corporation became the owner of 99.9% of our outstanding Common Stock.
On
November 14, 2016, Zosano Pharma Corporation entered into Stock Purchase Agreements with eighteen (18) foreign investors (the
"New Shareholders"), pursuant to which Zosano Pharma Corporation sold an aggregate of 10,016,973 shares of common stock
of Zosano, Inc. (the "Company"), or approximately 99.9% of the issued and outstanding common stock of the Company, to
the New Shareholders. As a result of the transaction, the New Shareholders acquired approximately 99.9% of the total votes entitled
to be cast at any meeting of shareholders, giving them voting control of the Company. The New Shareholders obtained the funds
for the purchase of the Company's common stock in the transaction from each of their available cash on hand.
On
December 15, 2016, we filed Articles of Amendment to its Amended Articles of Incorporation (the "Articles of Amendment")
with the Secretary of State of Delaware effecting a name change of the Company to J.E.M. Capital, Inc. (the "Corporate Action").
The Corporate Action and the Amended Articles became effective on March 15, 2017, following compliance with notification requirements
of the Financial Industry Regulatory Authority. The new CUSIP number for the Company's common stock is 46619V107. On March 14,
2017, the Financial Industry Regulatory Authority (FINRA) approved the Corporate Action. The Company's stock is quoted on the
OTCQB under the ticker symbol ZOSN, but beginning March 15, 2017, the Company's common stock will begin trading under the symbol
JEMC.
On
January 5, 2017, we entered into a Share Exchange Agreement with Essential Element Limited, a British Virgin Islands company ("ESEL"),
and Leung Chi Wah Earnest ("Mr. Leung"), the principal shareholder of ESEL, pursuant to which the Company issued an
aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company,
to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares
of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital"). ESEL and JEM Capital currently
have no operations but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong
Kong and China. ESEL has incurred material expenses setting up such structure.
3
Business
Overview
On
October 31, 2013, we underwent a change of control and implemented a business plan to seek and identify a privately held operating
company desiring to become a publicly held company by merging with us through a reverse merger or acquisition. Our strategy is
to identify a privately held operating company, which is profitable or, in management's view, has growth potential, irrespective
of the industry in which it is engaged, desiring to become a publicly held company with access to U.S. capital markets by merging
with us through a reverse merger or acquisition. However, we do not intend to combine with a company that may be deemed an investment
company subject to the Investment Company Act of 1940. Private companies wishing to have their securities publicly quoted may
seek to merge or effect another form of business combination with a shell company with a significant stockholder base. As a result
of the merger or other business combination, the stockholders of the private company would hold a majority of the issued and outstanding
shares of the shell company, which will likely cause substantially dilution to our current shareholder base. Typically, the directors
and officers of the private company become the directors and officers of the shell company. Often the name of the private company
becomes the name of the shell company.
From
October 31, 2013 to November 14, 2016, we have no capital and must depend on Zosano Pharma Corporation, the holder of 99.9% of
our outstanding voting securities, to provide us with the necessary funds to implement our business plan. As the result of sales
of shares to New Shareholders on November 14, 2016, we must depend on the New Shareholders to provide us with the necessary funds
to implement our business plan. We continue to evaluate business opportunities that we may pursue, but we have not reached any
definitive agreement or understanding with any person concerning a merger or other business combination.
On
January 18, 2019, the Company appointed MingJing Xia and Yulong Yang as directors of the Company, and subsequently in April and
May 2019, MingJing Xia was appointed as the Chairperson of the Board and Chief Financial Officer, while Yulong Yang appointed
as the Chief Executive Officer. They would be primarily responsible for evaluating business combination opportunities. We believe
that business opportunities may come to our attention from various sources, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals.
We have no plan, understanding, agreements, or commitments with any individual for such person to act as a finder of opportunities
for us.
We
can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited
resources that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances
that any business combination, if one occurs, will be on terms that are favorable to our current stockholders or us.
We
do not propose to restrict our search for a business combination candidate to any particular geographical area or industry, and,
therefore, we are unable to predict the nature of our future business operations. Our management's discretion in the selection
of business opportunities is unrestricted, subject to the availability of such opportunities, economic conditions and other factors.
Any
entity that has an interest in being acquired by, or merging into us, is expected to be an entity that desires to become a public
company and establish a public trading market for its securities. In connection with such a merger or acquisition, it is anticipated
that an amount of common stock constituting control of us would be issued by us.
Evaluation
and Selection of Business Opportunities
Certain
types of business acquisition transactions may be completed without requiring us to first submit the transaction to our stockholders
for their approval. If the proposed transaction is structured in such a fashion, our stockholders will not be provided with financial
or other information relating to the candidate prior to the completion of the transaction.
If
the structure of a proposed business combination or business acquisition transaction requires the approval of our stockholders,
and we are a company required to file reports under the Exchange Act, then we will be required to provide our stockholders with
information as applicable under Regulations 14A and 14C under the Exchange Act. Currently, however, we are not required to file
reports under the Exchange Act.
The
analysis of business opportunities will be undertaken by or under the supervision of Yulong Yang and Mingjing Xia, our Chief Executive
Officer and Chief Financial Officer, respectively. In analyzing potential merger candidates, our management will consider, among
other things, the following factors:
|
·
|
potential
for future earnings and appreciation of value of securities;
|
|
·
|
perception
of how any particular business opportunity will be received by the investment community and by our stockholders;
|
|
·
|
ability,
following the business combination, to qualify securities for listing on a national securities exchange;
|
|
·
|
historical
results of operation;
|
|
·
|
liquidity
and availability of capital resources;
|
|
·
|
competitive
position as compared to other companies of similar size and experience within the industry segment as well as within the industry
as a whole;
|
|
·
|
strength
and diversity of existing management or management prospects that are scheduled for recruitment;
|
|
·
|
amount
of debt and contingent liabilities; and
|
|
·
|
the
products and/or services and marketing concepts of the target company.
|
No
single factor will control the selection of a business opportunity. Our management will attempt to analyze all factors appropriate
to each opportunity and make a determination based upon reasonable investigative measures and available data. Potentially available
business opportunities may occur in many different industries and at various stages of development, all of which will make the
task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Because of our
limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the business opportunity
to be acquired. Although we expect to analyze specific proposals and select a business opportunity in the near future, we are
unable to predict when we may consummate a business transaction.
Before
making a decision to participate in a business transaction, we will generally request that we be provided with written materials
regarding the business opportunity containing as much relevant information as possible, including, but not limited to, a description
of products, services and company history; management resumes; financial information; available projections, with related assumptions
upon which they are based; an explanation of proprietary products and services; evidence of existing patents, trademarks, or service
marks, or rights thereto; present and proposed forms of compensation to management; a description of transactions between such
company and its affiliates during the relevant periods; a description of present and required facilities; an analysis of risks
and competitive conditions; a financial plan of operation and estimated capital requirements; audited consolidated financial statements,
or if audited consolidated financial statements are not available, unaudited consolidated financial statements, together with
reasonable assurance that audited consolidated financial statements would be able to be produced in order to file a Current Report
on Form 8-K to be filed with the Securities and Exchange Commission ("SEC") upon consummation of the business combination.
We
believe that various types of potential candidates might find a business combination with us to be attractive. These include candidates
desiring to create a public market for their securities in order to enhance liquidity for current stockholders, candidates which
have long-term plans for raising capital through public sale of securities and believe that the prior existence of a public market
for their securities would be beneficial, and candidates who plan to acquire additional assets through issuance of securities
rather than for cash and believe that the development of a public market for their securities will be of assistance in that process.
Companies which have a need for an immediate cash infusion are not likely to find a potential business combination with us to
be a prudent business transaction alternative.
Employees
Currently
we have two employees including executive officers. We rely exclusively on the expertise of executive officers. Our management
expects to use consultants, attorneys and accountants as necessary. The need for employees and their availability will be addressed
in connection with the decision on whether or not to acquire or participate in specific business opportunities.
Available
Information
Historically
we have filed periodic reports under the Exchange Act. Our Quarterly Reports, Annual Reports, and other filings can be obtained
from the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of
10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission at http://www.sec.gov.
