Company Quick10K Filing
CAT9
Price-0.00 EPS0
Shares102 P/E-0
MCap-0 P/FCF-0
Net Debt-1 EBIT1
TEV-1 TEV/EBIT-1
TTM 2019-09-30, in MM, except price, ratios
10-K 2019-12-31 Filed 2020-04-27
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-13
10-Q 2019-03-31 Filed 2019-05-20
10-K 2018-12-31 Filed 2019-04-01
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-13
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-29
10-Q 2017-09-30 Filed 2017-11-17
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-04-28
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-18
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-04-15
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
8-K 2020-04-27 Other Events
8-K 2020-03-12 Other Events, Exhibits
8-K 2019-08-23 Enter Agreement, Exhibits
8-K 2019-05-14 Officers, Exhibits
8-K 2018-05-30 Accountant, Exhibits

CAT9 10K Annual Report

Part I
Item 1. Description of Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10 - K Summary.
Note 1 - Description of Business and History
Note 2 - Summary of Significant Accounting Policies
Note 3 - Significant Concentration
Note 4 - Accounts Receivable
Note 5 - Inventories
Note 6 &Mdash; Property and Equipment
Note 7 &Mdash; Capitalized Software Costs
Note 8 - Loan Payable
Note 9 - Related Party Transactions
Note 10 - Stockholders' Equity
Note 11 - Income Taxes
Note 12 - Accumulated Other Comprehensive Income
Note 13 - Subsequent Events
EX-31 ex31.htm
EX-32 ex32.htm

CAT9 Earnings 2019-12-31

Balance SheetIncome StatementCash Flow
1.41.00.50.1-0.4-0.82013201520172020
Assets, Equity
2.31.81.30.70.2-0.32013201520172020
Rev, G Profit, Net Income
0.40.30.1-0.0-0.2-0.32013201520172020
Ops, Inv, Fin

10-K 1 cat9201910k.htm FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

  [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the fiscal year ended December 31, 2019
     
  [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the transition period from __________________ to __________________
       

 

CAT9 Group Inc. 

(Exact name of registrant as specified in its charter)

 

Delaware     47-2912810

(STATE OR OTHER JURISDICTION OF

INCORPORATION OR ORGANIZATION)

    (IRS EMPLOYEE IDENTIFICATION NO.)

 

 

Room 2001, Dading Century Square, No 387, Tianren Road, Wuhou District, Chengdu,

Sichuan Province, China 610000

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 86 028 85594777

(ISSUER TELEPHONE NUMBER)

 

Room 1702, Building 2, No. 301, Yunan Avenue, Banan District,

Chongqing, China 401320

(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) 

 

Securities registered under Section 12(b) of the Exchange Act:
None.

 1 

 

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.0001 par value per share
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

  

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 [X] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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 [X] 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, or a smaller reporting company.

 

[ ] Large accelerated filer [ ] Accelerated filer
[ ] Non-accelerated filer [X] Smaller reporting company
  [X] Emerging growth company

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

 

The issuer’s common stock is quoted on the Over-the-Counter market under the trading symbol “CATN”. The aggregate market value of the issuer’s voting and non-voting common equity held as of June 28, 2019, the last day of the registrant’s most recently completed second fiscal quarter, by non-affiliates of the issuer was $122,599,680. As of April 27, 2020 there were 102,166,400 shares of $0.0001 par value common stock issued and outstanding.

 

 

 

 

 

 

 

 

 2 

 

 

TABLE OF CONTENTS

 

    Page

 

PART I

 

Item 1. Business 4
Item 1A. Risk Factors 32
Item 2. Properties 38
Item 3. Legal Proceedings 38
Item 4. Mine Safety Disclosures 38

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39
Item 6. Selected Financial Data 39
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 41
Item 8. Financial Statements and Supplementary Data 41
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 41
Item 9A. Controls and Procedures 41
Item 9B. Other Information 42

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance 42
Item 11. Executive Compensation 43
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 44
Item 13. Certain Relationships and Related Transactions, and Director Independence 44
Item 14. Principal Accountant Fees and Services 44

 

PART IV

Item 15. Exhibits, Financial Statement Schedules 46
Item 16. Form 10-K Summary 46

 

 

 

 

 

 

 3 

 

FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of CAT9 Group Inc. (the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. 

PART I

Item 1.   Description of Business.

(a)   Overview

The terms "we", "Company" and "CAT9" refer to CAT9 Group Inc. , a Delaware corporation, formerly known as ANDES 4 Inc. ("ANDES 4"), its wholly-owned subsidiary, CAT9 Holdings Ltd, a company organized under the laws of the Cayman Islands, ("CAT9 Cayman"); CAT9 Cayman's wholly-owned subsidiary, CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing CAT9 Industrial Company Ltd.(“Chongqing CAT9 or “CQC9”), a company organized under the laws of the People's Republic of China.

(b)   Business of Issuer

On December 27, 2016, CAT9 closed a share exchange transaction pursuant to which CAT9 became the 100% parent of CAT9 Cayman, assumed the operations of CAT9 Cayman and its subsidiaries, including CAT9 Investment China, and Chongqing CAT9 Industrial Company Ltd.

CAT9 Cayman is a holding company incorporated in August 20, 2015, under the laws of the Cayman Islands. CAT9 Investment China Limited was incorporated in September 10, 2015, under the laws of Hong Kong. CAT9 Investment China is a window for the group to handle the business operations outside of China.

Chongqing CAT9 Industrial Company Ltd., (“Chongqing CAT9 or “CQC9”),fka Chongqing Field Industrial Company Ltd. is registered in Chongqing Province, PRC (People’s Republic of China)and was incorporated under the laws of the PRC on June 26, 2014, and operates through strategic alliance and distribution rights agreements in the PRC, the Company prior to early 2017 was previously engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer truncatum trees and harvesting of Acer truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery sales.

 

 4 

 

In early 2017, management suspended its food and machinery sales business in favor of capitalizing on the growing Acer truncatum industry within China and decided that it would to direct efforts towards its Acer truncatum plantation operations during 2017.

As of the date of this Current Report on Form 10-K, the Company employs a staff of 30 people and is located in Chengdu at Room 2001, Dading Century Square, No 387, Tianren Road, Wuhou District, Chengdu, Sichuan Province, China 610000.

 

Products and Market

Chongqing CAT9 operates Acer truncatum plantations and operations in China. Acer truncatum is a maple tree known as the “Shangtung maple” which is native to China that contains an extract from its leaves and seeds called Nervonic acid, or bunge seed oil. The tree itself typically grows 20-25 feet tall, blooms in the month of April, and is primarily a full sun to part shade tree. It is the principal extract of the Acer truncatum plant which Acer truncatum oil is derived. Nervonic acid is a rich omega-9 fatty acid that is known to be beneficial to memory related brain health, anti-aging, blood lipid regulation, and anti-fatigue symptoms. There are a few alternate sources where nervonic acid can be derived, however at much less yield than from an Acer truncatum plant.

 

 5 

 

Nervonic Acid content (mg/100g)
Acer truncatum 580
Brassica  Oil Seeds 69-83
Sesame Seeds 35
Macadamia Nuts 18
TropaeolumSpeciosum 10
Lunaria (Money Plant) 8
King Salmon (Chinook) 140
Sockeye Salmon 40

 

Nervonic Acid has been researched and tested to provide improved brain cell activity and studies have shown it to improve and reduce the risks of Alzheimer’s disease. 

 

Source: Herb Nutritionals

Acer truncatum farm #1 Yunnan Province, China

 

 6 

 

Acer truncatum Tree

Factory floor Acer truncatum finished product ready to ship

 7 

 

Factory floor bottle and assembly line

Suppliers represented by CAT9

 

Shandong Run’an Biotech Co., Ltd. Acer truncatum oil, and sandwich gel candy
Heze Zonghoo Jianyuan Biotech Co., Ltd. Acer truncatum oil

 

CAT9 also seeks to establish five (5) additional planting bases of 350 acres each. These bases will become a CAT9 Group asset over years which we will seek to manage and develop to include land acquisitions, planting, and maintenance. In addition, we are planning to contract approximately 17,000 acres of existing forestry with local individuals, organizations and or provincial governments to insure our supply of raw materials. We are also planning to invest further into our research and development (R&D) to improve our processing yield of Acer truncatum and nervonic acid. This includes the research and development of planting technology, products, and process technology. We also plan to increase our spending on our information systems; we will seek to invest in a fully integrated information system to monitor crop production, fertilization, irrigation, and harvesting yield. We will also add quality control measures, POS systems, packaging, logistics, and e-commerce systems. A JIT (just in time) system to monitor inventory and critical path raw material requirements will also be implemented as well as a sourcing and seasonal cost data base of all suppliers for efficient and cost effective purchasing.

 

Our funds are kept in both financial institutions located in Hong Kong (“HK”) and the PRC, the latter does not provide insurance for amounts on deposit. Moreover, we are subject to the regulations of the PRC, which restrict the transfer of cash from the PRC, except under certain specific circumstances. Accordingly, such funds may not be readily available to us to satisfy obligations which have been incurred outside the PRC.

We generally finance our operations through operating profit and borrowings from our directors. As of the date of this Form 10-K Annual Report, we have not experienced any difficulties due to a shortage of capital, we have not experienced any difficulty in raising funds through loans from banks, outside parties and financial institutions, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our loans when they come due. We are unaware of any trends, demands, commitments events or uncertainties that will result or be likely to result in material changes in our liquidity.

 8 

 

We believe that the level of financial resources is a significant factor for our future development and accordingly, we may determine from time to time to raise capital through private debt or equity financing to strengthen our financial position, to expand our facilities and to provide us with additional flexibility to take advantage of business opportunities. No assurances can be given that we will be successful in raising such additional capital on terms acceptable to us.

 

Our Products

Our finished product gift box (Edible Vegetable Blending Oil added with Acer truncatum Seed Oil)

Our finished product gift box (Edible Vegetable Blending Oil added with Acer truncatum Seed oil and Sunflower Seed Oil)

 9 

 

 

Our finished product gift box (5L Acer truncatum Seed Blending Oil added with Sunflower Seed Oil)

 

Our finished product gift box (5L Rapeseed oil)

 

 10 

 

Our finished product Acer truncatum (Acer truncatum Seed Oil In Present Box- 100% Acer truncatum Seed Oil)

 

 

 

Our finished product Acer truncatum (Edible Vegetable Blending Oil added with Acer truncatum Seed Oil with Grape Seed Oil)

 11 

 

Our finished product Acer truncatum (Acer truncatum Seed Oil Sandwich Gel Candy)

 

Our finished product Acer truncatum (Acer truncatum Seed Oil Gel Candy)

 12 

 

Our finished product Acer truncatum ( Nervonic Acid Candy)

 

Risks Related to Our Business and Industry

 

We are a relatively new entrant in the Acer truncatum industry. In early 2017, our management believed that economic opportunities for the Company were favorable in the Acer truncatum industry and has established a presence with the signing of several plantation agreements. There is considerable risk in the Acer truncatum industry and there can be no assurance that we will be successful in our endeavor to lease additional land, or purchase and harvest additional Acer truncatum trees. There is also no assurances that if we are unsuccessful in our Acer truncatum business that we can pivot our company and re-engage our food distribution and farm equipment sales business.

 

Acer truncatum is claimed to have nutritional and health benefits but we cannot assure you that all or any of the claims made by others are accurate.

Acer truncatum’s health benefits are claimed by studies and users of its extracted oil. These users generally use Acer truncatum products due to word of mouth or other advertising by manufacturers of the product. Additionally, there are little to no restrictions or health regulations on Acer truncatum in China at this time. The Chinese Food and Drug Administration or State Food and Drug Administration (SFDA) of China has not opined on Acer truncatum at this time. While there are some resources that claim through abstract writings that there are health benefits that support brain health by way of high levels of nervonic acid found in Acer truncatum oil, the Company cannot make any assurances that these claims are in any way completely accurate. Claims have been made by various sources that Nervonic acid can repair damaged brain nerve pathways and promote the regeneration of nerve cells, used to treat schizophrenia, psychosis, peroxisomal disorders, diabetes, alcoholism and other conditions.

Management has not commissioned any third party reports to support any basis to these claims; however, it is management’s personal belief that the nature of these claims made by independent studies is credible.

 13 

 

We are subject to natural disasters.

Acer truncatum trees are generally strong and adaptable but can be damaged by harsh weather, diseases and crop pests. If our crops are damaged by natural disasters such as floods, drought, storms, or other farming risks, our business may suffer and our investors may lose their entire investment. Additionally, there are no known serious insect or disease problems that afflict Acer truncatum trees.

Increased Chinese government regulation of our production capacity and/or our sales and marketing operations could impact our business.

There are presently no significant Chinese government regulations of the health claims made by the participants in the Acer truncatum business regarding their products. Additionally, there are limited government regulations over the conditions under which we manufacture our products. While other countries such as the United States and the European Union have extensive regulations of nutraceutical and plant-based products, including strict health-related claims, there are no current regulations in China to the degree of these other countries.

Our business is reliant on retaining and hiring key personnel that are in high demand in China.

We operate within an intensely competitive environment for key personnel in such areas as biologists, chemists, technicians, production supervisors, and sales and marketing personnel. If we are unable to fulfill these roles as we grow as a company, our future success will be severely impaired, and we will be unable to implement our business plan.

