Company Quick10K Filing
EOS
Price-0.00 EPS-0
Shares74 P/E0
MCap-0 P/FCF0
Net Debt-0 EBIT-0
TEV-0 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-K 2020-12-31 Filed 2021-04-15
10-Q 2020-09-30 Filed 2021-01-25
10-Q 2020-06-30 Filed 2020-08-21
10-Q 2020-03-31 Filed 2020-06-25
10-K 2019-12-31 Filed 2020-04-16
S-1 2019-10-11 Public Filing
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-21
10-K 2018-12-31 Filed 2019-04-15
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-04-04
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-04-14
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-13
10-K 2015-12-31 Filed 2016-03-23
10-Q 2015-09-30 Filed 2016-01-08
8-K 2021-01-15
8-K 2020-05-15
8-K 2020-03-30
8-K 2020-03-02
8-K 2019-12-30
8-K 2019-11-25
8-K 2019-08-07
8-K 2019-01-18

EOSS 10K Annual Report

Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Common Equity, Related Stockholder Matters and 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.
Note 1. Nature of Operations and Summary of Accounting Policies
Note 2. Lease
Note 3. Long - Term Investment
Note 4. Security Deposits
Note 5. Related Party Transactions
Note 6. Stockholders' Equity
Note 7. Income Taxes
Note 8. Commitments and Contingencies
Note 9. Subsequent Events
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, and Director Independence.
Item 14. Principal Accounting Fees and Services.
Item 15. Exhibits and Financial Statement Schedules.
Item 16. 10 - K Summary.
EX-31.1 eoss_ex311.htm
EX-31.2 eoss_ex312.htm
EX-32.1 eoss_ex321.htm
EX-32.2 eoss_ex322.htm

EOS Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
2.01.61.10.70.2-0.22013201520172020
Assets, Equity
1.10.80.60.30.1-0.22013201520172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22013201520172020
Ops, Inv, Fin

10-K 1 eoss_10k.htm FORM 10-K eoss_10k.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

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

 

For the fiscal year ended December 31, 2020

 

or

 

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

 

EOS INC.

(Exact name of registrant as specified in its charter)

 

Nevada

30-0873246

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

372 Linsen N. Road, Suite 519,

Zhongshan District,

Taipei City, 104, Taiwan (Republic of China)

(Address of principal executive offices, Zip Code)

 

+8862-2568-3278

(Registrant’s telephone number, including area code)

 

Securities Registered Pursuant to Section 12(b) of the Act: None

 

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock $.001 par value

 

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

 

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

 

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

 

Indicate by check mark whether registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ☒      No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

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 ☒

 

At June 29, 2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant is approximately $45 million.

 

The number of shares of registrant’s common stock outstanding, as of April 12, 2021 was 74,122,997.

  

 

 

 

TABLE OF CONTENTS

 

PART I

Item 1.

Business

4

Item1A.

Risk Factors

9

Item1B.

Unresolved Staff Comments

9

Item 2.

Properties

9

Item 3.

Legal Proceedings

9

Item 4.

Mine Safety Disclosures

9

PART II

Item 5.

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

10

Item 6.

Selected Financial Data

11

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item7A.

Quantitative and Qualitative Disclosures about Market Risk

24

Item 8.

Financial Statements and Supplementary Data

F-1

Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

25

Item9A.

Controls and Procedures

25

Item9B.

Other Information

25

PART III

Item10.

Directors, Executive Officers and Corporate Governance

26

Item11.

Executive Compensation

30

Item12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

30

Item13.

Certain Relationships and Related Transactions and Director Independence

31

Item14.

Principal Accountant Fees and Services

31

 

 

 

 

 

 

PART IV

Item15.

Exhibits, Financial Statement Schedules

32

Item 16.

Form 10-K Summary

32

SIGNATURES

33

 

 
2

Table of Contents

 

FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K contain “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward looking statement can be guaranteed and actual future results may vary materially.

 

These risks and uncertainties, many of which are beyond our control, include, and are not limited to:

 

·

our growth strategies;

 

·

our anticipated future operation and profitability;

 

·

our future financing capabilities and anticipated need for working capital;

 

·

the anticipated trends in our industry;

 

·

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

 

·

our operations in China and the regulatory, economic and political conditions in China; and

 

·

current and future competition.

 

In addition, factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

 
3

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PART I

 

Item 1. Business.

 

Description of Business

 

General Information

 

Organizational Structure

 

EOS Inc. (“we,” “us,” “our,” or the “Company”) was incorporated in the State of Nevada on April 3, 2015.

 

On or about November 18, 2016, the Company formed EOS INC. TAIWAN BRANCH, a Taiwanese corporation (“EITB”) and the Company owns 100% of EITB.

 

On March 1, 2019, we formed Maosong Trading Co., Ltd. (“Maosong Trading”) under the laws of PRC.

 

During the year ended December 31, 2017, the Company paid the expenses of EITB in the amount of approximately $6,290. Additionally, the Company will continue to pay the expenses of EITB.

 

The principal executive office of EITB is located at 7F-1, No. 162, Sec. 2, Zhongshan N. Rd., Zhongshan District, Taipei City, 10452, Taiwan (Republic of China).

 

Yu-Cheng Yang, a shareholder of the Company, is the sole director of EITB.

 

Yu-Hsiang Chia is the branch manager of EITB. Mr. Chia holds 1,080,817 shares of the Company’s common stock.

 

Emperor Star International Trade Co., Ltd., (“Emperor Star”), was incorporated on November 16, 2015 under the laws of Taiwan. Emperor Star is in the business of marketing and distributing various consumer products, including detergents, nutrition supplements, and skin care products.

 

On May 3, 2017, the Company entered into and closed a Share Purchase and Sale Agreement (the “Purchase Agreement”) with Emperor Star to acquire all of the issued and outstanding shares of Emperor Star in consideration of $30,562 in cash. As a result of the transaction, Emperor Star became the Company’s wholly owned subsidiary. Upon consummation of the transaction, the Company has assumed the business of Emperor Star and ceased to be a shell company. Yu-Hsiang Chia currently serves as the officer and director of Emperor Star.

 

Yu-Hsiang Chia currently serves as the officer and director of Emperor Star. On May 26, 2020, EOS Inc. increased its investment in Emperor Star by $134,004 (NTD$4,000,000). The Company also received the contributions to Emperor Star from non-controlling interests in the amount of $33,398 (NTD$1,000,000). As a result, the Company owns 83% equity interest of Emperor Star as of June 30, 2020, which is no longer a wholly-owned subsidiary.

 

We have never been a party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.

 

General Business Overview

 

We are a distributor of various consumer products, such as skin care products, dietary supplements, electronic noise suppressing devices and water purifying machines. Based on the sales and trends of various consumer products, we from time to time select or drop the products that we distribute and sell.

 

We market and distribute skin care products manufactured by A.C. (USA), Inc. (“A.C.”), which is headquartered in the City of Industry, California and has offices in Taiwan. We market and distribute A.C. skin care products to resellers who will recognize the needs of their targeted customers in various regions in Asia, such as People’s Republic of China (“PRC”), Singapore and Malaysia. We acquire the products from A.C.’s Taiwan warehouses. Our strategy is to target spas, department stores and specialty stores that sell similar skin products. As of the date of this annual report, we have sold the A.C. Products to local distributors and specialty stores.

 

 
4

Table of Contents

 

The skin care products that we will distribute are designed to address various skin care needs. Those products include moisturizers, serums, cleansers, toners, body care, exfoliators, acne and oil correctors, facial masks, cleansing devices and sun care products. A number of those products are developed for use on particular areas of the body, such as the face or hands or around the eyes.

 

We believe the Company, together with its subsidiaries, distributes highly innovative personal care products and ecologically friendly cleaning products in Taiwan and plans to expand its distribution to China, Malaysia, and Thailand. Emperor Star’s product line includes anti-aging products that address the key signs of aging to reinvigorate and provide youthful energy and nutrition supplements. The Company stopped the line of ecologically friendly cleaning products in 2018.

 

In April 2018, we, through Emperor Star, started purchasing a type of water purifying machines from Cosminergy Hitech Development Co., Ltd. (“Cosminergy”) and reselling such water purifying machines in certain Asian countries and regions. However, we decided not to continue the sales of Cosminergy’s water purifying machines in 2019.

In November 2019, we started the marketing, promotion, sales and distribution of certain electrical noise suppressing device (the “Calibrator”) globally provided by Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, based on an exclusive patent licensing and distribution agreement (the “Ultra Velocity Agreement”) between Ultra Velocity and us. However, due to the outbreak of coronavirus (“COVID-19”) in mainland China, Ultra Velocity and we terminated the Ultra Velocity Agreement in March 2020 and intended to redefine the cooperation model between the respective parties.

 

In addition, we provided inventory, membership and business management software that designed by CKS Information Co., Ltd. to our customers in the fiscal year of 2019.

 

Acquisition of Control Interest in A-Best

 

On August 7, 2019, the Company, A-Best Wire Harness & Components Co., Ltd (“A-Best”), a company formed under the laws of Taiwan, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a purchase agreement (the “Purchase Agreement”), pursuant to which, subject to the terms and conditions therein, the Company shall purchase thirty-one percent (31%) of the issued and outstanding equity interest in A-Best and as consideration, issue ten million (10,000,000) shares (the “Stock Consideration”) of its common stock (the “Common Stock”) to Ing-Ming Lai and pay Ing-Ming Lai fifty-five million (55,000,000) new Taiwanese dollars (“NTD”) (the “Cash Consideration”). The Company currently owns twenty percent (20%) of equity securities in A-Best, and will subsequently own a total of fifty-one percent (51%) of issued and outstanding A-Best shares when Ing-Ming Lai completes transferring his 31% of A-Best’s equity to the Company in accordance with the Purchase Agreement. Pursuant to the Purchase Agreement, the Company shall use its best efforts to obtain its shareholder approval to increase the number of authorized common stock to allow legal issuance of the Stock Consideration to Ing-Ming Lai no later than December 31, 2019. In addition, pursuant to the Purchase Agreement, the Company shall pay the Cash Consideration to Ing-Ming Lai if and only if the Company successfully completes an Initial Public Offering (the “IPO”) of its common stock, with gross proceeds of no less than $5,000,000 USD. The Purchase Agreement contains the customary confidentiality provision, representations and warranties. The Purchase Agreement also provides for mutual indemnification clauses. A-Best is a Taipei-based company that designs magnetic resonance speakers.