ITEM
1A – RISK FACTORS
As
a smaller reporting company, this Item is not applicable to us.
ITEM
1B – UNRESOLVED STAFF COMMENTS
None
ITEM
2 – PROPERTIES
Currently
we maintain a mailing address at Hong Kong at 5B, Prat Building, 13 Prat Avenue, Tsim Sha Tsui, Kowloon, Hong Kong and our telephone
number at this address is (852) 3957 0379. Other than this mailing address, we do not maintain any other office facilities, and
do not anticipate the need for maintaining any office facilities at any time in the foreseeable future. We do not pay any rent
or other fees for the use of the mailing address. Our management does not believe we will establish a separate office until we
have completed a business acquisition transaction. It is not possible to predict what arrangements will actually be made with
respect to future office facilities.
ITEM
3 - LEGAL PROCEEDINGS
We
are not a party to or otherwise involved in any pending legal proceedings.
ITEM
4 – MINE SAFETY DISCLOSURES
Not
applicable.
PART
II
ITEM
5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
Our
common stock is quoted for trading on the OTC Bulletin Board and OTC Markets, and has been quoted since July 10, 2012. Our current
trading symbol is "JEMC". There have been a limited number of trades of our common stock since our stock has been quoted
on the OTC Markets. In 2013, 500 shares of our common stock traded during the quarter ended September 30, 2013 at $0.70 per share
(giving effect to the 1-for-200 reverse split of our common stock effected on October 21, 2013). No shares were traded in 2019
and 2018.
The
following table sets forth the high and low bid information for each quarter within the fiscal years ended December 31, 2018 and
December 31, 2019, as reported by OTC Markets, adjusted to reflect the 1-for-200 reverse stock split of our common stock effected
on October 21, 2013. The information reflects prices between dealers and does not include retail markup, markdown, or commission,
and may not represent actual transactions.
|
|
|
|
Bid
Prices
|
Year
Ended
December
31,
|
|
Period
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
2018
|
|
First Quarter
|
|
$
0.70
|
|
$
0.70
|
|
|
Second Quarter
|
|
$
0.70
|
|
$
0.70
|
|
|
Third Quarter
|
|
$
0.70
|
|
$
0.70
|
|
|
Fourth Quarter
|
|
$
0.70
|
|
$
0.70
|
2019
|
|
First
Quarter
|
|
$
0.70
|
|
$
0.70
|
|
|
Second Quarter
|
|
$
0.70
|
|
$
0.70
|
|
|
Third Quarter
|
|
$
0.70
|
|
$
0.70
|
|
|
Fourth Quarter
|
|
$
0.70
|
|
$
0.70
|
The
Securities Enforcement Remedies and Penny Stock Reform Act of 1990 requires additional disclosure by brokers and dealers relating
to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations
that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to
a few exceptions that we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.
Holders
As
of March 27, 2020, there were 14,032,400 shares of our common stock outstanding held by 65 holders of record and additional shares
held in brokerage accounts. Of these shares, 1,527 shares were free-trading.
Warrants
We
do not have any warrants to purchase our common stock outstanding.
Dividends
No
dividends were declared or paid for the year ended December 31, 2019 and 2018.
Securities
Authorized for Issuance Under Equity Compensation Plans
There
are no outstanding options or warrants to purchase shares of our common stock under any equity compensation plans.
Currently,
we do not have any equity compensation plans and we have never had such a plan. As a result, we did not have any options, warrants
or rights outstanding as of December 31, 2019 or 2018.
Recent
Issuance of Unregistered Securities
None.
ITEM
6 - SELECTED FINANCIAL DATA
As
a smaller reporting company, we are not required to provide the information required by this Item.
ITEM
7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the
consolidated financial statements and notes included on page F-1 of this Annual Report on Form 10-K. This Annual Report on Form
10-K of J.E.M. Capital, Inc. contains forward-looking statements, principally in this Section and "Business." Generally,
you can identify these statements because they use words like "anticipates," "believes," "expects,"
"future," "intends," "plans," and similar terms. These statements reflect only our current expectations.
Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee
their accuracy and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which
are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue reliance on
these forward-looking statements which apply only as of the date of this annual report. To the extent that such statements are
not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and
uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such
expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the
statement of expectation of belief will be accomplished.
We
believe it is important to communicate our expectations to our investors. There may be events in the future, however, that we
are unable to predict accurately or over which we have no control. Any risk factors listed in this filing, as well as any cautionary
language in this annual report, provide examples of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events
to differ materially from those anticipated, include, but are not limited to, changes in investment and business strategies; general
economic, financial and business conditions; changes in and compliance with governmental regulations; changes in various tax laws;
and the availability of key management and other personnel.
Overview
We
were incorporated on September 14, 2011 in Delaware as "Eco Planet Corp." On October 21, 2013, we effected a 1-for-200
reverse stock split of our common stock, $0.0001 par value per share (the "Common Stock"), and changed our name to "Zosano,
Inc." On October 31, 2013, we entered into a Stock Purchase Agreement with Zosano Pharma Corporation (formerly known as ZP
Holdings, Inc.) pursuant to which we issued and sold 10,016,973 shares of Common Stock (the "Shares") to Zosano Pharma
Corporation. As a result of our issuance and sale of the Shares to Zosano Pharma Corporation, a change in control of the Company
occurred and Zosano Pharma Corporation became the owner of 99.9% of our outstanding Common Stock.
On
November 14, 2016, Zosano Pharma Corporation entered into Stock Purchase Agreements with eighteen (18) foreign investors (the
"New Shareholders"), pursuant to which Zosano Pharma Corporation sold an aggregate of 10,016,973 shares of common stock
of Zosano, Inc. (the "Company") or approximately 99.9% of the issued and outstanding common stock of the Company, to
the New Shareholders. As a result of the transaction, the New Shareholders acquired approximately 99.9% of the total votes entitled
to be cast at any meeting of shareholders, giving them voting control of the Company. The New Shareholders obtained the funds
for the purchase of the Company's common stock in the transaction from each of their available cash on hand.
On
November 21, 2016, we obtained written consent by the holder of the majority of the voting power of the Company's capital stock
approving amendments to the Company's Articles of Incorporation to change the Company's name from Zosano, Inc. to J.E.M. Capital,
Inc. The Company has filed Articles of Amendment with the Secretary of State of Delaware, which will become effective upon compliance
with notification requirements of the Financial Industry Regulatory Authority.
On
January 5, 2017, we entered into a Share Exchange Agreement with Essential Element Limited, a British Virgin Islands company ("ESEL"),
and Leung Chi Wah Earnest ("Mr. Leung"), the principal shareholder of ESEL, pursuant to which the Company issued an
aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company,
to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares
of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital"). ESEL and JEM Capital currently
have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong
Kong and China. ESEL has incurred material expenses setting up such structure.
We
are a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act").
As a shell company, we have no operations and assets. Our current business plan is to identify a privately held operating company,
which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged, desiring
to become a publicly held company with access to U.S. capital markets by merging with us through a reverse merger or acquisition.
We can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited
resources that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances
that any business combination, if one occurs, will be on terms that are favorable to our current stockholders or us.
Year
Ended December 31, 2019 Compared To Year Ended December 31, 2018
|
|
Years
Ended
December
31,
|
|
|
2019
|
|
2018
|
Operating
expenses:
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
34,296
|
|
|
87,413
|
Total
operating expenses
|
|
|
34,296
|
|
|
87,413
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(34,296)
|
|
|
(87,413)
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(34,296)
|
|
|
(87,413)
|
Revenue
We
have never generated any revenue. We do not expect to generate any revenues before we merge with a privately-held operating company
desiring to become a publicly-held company. After a successful merger transaction, we do not know when, or if, we will generate
revenue as that will be in the control of the private company that merges with us.