We may have difficulty establishing adequate management and financial controls in China.

We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected for a United States public company. Despite our record as a fully-reporting company on Edgar since February 6, 2015, if we cannot continue to maintain such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.

 

Our success depends on collaborative partners, licensees and other third parties over whom we have limited control.

We have made a number of agreements to lease land to develop plantations for our Acer truncatum trees with third parties. To the extent we enter into these agreements, we cannot assure you that we will not encounter discourse or problems that may lead to loss of production. Additionally, due to the nature of the process of developing these plantations, we require arrangements with manufacturing facilities, marketing and commercialization partners of our products. There are no assurances that we will be able to establish or maintain collaborations that are important to our business on favorable terms, or at all.

 

A number of risks may arise from the Company's dependence on collaborative agreements with third parties. Product development and commercialization efforts could be adversely affected if any collaborative partner:

 

•   terminates or suspends its agreement with us;
   
•   causes delays;
   
•  fails to timely develop or manufacture in adequate quantities;
   
otherwise fails to meet its contractual obligations.
   
Our collaborative partners could pursue other technologies or develop alternative products that could compete with the products we are developing.

 

We have limited business insurance coverage.

       

We do not have any business liability or disruption insurance coverage for our operations in China. Any business disruption, litigation or natural disaster may result in our incurring substantial costs and the diversion of our resources.

 14 

 

Price controls may affect both our revenues and net income.

 

The laws of the PRC provide for the government to fix and adjust prices. To the extent that we are subject to price control, our revenue, gross profit, gross margin and net income will be affected since the revenue we derive from our sales will be limited and, unless there is also price control on the products that we purchase from our suppliers, we may face no limitation on our costs. Further, if price controls affect both our revenue and our costs, our ability to be profitable and the extent of our profitability will be effectively subject to determination by the applicable regulatory authorities in the PRC.

 

Our operations may not develop in the same way or at the same rate as might be expected if the PRC economy were similar to the totally market-oriented economies of member countries of the Organization for Economic Cooperation and Development ("OECD").

 

The economy of the PRC has historically been a nationalistic, "planned economy," meaning it functions and produces according to governmental plans and pre-set targets or quotas. In certain aspects, the PRC's economy has been making a transition to a more market-oriented economy, although the government imposes price controls on certain products and in certain industries. However, we cannot predict the future direction of these economic reforms or the effects these measures may have. The economy of the PRC also differs from the economies of most countries belonging to the OECD, an international group of member countries sharing a commitment to democratic government and market economy. For instance:

 

 • the level of state-owned enterprises in the PRC, as well as the level of governmental control over the allocation of resources is greater than in most of the countries belonging to the OECD;
   
 • the level of capital reinvestment is lower in the PRC than in other countries that are members of the OECD;
   
 • the government of the PRC has a greater involvement in general in the economy and the economic structure of industries within the PRC than other countries belonging to the OECD;
   
 • the government of the PRC imposes price controls on certain products and our products may become subject to additional price controls; and
   
 • the PRC has various impediments in place that make it difficult for foreign firms to obtain local currency, unlike other countries belonging to the OECD where exchange of currencies is generally free from restriction.

 

As a result of these differences, our business may not develop in the same way or at the same rate as might be expected if the economy of the PRC were similar to those of the OECD member countries.

 

Our failure to effectively manage growth could harm our business.

 

We have rapidly and significantly expanded our operations since our inception and will endeavor to further expand our operations in the future. Any additional significant growth in the market for our services or our entry into new markets may require and expansion of our employee base for managerial, operational, financial, sales and marketing and other purposes.

 

During any growth, we may face problems related to our operational and financial systems and controls, including quality control and service capacities. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.

 

 15 

 

Aside from increased difficulties in the management of human resources, we may also encounter working capital issues, as we will need increased liquidity to hire additional employees. For effective growth management, we will be required to continue improving our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure investors that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers.

 

We may pursue future growth through strategic acquisitions and alliances which may not yield anticipated benefits and may adversely affect our operating results, financial condition and existing business.

 We may seek to grow in the future through strategic acquisitions in order to complement and expand our business. The success of our acquisition strategy will depend on, among other things:

  · the availability of suitable candidates;

  · competition from other companies for the purchase of available candidates;

  · our ability to value those candidates accurately and negotiate favorable terms for those acquisitions;

  · the availability of funds to finance acquisitions;

  · the ability to establish new informational, operational and financial systems to meet the needs of our business;

  · the ability to achieve anticipated synergies, including with respect to complementary products or services; and

  · the availability of management resources to oversee the integration and operation of the acquired businesses.

 

If we are not successful in integrating acquired businesses and completing acquisitions in the future, we may be required to reevaluate our acquisition strategy. We also may incur substantial expenses and devote significant management time and resources in seeking to complete acquisitions. Acquired businesses may fail to meet our performance expectations. If we do not achieve the anticipated benefits of an acquisition as rapidly as expected, or at all, investors or analysts may not perceive the same benefits of the acquisition as we do. If these risks materialize, our stock price could be materially adversely affected.

 We face risks related to natural disasters, terrorist attacks or other unpredictable events in China which could have a material adverse effect on our business and results of operations

Our business could be materially and adversely affected by natural disasters, terrorist attacks or other events in China where all of our operations are located. For example, in early 2008, parts of China suffered a wave of strong snow storms that severely impacted public transportation systems. In May 2008, Sichuan Province in China suffered a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties. The May 2008 Sichuan earthquake has had a material adverse effect on the general economic conditions in the areas affected by the earthquake. The occurrence of any future disasters such as earthquakes, fires, floods, wars, terrorist attacks, computer viruses, transportation disasters or other events, or our information system or communications network breaks down or operates improperly as a result of such events, our facilities may be seriously damaged, and we may have to stop or delay operations. We may incur expenses relating to such damages, which could have a material adverse effect on our business and results of operations. 

 16 

 

We may adopt an equity incentive plan under which we may grant securities to compensate employees and other services providers, which would result in increased share-based compensation expenses and, therefore, reduce net income.

We may adopt an equity incentive plan under which we may grant shares or options to qualified employees. Under current accounting rules, we would be required to recognize share-based compensation as compensation expense in our statement of operations, based on the fair value of equity awards on the date of the grant, and recognize the compensation expense over the period in which the recipient is required to provide service in exchange for the equity award. We have not made any such grants in the past, and accordingly our results of operations have not contained any share-based compensation charges. The additional expenses associated with share-based compensation may reduce the attractiveness of issuing stock options under an equity incentive plan that we may adopt in the future. If we grant equity compensation to attract and retain key personnel, the expenses associated with share-based compensation may adversely affect our net income. However, if we do not grant equity compensation, we may not be able to attract and retain key personnel or be forced to expend cash or other compensation instead. Furthermore, the issuance of equity awards would dilute the shareholders’ ownership interests in our company.

If we are unable to maintain or expand our sales and marketing capabilities, and attract and retain skilled personnel, we may not be able to generate anticipated revenues.

Increasing our customer base and penetrating our target markets will depend to a significant extent on our ability to expand our sales and marketing operations and activities. We expect to be largely dependent on our sales force to obtain new customers. We also expect to be highly dependent on skilled computer programmers. Competition for both are intense, and we may not be able to attract, integrate sufficient highly qualified personnel.

Our failure to obtain capital may significantly restrict our proposed operations.

We will need to raise more capital to expand our business. Future sources of capital may not be available to us when we need it or may be available only on unacceptable terms.

 

We are subject to the risk that certain key personnel, including key employees named below, on whom we depend, in part, for our operations, will cease to be involved with us.  The loss of any these individuals would adversely affect our financial condition and the results of our operations.

 

We are dependent on the experience, knowledge, skill and expertise of our President, CEO, Chairman, Wenfa “Simon” Sun. We are also in large part dependent on Suyun Cao, our CFO and Secretary. The loss of any of the key personnel listed above could materially and adversely affect our future business efforts. Our success depends in substantial part upon the services, efforts and abilities of Wenfa “Simon” Sun, due to his experience, history and knowledge of the agricultural industry and his overall insight into our business direction. The loss or our failure to retain Mr. Sun, or Mr. Cao, or to attract and retain additional qualified personnel, could adversely affect our operations.  We do not currently carry key-man life insurance on any of our officers and have no present plans to obtain this insurance.  See “Management.”

 

The lack of public company experience of our management team may put us at a competitive disadvantage.

 

As a company with a class of securities registered under the Exchange Act, we are subject to reporting and other legal, accounting, corporate governance, and regulatory requirements imposed by the Exchange Act and rules and regulations promulgated under the Exchange Act.  Our President, Chairman and CEO has no public company experience and under the Federal securities laws of the United States and rules and regulations of the U.S. Securities and Exchange Commission, which could impair our ability to comply with these legal, accounting, and regulatory requirements.  Such responsibilities include complying with Federal securities laws and making required disclosures on a timely basis.  Our senior management may not be able to implement and effect programs and policies in an effective and timely manner that adequately responds to such increased legal and regulatory compliance and reporting requirements. Our failure to do so could lead to the imposition of fines and penalties and further result in the deterioration of our business.

 

 17 

 

If we fail to maintain the adequacy of our internal controls, our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock price to decrease substantially if we succeed in becoming a publicly-traded company.

 

We have committed limited personnel and resources to the development of the external reporting and compliance obligations that would be required for a public company. Recently, we have taken measures to address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations in connection with becoming a publicly-traded company. We plan to obtain additional financial and accounting resources to support and enhance our ability to meet the requirements of being a publicly-traded company. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls, reporting systems or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially upon trading as a publicly-traded company. We have implemented, or plan to implement, the measures described below under the supervision and guidance of our management to remediate the above control deficiencies and to strengthen our internal controls over financial reporting. Key elements of the remediation effort include, but are not limited to, the following initiatives, which have been implemented, or are in the process of implementation, as of the date of filing of this Annual Report:

 

 • We have increased efforts to enforce internal control procedures. We have also reorganized the structure of our accounting department in China and clarified the responsibilities of each key personnel in order to increase communications and accountability.
   
 • We have recruited and will continue to bring in additional qualified financial personnel for the accounting department to further strengthen our China financial reporting function.
   
 • We continually review and improve our standardization of our monthly and quarterly data collection, analysis, and reconciliation procedures.
   
 • We plan on significantly increasing the level of communication and interaction among our China management, independent auditors, our directors of the Board, and other external advisors.
   
 • We are making progress on engaging qualified internal control consultants to help us comply with internal control obligations, including Section 404 of the Sarbanes-Oxley Act of 2002. We also plan to dedicate sufficient resources to implement required internal control procedures.

 

If our financial and managerial controls, reporting systems or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.

 

Competition

The Acer truncatum industry in China is highly competitive with competitors from larger enterprises to smaller farmers. The company also competes with various distribution methods such as online sales through mobile applications and internet websites.

Strategy

The long term strategy of the company is to build and complete an industry chain of Acer truncatum seed oil for planting, production, research and developing, and sales by way of being devoted to developing truncatum trees, developing technology of extracting planting nervonic acid, increasing sales of Acer truncatum extract, integrating resources of national Acer truncatum planting base, and building our customer health database.

 18 

 

Risks Related To Us Doing Business in China

 

As substantially all of our assets are located in the PRC and all of our revenues are derived from our operations in China, changes in the political and economic policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.

 

Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters. Under the current government leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

 

Our operations are subject to PRC laws and regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof, may have a material and adverse effect on our business.

 

The PRC’s legal system is a civil law system based on written statutes. Decided legal cases do not have so much value as precedent in China as those in the common law system prevalent in the United States. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to, governmental approvals required for conducting business and investments, laws and regulations governing the advertising industry, as well as commercial, antitrust, patent, product liability, environmental laws and regulations, consumer protection, and financial and business taxation laws and regulations.

 The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties.

Our PRC subsidiaries, CQC9, is considered a foreign invested enterprise under PRC laws, and as a result is required to comply with PRC laws and regulations, including laws and regulations specifically governing the activities and conduct of foreign invested enterprises. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the relevant authorities find us in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation:

  · levying fines;
  · revoking our business license, other licenses or authorities;
  · requiring that we restructure our ownership or operations; and
  · requiring that we discontinue any portion or all of our business.

Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management.

 19 

 

All of our current operations are conducted in China. Moreover, all of our directors and officers are nationals and residents of China. All or substantially all of the assets of these persons are located outside the United States and in the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon these persons. In addition, uncertainty exists as to whether the courts of China would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in China against us or such persons predicated upon the securities laws of the United States or any state thereof.

 Contract drafting, interpretation and enforcement in China involves significant uncertainty.

We have entered into numerous contracts governed by PRC law, many of which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tend to contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations. As a result, contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement in China is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties. Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you that we will prevail.

 Recent PRC regulations relating to acquisitions of PRC companies by foreign entities may create regulatory uncertainties that could restrict or limit our ability to operate. Our failure to obtain the prior approval of the China Securities Regulatory Commission, or the CSRC, for our planned public offering and the listing and trading of our common stock could have a material adverse effect on our business, operating results, reputation and trading price of our common stock if and when we become trading.