 

In connection with the Purchase Agreement, on August 7, 2019, the Company, A-Best, and Ing Ming Lai entered into an Exclusive Sales Agreement (the “Exclusive Sales Agreement”), pursuant to which the Company is granted the right as the exclusive distributor to sell all of A-Best’s products, including its Micro-ceramic magnetic resonance speakers in the world, and the right to use A-Best’s trademarks and copyrights in connection with the sale of such products. The term of the Exclusive Sales Agreement shall be three (3) years from execution and be automatically renewed for another term of three (3) years unless one party gives the other parties a written notice of termination three (3) months before the end of the term.

 

In connection with the Purchase Agreement, on August 7, 2019, the Company and Ing-Ming Lai entered into a management agreement (the “Management Agreement”), pursuant to which the Company has agreed to maintain A-Best’s existing operations and Ing-Ming Lai’s positions as A-Best’s President and Chief Executive Officer of A-Best, until A-Best’s board of directors decides to terminate the terms of his positions. Pursuant to the Management Agreement, the Company shall also designate one individual to A-Best’s board of directors, and A-Best’s board of directors shall continue to maintain two director seats, where at least one of the two directors is designated by the Company until the Parties either reach a shareholder agreement or A-Best receives additional capital investment in equity or debt. The Management Agreement became effective upon execution. For more information about this transaction, the Purchase Agreement, the Exclusive Sales Agreement and Management Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on August 13, 2019.

 

 
5

Table of Contents

 

On December 30, 2019, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the “Termination Agreement”) to, among other things, terminate the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, all of which were dated August 7, 2019. The Company, A-Best and Mr. Ing-Ming Lai decided to terminate the three agreements primarily because they need more time to agree to a mutually beneficial way to cooperate with each other with respect to the sales of the Micro-ceramic magnetic resonance speakers that A-Best has developed. Pursuant to the Termination Agreement which became effective on December 31, 2019, none of the three parties owes any compensation, payments, damages, penalties or liabilities to one another or has any obligations to perform under any of the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, except that each party agrees to keep confidential the business plans, research and development information obtained from performing the three agreements. For more information about the Termination Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on December 31, 2019. 

 

On March 2, 2020, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best (collectively, the “Parties”) entered into a strategic alliance agreement (the “Strategic Alliance Agreement”), pursuant to which the Parties redefined their cooperation with respect to the sales and distribution of A-Best’s micro-ceramic speakers. In accordance with the Strategic Alliance Agreement, A-Best, Mr. Ing-Ming Lai and the Company terminated the Investment Cooperation Agreement dated January 12, 2019 entered by and among the Parties and as a result the Company agreed to return 20% of the equity interest in A-Best to Mr. Ing-Ming Lai, which was valued at approximately $33,411 by the Parties.

 

Furthermore, subject to the terms and conditions of the Strategic Alliance Agreement, A-Best has granted the Company the exclusive sale and distribution right of A-Best’s micro-ceramic speakers in the world for one (1) year (the “Term”), which may be renewed with mutual consent of the Parties two months prior to the expiration of the Term, while A-Best retains its own right to sell and distribute the micro-ceramic speakers on its own. In consideration for the exclusive distribution right of A-Best’s speakers under the Strategic Alliance Agreement, the Company agreed to have A-Best keep the Company’s 10,000,000 shares of common stock, par value $0.001 per share, issued under the Investment Cooperation Agreement and the Company may keep the revenue and profits generated from the sale of A-Best speakers until the total revenue from such speakers reaches $15 million U.S. dollars. This Strategic Alliance Agreement contains A-Best’s and Mr. Ing-Ming Lai’s joint representation regarding their intellectual property rights to A-Best ceramic speakers. For more information about this transaction and the Strategic Alliance Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on March 5, 2020.

 

On April 22, 2020, the Company returned 20% equity interest in A-Best to Mr. Ing-Ming Lai pursuant to the Strategic Alliance Agreement.

 

On November 25, 2019, the Company and Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, entered into an exclusive patent licensing and distribution agreement (the “Exclusive Patent Licensing and Distribution Agreement”), pursuant to which, subject to the terms and conditions therein, Ultra Velocity granted the Company an exclusive license to the patent (Patent M566970 registered in Taiwan) to its electrical noise suppressing device (the “Calibrator”) and the exclusive right to market, promote, distribute and sell the Calibrator globally. In accordance with the Agreement and in consideration for the exclusive patent license and distribution right to the Calibrator, the Company agreed to issue Ultra Velocity three million (3,000,000) restricted shares of its common stock after the execution of this Agreement and upon the shareholder approval to increase the number of authorized capital of the Company (the “Shareholder Approval”). The term of this Agreement was ten years, commencing from the dare thereof. However, on March 30, 2020, the Company and Ultra Velocity terminated the Exclusive Patent Licensing and Distribution Agreement via a mutually agreed written notice, effective March 24, 2020.

 

 
6

Table of Contents

 

Distribution Agreements and Supply Agreement

 

On May 1, 2015, we entered into a written Distribution Agreement with A.C. (USA), Inc. (“A.C.”) pursuant to which we have an exclusive right to market and distribute in Taiwan certain skin care products manufactured by A.C. for a period of 5 years (the “Distribution Agreement”). Pursuant to the provisions of the Distribution Agreement, we will market and promote the A.C. Products as defined therein in the Territory as amended to include PRC, Singapore and Malaysia in addition to Taiwan. Accordingly, we are the exclusive distributor for those A.C. Products in the above Territories.

 

On April 30, 2018, we, through our Emperor Star, entered into a distribution agreement (the “Cosminergy Distribution Agreement”) with Cosminergy Hitech Development Co., Ltd. (Cosminergy”) pursuant to which we started purchasing a type of water purifying machines from Cosminergy and reselling the water purifying machines in certain Asian areas and countries. The Cosminergy Distribution Agreement expired on April 30, 2019 and we did not renew it.

 

We, through one of our wholly-owned subsidiaries, entered into a product supply agreement (“Fortune King Product Supply Agreement”) with Fortune King (HK) Trading Limited (“Fortune King”), a company formed under the laws of Hong Kong, to provide and sell any products that Fortune King orders from EOS and its subsidiaries. Pursuant to the Fortune King Product Supply Agreement, we agreed to provide products ordered by Fortune King within five business days from the order date and the products we sell should have the expiration date/shelf life at least one year from the supply date. The Fortune King Product Supply Agreement became effective on October 1, 2018 and was extended to September 30, 2021. We provide marketing information on the products we sell and training services to Fortune King. During the year ended December 31, 2018 and nine months ended September 30, 2019, the majority of EOS’ sales of Nine Layer Transformation Hair Cream, Deep Seawater Mineral Extract, Lifegenes, Youthgenes, and household water purifying machines were to Fortune King. As of June 30, 2019, Fortune King was a related party of us because the founder and officer of Fortune King was a shareholder of EOS. On or about June 30, 2019, the founder and officer of Fortune King transferred her equity interest in the Company and therefore Fortune King is no longer a related party to the Company.

 

Skin Care Products- A.C. Products

 

Moisturizing Mask – contains highly concentrated hydrating and anti-wrinkle ingredients that are specifically targeted for anti-wrinkle effects. This product adds moisture to the skin and brings out a natural healthy glow. Key ingredients are collagen, glycerin, hyaluronic acid, purified water and silk hydrolyzed protein. Rose water contributes a relaxing effect.

 

Acne Mask – contains a special formula that penetrates into the skin to clean pores, removes dirt and helps balance oil secretion. While purifying, Acne Mask, also, hydrates and moisturizes the skin with the designed calming and luminous effect. Ingredients include aloe vera extract, eucalyptus, lemon extract, hydrogenated castor oil, chamomile extract and sorbitol.

 

Brightening Mask – contains concentrated L-ascorbic acid and natural botanical extracts that are good for evening skin tones and hydrating the skin. Application of the mask after exposure to sun can help minimize sun damage and clarify the skin. Key ingredients include carbopol, perfume, diglycerin, hyaluronic acid, aloe vera extract, mulberry extract, ginseng extract, collagen, rose water, hydrogenated castor oil, kojic acid and berry extract.

 

Levo-H Serum – is formulated to provide maximum hydration to the skin, as well as to reduce fine lines. After using this product, we hope the customers feel their skin moisturized and radiant.

 

Levo-C Serum – is designed to diminish ultraviolet damages and even out overall skin tone. This product has a high concentrate L-ascorbic acid and can clarify skin, leaving it with a healthy glow.

 

Cosminergy Water Purifying Machines

 

The Cosminergy water purifying machines contain anion ceramic and silicon ceramic which can remove from water particles, sediments, chemical contaminants, like heavy metals and hydrogen sulfide to purify water. We believe the Cosminergy water purifying machines will be popular in the areas where the water quality is relatively poor. We believe the Cosminergy water purifying machines can effectively kill and stop the reproduction of bacteria in the water.

 

 
7

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Marketing and Distribution

 

We believe our market is retailers who recognize the needs of the targeted consumers. Our strategy is to target spas, department stores and specialty stores that sell similar skin care products. We hope that our product positioning will assist in the marketing and distribution of those skin care products. We anticipate that we will reach our targeted reseller market by the following types of resellers: 

 

Spas and Health Clubs – Most high quality day spas and health clubs (and many upscale spas at resort properties) use generic products. Our goal will be to develop affiliations with select spas in urban areas and vacation destinations to whom we will market and sell those skin care products.

 

Lifestyle Retailers – We anticipate that the skin care products will be lifestyle-based rather than the typical soaps and potions of natural product retailers. These retailers exist in almost every city and have developed loyal and sophisticated customer bases.