Operating
expenses
Our
operating expenses primarily consisted of general and administrative expenses, such as salary and related expenses, audit and
review fees, tax returns preparation fees, transfer agent services, Edgar filing costs, franchise and business taxes, other professional
services and general office expenses. Operating expenses for the year ended December 31, 2019 and 2018 were $34,296 and $87,413,
respectively. The decrease in operating expenses was due to the decrease in salary and related expenses paid for officers and
other office expenses of the Company for the year ended December 31, 2019. We anticipate our operating expenses will be approximately
$40,000 to $100,000 per year until we successfully merge with a privately-held operating company.
Net
loss
Net
loss for the fiscal year ended December 31, 2019 was $34,296, or $0.003 per share, as compared to $87,413, or $0.007 per share
for the year ended December 31, 2018. The decrease in net loss was due to the decrease in salary and related expenses paid for
the year ended December 31, 2019. We will continue to operate at a net loss until we merge with a privately-held operating company
desiring to become a publicly-held company. After a successful merger transaction, we do not know when, or if, we will operate
at a net profit as that will be in the control of the private company that merges with us. We anticipate our net loss will primarily
consist of our operating expenses until we successfully merge with a private company.
Liquidity
and Capital Resources
During
the years ended December 31, 2019 and 2018, because of our operating losses, we did not generate positive operating cash flows.
Our cash on hand as of December 31, 2019 and 2018 was $Nil and $164 respectively and our monthly cash flow burn rate is minimal
due to our lack of operations. Our current cash needs are being satisfied by stockholders. We do not believe we will be able to
satisfy our cash needs internally until we consummate a merger transaction with a private company, and even then there is no assurance
we will be able to do so.
Our
cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2019 compared to December 31,
2018 are as follows:
|
|
December
31,
|
|
December
31,
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
Cash
|
|
|
-
|
|
|
|
164
|
|
|
|
(164)
|
|
Prepaid
expenses
|
|
|
12,000
|
|
|
|
-
|
|
|
|
12,000
|
|
Total
current assets
|
|
|
12,000
|
|
|
|
164
|
|
|
|
11,836
|
|
Equipment,
net
|
|
|
-
|
|
|
|
496
|
|
|
|
(496)
|
|
Total
assets
|
|
|
12,000
|
|
|
|
660
|
|
|
|
11,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
132,456
|
|
|
|
110,820
|
|
|
|
21,636
|
|
Total
liabilities
|
|
|
132,456
|
|
|
|
110,820
|
|
|
|
21,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
and Liabilities
As
of December 31, 2019, we had prepaid expenses of $12,000 in respect of the unvested awards of stock based compensation. We had
liabilities totalling $132,456 and $110,820 as of December 31, 2019 and December 31, 2018, respectively, which consisted of accrued
expenses related to salary, office expenses, audit fees, transfer agent services, legal fees and advances from shareholders.
Stockholders'
Deficit
Stockholders'
deficit consisted primarily of shares issued to founders in the amount of $1,403, capital raised to fund our operations of $55,589,
and additional capital provided to settle obligations for $245,679, offset by the accumulated deficit of $446,927 as of December
31, 2019.
Sources
and Uses of Cash
As
of December 31, 2019 and 2018, we had cash of $Nil and $164, respectively, no significant change in cash position.
Cash
Flows from Operating Activities . For the fiscal year ended December 31, 2019, our net cash used in operations was $25,650
compared to net cash used in operations of $47,947 for the fiscal year ended December 31, 2018. This was mainly attributable to decrease
in expenses for the year ended December 31, 2019.
Cash
Flows from Financing Activities . Net cash flows provided by financing activities in the fiscal year ended December 31,
2019 was $25,486, compared to net cash provided by financing activities of $47,945 in the same period in 2018. Net cash provided
by financing activities in 2019 and 2018 were primarily due to advances from shareholders.
Going
Concern
Our
independent auditors have added an explanatory paragraph to their audit opinion issued in connection with our consolidated financial
statements for our fiscal year ended December 31, 2019 and 2018 regarding our ability to continue as a going concern. Our ability
to continue as a going concern is dependent upon our ability to locate a private company to merge with and our ability to successfully
borrow money from our shareholders.
The
consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going
concern.
Contractual
Obligations
We
have no contractual obligations as of December 31, 2019.
Off
Balance Sheet Arrangements
We
have no off-balance sheet arrangements.
Critical
Accounting Policies
Use
of Estimates
The
Company's consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(U.S. GAAP) which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the consolidated financial statements and reported amounts of revenue and expense during the reporting period.
Estimates are used when accounting for certain items such as accounting for income tax valuation allowances. Estimates are based
on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due
to the inherent uncertainty involved with estimates, actual results may differ.
Principles
of Consolidation
The
consolidated financial statements include the financial statements of J.E.M. Capital, Inc. and its subsidiaries for which it is
the primary beneficiary. Upon making this determination, the Company is deemed to be the primary beneficiary of the entity, which
is then required to be consolidated for financial reporting purposes. All significant intercompany transactions and balances have
been eliminated upon consolidation.
Business
acquisitions
The
Company has accounted for all of its acquisitions using the acquisition method. The operating results of each acquisition have
been included in the consolidated financial statements since the respective dates of acquisition. There were no business acquisitions
for the years ended December 31, 2019 and 2018.
Income
Taxes
The
Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included
in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference
between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will
result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards
is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized
in future periods. Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical
and projected future operating results, the eligible carryforward period, and other circumstances. If it becomes more likely than
not that a tax asset will be used, the related valuation allowance on such assets would be reduced.
The
Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. Once this threshold has been
met, the Company's measurement of its expected tax benefits is recognized in its consolidated financial statements. The Company
accrues interest on unrecognized tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized
as a component of income tax expense.
The
Company' income tax returns are subject to examination for three years from the date filed or the due date, whichever is later.
The Company did not identify any material uncertain tax positions.
Recent
Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other
standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the recently
issued accounting standards will not have a material impact on our financial position or results of operations upon adoption.
ITEM
7A - 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
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For
consolidated financial statements and notes filed as part of this Annual Report, see Index to Consolidated Financial Statements
beginning on page F-1 of this Annual Report.
ITEM
9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM
9A - CONTROLS AND PROCEDURES
|
(a)
|
Disclosure
Controls and Procedures
|
We
conducted an evaluation, with the participation of our principal executive and principal financial officer, of the effectiveness
of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2019, to ensure that information required to be disclosed
by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the
time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required
to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial
officer has concluded that as of December 31, 2019, and as of the date that the evaluation of the effectiveness of our disclosure
controls and procedures was completed, our disclosure controls and procedures were not effective to satisfy the objectives for
which they are intended.
|
(b)
|
Management
Report on Internal Control Over Financial Reporting
|
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process
designed by, or under the supervision of, our principal executive and principal financial officer, and effected by our board of
directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles
in the United States and includes those policies and procedures that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail, accurately and fairly reflect our transactions and any disposition
of our assets;
|
|
|
|
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements
in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and
|
|
|
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the consolidated financial statements.
|
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. In addition,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that resources may become severely limited.
Under
the supervision and with the participation of our management, including our principal executive and principal financial officer,
we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2019. In making
this assessment, our management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management determined that we did not maintain
effective internal control over financial reporting as of December 31, 2019, due to the material weaknesses described below.
A
material weakness is a deficiency, or a combination of deficiencies in internal control, such that there is a reasonable possibility
that a material misstatement of our consolidated financial statements will not be prevented, or detected and corrected, on a timely
basis. A significant deficiency is a deficiency, or combination of control deficiencies, in internal control that is less severe
than a material weakness, yet important enough to merit attention by those charged with governance.
Our
management, with the participation and under the supervision of our Chief Executive Officer, Yulong Yang and our Chief Financial
Officer, MingJing Xia, conducted an evaluation of the effectiveness of our internal control over financial reporting based on
the framework and criteria established in Internal Control- Integrated Framework, issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Based on this evaluation, MingJing Xia and Yulong Yang determined that our internal control
over financial reporting was effective as of December 31, 2019.
|
(c)
|
Changes
in Internal Control over Financial Reporting
|
We regularly
review our system of internal control over financial reporting and make changes to our processes and systems to improve controls
and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities
as implementing new, more efficient systems, consolidating activities, and migrating processes.