The PRC State Administration of Foreign Exchange, or “SAFE,” issued a public notice in November 2005, known as Circular 75, which has become null and void and has been replaced by Circular (2014) 37, issued on 14 July, 2014, concerning the use of offshore holding companies controlled by PRC residents in mergers and acquisitions in China. This circular requires that (1) a PRC resident shall register with a local branch of the SAFE before he or she establishes or controls an overseas special purpose vehicle, or SPV, for the purpose of overseas equity financing (including convertible debt financing);(2) when a PRC resident contributes the assets of or his or her equity interests in a domestic enterprise to an SPV, or engages in overseas financing after contributing assets or equity interests to an SPV, such PRC resident must register his or her interest in the SPV and any changes in such interest with a local branch of the SAFE; and (3) when the SPV undergoes a material change regarding to PRC resident, such as a change in share capital or merger or acquisition, the PRC resident shall, register such change with a local branch of the SAFE. In addition, SAFE issued updated internal implementing rules, or the Implementing Rules in relation to Circular 37. However, there exist uncertainties regarding the SAFE registration for PRC residents’ interests in overseas companies. If any PRC resident stockholder of a SPV fails to make the required SAFE registration and amended registration, the onshore PRC subsidiaries of that offshore company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the offshore entity. Failure to comply with the SAFE registration and amendment requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. Because of uncertainty in how Circular 37 will be interpreted and enforced, we cannot be sure how it will affect our business operations or future plans. For example, CQFI's ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 37 by our PRC resident beneficial holders over whom we have no control. In addition, we cannot assure you that such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations. Failure by any PRC resident beneficial holder to register as required with the relevant branch of SAFE could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit CQFI's ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

 On August 8, 2006, the PRC Ministry of Commerce (“MOFCOM”), joined by the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission and SAFE, released a substantially amended version of the Provisions for Foreign Investors to Merge with or Acquire Domestic Enterprises (the “Revised M&A Regulations”), which took effect on September 8, 2006 and was further amended on June 22, 2009. These new rules significantly revised China’s regulatory framework governing onshore-to -offshore restructurings and foreign acquisitions of domestic enterprises. These new rules signify greater PRC government attention to cross-border merger, acquisition and other investment activities, by confirming MOFCOM as a key regulator for issues related to mergers and acquisitions in China and requiring MOFCOM approval of a broad range of merger, acquisition and investment transactions. Further, the new rules establish reporting requirements for acquisition of control by foreigners of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign control transactions in key industries.

 20 

 

Among other things, the Revised M&A Regulations include new provisions that purport to require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. However, the application of this PRC regulation remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope and applicability of the CSRC approval requirement. Our PRC counsel, Hubei Taoshi Law Firm, believes that it is uncertain whether the transaction is subject to CSRC’s approval, and in reality, many other similar companies have completed similar transactions like the share exchange and private placement contemplated under the Exchange Agreement without CSRC’s approval and our PRC legal counsel is not aware of any situation in which the CSRC has imposed a punishment or penalty in connection with any such transactions. However, if the CSRC or other PRC Government Agencies subsequently determine that CSRC approval is required for the share exchange and private placement contemplated under the Exchange Agreement, we may face material regulatory actions or other sanctions from the CSRC or other PRC Government Agencies.

 

If the CSRC or another PRC regulatory agency subsequently determines that CSRC approval was required for our restructuring, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common stock.

 

According to the Revised M&A Regulations and other PRC rules regarding foreign exchange, an offshore company’s shares can be used as consideration for the acquisition of a domestic PRC company’s equity by foreign investors only under very limited circumstances. Prior approval from the MOFCOM must be obtained before such a share exchange can be done. If relevant PRC government authorities deem a future acquisition of a domestic PRC company’s equity by us or our offshore subsidiary using our common stock or other types of our securities as consideration to be a transaction subject to the Revised M&A Regulations, complying with the requirements of this regulation to complete such transactions could be time- consuming and any required approval processes, including obtaining approval from the MOFCOM, may delay or inhibit our ability to complete such transactions. Any delay or inability to obtain applicable approvals to complete acquisitions could affect our ability to expand our business or maintain our market share. However, the application of the Revised M&A Regulations remains unclear and it is uncertain whether a future acquisition of a domestic PRC company’s equity by our domestic PRC subsidiaries using our common stock or other types of our securities as consideration will be subject to such regulations.

 

Also, if later the CSRC requires that we obtain its approval, we may be unable to obtain a waiver of the CSRC approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding this CSRC approval requirement could have a material adverse effect on the trading price of our common stock. It is uncertain that CSRC is or will be curtailing or suspending overseas listings for Chinese private companies.

 

It is uncertain how our business operations or future strategy will be affected by the interpretations and implementation of Circular 37 and the Revised M&A Regulations. It is anticipated that application of the new rules will be subject to significant administrative interpretation, and we will need to closely monitor how MOFCOM, SAFE, CSRC and other ministries apply the rules to ensure that our domestic and offshore activities continue to comply with PRC law. Given the uncertainties regarding interpretation and application of the new rules, we may need to expend significant time and resources to maintain compliance with such rules.

  

If the land use rights of our landlord are revoked, we would be forced to relocate operations.

 

 21 

 

Under Chinese law, land is owned by the state or rural collective economic organizations. The state issues to the land users the land use right certificate. Land use rights can be revoked and the land users could be forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent. We limited land use rights and each of our facilities relies on land use rights of our landlords, and the loss of such rights would require us to identify and relocate our operations, which could have a material adverse effect on our financial conditions and results of operations.

 

We will not be able to complete an acquisition of prospective acquisition targets in the PRC unless their financial statements can be reconciled to U.S. generally accepted accounting principles in a timely manner.

 

Companies based in the PRC may not have properly kept financial books and records that may be reconciled with U.S. generally accepted accounting principles. If we attempt to acquire a significant PRC target company and/or its assets, we would be required to obtain or prepare financial statements of the target that are prepared in accordance with and reconciled to U.S. generally accepted accounting principles. Federal securities laws require that a business combination meeting certain financial significance tests require the public acquirer to prepare and file historical and/or pro forma financial statement disclosure with the SEC. These financial statements must be prepared in accordance with, or be reconciled to U.S. generally accepted accounting principles and the historical financial statements must be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. If a proposed acquisition target does not have financial statements that have been prepared in accordance with, or that can be reconciled to, U.S. generally accepted accounting principles and audited in accordance with the standards of the PCAOB, we will not be able to acquire that proposed acquisition target. These financial statement requirements may limit the pool of potential acquisition targets with which we may acquire and hinder our ability to expand our retail operations. Furthermore, if we consummate an acquisition and are unable to timely file audited financial statements and/or pro forma financial information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as Item 9.01 of Form 8-K, we will be ineligible to use the SEC’s short-form registration statement on Form S-3 to raise capital, if we are otherwise eligible to use a Form S-3. If we are ineligible to use a Form S-3, the process of raising capital may be more expensive and time consuming and the terms of any offering transaction may not be as favorable as they would have been if we were eligible to use Form S-3.

 

We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises’ Share Transfer Income (“Circular 698”) that was released in December 2009 with retroactive effect from January 1, 2008.

 

The Chinese State Administration of Taxation (SAT) released a circular (Guoshuihan No. 698 – Circular 698) on December 10, 2009 that addresses the transfer of shares of Chinese resident companies by nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. While, Circular 698 does not apply to shareholders who are individuals, the PRC authority has the discretion to determine whether these enterprise shareholders are treated as a resident enterprise. If such shareholders are recognized as non-resident enterprises, Circular 698 may have been applicable to the Share Exchange due to the transfer of shares of CAT9 Cayman, which Wenfa "Simon" Sun indirectly via HK CAT9, directly holds the equity interests of CQFI the Company by such enterprise shareholders. Circular 698 provides that where a non-resident enterprise investor indirectly transfers the equity of a PRC resident enterprise, if the overseas intermediary holding company being transferred by the non-resident enterprise is established in a country/region where the effective tax rate is less than 12.5% or which does not tax the overseas income of its residents, the non-resident enterprise must submit the required documents to the PRC tax authority in charge of the PRC resident enterprise within 30 days after the equity transfer agreement is concluded. {This clause has been terminated by Bulletin (2013)72} However, there is uncertainty as to the application of Circular 698. For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. We have not provided any information to the relevant PRC tax authorities regarding the share exchange transaction.

 

 22 

 

We have sought the advice, but not an opinion, of PRC legal counsel regarding the application of and the risks associated with Circular 698. Circular 698, which provides parties with a short period of time to comply its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. It further provides that where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes. However, there are no formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our company complies with the Circular 698.

 

Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of our holding companies, CAT9 Cayman, a company organized under the laws of the Cayman Islands (“CAT9 Cayman”) and CAT9 China Investment Limited, a company organized under the laws of Hong Kong (“CAT9 HK”). If we, CAT9 Cayman or CAT9 HK is determined to be a PRC resident enterprise by PRC tax authorities, Circular 698 will not be applicable to any direct or indirect transfer of our shareholdings in CQFI. If we, CAT9 Cayman or CAT9 HK is determined to be a non-resident enterprise by the PRC tax authorities and the direct or indirect transfer of our shareholdings in CQFI, is recognized by the tax authority in charge as the transfer of shares of Chinese resident companies by nonresident companies, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations. Because CAT9 HK, a Hong Kong company owns 100% of CQFI; CAT9 Cayman, a Cayman Islands company owns 100% of CAT9 HK; and the Company, a Delaware corporation, owns 100% of CAT9 Cayman, it is possible that Circular 698 could apply to any transfer of shares of the Company, CAT9 Cayman or CAT9 HK, as an indirect transfer of the equity of CQFI, if such transfers are not made through a public securities market or by individuals. If the PRC tax authority determines that Circular 698 applies to us, we will be obligated to make tax returns filings with the relevant PRC tax authority in accordance with PRC tax laws and regulations. Failure to do so will subject us to fines up to RMB10,000 ($1,471). Furthermore, if the PRC tax authority determines that our arrangement which resulted in the underpayment of taxes was done to evade taxation, in addition to paying all the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances.

The foreign currency exchange rate between U.S. Dollars and Renminbi could adversely affect our financial condition.

 

Until 1994, the Renminbi experienced a gradual but significant devaluation against most major currencies, including dollars, and there was a significant devaluation of the Renminbi on January 1, 1994 in connection with the replacement of the dual exchange rate system with a unified managed floating rate foreign exchange system. Since 1994, the value of the Renminbi relative to the U.S. dollar has remained stable and has appreciated slightly against the U.S. Dollar. Countries, including the United States, have argued that the Renminbi is artificially undervalued due to China’s current monetary policies and have pressured China to allow the Renminbi to float freely in world markets. In July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of designated foreign currencies. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in further and more significant appreciation of the Renminbi against the U.S. dollar.

 

As we may rely on dividends and other fees paid to us by our subsidiary and affiliated consolidated entities in China, any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues, earnings and financial position, and the amount of, and any dividends payable on, our shares in U.S. dollars. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, since our functional and reporting currency is the U.S. dollar while the functional currency of our subsidiary and affiliated consolidated entities in China is Renminbi, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would have a positive or negative effect on our reported financial results, which may not reflect any underlying change in our business, results of operations or financial condition.

 23 

 

Governmental control of currency conversion may limit our ability to utilize our revenues.

 

Substantially all of our revenues and expenses are denominated in Renminbi. Under PRC laws, the Renminbi is currently convertible under a company’s “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the company’s “capital account,” which includes foreign direct investment and loans, without the prior approval of SAFE. SAFE reserves the discretion to deny the conversion of RMB into foreign currencies for capital account transactions. Currently our PRC subsidiary, CQC9, may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, without the approval of SAFE. Therefore, CQC9may convert the revenues it generates in RMB into other currencies, such as U.S. Dollars, for settlement of current account transactions without having to obtain approval from SAFE. However, foreign exchange transactions by CQC9under the capital account continue to be subject to significant foreign exchange controls and require the approval of or need to register with PRC governmental authorities, including SAFE. Therefore, CQC9 may not convert its sales revenues from RMB into other currencies for capital account transactions, such as to repay a loan, without first obtaining the approval of SAFE. If CQC9,borrows foreign currency loans from us or other foreign lenders, these loans must first be registered with the SAFE. If CQC9, a wholly foreign-owned enterprise, borrows foreign currency, the accumulative amount of its foreign currency loans shall not exceed the difference between the total investment and the registered capital of CQC9. If we finance CQC9, by means of additional capital contributions, these capital contributions must be approved by certain government authorities such as the Ministry of Commerce or its local counterparts. Additionally, the existing and future restrictions on currency exchange may affect the ability of our PRC subsidiary or affiliated entities to obtain foreign currencies, limit our ability to meet our foreign currency obligations, or otherwise materially and adversely affect our business.

 

Inflation in the PRC could negatively affect our profitability and growth.

 

While the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. According to the National Bureau of Statistics of China, the change in China’s Consumer Price Index increased to 8.5% in April 2008. If prices for our products and services rise at a rate that is insufficient to compensate for the rise in the costs of supplies such as raw materials, it may have an adverse effect on our profitability.

 

Furthermore, in order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. In January 2010, the Chinese government took steps to tighten the availability of credit including ordering banks to increase the amount of reserves they hold and to reduce or limit their lending. The implementation of such policies may impede economic growth. In October 2004, the People’s Bank of China, the PRC’s central bank, raised interest rates for the first time in nearly a decade and indicated in a statement that the measure was prompted by inflationary concerns in the Chinese economy. In April 2006, the People’s Bank of China raised the interest rate again. Repeated rises in interest rates by the central bank would likely slow economic activity in China which could, in turn, materially increase our costs and also reduce demand for our products and services.