 

Additionally, we anticipate that we will market those skin care products to cosmetic specialty retailers and boutique department stores.

 

We believe that the targeted in users of those skin care products are between the ages of 20 and 65 and are predominantly female. We believe they are urban professionals with at least some college level education. The targeted users have active lifestyles and are concerned about social and environmental issues. Mind and body wellness are important to them. They belong to a health club; take yoga, pilates or taichi lessons. The maintenance of a youthful appearance are a part of their life.

 

Cosminergy Water Purifying Machines

 

In 2018, we mainly distributed the Cosminergy water purifying machines in PRC (including Hong Kong), Taiwan and Singapore through retailers in those regions and countries. In April 2019, we ceased the distribution of Cosminergy water purifying machines. We intend to find another strategic supplier for other types of water purification equipment.

 

Calibrators

 

We started the sales and distribution of automobile carbon reduction machines or Calibrators for Ultra Velocity in November 2019. During the year ended December 31, 2019, we generated a gross revenue of approximately $350,000 in the Asian market.

 

Patents and Trademarks

 

At the present we do not own any patents or trademarks. However, we had obtained the exclusive license to the patent (Patent M566970 registered in Taiwan) to the Calibrator from Ultra Velocity pursuant to the Exclusive Patent Licensing and Distribution Agreement, which was terminated on March 24, 2020.

 

Need for any Government Approval

 

There is no approval required for the marketing and distribution of those A.C. Products in Taiwan; provided, however, pursuant to the Statute for the Control of Cosmetic Hygiene promulgated by the Ministry of Health and Welfare in Taiwan, we are required to file an application with the Ministry of Health and Welfare in Taiwan for reference purposes.

 

 
8

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We have been informed by appropriate representatives of A.C. that the skin care products we plan to market and distribute pursuant to the Distribution Agreement are classified as cosmetics not containing any medical, poisonous or potent drugs under the Republic of China Statute for Control of Cosmetic Hygiene. Accordingly, those products are not necessarily subject to any inspection to obtain approval for their sales. The labeling of those packages clearly indicate in Chinese the name and address of the manufacturer, the name of the product, the ingredients, the usage and directions, the weight, the manufacturing date, the expiration date, the name and address of the importer. We were informed by those representatives that those skin care products are, currently, appropriate for marketing and distribution in Taiwan. In the year of 2018, the Customs of Hong Kong, Malaysia and Singapore approved the imports of the A.C. Products that we brought to the three regions and countries. We were in the process of preparing additional documents for the Customs of the PRC with respect to the imports of the A.C. Products.

 

Environmental Laws

 

Our operations focused on sales and distribution and therefore are not subject to any environmental laws.

 

Employees and Employment Agreements of the Company, EITB and Emperor Star

 

The Company, EITB and Emperor Star have a total of nine employees. Our President, He Siang Yang, who, currently, devotes 20 or more hours a week to our business, is responsible for the primary operation of our business. There is no outstanding employment agreement.

 

12 Month Growth Strategy

 

Our goal is to maximize shareholder value. To achieve that goal, we intend to expand our operations and evaluate and cultivate new and alternative revenue generating opportunities. We are committed to marketing and distributing skin care products. While strategic and wisely executed marketing campaigns are key to expanding our operations; offering innovative skin care products should position us in the best possible way for long term success.

 

Item 1A. Risk Factors.

 

Not applicable for smaller reporting companies.

 

Item 1B. Unresolved Staff Comments.

 

None.

 

Item 2. Properties.

 

We do not own any real property. Our principal executive office is presently located at 7F.-1, No. 162, Sec. 2, Zhongshan N. Rd., Zhongshan District, Taipei City 10452, Taiwan (Republic of China). EOS’s Taiwan branch and Emperor Star operate from this Taipei location. Taiwan. Emperor Star and EOS Taiwan Branch entered into the office leases which commenced on June 15, 2019 and terminated on September 28, 2020.

  

Item 3. Legal Proceedings.

 

We are currently not a party to any material legal or administrative proceedings and are not aware of any pending legal or administrative proceedings against us. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

 
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PART II

 

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

 

Our common stock is currently quoted on the OTCQB under the symbol “EOSS.” There has not been any significant trading to date in the Company’s common stock. The table below presents the high and low bid for our common stock for each quarter for the years ended December 31, 2020 and 2019. These prices reflect inter-dealer prices, without retail markup, markdown, or commission, and may not represent actual transactions.

 

 

 

High

 

 

Low

 

Year ended December 31, 2020

 

 

 

 

 

 

1st Quarter

 

$ 1.00

 

 

$ 1.00

 

2nd Quarter

 

$ 1.50

 

 

$ 1.50

 

3rd Quarter

 

$ 1.50

 

 

$ 1.50

 

4th Quarter

 

$ 3.25

 

 

$ 3.25

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2019

 

 

 

 

 

 

 

 

1st Quarter

 

$ 3.50

 

 

$ 0.65

 

2nd Quarter

 

$ 2.50

 

 

$ 1.10

 

3rd Quarter

 

$ 2.50

 

 

$ 1.45

 

4th Quarter

 

$ 2.40

 

 

$ 1.49

 

 

There were approximately 178 holders of record of our common stock as of April 13, 2021.

  

Common Stock

 

As of April 13, 2021, the outstanding number of shares of our common stock was 74,122,997. All our outstanding common shares are legally issued, fully paid and non-assessable.

 

Each share of our common stock entitles the shareholder one vote on any and all matters such shareholder is entitled to vote at a shareholders’ annual or special meeting. There are no cumulative voting rights, which mean that the shareholder or shareholders owning 50% of the issued and outstanding shares in our capital stock can elect the entire board of directors. Therefore, any shareholder or shareholders, cumulatively with less than 50% of the voting power, cannot elect any director to the board of directors on their won. Pursuant to the provisions of Section 78.320 of the Nevada Revised Statues (the “NRS”), at least a majority of the outstanding shares of capital stock entitled to vote must be present, in person or by proxy, at any meeting in favor of the action exceeds the number of votes cast in opposition to the action, provided, however, that directors may be elected by a plurality of the votes of the shares present at the meeting and entitled to vote. Certain fundamental corporate changes, such as the liquidation and business combination, require the approval of holders of a majority of the outstanding shares entitled to vote.

 

Holders of our common stock have no pre-emptive rights nor conversion rights. There are no redemption or sinking fund provisions applicable to our common stock.

 

Preferred Stock

 

At present, we have no preferred stock authorized.

 

Dividends

 

The holders of our common stock are entitled to receive dividends on a pro rata based on the number of shares held, when and if declared by our Board of Directors, from funds legally available for that purpose. NRS Section 78.288 prohibits us from declaring dividends where, after giving effect to the distribution of the dividend we would not be able to pay our debts as they become due in the normal course of business; or except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution. We do not, however, intend to pay any dividends in the foreseeable future and currently intend to retain all future earnings to finance our business.

 

 
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Our shareholders are not entitled to preference as to dividends or interest; pre-emptive rights to purchase new issues of shares; preference upon liquidation; or any other special rights or preferences.

 

There are no restrictions on dividends under any loan or other financing arrangements.

 

We paid no dividends on our common stock in the fiscal year of 2018. We do not have a policy of paying regular dividends and do not expect to pay any dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings for our business. The payment of any future dividends on our common stock will be determined by our Board of Directors and will depend on business conditions, our financial earnings and other factors.

 

Outstanding Stock Options, Warrants and Convertible Securities

 

We have no outstanding stock options, warrants or convertible securities as of December 31, 2020.

 

Equity Compensation Plans, Bonus Plans

 

As of December 31, 2020, we had no equity incentive plans outstanding. We have no Compensation Committee.

 

Pension Benefits

 

As of December 31, 2020, we did not have any defined benefit pension plans. 

 

Nonqualified Deferred Compensation

 

We do not maintain any nonqualified deferred compensation plans.

 

Debt Securities

 

We have no debt securities outstanding.

 

Repurchase Programs

 

There is currently no share repurchase program pending.

 

Recent Transactions Involving Unregistered Securities

 

On January 15, 2019, A-Best, its majority shareholder Ing Ming Lai, a Taiwanese individual, and the Company entered into an Investment Cooperation Agreement (the “Investment Agreement”), pursuant to which we issued 10 million shares of our common stock to Ing Ming Lai. The Company made such an issuance in reliance on an exemption from registration set forth in section 4(2) of the Securities Act of 1933, as amended.

 

Item 6. Selected Financial Data.

 

As a smaller reporting company, we are not required to provide the information under this item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

 
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Forward Looking Statements

 

Some of the statements contained in this Form 10-K that are not historical facts are “forward-looking statements” which can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

 

1.

Our ability to attract and retain management and key employees;

 

2.

Our ability to generate customer demand for our products;

 

3.

The intensity of competition; and

 

4.

General economic conditions.

 

All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

 

Overview

 

Description of Business

 

General Information

 

EOS Inc. (“we,” “us,” “our,” or the “Company”) was incorporated in the State of Nevada on April 3, 2015.

 

On or about November 18, 2016, the Company formed EOS INC. TAIWAN BRANCH, a Taiwanese corporation (“EITB”) and the Company owns 100% of EITB. Yu-Cheng Yang, a shareholder and director of the Company, is the sole director of EITB. Yu-Hsiang Chia is the branch manager of EITB.

 

Emperor Star International Trade Co., Ltd., (“Emperor Star”), was incorporated on November 16, 2015 under the laws of Taiwan. Emperor Star is in the business of marketing and distributing various consumer products, including detergents, nutrition supplements, and skin care products.