Other
than as described above, there was no change in our internal control over financial reporting identified in connection with the
evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2019
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM
9B – OTHER INFORMATION
None.
PART
III
ITEM
10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
and Executive Officers
The
following table sets forth the names and ages of our directors, director nominees, and executive officers, the principal offices
and positions with the Company held by each person as of March 27, 2020.
Name
|
|
Age
|
|
Position(s)
|
|
|
|
|
|
MingJing
Xia
|
|
50
|
|
Director,
Chairperson of the Board of Directors and Chief Financial Officer
|
Yulong
Yang
|
|
42
|
|
Director
and Chief Executive Officer
|
YinFook
To, Tony
|
|
50
|
|
Corporate
Secretary
|
Our
Board of Directors is divided into three classes designated as Class I, Class II and Class III, respectively, with each class
serving staggered three-year terms. The text of the classified board amendment can be found in Article V, Section A.2 of our Amended
and Restated Certificate of Incorporation, as amended, filed as an exhibit to our Current Report on Form 8-K filed with the Commission
on November 6, 2013.
On
January 18, 2019, the Board of Directors of the Company appointed Mr. MingJing Xia and Mr. Yulong Yang as Directors of the Company.
On
April 11, 2019, Mr. Leung and Shirley Cheng Sze Ki tendered their resignations from the position of Directors. Mr. Leung also
resigned from the positions of Chief Executive Officer and Chairperson of the Board of Directors, while Shirley Cheng Sze Ki resigned
from the positions of Chief Financial Officer and Corporate Secretary on the same date.
On
April 11, 2019, Mr. Mingjing Xia was appointed as the Chairperson of the Board of Directors, and also the Chief Executive Officer,
Chief Financial Officer and Corporate Secretary of the Company.
On
May 16, 2019, Mr. Mingjing Xia resigned from the position of Company Secretary and Mr. YinFook To, Tony was appointed as the Corporate
Secretary of the Company.
On
May 22, 2019, Mr. Mingjing Xia resigned from the position of Chief Executive Officer and Mr. Yulong Yang was appointed as the
Chief Executive Officer of the Company.
We
do not currently intend to hold an annual meeting of stockholders until after we consummate a business transaction, and thus may
not be in compliance with Section 211(b) of the General Corporation Law of the State of Delaware. Therefore, if our stockholders
want us to hold an annual meeting prior to our consummation of a business transaction, they may attempt to force us to hold one
by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the General Corporation Law
of the State of Delaware.
To
our knowledge, no director or executive officer of the Company has been involved in any legal proceeding listed in Item 401(f)
of Regulation S-K in the past ten years. To our knowledge, no promoter or control person of the Company has been involved in any
legal proceeding listed in paragraphs (1) through (6) of Item 401(f) of Regulation S-K in the past five years. The following is
a brief description of the business experience of our current directors and executive officers:
MingJing
Xia is a passionate investor on blockchain and its core technology. He joined the blockchain industry in 2016 and founded
ZhongAo International Holding Group Co., Ltd that same year, the company has since grown to members over 160,000 in 2018 with
operation in major Asian cities such as Seoul, Hong Kong, Shanghai, Shenzhen and Chongqing. Throughout his career since 1991,
Mr Xia has managed teams over 20,000, he is good at public relation. Mr Xia has been an educator and trainer for 25 years (1991-2016).
Mr Xia earned his bachelor degree from Chongqing Normal University of China in June of 1991.
Yulong Yang is currently the owner and director of Picasso Digital Assets Investment Management (UK) Co., Ltd which was registered
(June 8, 2018) in the United Kingdom and another Picasso Digital Assets Investment company registered in Hong Kong in April 2018,
he has managed over 50 IT technical personnel worldwide. Mr. Yang is also the director (since 2016) of ZhongAo International Holding
Group Co., Ltd which has operation in major Asian cities such as Seoul, Hong Kong, Shanghai, Shenzhen and Chongqing. In
his recent business endeavor of blockchain and anti-counterfeiting and traceability. During his earlier career from 2004 to 2013,
Mr. Yang is a seasoned investor and good at in sales, business operation and managing teams. Mr Yang graduated from Chongqing
College of Electronic Engineering of China in June 1998.
YinFook
To Tony started working on the US capital markets in recent years and is currently in the process of founding a joint US/China
financial innovation company. He is experienced in management consulting, marketing, business development, operation and administration,
having worked in Greater China for 18 years (lived in Hong Kong, Beijing, Shanghai, Shenzhen, Chongqing). He has coached CEOs
of American companies and worked with them on China market entry strategies and actual implementation. Mr. To also worked on the
past Beijing 2008 Olympics, got well-acquainted with major Chinese companies in China. Back in 2003, he was invited by a senior
Olympic advisor to work as a consultant on the Beijing Olympic preparation with the Beijing government, the owners of the Olympic
stadium, and the worldwide and local Chinese Olympic sponsors. Through his work on the Beijing Olympics, he developed high level
China contacts that help him navigate the complex China network of people and policies in order to provide China market-entry
services to western companies. He is a native of Nanjing China, grew up in Hong Kong and graduated from Brigham Young University-Hawaii.
Mr. To served as Director/Head of Hong Kong Operation of World Organization of Governance and Competitiveness (WOGC) from 2017
to 2018, Vice President of Eastgate, Inc. from 2009 to 2017, and Project Manager of the Office of Senior Advisor of Beijing 2008
Olympics from 2003 to 2007. Mr. To currently serves as a member of the board of directors for International Leaders Capital Corporation.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Not
applicable.
Code
of Ethics
We
have not adopted a written code of ethics, because we believe and understand that our officers and directors adheres to and follows
ethical standards without the necessity of a written policy. Additionally, due to the fact we do not have operations, adopting
a code of ethics is unnecessary at this time.
Audit
Committee
We
do not currently have an audit committee.
Compensation
Committee
We
do not currently have a compensation committee.
ITEM
11 - EXECUTIVE COMPENSATION
As
of December 31, 2019, there were only two Executive Officers including Chief Executive Officer and Chief Financial Officer in
the Company. The Company's Chief Executive Officer and Chief Financial Officer during fiscal year 2019 and 2018 are set
forth below:
Name
|
Position
|
MingJing
Xia
|
Director,
Chairperson of the Board and Chief Financial Officer
|
Yulong
Yang
|
Director
and Chief Executive Officer
|
Earnest
Leung Chi Wah (resigned on April 11, 2019)
|
Former
Chief Executive Officer and Chairperson of the Board
|
Shirley
Cheng Sze Ki (resigned on April 11, 2019)
|
Former
Chief Financial Officer, Director and Corporate Secretary
|
Summary
Compensation Table
The
following table sets forth information concerning all compensation awarded to, earned by or paid during fiscal year 2019 and 2018,
to the Named Executive Officers:
Name
and
Principal
Position
|
Year
|
(1)
Salary
($)
|
Bonus
($)
|
(3)
Stock
Awards
($)
|
Options
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in Pension and Nonqualified Deferred Compensation Earnings($)
|
(2)
All
Other
Compensation
($)
|
Total
($)
|
MingJing
Xia, Director and Chief Financial Officer
|
2019
2018
|
-
-
|
-
-
|
6,000
-
|
-
-
|
-
-
|
-
-
|
-
-
|
6,000
-
|
|
|
|
|
|
|
|
|
|
|
Yulong
Yang, Director and Chief Executive Officer
|
2019
2018
|
-
-
|
-
-
|
6,000
-
|
-
-
|
-
-
|
-
-
|
-
-
|
6,000
-
|
|
|
|
|
|
|
|
|
|
|
Earnest
Leung Chi Wah,
Former
Chief Executive
Officer
and
Director
|
2019
2018
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
|
|
|
|
|
|
|
|
|
|
Shirley
Cheng Sze Ki, Former Chief
Financial
Officer, Director and Corporate
Secretary
|
2019
2018
|
-
33,846
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
1,692
|
-
35,538
|
16
|
(1)
|
The
executive compensation for the Company's Chief Executive Officer and Chief Financial Officer for fiscal year of 2018
primarily consisted of basic salary only. Basic salaries are reviewed annually and may be adjusted to realign salaries with
market levels after taking into account individual responsibilities, performance and experience.