 

Our funds are held in banks that provide insurance limited to 500,000 RMB or $76,000 USD per depositor, the failure of any bank in which we deposit our funds could affect our ability to continue in business.

 

On May 1, 2015, China introduced the Deposit Insurance Regulations. China began insuring deposits denominated in RMB and foreign currencies with the maximum payout amount per depositor at RMB 500,000 or $76,000 USD. A significant portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of a bank failure, and to the extent we hold more than the maximum amount covered, we will not (1) have access to our funds on deposit and (2) our bank insurance coverage will not cover more than RMB 500,000 or $76,000 USD and we will realize a loss. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash and the limited amount being covered by banks will impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we will be unable to continue in business.

 

 

 24 

 

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

 

As our ultimate holding company is a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

 

If we make equity compensation grants to persons who are PRC citizens, they may be required to register with the State Administration of Foreign Exchange of the PRC, or SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt an equity compensation plan for our directors and employees and other parties under PRC law.

 

On March 28, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company, also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options.

 

Domestic individuals who are granted shares or share options by companies listed on overseas stock exchanges based on the employee share option or share incentive plan are required to register with the State Administration of Foreign Exchange or its local counterparts. Pursuant to Circular 78, PRC individuals participating in the employee stock option plans of the overseas listed companies shall entrust their employers, including the overseas listed companies and the subsidiaries or branch offices of such offshore listed companies in China, or engage domestic agents to handle various foreign exchange matters associated with their employee stock options plans. The domestic agents or the employers shall, on behalf of the domestic individuals who have the right to exercise the employee stock options, apply annually to the State Administration of Foreign Exchange or its local offices for a quota for the conversion and/or payment of foreign currencies in connection with the domestic individuals’ exercise of the employee stock options. The foreign exchange proceeds received by the domestic individuals from sale of shares under the stock option plans granted by the overseas listed companies must be remitted into the bank accounts in China opened by their employers or PRC agents. If we adopt an equity compensation plan in the future and make option grants to our officers and directors, most of whom are PRC citizens, Circular 78 may require our officers and directors who receive option grants and are PRC citizens to register with SAFE.

 

We will comply with Circular 78 if we adopt an equity incentive plan. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming. If it is determined that any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject our PRC subsidiary when it is deemed a domestic agent as defined under Circular 78 and participants of our incentive plan who are PRC citizens to fines and legal sanctions and may prevent us from being able to grant equity compensation to our PRC employees. If we are unable to compensate our PRC employees and directors through equity compensation, our business operations may be adversely affected.

 

Under the New EIT Law, we, CAT9 Cayman and CAT9 HK may be classified as “resident enterprises” of China for tax purposes, which may subject us, CAT9 Cayman and CAT9 HK to PRC income tax on taxable global income.

 

 25 

 

Under the new PRC Enterprise Income Tax Law (the “New EIT Law”) and its implementing rules, both of which became effective on January 1, 2008, enterprises are classified as resident enterprises and non-resident enterprises. An enterprise established outside of China with its “de facto management bodies” located within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management body as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a foreign company such as us, CAT9 Cayman and CAT9 HK. The Company has not sought the advice of PRC tax counsel regarding the risks associated with the New EIT Law. Because our CAT9 Cayman and CAT9 HK's members of management are located in China, we believe it is likely that we, CAT9 Cayman and CAT9 HK meet the qualifications of a “resident enterprise” and would be recognized as a Chinese “resident enterprise,” subject to the ultimate judgment of the PRC tax authority, based on the standard of “de facto management body”. “Resident enterprise” treatment would not have impacted the Company’s results since the New EIT Law’s effectiveness, as CAT9 Cayman and CAT9 HK have no taxable income and no dividends were paid by any of our subsidiaries, including CAT9 Cayman and CAT9 HK, CQC9. If the PRC tax authorities determine that we, CAT9 Cayman and CAT9 HK are collectively a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income, including interest income on the proceeds from this offering, as well as PRC enterprise income tax reporting obligations. The failure to pay such taxes will subject us to fines up to RMB10,000 ($1,471), and furthermore, if the PRC tax authority determines that our arrangement which resulted in the underpayment of taxes was done to evade taxation, in addition to paying all the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances. Second, the New EIT Law provides that dividend paid between “qualified resident enterprises” is exempted from enterprise income tax. A recent circular issued by the State Administration of Taxation on April 22, 2010, regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group enterprises and established outside of China as “resident enterprises” clarified that dividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC shareholders. It is unclear whether the dividends that we, CAT9 Cayman and CAT9 HK receive from CQC9 will constitute dividends between “qualified resident enterprises” and would therefore qualify for tax exemption, because the definition of qualified resident enterprises is unclear and the relevant PRC government authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. We are actively monitoring the possibility of “resident enterprise” treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible. As a result of the New EIT Law, our historical operating results will not be indicative of our operating results for future periods and the value of our common stock may be adversely affected.

 

Dividends payable by us to our foreign investors and any gain on the sale of our shares may be subject to taxes under PRC tax laws.

 

If dividends payable to our stockholders are treated as income derived from sources within China, then the dividends that stockholders receive from us, and any gain on the sale or transfer of our shares, may be subject to taxes under PRC tax laws. We have not consulted with PRC tax counsel regarding the taxes that may be associated with dividends paid by us.

 

Under the New EIT Law and its implementing rules, PRC enterprise income tax at the rate of 10% is applicable to dividends payable by us to our investors that are non-resident enterprises so long as such non-resident enterprise investors do not have an establishment or place of business in China or, despite the existence of such establishment of place of business in China, the relevant income is not effectively connected with such establishment or place of business in China, to the extent that such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of our shares by such investors is also subject to a 10% PRC income tax if such gain is regarded as income derived from sources within China and we are considered as a resident enterprise which is domiciled in China for tax purpose. Additionally, there is a possibility that the relevant PRC tax authorities may take the view that the purpose of us, CAT9 Cayman and CAT9 HK is holding CQC9, and the capital gain derived by our overseas shareholders or investors from the share transfer is deemed China-sourced income, in which case such capital gain may be subject to a PRC withholding tax at the rate of up to 10%. If we are required under the New EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders or investors who are non-resident enterprises, or if you are required to pay PRC income tax on the transfer or our shares under the circumstances mentioned above, the value of your investment in our shares may be materially and adversely affected.

 

 26 

 

In January, 2009, the State Administration of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises (“Measures”), pursuant to which, the entities which have the direct obligation to make the following payment to a non-resident enterprise shall be the relevant tax withholders for such non-resident enterprise, and such payment includes: incomes from equity investment (including dividends and other return on investment), interests, rents, royalties, and incomes from assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China. Further, the Measures provides that in case of equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer payment shall, by itself or engage an agent to, file tax declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise. However, it is unclear whether the Measures refer to the equity transfer by a non-resident enterprise which is a direct or an indirect shareholder of the said PRC Company. Given these Measures, there is a possibility that we may have an obligation to withhold income tax in respect of the dividends paid to non-resident enterprise investors. If we have such an obligation, our omission or failure to fulfill such obligation may subject us to similar penalties to those applied to a taxpayer, including fines up to RMB10,000, and in the case of being recognized as constituting evasion of taxation, other than making up for the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances.

 

SAFE rules and regulations may limit our ability to transfer the net proceeds from this offering to our PRC subsidiaries, which may adversely affect the business expansion of our PRC subsidiaries, and we may not be able to convert the net proceeds from this offering into Renminbi to invest in or acquire any other PRC companies.

 

On August 29, 2008, SAFE promulgated Circular 142, a notice regulating the conversion by a foreign -invested company of foreign currency into Renminbi by restricting how the converted Renminbi may be used. The notice requires that the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies. The use of such Renminbi capital may not be changed without SAFE’sapproval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of Circular 142 will result in severe penalties, such as heavy fines.

   

A recurrence of Severe Acute Respiratory Syndrome (SARS), Avian Flu, or another widespread public health problem, such as the spread of H1N1 (“Swine”) Flu, or the Coronavirus/COVID-19 in the PRC could adversely affect our operations. (see our disclosure under Special Risk Factor due to the Novel Coronavirus (COVID-19) below)

 

A renewed outbreak of SARS, Avian Flu or another widespread public health problem, such as the spread of H1N1 (“Swine”) Flu, in China, where all of our operations are located and where all of our sales occur, will have a negative effect on our operations. Such an outbreak will have an impact on our operations as a result of:

  · quarantines or closures of our facilities, which will severely disrupt our operations,
  · the sickness or death of our key officers and employees, and
  · a general slowdown in the Chinese economy.
  · Any of the foregoing events or other unforeseen consequences of public health problems will adversely affect our operations.


 

 27 

 

Special Risk Factor due to the Novel Coronavirus (COVID-19)

During late 2019, a virus now known as the Novel Coronavirus or “COVID-19” appeared in Wuhan, China. By March 11, 2020, the WHO (World Health Organization) labeled COVID-19 as a pandemic and many countries around the world began closing borders and making efforts to either shelter-in-place or quarantine its population. Our Company and all of our operations are located in China. During the first quarter of 2020, China had placed a mandatory quarantine on certain areas, specifically in Wuhan located in Hubei Province. During this period, the Company’s employees and staff worked from home as advised by the government. The negative effect of COVID-19 on our operations are no longer hypothetical scenarios and during the quarantine period in early 2020, our sales declined as a result.

As of the date of this Form 10-K filing, China has slowly begun to relax some quarantine measures and allowed some businesses to operate again. We cannot make any assurances that COVID-19 will not reappear with new infections and to the extent that COVID-19, or another virus appears, we may encounter prolonged operational lockdown measures which would disrupt our business operations.

Due to the quarantine order, we had difficulties with coordinating employees and staff for our 2019 annual audit and therefore compelled to file for a special extended 45 day period to file our 2019 annual report on Form 10-K with the U.S Securities and Exchange Commission via Form 8-K on March 23, 2020.

 

The market price and trading volume of shares of our common stock may be volatile.

When and if a more robust market develops for our securities, the market price of our common stock could fluctuate significantly for many reasons, including for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors or suppliers regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within our industry experience declines in their share price, our share price may decline as well. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

Regulations, including those contained in and issued under the Sarbanes-Oxley Act of 2002 (“SOX”) and the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), increase the cost of doing business and may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our Common Stock.

 

We are a public company.  The current regulatory climate for public companies, even small and emerging growth companies such as ours, may make it difficult or prohibitively expensive to attract and retain qualified officers, directors and members of board committees required to provide for our effective management in compliance with the rules and regulations which govern publicly-held companies, including, but not limited to, certifications from executive officers and requirements for financial experts on boards of directors. The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting these roles.  For example, the enactment of the Sarbanes-Oxley Act of 2002 has resulted in the issuance of a series of new rules and regulations and the strengthening of existing rules and regulations by the SEC.

 

 Further, recent and proposed regulations under Dodd-Frank heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters.  We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management of our business could be adversely affected.

 

Our internal controls over financial reporting may not be effective, and our independent auditors may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business.   

 

We are subject to various SEC reporting and other regulatory requirements. We have incurred and will continue to incur expenses and, to a lesser extent, diversion of our management’s time in our efforts to comply with SOX Section 404 regarding internal controls over financial reporting.  Our management’s evaluation over our internal controls over financial reporting may determine that material weaknesses in our internal control exist.  If, in the future, management identifies material weaknesses, or our external auditors are unable to attest that our management’s report is fairly stated or to express an opinion on the effectiveness of our internal controls, this could result in a loss of investor confidence in our financial reports, have an adverse effect on our stock price, and subject us to sanctions or investigation by regulatory authorities.

 28 

 

Limitations on director and officer liability and our indemnification of our officers and directors may discourage stockholders from bringing suit against a director.  

Our Certificate of Incorporation and By-Laws provide, with certain exceptions as permitted by Delaware corporation law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director. In addition, our Certificate of Incorporation and By-Laws provide for mandatory indemnification of directors and officers to the fullest extent permitted by governing state law.   

We may incur a variety of costs to engage in future acquisitions of companies, products or technologies, to grow our business, to expand into new markets, or to provide new services.  As such, the anticipated benefits of those acquisitions may never be realized.

It is management’s intention to acquire other businesses to grow our customer base, to expand into new markets, and to provide new product lines.  We may make acquisitions of, or significant investments in, complementary companies, products or technologies, although no additional material acquisitions or investments are currently pending.  Acquisitions may be accompanied by risks such as: 

  · difficulties in assimilating the operations and employees of acquired companies;
  · diversion of our management’s attention from ongoing business concerns;
  · our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services;
  · additional expense associated with amortization of acquired assets;
  · additional expense associated with understanding and development of acquired business;
  · maintenance and implementation of uniform standards, controls, procedures and policies; and
  · impairment of existing relationships with employees, suppliers and customers as a result of the integration of new management employees.

Our failure to manage growth effectively could harm our ability to attract and retain key personnel and adversely impact our operating results.

There can be no assurance that we will be able to manage our expansion through acquisitions effectively. Our current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage our future operations, especially as we employ personnel in multiple geographic locations. We may not be able to hire, train, retain, motivate and manage required personnel, which may limit our growth, damage our reputation and negatively affect our financial performance and harm our business.