 

On May 3, 2017, the Company entered into and closed a Share Purchase and Sale Agreement (the “Purchase Agreement”) with Emperor Star to acquire all issued and outstanding shares of Emperor Star in consideration of $30,562 in cash. As a result of the transaction, Emperor Star became the Company’s wholly owned subsidiary. Upon consummation of the transaction, the Company has assumed the business of Emperor Star and ceased to be a shell company. Yu-Hsiang Chia currently serves as the officer and director of Emperor Star. On May 26, 2020, EOS Inc. increased its investment in Emperor Star by $134,004 (NTD$4,000,000). The Company also received the contributions to Emperor Star from non-controlling interests in the amount of $33,398 (NTD$1,000,000). As a result, the Company owns 83% equity interest of Emperor Star as of June 30, 2020, which is no longer a wholly-owned subsidiary.

 

On September 20, 2018, the Company set up another wholly-owned subsidiary, EOS International Inc. (“EOS(BVI)”), under the laws of British Virgin Islands. EOS(BVI) is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifying machines. On March 1, 2019, EOS(BVI) set up a wholly-owned subsidiary, Shanghai Maosong Co., Ltd (“Maosong”), under the laws of People’s Republic of China. Maosong is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifying machines in China. As of the date of this report, Maosong has a registered capital of USD $100,000, but no capital has actually been paid into Maosong.

 

 
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We have never been a party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.

 

We do not own any real property. Our principal executive office is presently located at 7F.-1, No. 162, Sec. 2, Zhongshan N. Rd., Zhongshan District, Taipei City 10452, Taiwan (Republic of China). EITB and Emperor Star operate from this Taipei location. Taiwan. Emperor Star and EITB entered into the office leases which commenced on June 15, 2019 and will end on June 14, 2021. The office occupies approximately 1,388 square feet and the average amount of office rent (including the maintenance fees) is approximately $2,016 per month. Before this location, our former principal executive office was at 372 Linsen N. Road, Suite 519, Zhongshan District, Taipei City, 104, Taiwan. Our then monthly rent for that office space was $1,280 and that lease expired on June 30, 2019.

 

A-Best operates its business at the address of 159 Songde Road, Building 13, Room 1, Xinyi District, Taipei, Taiwan. A-Best’s lease for that office space commenced on January 20, 2018 and will end on January 19, 2020 with a term of two years. The monthly rent for that office space is $1,451, excluding utilities and maintenance fees.

 

General Business Overview

 

EOS Inc. markets and distributes a variety of consumer products selected based on its understanding of the demand for each of its products. EOS conducts its business primarily in Asia, including the People’s Republic of China (“PRC”), Taiwan, Singapore and Malaysia. The principal products that EOS markets and sells through its subsidiaries include Nine Layer Transformation Hair Cream, Deep Seawater Mineral Extract, and Lifegenes & Youthgenes. Nine Layer Transformation Hair Cream is hair-coloring product that darkens the user’s hair color to brown or black while nourishing the hair. Deep Seawater Mineral Extract is a dietary supplement that is designed to enhance the overall health and appearance of the consumer. Both Lifegenes and Youthgenes are dietary supplements designed to improve the consumer’s health. In addition to the four major products, EOS also sells and distributes other dietary supplements and skin care products from time to time as it deems profitable. During the year ended December 31, 2020, the net sales of dietary supplements and skin care products were $57,154, which represented approximately 10.14% of the total net sales for that period.

 

On April 30, 2018, we, through our Emperor Star, started purchasing a type of water purifying machines from Cosminergy Hitech Development Co., Ltd. (“Cosminergy”) and reselling the water purifying machines in certain Asian areas and countries. The sales generated from selling the water purifying machines for the year ended December 31, 2020 and 2019 were $321,808 and $769,592, respectively, accounting for approximately 57.08% and 33.61% of the total revenue of the said period, respectively.

 

In November 2019, we started the marketing, promotion, sales and distribution of certain electrical noise suppressing device (the “Calibrator”) globally provided by Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, based on an exclusive patent licensing and distribution agreement (the “Ultra Velocity Agreement”) between Ultra Velocity and us. However, due to the outbreak of coronavirus (“COVID-19”) in mainland China, Ultra Velocity and we terminated the Ultra Velocity Agreement in March 2020 and intended to redefine the cooperation model between the respective parties. During the year ended December 31, 2020, the net sales of calibrator was $143,987, which represented approximately 25.54% of the total net sales for that period.

 

In addition, we provided inventory, membership and business management software that designed by CKS Information Co., Ltd. to our customers in the fiscal year of 2019. During the year ended December 31, 2020 and 2019, the software business line generated $40,802 and $102,437 respectively, accounting for approximately 7.24% and 4.47% of the total net sales for that period.

 

 
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Acquisition of Control Interest in A-Best

 

On August 7, 2019, the Company, A-Best Wire Harness & Components Co., Ltd (“A-Best”), a company formed under the laws of Taiwan, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a purchase agreement (the “Purchase Agreement”), pursuant to which, subject to the terms and conditions therein, the Company shall purchase thirty-one percent (31%) of the issued and outstanding equity interest in A-Best and as consideration, issue ten million (10,000,000) shares (the “Stock Consideration”) of its common stock (the “Common Stock”) to Ing-Ming Lai and pay Ing-Ming Lai fifty-five million (55,000,000) new Taiwanese dollars (“NTD”) (the “Cash Consideration”). The Company currently owns twenty percent (20%) of equity securities in A-Best, and will subsequently own a total of fifty-one percent (51%) of issued and outstanding A-Best shares when Ing-Ming Lai completes transferring his 31% of A-Best’s equity to the Company in accordance with the Purchase Agreement. Pursuant to the Purchase Agreement, the Company shall use its best efforts to obtain its shareholder approval to increase the number of authorized common stock to allow legal issuance of the Stock Consideration to Ing-Ming Lai no later than December 31, 2019. In addition, pursuant to the Purchase Agreement, the Company shall pay the Cash Consideration to Ing-Ming Lai if and only if the Company successfully completes an Initial Public Offering (the “IPO”) of its common stock, with gross proceeds of no less than $5,000,000 USD. The Purchase Agreement contains the customary confidentiality provision, representations and warranties. The Purchase Agreement also provides for mutual indemnification clauses. A-Best is a Taipei-based company that designs magnetic resonance speakers.

 

In connection with the Purchase Agreement, on August 7, 2019, the Company, A-Best, and Ing Ming Lai entered into an Exclusive Sales Agreement (the “Exclusive Sales Agreement”), pursuant to which the Company is granted the right as the exclusive distributor to sell all of A-Best’s products, including its Micro-ceramic magnetic resonance speakers in the world, and the right to use A-Best’s trademarks and copyrights in connection with the sale of such products. The term of the Exclusive Sales Agreement shall be three (3) years from execution and be automatically renewed for another term of three (3) years unless one party gives the other parties a written notice of termination three (3) months before the end of the term.

 

In connection with the Purchase Agreement, on August 7, 2019, the Company and Ing-Ming Lai entered into a management agreement (the “Management Agreement”), pursuant to which the Company has agreed to maintain A-Best’s existing operations and Ing-Ming Lai’s positions as A-Best’s President and Chief Executive Officer of A-Best, until A-Best’s board of directors decides to terminate the terms of his positions. Pursuant to the Management Agreement, the Company shall also designate one individual to A-Best’s board of directors, and A-Best’s board of directors shall continue to maintain two director seats, where at least one of the two directors is designated by the Company until the Parties either reach a shareholder agreement or A-Best receives additional capital investment in equity or debt. The Management Agreement became effective upon execution. For more information about this transaction, the Purchase Agreement, the Exclusive Sales Agreement and Management Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on August 13, 2019.

 

On December 30, 2019, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the “Termination Agreement”) to, among other things, terminate the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, all of which were dated August 7, 2019. The Company, A-Best and Mr. Ing-Ming Lai decided to terminate the three agreements primarily because they need more time to agree to a mutually beneficial way to cooperate with each other with respect to the sales of the Micro-ceramic magnetic resonance speakers that A-Best has developed. Pursuant to the Termination Agreement which became effective on December 31, 2019, none of the three parties owes any compensation, payments, damages, penalties or liabilities to one another or has any obligations to perform under any of the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, except that each party agrees to keep confidential the business plans, research and development information obtained from performing the three agreements. For more information about the Termination Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on December 31, 2019. 

 

On March 2, 2020, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best (collectively, the “Parties”) entered into a strategic alliance agreement (the “Strategic Alliance Agreement”), pursuant to which the Parties redefined their cooperation with respect to the sales and distribution of A-Best’s micro-ceramic speakers. In accordance with the Strategic Alliance Agreement, A-Best, Mr. Ing-Ming Lai and the Company terminated the Investment Cooperation Agreement dated January 12, 2019 entered by and among the Parties and as a result the Company agreed to return 20% of the equity interest in A-Best to Mr. Ing-Ming Lai, which was valued at approximately $33,411 by the Parties.

 

Furthermore, subject to the terms and conditions of the Strategic Alliance Agreement, A-Best has granted the Company the exclusive sale and distribution right of A-Best’s micro-ceramic speakers in the world for one (1) year (the “Term”), which may be renewed with mutual consent of the Parties two months prior to the expiration of the Term, while A-Best retains its own right to sell and distribute the micro-ceramic speakers on its own. In consideration for the exclusive distribution right of A-Best’s speakers under the Strategic Alliance Agreement, the Company agreed to have A-Best keep the Company’s 10,000,000 shares of common stock, par value $0.001 per share, issued under the Investment Cooperation Agreement and the Company may keep the revenue and profits generated from the sale of A-Best speakers until the total revenue from such speakers reaches $15 million U.S. dollars. This Strategic Alliance Agreement contains A-Best’s and Mr. Ing-Ming Lai’s joint representation regarding their intellectual property rights to A-Best ceramic speakers. For more information about this transaction and the Strategic Alliance Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on March 5, 2020.

 

 
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On April 22, 2020, the Company returned 20% equity interest in A-Best to Mr. Ing-Ming Lai pursuant to the Strategic Alliance Agreement.