|
|
(2)
|
All
other compensation only represents a monthly contribution paid by the Company into a mandatory provident fund for the benefit
of each of the Company's Chief Executive Officer and Chief Financial Officer.
|
|
(3)
|
On
June 21, 2019, the Company passed a unanimous written consent of the Board of Directors to issue 1,000,000 and 1,000,000 common
shares to Mr. MingJing Xia ("Mr. Xia") and Mr. Yulong Yang ("Mr. Yang"), respectively. These shares
were issued on the same date to Mr. Xia for his service in the capacity of Chief Financial Officer and Chairperson of the
Board, and issued to Mr. Yang for his service in the capacity of Chief Executive Officer and member of the Board, for their
first year's services commencing from 1 July 2019. Both of Mr. Xia and Mr. Yang are entitled to a monthly salary of
$1,000 during this period.
|
Employment
Contracts
The
Company entered into an executive employment agreement with Mr. Leung in connection with his services to the Company as our Chief
Executive Officer. Under the terms of the agreement, Mr. Leung will receive a monthly salary of HK$50,000 (approximately $6,410)
and on May 1, 2017, Mr. Leung agreed to withheld his salary. Shirley Cheng Sze Ki was appointed as the Company's Chief Financial
Officer and is entitled to a monthly salary of HK$40,000 (approximately $5,128) and on July 1, 2017, the Company and Ms Cheng
agreed to reduce the salary to HK$22,000 (approximately $2,821). The employment may be terminated by the Company at any time without
notice or payment, in the event that any of the executives engage in misconduct or dereliction of duty. No salaries were paid
to Mr. Leung and Shirley Cheng Sze Ki in fiscal year of 2019.
On
June 21, 2019, the Company passed a unanimous written consent of the Board of Directors to issue 1,000,000 and 1,000,000 common
shares to Mr. MingJing Xia ("Mr. Xia") and Mr. Yulong Yang ("Mr. Yang"), respectively. These shares were
issued on the same date to Mr. Xia for his service in the capacity of Chief Financial Officer and Chairperson of the Board, and
issued to Mr. Yang for his service in the capacity of Chief Executive Officer and member of the Board, for their first year's
services commencing from 1 July 2019. Both of Mr. Xia and Mr. Yang are entitled to a monthly salary of $1,000 during this period.
In connection with these stock grants and in accordance with ASC Topic 718, the Company recognized $12,000 of non-cash stock-based
compensation included in general and administrative expenses on the consolidated statements of operations for the year ended December
31, 2019.
Option/SAR
Grants
We
do not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation
rights known as SARs or freestanding SARs have been made to any executive officer or any director since our inception; accordingly,
no stock options have been granted or exercised by any of the officers or directors since we were founded.
Long-Term
Incentive Plans and Awards
We
do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual
grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any
director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or
agreements have been granted or entered into or exercised by any of the officers or directors or employees or consultants since
we were founded.
Compensation
of Directors
Overview
All
the compensation packages for each of the directors are approved by the Board of Directors. The following table provides
information about the compensation earned by directors who served during fiscal year 2019:
Name
of director
|
|
Fees
Earned
or
Paid in
Cash (1)
($)
|
|
Stock
Awards
(2)
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MingJing
Xia
|
|
-
|
|
6,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yulong
Yang
|
|
-
|
|
6,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnest
Leung Chi Wah
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shirley
Cheng Sze Ki
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
|
No
directors were entitled to any monthly cash compensation during the fiscal year ended December 31, 2019.
|
|
|
|
|
(2)
|
As
required by SEC rules, amounts in the column "Stock Awards" represent the aggregate grant date fair value of awards
made each year computed in accordance with ASC Topic 718. The grant date fair value of each of the directors' award
is measured based on the closing price of our common stock on the date of grant. These amounts do not reflect whether the
recipient has actually realized or will realize a financial benefit from the awards. Under generally accepted accounting principles,
compensation expense with respect to stock awards granted to our employees, executives and directors is generally recognized
over the requisite services period.
|
Potential
Payments upon Termination or Change-in Control
The
employment agreements with current Named Executives may be terminated by giving the other party one-month advanced notice. Other
than as disclosed above, the Company does not have change-in-control arrangements with any of its current Named Executives, and
the Company is not obligated to pay severance or other enhanced benefits to executive officers, unless otherwise stated in Hong
Kong Employment Ordinance, upon termination of their employment. Accordingly, there is no potential payments payable to our current
Named Executive Officers upon termination or change-in control.
ITEM
12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth, as of March 27, 2020, certain information with respect to the Company's equity securities owned of
record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of
each class of the Company's outstanding equity securities; and (iii) all Directors and Executive Officers as a group.
Title
of Class
|
Name
and Address
of
Beneficial Owner
|
Nature
of Beneficial Ownership
|
Number
of Shares
|
Percent
of Class (1)
|
Percent
of Total Voting Control of Company
|
Common
Stock
|
Earnest
Leung Chi Wah
|
Former
Chief Executive Officer and Chairperson of Board of Directors
|
-
|
0%
|
0%
|
|
|
|
|
|
|
Common
Stock
|
Shirley
Cheng Sze Ki
|
Former
Chief Financial Officer, Corporate Secretary and Director
|
-
|
0%
|
0%
|
|
|
|
|
|
|
Common
Stock
|
MingJing
Xia
|
Director
and Chief Financial Officer
|
1,000,000
|
7.13%
|
7.13%
|
|
|
|
|
|
|
Common
Stock
|
Yulong
Yang
|
Director
and Chief Executive Officer
|
1,000,000
|
7.13%
|
7.13%
|
|
|
|
|
|
|
Common
Stock
|
All
Directors and Officers
|
|
2,000,000
|
14.26%
|
14.26%
|
|
|
|
|
|
|
Common
Stock
|
Cihan
Huang, 21/F, One Harbour Square, No.181, Hoi Bun Road, Kwun Tong, Hong Kong
|
5%
+ Shareholder
|
1,403,780
|
10.00%
|
10.00%
|
Common
Stock
|
Jingzhi
Yang, Room 1003, No.159 Tingyuan Road, Dajiating Garden, Haizhu District, Guangzhou, Guangdong, PRC
|
5%
+ Shareholder
|
1,002,700
|
7.15%
|
7.15%
|
Common
Stock
|
Meile
Zhou, 2A-6, City Shangu, Tonggu Road, Nanshan District, Shenzhen, Guangdong, PRC
|
5%
+ Shareholder
|
1,203,240
|
8.57%
|
8.57%
|
Common
Stock
|
Wong
Wing Kong, Room 1002, 5th Building, Quanhai Garden, Xin Zhou Road, Futian District, Shenzhen, Guangdong, PRC
|
5%
+ Shareholder
|
1,601,273
|
11.41%
|
11.41%
|
Common
Stock
|
Wing
Yan Sharon Lo, Flat B, 20/F, Bayview Park, Chai Wan, Hong Kong
|
5%
+ Shareholder
|
701,890
|
5.00%
|
5.00%
|
Common
Stock
|
Yuk
Chor Wong, Flat 7C, 114 Broadway Street, Mei Foo Sun Chuen, Kowloon, Hong Kong
|
5%
+ Shareholder
|
1,202,500
|
8.57%
|
8.57%
|
Common
Stock
|
Tu
Shen Sheng, 53 Bulkeley Street, Hung Hom, Kowloon, Hong Kong
|
5%
+ Shareholder
|
1,197,000
|
8.53%
|
8.53%
|
|
|
|
|
|
|
Common
Stock
|
Total
Shares Owned by Persons Named above
|
|
10,312,383
|
73.49%
|
73.49%
|
|
|
|
|
|
|
|
(1)
|
Based
on 14,032,400 shares outstanding as of March 27, 2020. Shares of common stock subject to options or warrants currently exercisable,
or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such
options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person
|
We
are not aware of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities
of any class of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.