The forecasts of market growth included in this Offering may prove to be inaccurate, and even if the market in which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates, if at all.

 29 

 

Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate. Forecasts relating to the expected growth in the agricultural sector within China, including the forecasts or projections referenced in this Offering Memorandum, may prove to be inaccurate. Even if these markets experience the forecasted growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.

We might require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

 

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure funds. If we raise funds through issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our future capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired.

 

If we obtain financing, existing shareholder interests may be diluted.

 

If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our shareholders will be diluted. In addition, any new securities could have rights, preferences and privileges senior to those of our common stock. Furthermore, we cannot assure you that additional financing will be available when and to the extent we require or that, if available, it will be on acceptable terms.

 

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”

 

We are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements are time-consuming and expensive and could have a negative effect on our business, results of operations and financial condition.

 

As a public company, we are subject to the reporting requirements of the Exchange Act, and requirements of SOX. The cost of complying with these requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. SOX requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we must commit significant resources, may be required to hire additional staff and need to continue to provide effective management oversight.

 

We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join the Company and to maintain appropriate operational and financial systems to adequately support expansion.

 

These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

As an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) enacted on April 5, 2012, we may take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of SOX (and rules and regulations of the SEC thereunder, which we refer to as Section 404) and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

 30 

 

When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We will remain an “emerging growth company” for up to five years, although we may cease to be an emerging growth company earlier under certain circumstances. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations –JOBS Act” for additional information on when we may cease to be deemed to be an emerging growth company. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

Employment Laws

We are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, and social insurance, housing funds and other welfare that may be applicable. These include local labor laws and regulations, which may require substantial resources for compliance.

China's National Labor Law, which became effective on January 1, 1995, and China's National Labor Contract Law, which became effective on January 1, 2008, permits workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract. The National Labor Contract Law has enhanced rights for the nation's workers, including permitting open-ended labor contracts and severance payments. The legislation requires employers to provide written contracts to their workers, restricts the use of temporary labor and makes it harder for employers to lay off employees. It also requires that employees with fixed-term contracts be entitled to an indefinite-term contract after a fixed-term contract is renewed twice or the employee has worked for the employer for a consecutive ten-year period.

Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations promulgated by the State Council, as amended on August 5, 2008, or the Foreign Exchange Regulations. Under the Foreign Exchange Regulations, the RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval of the PRC State Administration of Foreign Exchange, or SAFE is obtained and prior registration with the SAFE is made. Foreign-invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations, which include approvals by the Ministry of Commerce ("MOFCOM"), the SAFE and the State Reform and Development Commission.

Dividend Distributions

Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation.

 31 

 

Properties

Our principal executive offices are located in Chengdu at Room 2001, Dading Century Square, No 387, Tianren Road, Wuhou District, Chengdu, Sichuan Province, China 610000

Legal Proceedings

We are not involved in any material legal proceedings outside of the ordinary course of our business.

 

Item 1A. Risk Factors.

Risk Factors

Any investment in our common stock involves a high degree of risk. Investors should carefully consider the risk described below and all of the information contained in this Current Report on Form 10-K before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur. Our shares of common stock are not currently listed or quoted for trading on any national securities exchange or national quotation system. If and when our common stock is traded, the trading price could decline due to any of these risks, and an investor may lose all or part of his or her investment. Some of these factors have affected our financial condition and operating results in the past or are currently affecting us. This Current Report on Form 10-K also contains forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Current Report on Form 10-K.

In early 2017, management suspended its food and machinery sales business in favor of capitalizing on the growing Acer truncatum industry within China and decided that it would to direct efforts towards its Acer truncatum plantation operations during 2017. Management believes that Acer truncatum plantation, harvesting, and production of edible oil is a more economically favorable direction for the company.

As of the date of this Current Report on Form 10-K, the Company employs a staff of 30 people and is located in Chengdu in Sichuan Province, China at Room 2001, Dading Century Square, No 387, Tianren Road, Wuhou District, Chengdu, Sichuan Province, China 610000 .

Products and Market

Chongqing CAT9 operates Acer truncatum plantations and operations in China. Acer truncatum is a maple tree known as the “Shangtung maple” which is native to China that contains an extract from its leaves and seeds called Nervonic acid, or bunge seed oil. The tree itself typically grows 20-25 feet tall, blooms in the month of April, and is primarily a full sun to part shade tree. It is the principal extract of the Acer truncatum plant which Acer truncatum oil is derived. Nervonic acid is a rich omega-9 fatty acid that is known to be beneficial to memory related brain health, anti-aging, blood lipid regulation, and anti-fatigue symptoms. There are a few alternate sources where nervonic acid can be derived, however at much less yield than from an Acer truncatum plant.

As of early 2017, management directed efforts towards the Acer truncatum industry in China. Acer truncatum is a plant that produces an extract from its leaves and seeds called Nervonic acid, or bunge seed oil.  It is the principal extract of the Acer truncatum plant which Acer truncatum oil is derived. Nervonic acid is a rich omega-9 fatty acid that is known to be beneficial to memory related brain health, anti-aging, blood lipid regulation, and anti-fatigue symptoms. There are a few alternate sources where nervonic acid can be derived, however at much less yield than from an Acer truncatum plant.

 

 32 

 

Nervonic Acid content (mg/100g)
Acer truncatum 580
Brassica  Oil Seeds 69-83
Sesame Seeds 35
Macadamia Nuts 18
TropaeolumSpeciosum 10
Lunaria (Money Plant) 8
King Salmon (Chinook) 140
Sockeye Salmon 40

Source: Herb Nutritionals

 

Nervonic Acid has been researched and tested to provide improved brain cell activity and studies have shown it has the potential to reduce Alzheimer’s disease. It is management’s belief that favorable claims regarding nervonic acid from several independent studies around the world by independent sources are credible; we do to an extent rely on these independent studies for guidance, however, we cannot verify these claims with certain accuracy. We did not compensate any party for any report or writing on nervonic acid or acer trunactum, we have no influence or made any requests or demands for any party to produce any report on nervonic acid or acer truncatum.

Suppliers represented by CAT9

 

Shandong Run’an BiotechCo., Ltd Acer truncatum oil, and sandwich gel candy
Heze Zonghoo Jianyuan Biotech Co., Ltd. Acer truncatum oil

 

CAT9 also seeks to establish five (5) additional planting bases of 350 acres each. These bases will become a CAT9 Group asset over years which we will seek to manage and develop to include land acquisitions, planting, and maintenance. In addition, we are planning to contract approximately 17,000 acres of existing forestry with local individuals, organizations and or provincial governments to insure our supply of raw materials. We are also planning to invest further into our research and development (R&D) to improve our processing yield of Acer truncatum and nervonic acid. This includes the research and development of planting technology, products, and process technology. We also plan to increase our spending on our information systems; we will seek to invest in a fully integrated information system to monitor crop production, fertilization, irrigation, and harvesting yield. We will also add quality control measures, POS systems, packaging, logistics, and e-commerce systems. A JIT (just in time) system to monitor inventory and critical path raw material requirements will also be implemented

Changes in Chinese environmental regulations and enforcement policies could subject us to additional liability and adversely affect our ability to continue certain operations.

 

In regards to our farm management and equipment operations, the Chinese environmental regulations continue to develop and evolve rapidly; therefore, we cannot predict the extent to which our operations may be affected by future enforcement policies as applied to existing laws, by changes to current environmental laws and regulations, or by the enactment of new environmental laws and regulations. There are numerous Chinese provincial and local laws and regulations relating to the protection of the environment and the ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision. Our business and operating results could be materially and adversely affected if we were required to increase expenditures to comply with any new environmental regulations affecting our operations. We may, in the future, receive citations or notices from governmental authorities that our operations are not in compliance with our permits or certain applicable regulations, including various transportation, environmental or land use laws and regulations. Should we receive such citations or notices, we would generally seek to work with the authorities to resolve the issues raised by such citations or notices. There can be no assurance, however, that we will always be successful in this regard, and the failure to resolve a significant issue could result in adverse consequences to us. As a result, we could incur material liabilities resulting from the costs of complying with environmental laws, environmental permits or any claims concerning noncompliance, or liability from contamination.

 33 

 

We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist at our facilities or at third-party sites for which we are liable. Enactment of stricter laws or regulations, stricter interpretations of existing laws and regulations or the requirement to undertake the investigation or remediation of currently unknown environmental contamination at our own or third-party sites may require us to make additional material expenditures, which would adversely affect our profitability.

  

We do not carry any business interruption or liability insuranceAs a result, we may incur uninsured losses, increasing the possibility that you would lose your entire investment in our company.

 

We could be exposed to liabilities or other claims for which we would have no insurance protection. We do not currently maintain any business interruption insurance or any other comprehensive insurance policy. As a result, we may incur uninsured liabilities and losses as a result of the conduct of our business. Business disruption insurance is available to a limited extent in China, but we have determined that the risks of disruption, the cost of such insurance and the difficulties associated with acquiring such insurance make it impractical for us to have such insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.

 

Our business is affected by competition and substantial technological change.

 

We currently face competition from many other companies that offer farm food products that may be lower than the prices we charge. Many of these companies have substantially greater financial and other resources than us and, therefore, are able to spend more than us in areas such as product development and marketing. Additionally, if our suppliers increase prices on Acer truncatum oil, or if there is a shortage, or if they refuse to sell to us, our business may be negatively affected by such actions.

 

Competitors may develop, use, create alternative innovative methods to sell, market and distribute farm food products that render our products or proposed products uneconomical or that may be superior to our products. In addition, farm management and equipment has its own set of risks related to competition and substantial technological changes. If our suppliers of farm management and equipment fail to deliver or we fail to secure product at favorable pricing, if our suppliers fail to create innovative products that customers demand, and we are unable to meet our end customer's demands, all of which would have a material adverse effect on us.

 

We have applied for a trademark in China and are considering patents; however, we have yet to be granted a trademark on our application.

 

We have filed for trademark application in China and are considering filing patents as well, however as of the date on this filing on Form 10-K, we have not yet been approved for our trademark.

 

Our business may be adversely affected by a global economic downturn, in addition to any uncertainties in the financial markets.

 

Although we believe that global financial markets have recovered from an economic downturn, we cannot make any assurances that we will not experience disruptions, or loss due to the possibility of another negative global event whereby severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability occurs Any economic downturn generally or any decrease in consumer spending in the PRC, could cause advertisers to reduce their spending on advertisements, would have a material adverse effect on our business, cash flows, financial condition and results of operations. The inability to obtain adequate financing from debt or capital sources could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.

 34 

 

We will need additional capital to successfully implement our current business strategy, which may not be available to us, and if we raise additional capital, it may dilute your ownership in us.

 

Our continued growth is dependent upon our ability to generate increased revenue from our existing customers, obtain new customers and raise capital from outside sources. An important element of our growth strategy is our Acer truncatum sales and our development of land leases to grow our own Acer truncatum plants. We believe that in order to continue to operate additional market share and general additional revenue, we will have to raise more capital to fund our business.

 

In the future, we may be unable to obtain the necessary financing for our capital requirements on a timely basis and on acceptable terms, and our failure to do so may adversely affect our financial position, competitive position, growth and profitability. Our ability to obtain acceptable financing at any time may depend on a number of factors, including: our financial condition and results of operations; the condition of the PRC economy and the Acer truncatum industry, and conditions in relevant financial markets in the United States, PRC and elsewhere in the world.

 

 Our failure to effectively manage growth could harm our business.

 

We have rapidly and significantly expanded our operations since our inception and will endeavor to further expand our operations in the future. Any additional significant growth in the market for our services or our entry into new markets may require and expansion of our employee base for managerial, operational, financial, sales and marketing and other purposes.

 

During any growth, we may face problems related to our operational and financial systems and controls, including quality control and service capacities. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.

 

Aside from increased difficulties in the management of human resources, we may also encounter working capital issues, as we will need increased liquidity to hire additional employees. For effective growth management, we will be required to continue improving our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure investors that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers.

 

We may pursue future growth through strategic acquisitions and alliances which may not yield anticipated benefits and may adversely affect our operating results, financial condition and existing business.

 

We may seek to grow in the future through strategic acquisitions in order to complement and expand our business. The success of our acquisition strategy will depend on, among other things:

 

  · the availability of suitable candidates;
  · competition from other companies for the purchase of available candidates;
  · our ability to value those candidates accurately and negotiate favorable terms for those acquisitions;
  · the availability of funds to finance acquisitions;
  · the ability to establish new informational, operational and financial systems to meet the needs of our business;
  · the ability to achieve anticipated synergies, including with respect to complementary products or services; and
  · the availability of management resources to oversee the integration and operation of the acquired businesses.

  

If we are not successful in integrating acquired businesses and completing acquisitions in the future, we may be required to reevaluate our acquisition strategy. We also may incur substantial expenses and devote significant management time and resources in seeking to complete acquisitions. Acquired businesses may fail to meet our performance expectations. If we do not achieve the anticipated benefits of an acquisition as rapidly as expected, or at all, investors or analysts may not perceive the same benefits of the acquisition as we do. If these risks materialize, our stock price could be materially adversely affected.

 35 

 

We face risks related to natural disasters, terrorist attacks or other unpredictable events in China which could have a material adverse effect on our business and results of operations.