 

On November 25, 2019, the Company and Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, entered into an exclusive patent licensing and distribution agreement (the “Exclusive Patent Licensing and Distribution Agreement”), pursuant to which, subject to the terms and conditions therein, Ultra Velocity granted the Company an exclusive license to the patent (Patent M566970 registered in Taiwan) to its electrical noise suppressing device (the “Calibrator”) and the exclusive right to market, promote, distribute and sell the Calibrator globally. In accordance with the Agreement and in consideration for the exclusive patent license and distribution right to the Calibrator, the Company agreed to issue Ultra Velocity three million (3,000,000) restricted shares of its common stock after the execution of this Agreement and upon the shareholder approval to increase the number of authorized capital of the Company (the “Shareholder Approval”). The term of this Agreement was ten years, commencing from the dare thereof. However, on March 30, 2020, the Company and Ultra Velocity terminated the Exclusive Patent Licensing and Distribution Agreement via a mutually agreed written notice, effective March 24, 2020.

 

On April 12, 2021, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the “Termination Agreement”) to terminate the agreement of Strategic Alliance Agreement (the “Strategic Alliance Agreement”) dated March 2, 2020. In the agreement, Ing-Ming Lai has proceed to effect a return of a total of 10,000,000 shares in EOS INC, back to the company.

 

The Board of Directors of this Corporation authorized the return of the 10,000,000 EOSS shares from Ing Ming Lai.

 

Distribution Agreements and Supply Agreement

 

On May 1, 2015, we entered into a written Distribution Agreement with A.C. (USA), Inc. (“A.C.”) pursuant to which we have an exclusive right to market and distribute in Taiwan certain skin care products manufactured by A.C. for a period of 5 years (the “Distribution Agreement”). Pursuant to the provisions of the Distribution Agreement, we will market and promote the A.C. Products as defined therein in Taiwan. Accordingly, we are the exclusive distributor for those A.C. Products in Taiwan.

 

On April 30, 2018, we, through our Emperor Star, entered into a distribution agreement (the “Cosminergy Distribution Agreement”) with Cosminergy Hitech Development Co., Ltd. (Cosminergy”) pursuant to which we started purchasing a type of water purifying machines from Cosminergy and reselling the water purifying machines in certain Asian areas and countries. The Cosminergy Distribution Agreement expired on April 30, 2019 and we did not renew it.

 

We, through one of our wholly-owned subsidiaries, entered into a product supply agreement (“Fortune King Product Supply Agreement”) with Fortune King (HK) Trading Limited (“Fortune King”), a company formed under the laws of Hong Kong, to provide and sell any products that Fortune King orders from EOS and its subsidiaries. Pursuant to the Fortune King Product Supply Agreement, we agreed to provide products ordered by Fortune King within five business days from the order date and the products we sell should have the expiration date/shelf life at least one year from the supply date. The Fortune King Product Supply Agreement became effective on October 1, 2018 and was extended to September 30, 2021. We provide marketing information on the products we sell and training services to Fortune King. During the year ended December 31, 2018 and nine months ended September 30, 2019, the majority of EOS’ sales of Nine Layer Transformation Hair Cream, Deep Seawater Mineral Extract, Lifegenes, Youthgenes, and household water purifying machines were to Fortune King. As of June 30, 2019, Fortune King was a related party of us because the founder and officer of Fortune King was a shareholder of EOS. On or about June 30, 2019, the founder and officer of Fortune King transferred her equity interest in the Company and therefore Fortune King is no longer a related party to the Company.

 

Critical Accounting Policies and Estimates

 

Principles of Consolidation

 

The accompanying unaudited consolidated financial statements, including the accounts of EOS Inc. and its wholly owned subsidiaries in Taiwan, British Virgin Islands, and People’s Republic of China, have been prepared in conformity with accounting principles generally accepted in the United States of America. Since the Company and Emperor Star are entities under common control prior to the acquisition of Emperor Star, the transaction is accounted for as a restructuring transaction. All the assets and liabilities of Emperor Star were transferred to the Company at their respective carrying amounts on the date of transaction. The Company has recast prior period financial statements to reflect the conveyance of Emperor Star’s common shares as if the restructuring transaction had occurred as of the earliest date of the financial statements. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. The nature of and effects on earnings per share (EPS) of nonrecurring intra-entity transactions involving long-term assets and liabilities is not required to be eliminated and EPS amounts have been recast to include the earnings (or losses) of the transferred net assets.

 

 
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The functional currency of the subsidiaries in Taiwan is the New Taiwan dollars and the subsidiary in People’s Republic of China is the Chinese Yuan, or Renminbi; however, the accompanying unaudited consolidated financial statements have been translated and presented in United States Dollars ($). In the accompanying unaudited consolidated financial statements and notes, “$”, “US$” and “U.S. dollars” mean United States dollars, “NT$” and “NT dollars” mean New Taiwan dollars, and “RMB” means Chinese Yuan, or Renminbi. 

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Classification

 

Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net income nor retained earnings.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less.

 

Accounts Receivable

 

Accounts receivable are stated at carrying value less estimates made for doubtful receivables. An allowance for impairment of trade receivables is established if the collection of a receivable becomes doubtful. Such receivable becomes doubtful when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. An impairment loss is recognized in the statement of income, as are subsequent recoveries of previous impairments.

 

Inventory

 

Inventory is stated at the lower of cost and net realizable value. Net realizable value (NRV) is defined as estimated selling prices less costs of completion, disposal, and transportation. Inventory consists mainly of finished goods held for resale. Cost is determined on a weighted average cost method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.

 

Property and Equipment

 

Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally is five years.

 

 
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Impairment of Long-Lived Assets

 

The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve breakeven operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Management has determined that no impairments of long-lived assets currently exist as of December 31, 2020 and 2019.

 

Long-term Equity Investment

 

The Company acquires equity investment to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:

 

Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gain (loss) on equity investments.

 

 

Non-marketable cost method investments when the equity method does not apply.

 

Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.

 

Other-Than-Temporary Impairment

 

The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:

 

Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gain (loss) on equity investments.

 

 

Non-marketable equity investments based on the Company’s assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the operating performance of the investee; adverse changes in market conditions and the regulatory or economic environment; changes in operating structure or management of the investee; additional funding requirements; and the investee’s ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gain (loss) on equity investments.

 

Revenue Recognition

 

During the fiscal year 2018, the Company has adopted FASB Accounting Standards Codification (“ASC”), Topic 606 (“ASC 606”), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018. The Company recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018. The results for the Company’s reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company’s review of existing sales contracts as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company’s revenue during all periods presented.

 

 
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Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

Merchandise sales: The Company recognizes sales revenues from merchandise sales when customers obtain control of the Company’s products, which typically occurs upon delivery to customer. Merchandise sales revenues are recorded at the sales price, or “transaction price”.

 

Software sales: The Company does not develop the software products on its own. When the Company receives a purchase order from the customer, the Company would engage with the third-party software company to customize and develop the software products. The Company recognizes software revenues upon completion of the installation and testing, and transfer the control of the software products to the customer. Software revenues are recorded at the fixed sales price, or “transaction price”, pursuant to the sales contracts. The Company may also charge the customer maintenance service fees on a straight-line basis over the service period pursuant to the sales contract. The Company concluded that the performance obligation for the maintenance service is distinct. Therefore, such maintenance service revenue can be separated from other elements in the arrangement.

 

Trade discount and allowances: The Company generally does not provide invoice discounts on product sales to its customers for prompt payment.

 

Product returns: The Company generally does not provide customers with the right to return a product for a full or partial refund, a credit, or an exchange for another product.

 

To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.

  

The following tables provide details of revenue by major products and by geography.

 

Revenue by Major Products

 

For the year ended December 31, 2020:

 

 

 

Nutrition supplement

 

$ 57,154

 

Water purifier machine

 

 

321,808

 

Automobile carbon reduction machine

 

 

143,987

 

Software

 

 

40,802

 

 Total

 

$ 563,751

 

 

Revenue by Geography

 

For the year ended December 31, 2020:

 

 

 

Asia Pacific

 

$ 563,751

 

Total

 

$ 563,751

 

 

Leases -— The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. For the comparative periods prior to adoption, the Company presented the disclosures which were required under ASC 840.

 

 
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The Company applied the following practical expedients in the transition to the new standard and allowed under ASC 842:

 

Practical Expedient

Description

Reassessment of expired or existing contracts

The Company elected not to reassess, at the application date, whether any expired or existing contracts contained leases, the lease classification for any expired or existing leases, and the accounting for initial direct costs for any existing leases.

Use of hindsight

The Company elected to use hindsight in determining the lease term (that is, when considering options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of right-to-use assets.

Reassessment of existing or expired land easements

The Company elected not to evaluate existing or expired land easements that were not previously accounted for as leases under ASC 840, as allowed under the transition practical expedient. Going forward, new or modified land easements will be evaluated under ASU No. 2016-02.

Separation of lease and non-lease components

Lease agreements that contain both lease and non-lease components are generally accounted for separately.

Short-term lease recognition exemption

The Company also elected the short-term lease recognition exemption and will not recognize ROU assets or lease liabilities for leases with a term less than 12 months.

 

The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company’s future minimum based payments used to determine the Company’s lease liabilities mainly include minimum based rent payments. As most of Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

 

The adoption of ASC 842 had no substantial impact on the Company’s consolidated balance sheets. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, adoption of this standard resulted in the recognition of operating lease right-of-use assets of $8,235 and operating lease liabilities of $8,235 on the consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of retained earnings.

 

In addition, the adoption of the standard did not have a material impact on the Company’s results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.

 

Advertising Costs

 

Advertising costs are expensed at the time such advertising commences. Advertising expenses were $22,840 and $39,645 for the year ended December 31, 2020 and 2019, respectively.

 

Post-retirement and Post-employment Benefits

 

The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Taiwan Labor Pension Act (the “Act”). Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $5,377 and $7,051 for the year ended December 31, 2020 and 2019, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.

 

 
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Fair Value Measurements

 

FASB ASC 820, “Fair Value Measurements” defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:

 

·

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.

 

·

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

·

Level 3 – Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.

 

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, advance to suppliers, prepaid expenses, accounts payable, accrued expenses, and due to shareholders, approximate fair value because of to their relatively short maturities.