ITEM
13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We
have not entered into any material transactions or series of transactions that would be considered material in which any director
or executive officer or beneficial owner of 5% or more of any class of our capital stock, or any immediate family member of any
of the preceding persons, had a direct or indirect material interest.
We
do not have a written policy concerning the review, approval, or ratification of transactions with related persons.
ITEM
14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
The
following table sets forth the aggregate fees billed for each of the fiscal years ended December 31, 2019 and 2018 for: (i) professional
services rendered by our principal accountant for the independent audit of our annual consolidated financial statements and review
of consolidated financial statements included in our Quarterly Reports on Form 10-Q or services that are normally provided by
the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; (ii) assurance and related
services by the principal accountant that are reasonably related to the performance of the audit or review of our consolidated
financial statements and are not included in the professional services described in clause (i) above; (iii) professional services
rendered by the principal accountant for tax compliance, tax advice and tax planning; and (iv) products and services provided
by the principal accountant that are not included in the services described in clauses (i) through (iii) above. The Company appointed
Union Power HK CPA Limited to audit the annual consolidated financial statements for the fiscal year ended December 31, 2019 and
2018, having reviewed the company's consolidated financial statements for the quarters ended March 31, June 30 and September 30,
2019 and 2018.
Year
Ended December 31,
|
|
2019
|
|
2018
|
Audit
Fees
|
|
$
|
21,800
|
|
|
$
|
21,000
|
|
Audit-Related
Fees
|
|
$
|
-
|
|
|
$
|
-
|
|
Tax
Fees
|
|
$
|
-
|
|
|
$
|
-
|
|
All
Other Fees
|
|
$
|
-
|
|
|
$
|
-
|
|
All
of the fees described above for the years ended December 31, 2019 and 2018, were approved by the Board of Directors.
PART
IV
ITEM
15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1)
Financial Statements
For
consolidated financial statements and footnotes filed as part of this Annual Report, see the Index to Consolidated Financial Statements
beginning on page F-1 of this Annual Report.
(a)(2)
Financial Statement Schedules
We
do not have any financial statement schedules required to be supplied under this Item.
(a)(3)
Exhibits
Refer
to (b) below.
(b)
|
Exhibits
|
|
3.1 (1)
|
|
Amended and Restated
Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware on September 24, 2013
|
|
|
|
3.2 (1)
|
|
Certificate of Amendment
to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware
on October 1, 2013
|
|
|
|
3.3 (1)
|
|
Certificate of Amendment
to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware
on October 11, 2013
|
|
|
|
3.4 (1)
|
|
Certificate of Amendment
to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware
on October 17, 2013
|
|
|
|
3.5 (4)
|
|
Certificate of Amendment
to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware
on December 15, 2016
|
|
|
|
3.5 (2)
|
|
Bylaws of Zosano,
Inc.
|
|
|
|
10.1 (1)
|
|
Stock Purchase Agreement
dated as of October 31, 2013 by and between Zosano, Inc. and ZP Holdings, Inc
|
|
|
|
10.2 (3)
|
|
Share Exchange Agreement
as of January 5, 2017 by and between J.E.M. Capital, Inc., Essential Element Limited and the shareholders of Essential Element
Limited
|
|
|
|
31.1*
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer
|
|
|
|
31.2*
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer
|
|
|
|
32.1*
|
|
Chief Executive Officer
Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2*
|
|
Chief Financial Officer
Certification Pursuant to 18 USC, 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 Extension Definition
Linkbase Document
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension
Label Linkbase Document
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension
Presentation Linkbase Document
|
*
Filed herewith.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement
or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and
otherwise are not subject to liability.
|
(1)
|
Incorporated
by reference from our Current Report on Form 8-K filed with the Commission on November 6, 2013.
|
|
(2)
|
Incorporated
by reference from our Registration Statement on Form S-1 filed with the Commission on January 23, 2012.
|
|
(3)
|
Incorporated
by reference from our Current Report on Form 8-K filed with the Commission on December 5, 2016.
|
|
(4)
|
Incorporated
by reference from our Current Report on Form 8-K filed with the Commission on March 16, 2017.
|
ITEM
16 - FORM 10-K SUMMARY
None.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated:
March 27, 2020
|
|
J.E.M.
Capital, Inc.
|
|
|
|
|
|
|
|
By:
|
/s/ Yulong Yang
|
|
|
|
Yulong
Yang
|
|
|
Chief
Executive Officer
|
|
|
(Principal
Executive Officer)
|
Dated: March
27, 2020
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ MingJing Xia
|
|
|
|
MingJing
Xia
|
|
|
Chief
Financial Officer
|
|
|
(Principal
Financial and Accounting Officer)
|
Power
of Attorney
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Yulong Yang and MingJing
Xia, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to
this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith with the Securities
and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes
may do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated:
Name
/s/
Yulong Yang
|
Title
Chief
Executive Officer and Director
|
Date
March
27, 2020
|
Yulong
Yang
|
(Principal
Executive Officer)
|
|
/s/
MingJing Xia
|
Chief Financial Officer
and Director
|
March 27, 2020
|
MingJing
Xia
|
(Principal Financial
and Accounting Officer)
|
|
J.E.M.
CAPITAL, INC.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2019
Report
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders of
J.E.M.
Capital, Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of J.E.M. Capital, Inc. and its subsidiaries (collectively referred
to as the "Company") as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders'
deficit and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred
to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and the consolidated
results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with
the accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with
respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide reasonable basis for our opinion.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
The Company has incurred net losses of $34,296 and $$87,413 for the years ended December 31, 2019 and 2018, respectively. Additionally,
the Company used net cash in operating activities of $25,650 and $47,947 for the years ended December 31, 2019 and 2018, respectively.
As of December 31, 2019 and 2018, the Company recorded stockholders' deficit of $120,456 and $110,160, respectively. These
factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
UNION
POWER HK CPA LIMITED
Certified
Public Accountants
We
have served as the Company's auditor since 2017.
Hong
Kong SAR
March
27, 2020
J.E.M.
CAPITAL, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
December
31,
|
|
December
31,
|
|
|
2019
|
|
2018
|
ASSETS
|
Current assets:
|
|
|
|
|
Cash
|
|
$
|
-
|
|
$
|
164
|
Prepaid expenses
|
|
|
12,000
|
|
|
-
|
Total current assets
|
|
|
12,000
|
|
|
164
|
|
|
|
|
|
|
|
Equipment, net
|
|
|
-
|
|
|
496
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,000
|
|
$
|
660
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
59,025
|
|
$
|
62,875
|
Due to shareholders
|
|
|
73,431
|
|
|
47,945
|
Total current liabilities
|
|
$
|
132,456
|
|
$
|
110,820
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
132,456
|
|
$
|
110,820
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value, 5,000,000 shares authorized; no shares issued or outstanding as of December 31, 2019 and 2018
|
|
|
|
|
|
|
Common
stock, $0.0001 par value; 195,000,000 shares authorized, 14,032,400 shares and 12,032,400 shares issued and outstanding as
of December 31, 2019 and 2018
|
|
|
1,403
|
|
|
1,203
|
Additional paid-in
capital
|
|
|
325,068
|
|
|
301,268
|
Accumulated deficit
|
|
|
(446,927)
|
|
|
(412,631)
|
Total stockholders'
deficit
|
|
|
(120,456)
|
|
|
(110,160)
|
|
|
|
|
|
|
|
Total liabilities
and stockholders' deficit
|
|
$
|
12,000
|
|
$
|
660
|
The
accompanying notes are an integral part of these consolidated financial statements.
J.E.M.
CAPITAL, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Year
Ended
December 31,
|
|
|
2019
|
|
2018
|
Operating expense:
|
|
|
|
|
General
and administrative
|
|
$
|
34,296
|
|
$
|
87,413
|
Total operating expense
|
|
|
34,296
|
|
|
87,413
|
|
|
|
|
|
|
|
Loss before provision
for income taxes
|
|
|
(34,296)
|
|
|
(87,413)
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(34,296)
|
|
$
|
(87,413)
|
|
|
|
|
|
|
|
Net loss per common
share - basic and diluted
|
|
$
|
(0.003)
|
|
$
|
(0.007)
|
Weighted average number
of common shares outstanding - basic and diluted
|
|
|
13,095,414
|
|
|
12,032,400
|
The
accompanying notes are an integral part of these consolidated financial statements.