 

Our business could be materially and adversely affected by natural disasters, terrorist attacks or other events in China where all of our operations are located. For example, in early 2008, parts of China suffered a wave of strong snow storms that severely impacted public transportation systems. In May 2008, Sichuan Province in China suffered a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties. The May 2008 Sichuan earthquake has had a material adverse effect on the general economic conditions in the areas affected by the earthquake. The occurrence of any future disasters such as earthquakes, fires, floods, wars, terrorist attacks, computer viruses, transportation disasters or other events, or our information system or communications network breaks down or operates improperly as a result of such events, our facilities may be seriously damaged, and we may have to stop or delay operations. We may incur expenses relating to such damages, which could have a material adverse effect on our business and results of operations.

 

We may adopt an equity incentive plan under which we may grant securities to compensate employees and other services providers, which would result in increased share-based compensation expenses and, therefore, reduce net income

 

We may adopt an equity incentive plan under which we may grant shares or options to qualified employees. Under current accounting rules, we would be required to recognize share-based compensation as compensation expense in our statement of operations, based on the fair value of equity awards on the date of the grant, and recognize the compensation expense over the period in which the recipient is required to provide service in exchange for the equity award. We have not made any such grants in the past, and accordingly our results of operations have not contained any share-based compensation charges. The additional expenses associated with share-based compensation may reduce the attractiveness of issuing stock options under an equity incentive plan that we may adopt in the future. If we grant equity compensation to attract and retain key personnel, the expenses associated with share-based compensation may adversely affect our net income. However, if we do not grant equity compensation, we may not be able to attract and retain key personnel or be forced to expend cash or other compensation instead. Furthermore, the issuance of equity awards would dilute the shareholders’ ownership interests in our company.

 

We have no plans of paying dividends on our Common Stock.

We have never paid dividends on our Common Stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy.

Special Risk Factor due to the Novel Coronavirus (COVID-19)

During late 2019, a virus now known as the Novel Coronavirus or “COVID-19” appeared in Wuhan, China. By March 11, 2020, the WHO (World Health Organization) labeled COVID-19 as a pandemic and many countries around the world began closing borders and making efforts to either shelter-in-place or quarantine its population. Our Company and all of our operations are located in China. During the first quarter of 2020, China had placed a mandatory quarantine on certain areas, specifically in Wuhan located in Hubei Province. During this period, the Company’s employees and staff worked from home as advised by the government. The negative effect of COVID-19 on our operations are no longer hypothetical scenarios and during the quarantine period in early 2020, our sales declined as a result.

As of the date of this Form 10-K filing,China has slowly begun to relax some quarantine measures and allowed some businesses to operate again. We cannot make any assurances that COVID-19 will not reappear with new infections and to the extent that COVID-19, or another virus appears, we may encounter prolonged operational lockdown measures which would disrupt our business operations.

 36 

 

Due to the quarantine order, we had difficulties with coordinating employees and staff for our 2019 annual audit and therefore compelled to file for a special extended 45 day period to file our 2019 annual report on Form 10-K with the U.S Securities and Exchange Commission via Form 8-K on March 23, 2020.

Authorization of Preferred Stock

Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of its authorized preferred stock, there can be no assurance that we will not do so in the future.

Control by Management

The officers and directors of the Company currently own 78% of all the issued and outstanding capital stock of the Company. Consequently, these individual shave the ability to control the operations of the Company and will have the ability to control substantially all matters submitted to stockholders for approval, including:

Election of the board of directors;
Removal of any directors;
Amendment of the Company’s certificate of incorporation or bylaws; and
Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination.

 

This Report Contains Forward-Looking Statements And Information Relating To Us, Our Industry And To Other Businesses

 

These forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. When used in this prospectus, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to risks and uncertainties that may cause our actual results to differ materially from those contemplated in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

Risks Related to Our Capital Structure

 

Our trading symbol is CATN, however, at the this Form 10-K, there is a limited trading market for our common stock, and there can be no assurances made of an established, robust public trading market, which if we were unable to accomplish, may adversely affect the ability of our investors to sell their securities in the public market. 

 

The market price and trading volume of shares of our common stock may be volatile.

 

If and when a market develops for our securities, the market price of our common stock could fluctuate significantly for many reasons, including for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors or suppliers regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within our industry experience declines in their share price, our share price may decline as well. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

 37 

 

Item 1B.  Unresolved Staff Comments

None.

Item 2.   Description of Property

Our office is located in Chengdu at Room 2001, Dading Century Square, No 387, Tianren Road, Wuhou District, Chengdu, Sichuan Province, China 610000, with 400 square meters.

 

We maintain a non-physical registered address in Chongqing, China for CQC9

 

Item 3.   Legal Proceedings

There are not presently any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.

Item 4.   Mine Safety Disclosures

Not applicable.

Forward Looking Statements

 

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this report. This report contains forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements because these forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Thus, our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in: economic conditions generally and the automotive modified plastics market specifically, legislative or regulatory changes that affect our business, including changes in regulation, the availability of working capital, the introduction of competing products, and other risk factors described herein. These risks and uncertainties, together with the other risks described from time-to-time in reports and documents that we filed with the SEC should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

  

 

 

 38 

 

PART II

Item 5.   Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities

Common Stock

Our Certificate of Incorporation authorizes the issuance of up to 500,000,000 shares of common stock, par value $0.0001 per share, as amended (the “Common Stock”). Our Common Stock is quoted as CATN on the Over-the-Counter Pink Sheet venue. As of December 31, 2019 there were 43 shareholders of record and as of the date of this filing, April 27, 2020, there are 43 holders of record of the Common Stock.

Our shares have been trading since February 2019. The following table sets forth the high and low bid prices for the Company’s common stock for the periods indicated. The prices below reflect inter-dealer quotations, without retail mark-up, mark-down or commissions and may not represent actual transactions.

 

  High   Low
Quarter ended March 31, 2019 $1.01   $0.10
       
Quarter ended June 30, 2019 $1.75   $0.69
       
Quarter ended September 30, 2019 $1.56   $1.20
       
Quarter ended December 31, 2019 $2.98   $1.56
       

Preferred Stock

Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”). The Company has not yet issued any of its preferred stock.

Dividends

We have not paid any dividends on our common stock to date and do not intend to pay dividends prior to the completion of a business combination. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

The Company does not have any equity compensation plans or any individual compensation arrangements with respect to its common stock or preferred stock. The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval.

Recent Sales of Unregistered Securities

None.

 

 39 

 

Item 6.  Selected Financial Data

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

Results of Operations for the Year Ended December 31, 2019, compared to the Year Ended December 31, 2018

 

Sales Revenue

 

Sales revenue for the year ended December 31, 2019, was $5,592,820, compared to $462,422 for the year ended December 31, 2019, an increase of $5,130,398 or 1109.5%. During 2019, the Company increased its sales staff. Our sales agents have been very successful with their sales efforts due to the expansion of their sales channels during 2019.

 

Cost of Goods Sold

 

Cost of goods sold for the year ended December 31, 2019, was $2,271,707, compared to $253,418 for the year ended December 31, 2018, an increase of $2,018,289 or 796.4%. The increase in cost of goods is directly related to the increase in sales. Specifically, for the cost of 3L blending oil and the Acer truncatum Gel Candy.

 

Operating Expenses

 

Professional fees were $88,610 for the year ended December 31, 2019, compared to $61,020 for the year ended December 31, 2018, an increase of $27,590, or 45.2%. Professional fees consist mostly of legal and audit expense. The decrease is the result of increased audit and legal expense.

 

Consulting expense was $172,758 for the year ended December 31, 2019, compared to $112,186 for the year ended December 31, 2018, an increase of $60,572 or 54%. Consulting expense has increased due to decreased use of consulting for business management and intellectual property.

 

Selling, general and administrative expense was $2,792,629 for the year ended December 31, 2019, compared to $750,808 for the year ended December 31, 2018, an increase of $2,041,821 or 271.9%. The increase is the result of the overall increase operations including salaries and wages, rent, freight and marketing expense.

 

Net Income (Loss)

 

Net income for the year ended December 31, 2019, was $292,507, compared to a net loss $715,894for the year ended December 31, 2018. The increase from the net loss to net income is the direct result of the increase in sales.

 

Liquidity and Capital Resources

 

During the year ended December 31, 2019, $482,500 was provided by operating activities compared to $796,194 used for operating activities in the prior year.

During the year ended December 31, 2019, we used $17,609 for investing activities for the purchase of property, equipment and software compared to $1,963 in the prior year.

 40 

 

During the year ended December 31, 2019, we repaid $481,543 of related party loans and received $86,289 from other loans for net cash used by financing activities of $395,254. For the year ended December 31, 2018, we received $93,312 from the sale of common stock, $476,507 from loans and $179,591 from loans from related parties, for total cash received of $749,410

Off-Balance Sheet Arrangements

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

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 8.   Financial Statements and Supplementary Data

Please see the financial statements beginning on page F-1 located elsewhere in this annual report on Form 10-K and incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosure.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of the Company’s management, including the Company’s President, Principal Financial Officer and Secretary, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report. Based on that evaluation, the Company’s sole officer concluded that the Company’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms.

 41 

 

Evaluation of Internal Controls over Financial Reporting

This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Changes in Internal Controls over Financial Reporting

There have been no significant changes to the Company’s internal controls over financial reporting that occurred during our last fiscal quarter of the year ended December 31, 2019, that materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

(a) Identification of Directors and Officers.

The following table sets forth certain information regarding our directors and executive officers as of December 31, 2019

Name   Age   Position
Wenfa "Simon" Sun   44   President, Chief Executive Officer, and Chairman of the Board of Directors
         
Suyun Cao   37   Chief Financial Officer and Secretary
         
Liu Shanhu   46   Independent Director

 

Wenfa “Simon” Sun, Age 44, President, Chief Executive Officer, Chairman of the Board of Directors

 

Mr. Sun holds a degree in International Finance from the Politics and Law University in Shanghai.  Post-graduation Mr. Sun started as an intern with Shanghai Sports foundation in 2005.  Putting his academic skills to practical application gained valuable experience in domestic and international finance policies and regulations.  In 2007 joined the Yantai Charitable Association where he used his experience and resources to raise funds for this notable charity.  Mr. Sun realizing the potential in both the domestic and international market for new technology in the Agriculture sector purchased Chongqing Steyer Agriculture Company. As President, he collaborated in a team effort and listed the Company's shares on the Shanghai Stock Exchange.

 

Suyun Cao, Age 37, Chief Financial Officer, Secretary

 

Mr. Cao, has served the Company’s financial accounting department since June 2018. Prior to joining the Company, Mr. Cao was a director for Chengdu Muzi Scene Decoration Design Co. Ltd and an accounting team manager for PriceWaterhouseCoopers Business Service division in Chengdu, China. He has also been employed as an internal controls and auditor from 2010 to 2012 with Lafarge Shui On Technical Services Co. Ltd. Mr. Cao holds a bachelor’s degree in accounting from Chengdu University of Information Technology.

 

 42 

 

Liu Shanhu, Age 46, Independent Director

Liu Shanhu holds a degree of economics in Beijing University. He started work as an office clerk for Foreign Affairs Office of Hainan Province on September of 1993. In December 1994 he became the producer, director and reporter for CCTV until 2004. During this period, he became the General Producer of full-length documentary, Melbourne's soul. From 2004 to 2014, he started Shanghai Shanhu enterprise planning co., LTD and was the chairman of board. During this period, he started to be the co-founders of the book, Wind Gap. He has ten years’ experience of media industry, and seven years’ experience of professional management. He has been appointed as a special researcher of international humanities in academy of social science in 1994. He specializes in effective team building, brand operating, and marketing.

(b) Significant Employees

 

We have no employees who are not executive officers, but who are expected to make a significant contribution to our business.

 

(c) Family Relationships.

 

None.

(d) Involvement in Certain Legal Proceedings.

There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of Registrant during the past five years.

Code of Ethics

We have not adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions in that our sole officer and director serve in these capacities.

Nominating Committee

We have not adopted any procedures by which security holders may recommend nominees to our Board of Directors.

Audit Committee

The Board of Directors acts as the audit committee. The Company does not have a qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert. The Company intends to continue to search for a qualified individual for hire.

Item 11.   Executive Compensation.

Employment Agreements

 

We have employment agreements with the following persons and terms:

 

The Company entered into employment agreements with Wenfa “Simon” Sun, its President, Chief Executive Officer, and Chairman on July 1, 2017. The agreement calls for Mr. Sun to earn 12,000 RMB per month upon the Company having a minimum of 2 million in RMB in retained earnings on its consolidated balance sheet. During the course of 2019, the Company had not met the minimum to make payment on the agreements.

 

We hired Suyun Cao as our Chief Financial Officer and Secretary on May 14, 2019.