 

Net Income Per Share

 

Basic income per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during each period. For the year ended December 31, 2020 and 2019, the Company does not have any outstanding common stock equivalents; therefore, a separate computation of diluted income per share is not presented.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

 

Concentration of Credit Risk

 

Cash and cash equivalents: The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions in Taiwan, but these investments may be in excess of the insurance limits of Taiwan Central Deposit Insurance Corporation (the “TCDIC”). The Company does not enter into financial instruments for hedging, trading or speculative purposes. Concentration of credit risk with respect to trade and notes receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas. As of December 31, 2020, the Company had approximately $13,916 in excess of TCDIC insured limits. The Company has not experienced any losses in such accounts.

 

Customers: The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.

 

 
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Table of Contents

 

For the year ended December 31, 2020, two customers accounted for more than 10% of the Company’s total revenues, representing approximately 67% and 18% of its total revenues, and 55% and 30% of accounts receivable in aggregate at December 31, 2020.

 

Customer

 

Net sales for the year ended

December 31, 2020

 

 

Accounts receivable balance

as of December 31, 2020

 

A

 

$ 378,458

 

 

$ 79,206

 

B

 

 

100,478

 

 

 

-

 

C

 

 

-

 

 

 

43,177

 

 

For the year ended December 31, 2019, one customer accounted for more than 10% of the Company’s total revenues, representing approximately 95% of its total revenues, and 99% of accounts receivable in aggregate at December 31, 2019.

 

Customer

 

Net sales for the year ended

December 31, 2019

 

 

Accounts receivable balance

as of December, 2019

 

A

 

$ 2,171,766

 

 

$ 2,151,192

 

 

 

Suppliers: The Company’s inventory is purchased from various suppliers.

 

For the year ended December 31, 2020, four suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately 39%, 24%, 23% and 10% of total net purchase, and 0%, 98%, 0% and 0% of accounts payable in aggregate at December 31, 2020, respectively:

 

Supplier

 

Net purchase for the year ended

December 31, 2020

 

 

Accounts payable balance

as of December 31, 2020

 

A

 

$ 191,514

 

 

$ -

 

B

 

$ 119,514

 

 

$ 18,079

 

C

 

$ 114,395

 

 

$ -

 

D

 

$ 51,623

 

 

$ -

 

 

 

For the year ended December 31, 2019, four suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately 34%, 27%, 19% and 10% of total net purchase, and 0% of accounts payable in aggregate at December 31, 2019, respectively:

 

Supplier

 

Net purchase for the year ended

December 31, 2019

 

 

Accounts payable balance

as of December 31, 2019

 

A

 

$ 96,743

 

 

$ -

 

B

 

$ 74,819

 

 

$ -

 

C

 

$ 52,505

 

 

$ -

 

D

 

$ 28,400

 

 

$ -

 

 

 
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Foreign-currency Transactions

 

Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) and Renminbi (“RMB”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars and Renminbi, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.

 

Translation Adjustment

 

The accounts of the Company’s subsidiaries were maintained, and their financial statements were expressed in New Taiwan Dollar (“NTD”) and Renminbi (“RMB”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, “Foreign Currency Matters”, with the NTD and RMB as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, common stock and additional paid-in capital are translated at the historical rates, and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under accumulated other comprehensive income (loss) as a component of stockholders’ equity.

 

Comprehensive Income (loss)

 

Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income (loss) on its consolidated statements of operations and other comprehensive income (loss).

 

Recent Accounting Pronouncements

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.

 

Results of Operations

 

The following presents the consolidated results of the Company for the years ended December 31,2020 and December 31,2019.

 

Net Revenue:

 

Net revenue was $563,751 for the year ended December 31, 2020, representing a decrease of $1,725,792, or 75.38%, as compared to $2,289,543 for the year ended December 31, 2019. The decrease was primarily due to the decrease in sales of water purifying machines.

 

 
22

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Cost of Sales:

 

Cost of sales was $81,717 for the year ended December 31, 2020, representing a decrease of $193,746 or 70.33%, as compared to $275,463 for the year ended December 31, 2019. Such decrease was mainly due to the decrease in the sales of water purifying machines.

 

Gross Profit:

 

Gross profit was $482,034 for the year ended December 31, 2020, compared to $2,014,080 for the same period in 2019. Gross profit as a percentage of net sales was 85.50% for the year ended December 31, 2020, compared to 87.97% in the same period in 2019. The change in gross margin was because the higher gross margin product accounted for a higher proportion of sales for the year ended December 31, 2020.

 

Selling, General and Administrative Expenses:

 

Selling, general and administrative expenses consist primarily of office rent, salary and related costs for personnel and facilities, and professional service fees. Selling, general and administrative expenses were $1,913,683 for the year ended December 31, 2020, representing an increase of $1,007,861 or 111%, as compared to $905,822 for the year ended December 31, 2019. The increase in selling, general and administrative expenses was primarily attributable to the increase in bad debt expense of approximately $973,910.

  

Income (Loss) from Operations:

 

Loss from operations was $1,431,649 for the year ended December 31, 2020 compared to income from operations of $1,108,258 for the year ended December 31, 2019, representing a decrease of $2,539,907 or -229%. Such decrease was primarily due to the decrease in sales, and the increase in bad debt expenses.

  

Other Income (expenses):

 

Other loss was $7,509 for the year ended December 31, 2020, reflecting an decrease of $18,982 or 72%, compared to other loss of $26,491 for the year ended December 31, 2019. The decrease was mainly attributable to the decrease in foreign currency exchange.

   

Net Income (Loss):

 

As a result of the above factors, we had net loss was $1,439,158 for the year ended December 31, 2020, as compared to net income of $1,081,767 for the year ended December 31, 2019, representing a decrease in income of $2,520,925 or -233%.

  

Liquidity and Capital Resources

 

Cash and cash equivalents were $122,482 at December 31, 2020 and $295,594 at December 31, 2019. Our total current assets were $965,567 at December 31, 2020, as compared to $2,819,688 at December 31, 2019. Our total current liabilities were $563,534 at December 31, 2020, as compared to $221,694 at December 31, 2019.

  

 
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We had a working capital of $402,033 on December 31, 2020, compared to the working capital of $2,597,994 on December 31, 2019. The decrease in working capital was primarily attributable to the decrease in cash and cash equivalents and increase in accounts payable.

   

Net cash used in operating activities was $373,598 during the year ended December 31, 2020, as compared to net cash from operating activities $265,176 for the year ended December 31, 2019. The decrease in net cash used in operating activities in the amount of $638,774 was primary attributable to the increase in security deposits and other assets and account payable, partially offset by the decrease in net income and advance to suppliers.

   

Net cash used in investing activities was $2,218 during the year ended December 31, 2020, as compared to $1,818 for the year ended December 31, 2019. The increase in net cash used in investing activities was due to the slight increase in the acquisition of property, plant and equipment.

 

Net cash provided by financing activities was $166,014 during the year ended December 31, 2020, as compared to $0 for the year ended December 31, 2019. The increase in net cash provided by financing activities was due to the proceeds from related party payable and borrowing.

  

Net change in cash and cash equivalents was a decrease of $173,112 for the year ended December 31, 2020, as compared to $259,464 for the year ended December 31, 2019.

  

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of December 31, 2020.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

 

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

 

 
24

 

 

Item 8. Financial Statements and Supplementary Data.

 

FINANCIAL STATEMENT SCHEDULES

 

Report of Independent Registered Public Accounting Firm

 

F-2

 

 

 

Financial Statements:

 

 

 

 

Consolidated Balance Sheets

 

F-4

 

 

 

Consolidated Statements of Operations and Comprehensive Income

 

F-5

 

 

 

Consolidated Statements of Stockholders’ Equity

 

F-6

 

 

 

Consolidated Statements of Cash Flows

 

F-7

 

 

 

Notes to Consolidated Financial Statements

 

F-8

 

 

 
F-1

Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of EOS Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of EOS Inc. and subsidiaries (the “Company”) as of December 31, 2020, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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.

 

Critical Audit Matters

 

The critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

 

Revenue Recognition Assessment

 

As described in Note 1 to the consolidated financial statements, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.

 

We identified the revenue recognition assessment as a critical audit matter. A high degree of auditor judgment was required in assessing the reasonable assurance for collection of payment from inventory transfer. 

 

The following are the primary procedures we performed to address this critical audit matter.

 

 

·

We inquired the Company’s collection policy for its account receivable.

 

·

We reviewed collection of accounts receivable from sales in prior years. In addition, we also reviewed subsequent receipt after end of 2020 for transactions of inventory transfer in 2020.

 

·

Besides goods transfer, we accessed other transactions between the Company and certain customer.

 

 

 

 

Yichien Yeh, CPA

 

We have served as the Company’s auditor since 2021.

Oakland Gardens, New York
April 15, 2021

 

 
F-2

 

 

Audit • Tax • Consulting • Financial Advisory

Registered with Public Company Accounting Oversight Board (PCAOB)

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

To the Board of Directors and Stockholders of

EOS Inc. and its subsidiaries

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of EOS Inc. and its subsidiaries ( “the Company”) as of December 31, 2019, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with the U.S. generally accepted accounting principles in the United States of America.

 

Change in Accounting Principle

 

As discussed in Note 1 and 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material 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 consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ KCCW Accountancy Corp.

 

We have served as the Company’s auditor since 2015.

Diamond Bar, California

April 8, 2020

 

KCCW Accountancy Corp.