J.E.M.
CAPITAL, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT
|
|
Common
Stock
|
|
Additional
Paid-in
|
|
Accumulated
|
|
Total
Stockholders'
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
(Deficit)
|
Balance - December
31, 2017
|
|
12,032,400
|
|
$
|
1,203
|
|
$
|
301,268
|
|
$
|
(325,218)
|
|
$
|
(22,747
)
|
Net
loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(87,413)
|
|
|
(87,413)
|
Balance
- December 31, 2018
|
|
12,032,400
|
|
|
1,203
|
|
|
301,268
|
|
|
(412,631)
|
|
|
(110,160)
|
Issue
of shares for share based compensation
|
|
2,000,000
|
|
|
200
|
|
|
23,800
|
|
|
-
|
|
|
24,000
|
Net
loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(34,296)
|
|
|
(34,296)
|
Balance
- December 31, 2019
|
|
14,032,400
|
|
$
|
1,403
|
|
$
|
325,068
|
|
$
|
(446,927)
|
|
$
|
(120,456)
|
The
accompanying notes are an integral part of these consolidated financial statements.
J.E.M.
CAPITAL, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
Year
Ended December 31,
|
|
|
2019
|
|
2018
|
Operating activities:
|
|
|
|
|
Net loss
|
|
$
|
(34,296)
|
|
$
|
(87,413)
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Depreciation
|
|
|
125
|
|
|
500
|
Writing off of equipment
|
|
|
371
|
|
|
-
|
Share based compensation
for services
|
|
|
12,000
|
|
|
-
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
Deposit paid
|
|
|
-
|
|
|
550
|
Accounts payable and
accrued expenses
|
|
|
(3,850)
|
|
|
38,416
|
Net cash used in
operating activities
|
|
$
|
(25,650)
|
|
$
|
(47,947)
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
Proceeds from shareholders
|
|
$
|
25,486
|
|
$
|
47,945
|
Net cash provided
by financing activities
|
|
$
|
25,486
|
|
$
|
47,945
|
|
|
|
|
|
|
|
Net decrease in
cash
|
|
|
(164)
|
|
|
(2)
|
|
|
|
|
|
|
|
Cash - Beginning
of period
|
|
|
164
|
|
|
166
|
|
|
|
|
|
|
|
Cash - End of period
|
|
$
|
-
|
|
$
|
164
|
|
|
|
|
|
|
|
Supplemental disclosure:
|
|
|
|
|
|
|
Cash paid during the
year for:
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
$
|
-
|
Income taxes
|
|
$
|
-
|
|
$
|
-
|
The
accompanying notes are an integral part of these consolidated financial statements.
J.E.M.
CAPITAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
Organization
and principal activities
|
Nature
of Operations
J.E.M.
Capital, Inc. (the "Company") has limited operations. The Company was incorporated under the laws of the State of Delaware
on September 14, 2011.
On
October 31, 2013, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement") with Zosano Pharma
Corporation, formerly known as ZP Holdings, Inc., a Delaware corporation (Zosano Pharma), pursuant to which the Company issued
and sold to Zosano Pharma 10,016,973 shares of the Company's common stock, $0.0001 par value, for an aggregate cash purchase
price of $365,000. As a result of the issuance and sale of the Company's common stock to Zosano Pharma pursuant to the Purchase
Agreement, a change in control of the Company occurred (in which Zosano Pharma acquired control of the Company). Immediately following
the change in control transaction, 10,027,000 shares of the Company's Common Stock were issued and outstanding. The 10,016,973
shares of common stock issued and sold to Zosano Pharma pursuant to the Purchase Agreement represent approximately 99.9% of the
Company's issued and outstanding common stock.
On
November 14, 2016, Zosano Pharma entered into Stock Purchase Agreements with eighteen (18) foreign investors (the "New Shareholders"),
pursuant to which Zosano Pharma sold an aggregate of 10,016,973 shares of common stock of Zosano, Inc. or approximately 99.9%
of the issued and outstanding common stock of the Company, to the New Shareholders.
On
January 5, 2017, the Company entered into a Share Exchange Agreement (the "Agreement") with Essential Element Limited,
a British Virgin Islands company ("ESEL"), and Leung Chi Wah Earnest ("Mr. Leung"), the principal shareholder
of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued
and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL
owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM
Capital").
ESEL
and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the
acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.
2.
|
Summary
of Significant Accounting Policies
|
Risks
and Uncertainties
The
Company's activities are subject to significant risks and uncertainties, including failure to identify a privately held operating
company desiring to merge with the Company, failure to complete a reverse merger transaction, and inability to secure funding
to continue as a going concern. (See Note 3 regarding going concern discussion.)
Basis
of Presentation and Use of Estimates
The
Company's consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(U.S. GAAP) which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the consolidated financial statements and reported amounts of revenue and expense during the reporting period.
Estimates are used when accounting for certain items such as accounting for income tax valuation allowances. Estimates are based
on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due
to the inherent uncertainty involved with estimates, actual results may differ.
Business
acquisitions
The
Company has accounted for all of its acquisitions using the acquisition method. The operating results of each acquisition have
been included in the consolidated financial statements since the respective dates of acquisition. There were no business acquisitions
for the year ended December 31, 2019 and 2018.
Principles
of Consolidation
The
consolidated financial statements include the financial statements of J.E.M. Capital Inc. and its subsidiaries for which it is
the primary beneficiary. Upon making this determination, the Company is deemed to be the primary beneficiary of the entity, which
is then required to be consolidated for financial reporting purposes. All significant intercompany transactions and balances have
been eliminated upon consolidation.
J.E.M.
CAPITAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2.
|
Summary
of Significant Accounting Policies - Continued
|
Equipment,
net
Equipment
is stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is provided on a straight-line
basis, less estimated residual values over the assets' estimated useful lives. The estimated useful lives are as follows:
Computer
hardware and software
|
3
years
|
When
equipment is retired or otherwise disposed of, the related cost, accumulated depreciation and provision for impairment loss, if
any, are removed from the respective accounts, and any gain or loss is reflected in the consolidated statements of operations.
Repairs and maintenance costs on equipment are expensed as incurred.
Impairment
of Long-Lived Assets
Long-lived
assets, such as equipment, are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount
of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds
the sum of the undiscounted cash flows expected to be generated from the asset's use and eventual disposition. An impairment
loss is measured as the amount by which the carrying amount exceeds the fair value of the asset calculated using a undiscounted
cash flow analysis. There was no impairment of long-lived assets for the years ended December 31, 2019 and 2018.
Fair
value of financial instruments
ASC
Topic 825, "Financial Instruments", requires disclosing fair value to the extent practicable for financial instruments
which are recognized or unrecognized in the balance sheets. The fair values of the financial instruments are not necessarily representative
of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or
settlement. For certain financial instruments, including deposit, accounts payable and accrued expenses, the fair values were
determined based on the near term maturities of such assets and liabilities.
Revenue
The
Company has yet to generate revenue from operations for the years ended December 31, 2019 and 2018.
Net
Loss per Common Share
Basic
loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of
shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial
instruments issued or outstanding for the years ended December 31, 2019 and 2018.
Stock-based
Compensation
The
Company adopted ASC Topic 718, using a modified prospective application transition method, which establishes accounting for stock-
based awards in exchange for employee services. Under this application, the Company is required to record stock-based compensation
expense for all awards granted after the date of adoption and unvested awards that were outstanding as of the date of adoption.
ASC Topic 718 requires that stock-based compensation cost is measured at grant date, based on the fair value of the award, and
recognized as expense over the requisite services period. The stock-based compensation expenses are recognized on a straight-line
basis over the shorter of the period over which services are to be received or the vesting period.