 43 

 

 

SUMMARY COMPENSATION TABLE

Name and Principle Position   Year    

Salary

($)

    

Bonus

($)

    

Stock Awards

($)

    

Option Awards

($)

    

Non-

Equity

Incentive

Plan

Compensation

($)

    

Nonqualified Deferred Compensation

($)

    

All

Other

Compen-

sation

($)

    

Total

Earnings

($)

 
(a)   (b)    (c)    (d)    (e)    (f)    (g)    (h)    (i)    (j) 
                                              
Wenfa "Simon" Sun, President, CEO, Chairman   12/31/19    —      —      —      —      —      —      —      —   
Suyun Cao CFO, Secretary   12/31/19    —      —      —      —      —      —      —      —   

 

Director Compensation

No director was compensated earned during the fiscal year ended December 31, 2019 by members of our board of directors. We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity. We intend to develop such a policy in the near future.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

As of the date of this Form 10-K, there were 102,166,400 shares of common stock issued and outstanding.  The following table sets forth certain information regarding the beneficial ownership of the outstanding shares as of the date of this Report, (i) each of our executive officers and directors; and (ii) all of our executive officers and directors as a group.

 

Except as otherwise indicated, each such person has investment and voting power with respect to such shares, subject to community property laws where applicable.  The address of all individuals for whom an address is not otherwise indicated is Room 2001, Dading Century Square, No 387, Tianren Road, Wuhou District, Chengdu, Sichuan Province, China 610000.

 

Name of Beneficial Owner (1)   Amount and Nature of
Beneficial Ownership
   

Percent (%) of

Common Stock

               
Named Executive Officers              
Wenfa “Simon” Sun, President, Chief Executive Officer, and Chairman of the Board of Directors(2)     80,000,000        78%
Suyun Cao, Chief Financial Officer, and Secretary     0       0%
Lu Shanhu     0       0%

 

All Directors and Officers as a Group (3 persons)

    80,000,000          78%
Guofu Industry Development     20,000,000       20%
Tech Associates Inc. (2)     1,000,000       1%
 44 

 

(1)The above table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable. Unless otherwise indicated, beneficial ownership is determined in accordance with the Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and includes voting or investment power with respect to the shares beneficially owned. Applicable percentages are based upon 102,166,400 shares of common stock outstanding as of April 27, 2020. 
 (2)Tech Associates, Inc. 460 Brannan Street, Suite 78064, San Francisco, CA 94107

 

Item 13. Certain Relationships and Related Transactions

 

Except as otherwise indicated herein, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.

Item 14.  Principal Accounting Fees and Services

Yichien Yeh CPA ("YY") is the Company’s independent registered public accounting firm. Set below are aggregate fees professional services rendered for the year ended December 31, 2019.

Audit Fees

The fees for the audit and review services billed and to be billed by YY for the year ended December 31, 2019 amounted to $28,500.

 

Audit Related Fees

None.

Tax Fees

There were no fees billed by YY for professional services for tax compliance, tax advice, and tax planning for the fiscal year ended December 31, 2019.

All Other Fees

There were no fees billed by YY for other products and services for the fiscal year ended December 31, 2019.

Audit Committee’s Pre-Approval Process

The Board of Directors acts as the audit committee of the Company, and accordingly, all services are approved by all the members of the Board of Directors.

 

 

 

 

 45 

 

PART IV

Item 15. Exhibits, Financial Statement Schedules

 

(a)Exhibits:

 

Exhibit Exhibit Description Filed herewith Form Period ending Exhibit Filing date
2.1 Share Exchange Agreement dated December 27, 2016, by and among the Registrant, CAT9 Cayman Holdings,; CAT9 Investment China Limited, and Chongqing Field Industrial Company Ltd.   8-K   2.1 12/27/16
3.1 Certificate of Incorporation   10   3.1 02/06/15
3.2 Bylaws   10   3.2 02/06/15
3.3    Amendment to Certificate of Incorporation   8-K         3.3         09/01/15
3.4 Certificate of Approval, Agreement of Merger   8-K 3.4 12/27/16
10.1    Wenfa "Simon" Sun Employment Agreement  8-K          10.1        12/27/16
10.2 MeiHong "Sanya" Qian Employment Agreement    8-K   10.2 12/27/16
10.3 Agreement with Yunnan Province, Acreage Terms   8-K   10.3 05/02/17
10.4 Agreement with Yunnan Province, RMB Amount   8-K   10.4  05/02/17
21.1    List of Subsidiaries   10-K   21.1 04/01/19
31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X        
32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X        
101.INS XBRL Instance Document X        
101.SCH XBRL Taxonomy Extension Schema Document X        
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X        
101.LAB XBRL Taxonomy Extension Label Linkbase Document X        
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X        
101.DEF XBRL Taxonomy Extension Definition Linkbase Definition X        

 

(b) The following documents are filed as part of the report:

1. Financial Statements: Balance Sheet, Statement of Operations, Statement of Stockholder’s Equity, Statement of Cash Flows, and Notes to Financial Statements.

Item 16. Form 10-K Summary.

None.

 

 

 

 46 

 

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CAT9 Group Inc.

 

Dated: April 27, 2020

   
 

By: /s/ Wenfa "Simon" Sun

Name: Wenfa "Simon" Sun

Title: President, Chief Executive Officer, and Chairman of the Board of Directors

 

By: /s/ Suyun Cao

Name: Suyun Cao

Title: Chief Financial Officer, Secretary

   

In accordance with Section 13 or 15(d) 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   Title   Date
         

By: /s/ Wenfa "Simon" Sun

Name: Wenfa "Simon" Sun

   President, Chief Executive Officer, and Chairman of the Board of Directors   April 27, 2020
         
         

 

 47 

 

 

CAT9 GROUP, INC.

 

FINANCIAL STATEMENTS

December 31, 2019

Contents

 

Financial Statements  
   
Report of Independent Registered Public Accounting Firm F-2
 
Consolidated Balance Sheets as of December 31, 2019 and 2018 F-3
   

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2019

and 2018

F-4
   
Consolidated Statement of Stockholders’ Deficit for the years ended December 31, 2019 and 2018 F-5
 
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018 F-6
   
Notes to Consolidated Financial Statements F-7
   

 

 

 

 

 

 

 

 

 

F-1 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of CAT9 Group Inc.

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of CAT9 Group Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive income (loss), stockholders' deficit, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CAT9 Group Inc. as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit 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 financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ Yichien Yah
YichienYeh, CPA

We have served as the Company’s auditor since 2018.


Oakland Gardens, New York
April 27, 2020

 

F-2 

 

CAT9 GROUP, INC.

Consolidated Balance Sheets

   

     December 31,
2019
  December 31,
2018
ASSETS            
             
Current assets:            
Cash    $189,429   $119,792 
Accounts receivable, net     426,895    10,129 
Prepaid expenses     1,551    13,285 
Inventories     235,101    141,531 
Other receivables, related party     1,669    1,682 
Advances to suppliers     97,210    78,403 
Other current assets     34,203    45,971 
Total current assets     986,058    410,793 
Property & equipment, net     22,188    42,181 
Capitalized software costs, net     13,379    —   
             
Total assets    $1,021,625   $452,974 
             
LIABILITIES AND STOCKHOLDERS’ DEFICIT            
             
Current liabilities:            
Accounts payable and accrued liabilities    $811,242   $151,840 
Customer deposits     29,261    14,092 
Loan payable     71,808    87,230 
Loan payable, related parties     —      466,121 
 Other payables     22,807    15,575 
 Other payables, related party     416,807    330,518 
Total current liabilities     1,351,925    1,065,376 
             
Total liabilities     1,351,925    1,065,376 
             
Shareholders' Deficit:            
Preferred stock $0.0001 par value, 5,000,000 shares authorized;none issued and outstanding     —      —   
Common stock $0.0001 par value, 500,000,000 shares authorized; 102,166,400 shares issued and outstanding     10,217    10,217 
Additional paid-in capital     497,573    497,573 
Accumulated deficit     (825,752)   (1,118,259)
Accumulated other comprehensive loss     (12,338)   (1,933)
Total Stockholders’ Deficit     (330,300)   (612,402)
Total liabilities and stockholders’ deficit    $1,021,625   $452,974 

 

The accompanying notes are an integral part of these consolidated financial statements.

F-3 

 

CAT9 GROUP, INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

        For the Years Ended December 31,
        2019     2018
Revenue   $ 5,592,820     $ 462,422
Cost of revenue     2,271,707       253,418
Gross Margin     3,321,113       209,004
                   
Operating expenses:              
    Professional Fees     88,610       61,020
    Consulting     172,758       112,186
    Selling, general and administrative     2,792,629       750,808
    Total operating expenses   3,053,997       924,014
Income (Loss) from operations   267,116       (715,010)
             
Other income (expenses):            
Other income   39,414       1,066
Interest income (expense)   2,176       (757)
Other expenses   (16,199)       (1,193)
Total other income (expense)   25,391       (884)
             
Income (Loss) from operations before income taxes     292,507       (715,894)
                   
Provision for income taxes     -       -
Net income (loss)   $ 292,507     $ (715,894)
                   
Other comprehensive (loss) income:              
Foreign currency translation adjustment     (10,405)       7,772
Comprehensive income (loss)   $ 282,102     $ (708,122)
Basic and diluted net income (loss) per common share   $ 0.003     $ (0.007)
Basic and diluted weighted average common shares                                                                                   102,166,400     102,166,400

 

The accompanying notes are an integral part of these consolidated financial statements.

F-4 

 

CAT9 GROUP, INC.

Consolidated Statement of Stockholders’ Equity (Deficit)

For the Years Ended December 31, 2019 and 2018

    Common Stock    Additional paid in     Accumulated     Other Comprehensive       
   Shares    Amount    Capital    Deficit    Loss    Total      
Balance, December 31, 2017   101,000,000   $10,100   $404,378   $(402,365)  $(9,705)  $2,408 
Common stock issued for cash   1,166,400    117    93,195    —      —      93,312 
Foreign currency translation adjustment   —      —      —      —      7,772    7,772 
Net loss   —      —      —      (715,894)   —      (715,894)
Balance, December 31, 2018   102,166,400    10,217    497,573    (1,118,259)   (1,933)   (612,402)
Foreign currency translation adjustment   —      —      —      —      (10,405)   (10,405)
Net income   —      —      —      292,507    —      292,507 
Balance, December 31, 2019   102,166,400   $10,217   $497,573   $(825,752)  $(12,338)  $(330,300)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

F-5 

 

CAT9 GROUP, INC.

Consolidated Statements of Cash Flows

      For the Years Ended December 31,
      2019       2018
Cash flows from operating activities:              
Net Income (Loss)   $ 292,507     $ (715,894)
Adjustments to reconcile net income (loss) to net cash used in operating activities:              
Foreign currency translation adjustment     (9,939 )     7,772
Bad debt expense     4,245       3,906
Depreciation expense     15,349       11,960
Amortization expense     2,697       —  
Loss on disposal of property and equipment     5,711       —  
Changes in operating assets and liabilities:              
    Accounts Receivable     (421,011 )     (125)
    Prepaid expenses     11,734     (13,285)
    Other receivables, related party     13       18,542
Inventories     (93,570 )     (138,925)
Advances to suppliers     (18,807 )     (14,705)
Other current assets     11,768       (29,043)
Accounts payable and accrued liabilities     659,402       94,246
Customer deposits     15,169       (36,218)
Other payables     7,232       15,575
Net cash provided by (used in) operating activities     482,500       (796,194)
               
Cash flows from investing activities:              
Purchase of equipment     (1,427 )     (1,963)
Purchase of software     (16,182 )     —  
Net cash used in investing activities     (17,609 )     (1,963)
               
Cash flows from financing activities:              
Funds received on stock issuance     —         93,312
Proceeds from loan payable     —         476,507
Loans from related parties     86,289       179,591
Repayment of related party loans     (481,543 )     —  
Net cash (used in) provided by financing activities     (395,254 )     749,410
               
Net change in cash     69,637       (48,747)
               
Cash, beginning of year     119,792       168,539
               
Cash, end of year   $ 189,429     $ 119,792
               
SUPPLEMENTAL DISCLOSURES:              
Cash paid for interest   $ —       $ —  
Cash paid for taxes   $ —       $ —  

The accompanying notes are an integral part of these consolidated financial statements.

F-6 

 

CAT9 GROUP, INC.

Notes to Consolidated Financial Statements

December 31, 2019

 

NOTE 1 - DESCRIPTION OF BUSINESS AND HISTORY

 

Description of business

CAT9 Group Inc., (the “Company”) formerly known as ANDES 4 Inc. ("ANDES 4"), was incorporated under the laws of the State of Delaware on January 26, 2015. On December 27, 2016, the Company and its wholly-owned subsidiary, CAT9 Holdings Ltd, a company organized under the laws of the Cayman Islands, ("CAT9 Cayman"); CAT9 Cayman's wholly-owned subsidiary, CAT9 Investment China Limited, a company organized under the laws of Hong Kong ("CAT9 HK"); and its wholly-owned subsidiary, Chongqing CAT9 Industry Company Ltd, a company organized under the laws of the People's Republic of China closed a share exchange transaction pursuant to which CAT9 became the 100% parent of CAT9 Cayman, assumed the operations of CAT9 Cayman and its subsidiaries, including CAT9 Investment China, and Chongqing CAT9 Industrial Company Ltd.

 

CAT9 Cayman is a holding company incorporated in August 20, 2015, under the laws of the Cayman Islands. CAT9 Investment China Limited was incorporated in September 10, 2015, under the laws of Hong Kong. CAT9 Investment China is a window for the group to handle the business operations outside of China.