3333 South Brea Canyon Rd. Suite 206, Diamond Bar, CA 91765, USA

Tel: +1 909 348 7228 • Fax: +1 909 895 4155 • info@kccwcpa.com

 

 
F-3

Table of Contents

  

EOS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  

 

 

December 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 122,482

 

 

$ 295,594

 

Accounts receivable

 

 

175,766

 

 

 

2,177,124

 

Inventory, net

 

 

449,227

 

 

 

10,541

 

Advance to suppliers

 

 

191,633

 

 

 

317,280

 

Prepaid expenses and other current assets

 

 

26,459

 

 

 

19,149

 

Total current assets

 

 

965,567

 

 

 

2,819,688

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

8,175

 

 

 

7,719

 

Operating lease right-of-use assets

 

 

-

 

 

 

34,979

 

Security deposits

 

 

1,113,010

 

 

 

127,534

 

Long-term investment

 

 

-

 

 

 

20,751

 

Total Assets

 

$ 2,086,752

 

 

$ 3,010,671

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ 18,415

 

 

$ 2,045

 

Accrued expenses

 

 

81,359

 

 

 

74,281

 

Due to shareholders

 

 

107,791

 

 

 

96,114

 

Income tax payable

 

 

105,969

 

 

 

25,837

 

Other current liabilities

 

 

250,000

 

 

 

 

 

Operating lease liabilities – current

 

 

-

 

 

 

23,417

 

Total current liabilities

 

 

563,534

 

 

 

221,694

 

 

 

 

 

 

 

 

 

 

Long-term loan

 

 

166,985

 

 

 

-

 

Operating lease liabilities – noncurrent

 

 

-

 

 

 

11,562

 

Total liabilities

 

 

730,519

 

 

 

233,256

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 75,000,000 shares authorized, 74,122,997 shares issued and outstanding as of December 31, 2020 and December 31, 2019

 

 

74,123

 

 

 

74,123

 

Additional paid-in capital

 

 

112,425

 

 

 

112,425

 

Retained earnings

 

 

1,058,090

 

 

 

2,577,898

 

Accumulated other comprehensive income

 

 

87,051

 

 

 

12,969

 

Total stockholders’ equity

 

 

1,331,689

 

 

 

2,777,415

 

Noncontrolling Interest

 

 

24,544

 

 

 

-

 

Total Equity

 

 

1,356,233

 

 

 

2,777,415

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

 

$ 2,086,752

 

 

$ 3,010,671

 

  

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

 

 
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Table of Contents

 

EOS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

  

 

 

For the Years Ended

December 31,

 

 

 

2020

 

 

2019

 

Net sales

 

$ 563,751

 

 

$ 2,289,543

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

81,717

 

 

 

275,463

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

482,034

 

 

 

2,014,080

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

1,913,683

 

 

 

905,822

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(1,431,649 )

 

 

1,108,258

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

(339 )

 

 

74

 

Other income (expense)

 

 

2,428

 

 

 

18

 

Gain (loss) on foreign currency exchange

 

 

11,152

 

 

 

(14,908 )

Gain (loss) on investment in equity securities

 

 

(20,750 )

 

 

(11,675 )

Total other income (expense)

 

 

(7,509 )

 

 

(26,491 )

 

 

 

 

 

 

 

 

 

Income (loss) before income tax provision

 

 

(1,439,158 )

 

 

1,081,767

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

92,357

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net Income (loss)

 

$ (1,531,515 )

 

$ 1,081,767

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

Net income (loss) attributable to non-controlling interests

 

$ (11,707 )

 

$ -

 

Net income (loss) attributable to EOS and subsidiaries

 

 

(1,519,808 )

 

 

1,081,767

 

Foreign currency translation adjustment, net of tax

 

 

76,381

 

 

 

24,434

 

Comprehensive Income (loss)

 

$ (1,455,134 )

 

$ 1,106,201

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$ 0.00

 

 

$ 0.02

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

74,122,997

 

 

 

70,177,792

 

 

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

 

 
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Table of Contents

 

EOS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Non

controlling

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Interest

 

 

Total

 

Balance at December 31, 2018

 

$ 64,122,997

 

 

$ 64,123

 

 

$ 90,000

 

 

$ 1,496,131

 

 

$ (11,465 )

 

$ -

 

 

$ 1,638,789

 

Common shares issued in exchange for investment in equity securities

 

 

10,000,000

 

 

 

10,000

 

 

 

22,425

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

32,425

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,434

 

 

 

-

 

 

 

24,434

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,081,767

 

 

 

-

 

 

 

-

 

 

 

1,081,767

 

Balance at December 31, 2019

 

 

74,122,997

 

 

 

74,123

 

 

 

112,425

 

 

 

2,577,898

 

 

 

12,969

 

 

 

-

 

 

 

2,777,415

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Contributions from noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

33,952

 

 

 

33,952

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

74,082

 

 

 

2,299

 

 

 

76,381

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,519,808 )

 

 

-

 

 

 

(11,707 )

 

 

(1,531,515 )

Balance at December 31, 2020

 

 

74,122,997

 

 

$ 74,123

 

 

$ 112,425

 

 

$ 1,058,090

 

 

$ 87,051

 

 

$ 24,544

 

 

$ 1,356,233

 

   

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

  

 
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Table of Contents

  

EOS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For the Year Ended December 31,

 

 

 

2020

 

 

2019

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net income (loss)

 

$ (1,531,515 )

 

$ 1,081,767

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation

 

 

2,269

 

 

 

1,916

 

Loss on investment in equity securities

 

 

20,750

 

 

 

11,675

 

Loss (gain) on foreign currency exchange

 

 

(11,152 )

 

 

14,908

 

Stock-based compensation

 

 

-

 

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease (increase) in accounts receivable

 

 

2,021,794

 

 

 

(344,219 )

Decrease (increase) in inventory

 

 

(420,468 )

 

 

(3,074 )

Decrease (increase) in advance to suppliers

 

 

139,772

 

 

 

(282,115 )

Decrease (increase) in security deposits and other assets

 

 

(937,531 )

 

 

(111,794 )

Increase (decrease) in accounts payable

 

 

15,483

 

 

 

(44,417 )

Increase (decrease) in accrued expenses

 

 

2,208

 

 

 

6,273

 

Increase (decrease) in income tax payable

 

 

74,792

 

 

 

(13,561 )

Increase (decrease) in due to shareholders

 

 

-

 

 

 

(52,183 )

Increase (decrease) in other current liabilities

 

 

250,000

 

 

 

-

 

Net cash used in operating activities

 

 

(373,598 )

 

 

265,176

 

 

 

 

 

 

 

 

 

 

Cash flows from Investing activities

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(2,218 )

 

 

(1,818 )

Net cash used in investing activities

 

 

(2,218 )

 

 

(1,818 )

 

 

 

 

 

 

 

 

 

Cash flows from Financing activities

 

 

 

 

 

 

 

 

Proceeds from (Repayment to) related party payable

 

 

6,772

 

 

 

-

 

Proceeds from (Repayment to) borrowings

 

 

159,242

 

 

 

-

 

Proceeds from investments by noncontrolling interests in subsidiary

 

 

 

 

 

 

-

 

Net cash provided by financing activities

 

 

166,014

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

36,690

 

 

 

(3,894 )

Net decrease in cash and cash equivalents

 

 

(173,112 )

 

 

259,464

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

 

 

 

 

 

 

 

Beginning

 

 

295,594

 

 

 

36,130

 

Ending

 

$ 122,482

 

 

$ 295,594

 

Supplemental Disclosure of Cash Flows

 

 

 

 

 

 

 

 

Cash paid during the periods for:

 

 

 

 

 

 

 

 

Interest

 

$ -

 

 

$ -

 

Income taxes

 

$ -

 

 

$ 8,125

 

 

 

 

 

 

 

 

 

 

Non-cash financing and investing activities

 

 

 

 

 

 

 

 

Common shares issued in exchange for investment in equity securities

 

$ -

 

 

$ 32,425

 

  

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

 

 
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Table of Contents

 

EOS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDAED FINANCIAL STATEMENTS

DECEMBER 31, 2020

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

 

Organization

 

EOS Inc. was incorporated on April 3, 2015 in the State of Nevada. The Company’s business plan is to market and distribute skin care products, including masks and serums.

 

On November 18, 2016, the Company has set up a wholly-owned subsidiary in Taiwan to assist the Company to promote the business in Taiwan.

 

Emperor Star International Trade Co., Ltd., (“Emperor Star”), was incorporated on November 16, 2015 under the laws of Taiwan. Emperor Star is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifiers.

 

On May 3, 2017, the Company entered into and closed a Share Purchase and Sale Agreement (the “Purchase Agreement”) with Emperor Star and the shareholder of Emperor Star to acquire all issued and outstanding shares of Emperor Star in consideration of $30,562 in cash. As a result of the Purchase, Emperor Star becomes the Company’s wholly owned subsidiary. Upon consummation of the Purchase, the Company has assumed the business of Emperor Star and ceased to be a shell company.

 

On September 20, 2018, the Company set up another wholly-owned subsidiary, EOS International Inc. (“EOS(BVI)”), under the laws of British Virgin Islands. EOS(BVI) is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifiers.

 

On March 1, 2019, EOS(BVI) set up a wholly-owned subsidiary, Shanghai Maosong Co., Ltd (“Maosong”), under the laws of People’s Republic of China. Maosong is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifiers in China. As of the date of this report, Maosong has a registered capital of USD $100,000, but no capital has actually been paid into Maosong.

 

Principles of Consolidation

 

The accompanying consolidated financial statements, including the accounts of EOS Inc. and its wholly owned subsidiaries in Taiwan, British Virgin Islands, and People’s Republic of China, have been prepared in conformity with accounting principles generally accepted in the United States of America. Since the Company and Emperor Star are entities under common control prior to the acquisition of Emperor Star, the transaction is accounted for as a restructuring transaction. All assets and liabilities of Emperor Star were transferred to the Company at their respective carrying amounts on the date of transaction. The Company has recast prior period financial statements to reflect the conveyance of Emperor Star’s common shares as if the restructuring transaction had occurred as of the earliest date of the consolidated financial statements. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. The nature of and effects on earnings per share (EPS) of nonrecurring intra-entity transactions involving long-term assets and liabilities is not required to be eliminated and EPS amounts have been recast to include the earnings (or losses) of the transferred net assets.