F-8
|
J.E.M.
CAPITAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
Summary
of Significant Accounting Policies - Continued
|
Income
Taxes
The
Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included
in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference
between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will
result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards
is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized
in future periods. Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical
and projected future operating results, the eligible carryforward period, and other circumstances. If it becomes more likely than
not that a tax asset will be used, the related valuation allowance on such assets would be reduced.
The
Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. Once this threshold has been
met, the Company's measurement of its expected tax benefits is recognized in its consolidated financial statements. The Company
accrues interest on unrecognized tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized
as a component of income tax expense.
The
Company' income tax returns are subject to examination for three years from the date filed or the due date, whichever is later.
The Company did not identify any material uncertain tax positions.
Recent
Accounting Pronouncements
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the consolidated financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on our consolidated financial position or results of operations.
The
accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation
of the Company as a going concern. The Company has not established any source of revenues to cover its operating costs, and as
such, has incurred an operating loss since inception. Further, as of December 31, 2019, the cash resources of the Company were
insufficient to continue to conduct its normal business operations. These and other factors raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the Company to continue as a going concern.
J.E.M.
CAPITAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
4.
|
General
and Administrative Expenses
|
The
following summarizes the type of expenses incurred:
|
|
Year
Ended December 31,
|
|
|
2019
|
|
|
2018
|
General
and administrative expenses:
|
|
|
|
|
|
Professional
fees
|
$
|
21,800
|
|
$
|
28,466
|
Filing
fees
|
|
-
|
|
|
6,414
|
Franchise
tax expense
|
|
-
|
|
|
409
|
Salary
and related expenses
|
|
-
|
|
|
35,538
|
Directors'
fee
|
|
12,000
|
|
|
12,000
|
Depreciation
|
|
125
|
|
|
500
|
Writing
off of equipment
|
|
371
|
|
|
-
|
Other
office expenses
|
|
-
|
|
|
4,086
|
Total
general and administrative expense
|
$
|
34,296
|
|
$
|
87,413
|
5.
|
Commitments and contingencie
|
Contingencies
The
Company accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of December 31, 2019
and 2018, the Company's management is of the opinion that there are no commitments and contingencies to account for.
Preferred
Stock
In
September 2013, the Company adopted an amended and restated certificate of incorporation by which the Company is authorized to
issue 5,000,000 shares of preferred stock with a $0.0001 par value. As of December 31, 2019, there were no shares of preferred
stock issued or outstanding.
Common
Stock, Stock Split and Dividend
In
September 2013, the Company adopted an amended and restated certificate of incorporation by which the Company is authorized to
issue 195,000,000 shares of common stock with a $0.0001 par value, which amended and restated certificate of incorporation went
effective on October 21, 2013.
In
anticipation of the acquisition of the Company's common stock by Zosano Pharma and on October 21, 2013, the Company completed
a 1-for-200 reverse stock split. As a result, existing stockholders held an aggregate of 10,027 shares on a post-split basis.
All share and per share amounts have been retroactively restated for the effect of this split.
On
October 31, 2013, the Company issued 10,016,973 shares of common stock to Zosano Pharma in exchange for an aggregate cash purchase
price of $365,000. Concurrently with the receipt of the proceeds from the sale of its common stock to Zosano Pharma, the Company
declared a dividend of the purchase price to its stockholders of record immediately prior to the closing of the purchase transaction.
On
January 5, 2017, the Company entered into a Share Exchange Agreement with Essential Element Limited, a British Virgin Islands
company ("ESEL"), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued
an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company,
to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares
of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital"). ESEL and JEM Capital currently
have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong
Kong and China. ESEL has incurred material expenses setting up such structure.
F-10
J.E.M.
CAPITAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
6.
|
Stockholders' Equity – Continued
|
Common
Stock, Stock Split and Dividend - Continued
On
June 21, 2019, the Company passed a unanimous written consent of the Board of Directors to issue 1,000,000 and 1,000,000 common
shares to Mr. MingJing Xia ("Mr. Xia") and Mr. Yulong Yang ("Mr. Yang"), respectively. These shares were
issued on the same date to Mr. Xia for his service in the capacity of Chief Financial Officer and Chairperson of the Board, and
issued to Mr. Yang for his service in the capacity of Chief Executive Officer and member of the Board, for their first year's
services commencing from 1 July 2019. Both of Mr. Xia and Mr. Yang are entitled to a monthly salary of $1,000 during this period.
In connection with these stock grants and in accordance with ASC Topic 718, the Company recognized $12,000 of non-cash stock-based
compensation included in general and administrative expenses on the consolidated statements of operations for the year ended December
31, 2019.
The
Company is authorized to issue 195,000,000 shares of common stock with a $0.0001 par value. As of December 31, 2019 and 2018,
14,032,400 shares and 12,032,400 shares of common stock were issued and outstanding, respectively.
As
of December 31, 2019 and 2018, the Company did not have any dilutive securities, such as stock options, warrants or convertible
securities, issued or outstanding.
7.
|
Related Party
Transactions
|
During
the years ended December 31, 2019 and 2018, the Company received loans of $25,486 and $47,945 from its shareholders, respectively.
As of December 31, 2019 and 2018, the Company recorded an amount of $73,431 and $47,945, respectively, payable to its shareholders.
The amounts are unsecured, bear no interest and are repayable on demand.
On
June 21, 2019, the Company passed a unanimous written consent of the Board of Directors to issue 1,000,000 and 1,000,000 common
shares to Mr. MingJing Xia ("Mr. Xia") and Mr. Yulong Yang ("Mr. Yang"), respectively. These shares were
issued on the same date to Mr. Xia for his service in the capacity of Chief Financial Officer and Chairperson of the Board, and
issued to Mr. Yang for his service in the capacity of Chief Executive Officer and member of the Board, for their first year's
services commencing from 1 July 2019. Both of Mr. Xia and Mr. Yang are entitled to a monthly salary of $1,000 during this period.
J.E.M.
CAPITAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Income
is subject to taxation in various countries in which the Company and its subsidiaries operate or are incorporated. The loss before
income taxes by geographical locations for the year ended December 31, 2019, and 2018 were summarized as follows:
|
|
|
|
Year
Ended December 31,
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
United States
|
|
|
|
$
|
33,800
|
|
$
|
46,789
|
|
|
Foreign
|
|
|
|
|
496
|
|
|
40,624
|
|
|
|
|
|
$
|
34,296
|
|
$
|
87,413
|
|
|
|
|
|
|
|
|
|
|
|
The
Company had accumulated tax losses of approximately $222,000 and $188,000 as of December 31, 2019 and 2018, respectively, which
will expire between 2031 and 2037.
The
net operating loss carryforwards indicated above represent the principle component of the Company's deferred tax assets as of
December 31, 2019 and December 31, 2018. Deferred tax assets of approximately $62,000 and $52,000 as of December 31, 2019 and
December 31, 2018, respectively, will be offset by valuation allowance of the same amounts as realization of such assets is uncertain.
|
December
31,
|
|
2019
|
|
2018
|
Deferred
tax assets:
|
|
|
|
|
|
Net
operating loss carryforwards
|
$
|
61,783
|
|
$
|
52,363
|
Total deferred
tax assets
|
|
61,783
|
|
|
52,363
|
Less: Valuation
allowance
|
|
(61,783)
|
|
|
(52,363)
|
Net deferred
tax assets
|
$
|
-
|
|
$
|
-
|
Movement
in valuation allowance:
|
December
31,
|
|
2019
|
|
2018
|
At
the beginning of the year
|
$
|
52,363
|
|
$
|
39,323
|
Current year
addition
|
|
9,420
|
|
13,040
|
At the end of
the year
|
$
|
61,783
|
|
$
|
52,363
|
The
provision for income taxes differs from the expected provision determined by applying the federal statutory rate to the loss before
income taxes. The reasons for the difference are state and local income taxes and various non-deductible expenses.
The
Company' income tax returns are subject to examination for three years from the date filed or the due date, whichever is later.
The
Company did not identify any material uncertain tax positions.