Chongqing CAT9 Industrial Company Ltd. is located in Chongqing, PRC and was incorporated under the laws of the PRC on June 26, 2014. Chongqing Field Industrial Company Ltd. operates through strategic alliance and distribution rights agreements in the PRC, the Company is engaged in the marketing and sales of (1) fresh fruits, vegetables meats (including primarily organic and non-organic from both domestically grown and imported (2) Acquisition of land for the planting of Acer truncatum trees and harvesting of Acer truncatum seeds to produce edible oil, (3) providing Hi-Tech cooperative farm management services in the PRC and overseas and (4) farm machinery sales.

 

Prior to the events above, the Company on July 31, 2015, the sole officer and director of the Company entered into a Share Purchase Agreement (the “SPA”) pursuant to which he entered into an agreement to sell an aggregate of 10,000,000 shares of his shares of the Company’s common stock to Chongqing Field Industrial Company Ltd. at an aggregate purchase price of $40,000. These shares represent 100% of the Company’s issued and outstanding common stock. Effective upon the closing date of the Share Purchase Agreement, August 12, 2015, the sole officer and director of the Company executed the agreement and owned no shares of the Company’s stock and Chongqing Field Industrial Company Ltd. was the sole stockholder of the Company.

 

On May 2, 2016, the Company entered into Employee Agreements with Wenfa "Simon" Sun, its President, Chief Executive Officer, and Chairman of the Board of Directors, and MeiHong "Sanya" Qian, its Chief Financial Officer and Secretary. Pursuant to the Employment Agreement, the Company issued 6,000,000 shares of restricted common stock to Wenfa "Simon" Sun, and 4,000,000 shares of restricted common stock to MeiHong "Sanya" Qian.

 

On May 3, 2016, the sole shareholder of the Company, Chongqing Field Industrial Ltd., ("CQFI") consented to a redemption of its 10,000,000 shares of common stock at a price of $0.0001 per share for an aggregate redemption price of $1,000. As a result of this action by CQFI, management of the Company now control 100% of the issued and outstanding shares.

  

With the redemption and subsequent issuance of the 10,000,000 shares of restricted common stock, the Company effected a change in its control and the new majority shareholders are the current members of management of the Company.

 

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-7 

 

The Company's functional currency for Chongqing CAT9is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in the United States Dollars (“USD”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, CAT9 Cayman, and its subsidiaries, including CAT9 Investment China, Chongqing CAT9 Industrial Co., Ltd: Chongqing Yubei Branch Company of Chongqing CAT9 Industrial Co., Ltd; Chengdu First Branch Company of Chongqing CAT9 Industrial Co., Ltd; and Chengdu Second Branch Company of Chongqing CAT9 Industrial Co., Ltd.All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated in consolidation.

 

Translation Adjustment

For the years ended December 31, 2019 and 2018, the accounts of the Chongqing CAT9were maintained, and its financial statements were expressed, in RMB.  Such financial statements were translated into USD in accordance with the Foreign Currency Matters Topic of the Codification (ASC 830), with the RMB as the functional currency.  According to the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capital are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital.  Transaction gains and losses are reflected in the income statement.

 

Comprehensive Income

The Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220).  Comprehensive income is comprised of net income and all changes to the statements of members’ capital, except those due to investments by members, changes in paid-in capital and distributions to members. Comprehensive income for the years ended December 31, 2019 and 2018 is included net income and foreign currency translation adjustments.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid instruments with original maturities of three months or less.

 

Revenue recognition

Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the company expects to receive in exchange for those goods. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

F-8 

 

We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services we transfer to our customer. Once a contract is determined to be within the scope of ASC Topic 606, at contract inception we review the contract to determine which performance obligations we must deliver and which of these performance obligations are distinct. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, our performance obligations are transferred to customers at a point in time, typically upon delivery.

 

There was no impact on our financial statements as a result of adopting ASC Topic 606 for the year ended December 31, 2019.

 

Accounts receivable

Accounts receivable are recorded net of allowance for doubtful accounts. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. Periodically, management assesses customer credit history and relationships as well as performs accounts receivable aging analysis.

 

Inventories

Inventories are valued at the lower of cost or market. Management compares the cost of inventories with the market value and allowance is made for writing down their inventories to market value, if lower. Inventories consist of raw materials and finished goods. When appropriate, allowances to inventories are recorded to write down the cost of inventories to their net realizable value. For the years ended December 31, 2019 and 2018, there were no such allowances.

 

Capitalized software costs

Per ASC 985-20 expenses in the development of the software are expensed until technological feasibility has been reached and costs are determined to be recoverable. At this point additional expenses are capitalized. Capitalization ends, and amortization begins when the product is available for general release to customers. The capitalized software cost is being amortized using the straight-line method over the useful life of one year. As of December 31, 2019, the Company has $13,379 of capitalized software development costs.

 

Property and equipment

Property and equipment are stated at cost net of accumulated depreciation and impairment losses. Depreciation is provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service. Estimated useful lives are as follows, taking into account the assets' estimated residual value:

 

Classification Estimated useful life
Computer and office equipment 3-5 years
Vehicles 4 years

 

Major additions, renewals and betterments are capitalized, while maintenance and repairs are expensed as incurred. Gains or losses on dispositions of property and equipment are included in operating income (loss).

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended December 31, 2019 and 2018, the Company had a loss on disposal of its property and equipment of $5,711 and $0, respectively.

F-9 

 

Fair value of financial instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments.

 

The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2018.

 

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis as of December 31, 2019 and 2018.

 

Income taxes

The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.  The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

Earnings (Loss) per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Earnings per share excludes all potential dilutive shares of common stock if their effect is anti-dilutive. There were no potential dilutive securities at December 31, 2019 and 2018.

F-10 

 

Recently issued accounting pronouncements

 

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 allows companies to account for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. We adopted this ASU on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on our consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. This new guidance will be effective for annual reporting periods beginning after December 15, 2020, including interim periods within those annual reporting periods, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We adopted this standard with no material impact to the consolidated financial statements.

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 –SIGNIFICANT CONCENTRATION

 

Credit Risk

 

Financial instruments which potentially expose the Company to concentrations of credit risk consist of cash and accounts receivable as of December 31, 2019 and 2018. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure collections and minimize losses.

 

The major part of the Company’s cash at December 31, 2019 and 2018 is maintained at financial institutions in the PRC which provide insurance on deposit for no more than 500,000 yuan for each depositor in a bank.  The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

 

Geographic Concentration

 

For the years ended December 31, 2019 and 2018, the Company’s sales were mainly made to customers located in the PRC. In addition, total accounts receivables as of December 31, 2019 and 2018 also arose from customers located in the PRC.

 

Major parts of net assets of the Company are also located in the PRC.

 

Customer Concentration

 

The following table sets forth information as to the revenue derived from those customers that accounted for more than 10% of our revenue for the year ended December 31, 2019:

   Amount  %
Shanghai Haan E-Business Co., Ltd.  $1,305,279    23%
Sichuan 2030 Health Management Co., Ltd.   1,508,022    27%
Sichuan Juhuimin E-Busines Co., Ltd   1,543,223    28%

 

 

F-11 

 

The following table sets forth information as to the accounts receivable derived from those customers that accounted for more than 10% of our accounts receivable as of December 31, 2019:

   Amount  %
Shanghai Haan E-Business Co., Ltd.  $187,348    44%
ZhongjunJilian (Shanghai)Tech Co., Ltd.   84,961    20%
Sichuan Juhuimin E-Busines Co., Ltd   129,249    30%

 

NOTE 4 –ACCOUNTS RECEIVABLE

 

Accounts receivable consist of the following:

   December 31,
   2019  2018
Accounts receivable  $434,810   $13,879 
Less: allowance for doubtful accounts   (7,915)   (3,750)
    

 

  
Accounts receivable, net  $426,895   $10,129 

 

NOTE 5 –INVENTORIES

Inventories consist of the following:

   December 31,
   2019  2018
Raw materials and parts  $36,710   $26,849 
Finished goods   198,391    114,682 
Total   235,101    141,531 
Less: allowance for inventory reserve        —   
Total inventory, net  $235,101   $141,531 

NOTE 6 — PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

   December 31,
   2019  2018
Furniture and Fixtures  $—     $1,782 
Equipment   14,134    20,464 
Automobile   34,098    34,517 
Acer Truncatum saplings   215    218 
Total property and equipment   48,447    56,981 
Less accumulated depreciation   (26,259)   (14,800)
Property and equipment, net  $22,188   $42,181 

Depreciation expense was $15,349 and $11,960 for the years ended December 31, 2019 and 2018, respectively.

F-12 

 

NOTE 7 — CAPITALIZED SOFTWARE COSTS

Capitalized software costs consist of the following as of:

   December 31
   2019  2018
Software  $16,055   $—   
Less accumulated amortization   (2,676)   —   
Software costs, net  $13,379   $—   

Amortization expense was $2,697 and $0 for the years ended December 31, 2019 and 2018, respectively.

 

NOTE 8 – LOAN PAYABLE

 

On June 16, 2018, the Company entered a loan agreement with an individual in the amount of $72,692 (RMB $500,000). The maturity date is June 15, 2019. The loan is unsecured, non-interest bearing.

 

NOTE 9 - RELATED PARTY TRANSACTIONS

 

Loan payable, related parties

 

On January 1, 2018, the Company entered into a loan agreement with Sichuan CAT9 Technology, the company under control of Wenfa Sun, the Company’s President, Chief Executive Officer and Chairman. The loan agreement offers the Company $726,922 (RMB 5,000,000) credit line. The maturity date is December 31, 2018. The loan is unsecured, non-interest bearing. As of December 31, 2019 and 2018, the balance of the loan is $0 and $466,121.

 

Due to related parties

 

During the normal course of business, affiliated companies, members, and/or officers may advance the Company funds to pay for certain operating expenses. All advances are unsecured, non-interest bearing and due on demand.

 

As of December 31, 2019, and 2018, the Company was indebted to related parties that advanced loans to the Company without any formal repayment terms. As of December 31, 2019, and 2018, the Company owed the aforementioned related parties $416,807 and $330,518, respectively.

 

NOTE 10 - STOCKHOLDERS’ EQUITY

 

Preferred Stock

The Company is authorized to issue 5,000,000 shares of $.0001 par value preferred stock. As of December 31, 2019, and no shares of preferred stock had been issued.

 

Common Stock

 

On November 13, 2018, Wenfa “Simon” Sun, our President, Chief Executive Officer and Chairman issued 20,000,000 (twenty million) shares of his common stock as a gift to Guofu Industry Development Limited, an entity controlled by Quilin She, a shareholder of the company. The Subscription Agreement was the result of a privately negotiated transaction without the use of public dissemination of promotional or sales materials. The buyer or ‘gift recipient” is a registered Hong Kong corporation and represented it was an “accredited investor,” and as such could bear the risk of such investment for an indefinite period of time and to afford a complete loss thereof.

F-13 

 

NOTE 11 – INCOME TAXES

 

The Company operates in more than one jurisdiction with the main operations conducted in PRC and no activities in The United States. These are complex regulatory environments subject to different interpretations by the taxpayer and the respective governmental taxing authorities.  The Company evaluates its tax positions and establishes liabilities, if required.

 

Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”), as from January 1, 2008 onwards, the EIT is at a statutory rate of 25%.

 

Net deferred tax assets consist of the following components as of December 31: 

 

  

December 31,

 2019

 

December 31,

2018

Unused tax loss brought forward  $(1,118,259)  $(402,365)
Income (loss) for the year   292,507    (715,894)
Expenses not deductible for tax          
Total net operating loss carry forwards  $(852,752)  $(1,118,259)
Effective tax rate   25%   25%
Unrecognized deferred tax asset carried forward  $213,188   $279,565 
Less: valuation allowances   (213,188)   (279,565)
           
Deferred income tax benefit, net of valuation allowance  $—     $—   

 

The Company has not recognized a deferred tax asset in respect of PRC tax loss in these financial statements as it is not more-likely-than-not that the future taxable profit against which loss can be utilized will be available to the entities operating in PRC.  Accordingly, a 100% valuation allowance has been made.

 

Uncertain Tax Positions

Interest associated with unrecognized tax benefits are classified as income tax and penalties in selling, general and administrative expenses in the statements of operations.  For the years ended December 31, 2019 and 2018, the Company had no related interest and penalties expenses. Currently, the Company is not subject to examination by major tax jurisdictions, but the tax authority in PRC has the right to examine the Company’s tax position in all past years.

 

Statutory Reserve

In accordance with the laws and regulations of the PRC, a wholly-owned Foreign Invested Enterprise’s income, after the payment of the PRC income taxes, shall be allocated to the statutory reserves.  The allocation is 10 percent of the net income and the cumulative allocations are not to exceed 50 percent of the registered capital.  However, the laws do not prohibit enterprises allocate net income to this reserve after the limit of 50 per cent of registered capital has been reached.  These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of December 31, 2019, and 2018, the Company has not allocated to these non-distributable reserve funds due to loss sustained in the years ended December 31, 2019 and 2018.

 

 

 

 

F-14 

 

NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Balance of related after-tax components comprising accumulated other comprehensive income included members’ capital were as follows at December 31:

 

  

December 31,

2019

 

December 31,

2018

Accumulated other comprehensive loss, beginning of period  $(1,933)  $(9,705)
Change in cumulative translation adjustment   (10,405)   7,772 
Accumulated other comprehensive loss, end of period  $(12,338)  $(1,933)

 

NOTE 13 – SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

 

 

 

 

 

 

 

 

F-15