 

The functional currency of the subsidiaries in Taiwan is the New Taiwan dollars and the subsidiary in People’s Republic of China is the Chinese Yuan, or Renminbi; however, the accompanying consolidated financial statements have been translated and presented in United States Dollars ($). In the accompanying consolidated financial statements and notes, “$”, “US$” and “U.S. dollars” mean United States dollars, “NT$” and “NT dollars” mean New Taiwan dollars, and “RMB” means Chinese Yuan, or Renminbi 

 

 
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Table of Contents

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Classification

 

Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net income nor retained earnings.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less.

 

Accounts Receivable

 

Accounts receivable are stated at carrying value less estimates made for doubtful receivables. An allowance for impairment of trade receivables is established if the collection of a receivable becomes doubtful. Such receivable becomes doubtful when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. An impairment loss is recognized in the statement of income, as are subsequent recoveries of previous impairments.

 

Inventory

 

Inventory is stated at the lower of cost and net realizable value. Net realizable value (NRV) is defined as estimated selling prices less costs of completion, disposal, and transportation. Inventory consists mainly of finished goods held for resale. Cost is determined on a weighted average cost method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.

 

Property and Equipment

 

Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally is five years. Depreciation expense is $2,269 and $1,916 for the years ended December 31, 2020 and 2019, respectively.

 

 
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Table of Contents

 

Impairment of Long-Lived Assets

 

The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve breakeven operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Management has determined that no impairments of long-lived assets currently exist as of December 31, 2020 and 2019.

 

Long-term Equity Investment

 

The Company acquires equity investment to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:

 

·

Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gain (loss) on equity investments.

 

 

·

Non-marketable cost method investments when the equity method does not apply.

 

Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.

 

Other-Than-Temporary Impairment

 

The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:

 

·

Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and the Company’s ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gain (loss) on equity investments.

 

 

·

Non-marketable equity investments based on the Company’s assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the operating performance of the investee; adverse changes in market conditions and the regulatory or economic environment; changes in operating structure or management of the investee; additional funding requirements; and the investee’s ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gain (loss) on equity investments.

 

Revenue Recognition

 

During the fiscal year 2018, the Company has adopted FASB Accounting Standards Codification (“ASC”), Topic 606 (“ASC 606”), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018. The Company recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018. The results for the Company’s reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company’s review of existing sales contracts as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company’s revenue during all periods presented 

 

Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

 
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Table of Contents

  

Merchandise sales: The Company recognizes sales revenues from merchandise sales when customers obtain control of the Company’s products, which typically occurs upon delivery to customer. Merchandise sales revenues are recorded at the sales price, or “transaction price”.

 

Software sales: The Company does not develop the software products on its own. When the Company receives a purchase order from the customer, the Company would engage with the third-party software company to customize and develop the software products. The Company recognizes software revenues upon completion of the installation and testing, and transfer the control of the software products to the customer. Software revenues are recorded at the fixed sales price, or “transaction price”, pursuant to the sales contracts. The Company may also charge the customer maintenance service fees on a straight-line basis over the service period pursuant to the sales contract. The Company concluded that the performance obligation for the maintenance service is distinct. Therefore, such maintenance service revenue can be separated from other elements in the arrangement.

 

Trade discount and allowances: The Company generally does not provide invoice discounts on product sales to its customers for prompt payment.

 

Product returns: The Company generally does not provide customers with the right to return a product for a full or partial refund, a credit, or an exchange for another product.

 

To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.

 

The following tables provide details of revenue by major products and by geography.

 

Revenue by Major Products

 

For the year ended December 31, 2020:

 

 

 

Nutrition supplement

 

$ 57,154

 

Water purifier machine

 

 

321,808

 

Automobile carbon reduction machine

 

 

143,987

 

Software

 

 

40,802

 

 Total

 

$ 563,751

 

 

Revenue by Geography

 

For the year ended December 31, 2020:

 

 

 

Asia Pacific

 

$

563,751

 

Total

 

$

563,751

 

 

Leases -— The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. For the comparative periods prior to adoption, the Company presented the disclosures which were required under ASC 840.

 

The Company applied the following practical expedients in the transition to the new standard and allowed under ASC 842:

 

Practical Expedient

 

Description

Reassessment of expired or existing contracts

 

The Company elected not to reassess, at the application date, whether any expired or existing contracts contained leases, the lease classification for any expired or existing leases, and the accounting for initial direct costs for any existing leases.

Use of hindsight

 

The Company elected to use hindsight in determining the lease term (that is, when considering options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of right-to-use assets.

Reassessment of existing or expired land easements

 

The Company elected not to evaluate existing or expired land easements that were not previously accounted for as leases under ASC 840, as allowed under the transition practical expedient. Going forward, new or modified land easements will be evaluated under ASU No. 2016-02.

Separation of lease and non-lease components

 

Lease agreements that contain both lease and non-lease components are generally accounted for separately.

Short-term lease recognition exemption

 

The Company also elected the short-term lease recognition exemption and will not recognize ROU assets or lease liabilities for leases with a term less than 12 months.

 

 
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Table of Contents

 

The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company’s future minimum based payments used to determine the Company’s lease liabilities mainly include minimum based rent payments. As most of Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

 

The adoption of ASC 842 had no substantial impact on the Company’s consolidated balance sheets. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, adoption of this standard resulted in the recognition of operating lease right-of-use assets of $8,235 and operating lease liabilities of $8,235 on the consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of retained earnings. As of December 31, 2020, there was no operating lease right-of-use assets and operating lease liabilities.

 

In addition, the adoption of the standard did not have a material impact on the Company’s results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.

 

Advertising Costs

 

Advertising costs are expensed at the time such advertising commences. Advertising expenses were $22,840 and $39,645 for the year ended December 31, 2020 and 2019, respectively.

 

Post-retirement and Post-employment Benefits

 

The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Taiwan Labor Pension Act (the “Act”). Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $5,377 and $7,051 for the years ended December 31, 2020 and 2019, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.

 

 
F-12

Table of Contents

 

Fair Value Measurements

 

FASB ASC 820, “Fair Value Measurements” defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:

 

·

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.

 

 

 

·

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

 

 

·

Level 3 – Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.

 

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, advance to suppliers, prepaid expenses, accounts payable, accrued expenses, and due to shareholders, approximate fair value because of to their relatively short maturities.

 

Net Income Per Share

 

Basic income per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during each period. For the year ended December 31, 2020 and 2019, the Company does not have any outstanding common stock equivalents; therefore, a separate computation of diluted income per share is not presented.

 

 
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Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

 

Concentration of Credit Risk

 

Cash and cash equivalents: The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions in Taiwan, but these investments may be in excess of the insurance limits of Taiwan Central Deposit Insurance Corporation (the “TCDIC”). The Company does not enter into financial instruments for hedging, trading or speculative purposes. Concentration of credit risk with respect to trade and notes receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas. As of December 31, 2020, the Company had approximately $13,916 in excess of TCDIC insured limits. The Company has not experienced any losses in such accounts.

 

 Customers: The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.

 

For the year ended December 31, 2020, two customers accounted for more than 10% of the Company’s total revenues, representing approximately 67% and 18% of its total revenues, and 55% and 30% of accounts receivable in aggregate at December 31, 2020.

 

Customer

 

Net sales for the year ended

December 31, 2020

 

 

Accounts receivable balance

as of December 31, 2020

 

A

 

$ 378,458

 

 

$ 79,206

 

B

 

 

100,478

 

 

 

-

 

C

 

 

-

 

 

 

43,177

 

 

For the year ended December 31, 2019, one customer accounted for more than 10% of the Company’s total revenues, representing approximately 95% of its total revenues, and 99% of accounts receivable in aggregate at December 31, 2019.

 

Customer

 

Net sales for the year ended

December 31, 2019

 

 

Accounts receivable balance

as of December, 2019

 

A

 

$ 2,171,766

 

 

$ 2,151,192

 

 

Suppliers: The Company’s inventory is purchased from various suppliers.

 

For the year ended December 31, 2020, four suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately 39%, 24%, 23% and 10% of total net purchase, and 0%, 98%, 0% and 0% of accounts payable in aggregate at December 31, 2020, respectively:

 

Supplier

 

Net purchase for the year ended

December 31, 2020

 

 

Accounts payable balance

as of December 31, 2020

 

A

 

$ 191,514

 

 

$ -

 

B

 

$ 119,514

 

 

$ 18,079

 

C

 

$ 114,395

 

 

$ -

 

D

 

$ 51,623

 

 

$ -

 

 

For the year ended December 31, 2019, four suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately 34%, 27%, 19% and 10% of total net purchase, and 0% of accounts payable in aggregate at December 31, 2019, respectively:

 

Supplier

 

Net purchase for the year ended

December 31, 2019

 

 

Accounts payable balance

as of December 31, 2019

 

A

 

$ 96,743

 

 

$ -

 

B

 

$ 74,819

 

 

$ -

 

C

 

$ 52,505

 

 

$ -

 

D

 

$ 28,400

 

 

$ -

 

 

* Related party transactions (See Note 5).

 

 
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Foreign-currency Transactions

 

Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) and Renminbi (“RMB”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars and Renminbi, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.

 

Translation Adjustment

 

The accounts of the Company’s subsidiaries were maintained, and their financial statements were expressed in New Taiwan Dollar (“NTD”) and Renminbi (“RMB”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, “Foreign Currency Matters”, with the NTD and RMB as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, common stock and additional paid-in capital are translated at the historical rates, and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under accumulated other comprehensive income (loss) as a component of stockholders’ equity.

 

Comprehensive Income (loss)

 

Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income (loss) on its consolidated statements of operations and other comprehensive income (loss).

 

Recent Accounting Pronouncements

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.

 

 
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Note 2. LEASE

 

The Company has no finance leases. The Company has terminated an office facility lease with Wanhong Enterprise Co., Ltd on September 28, 2020. The Company has entered into new lease agreement with Xiuling Huang on September 29, 2020 for the period of approximately 9 months.

 

As of 31 December, 2020, operating lease expense was $24,304. Future lease payable was $1,969.

  

Note 3. LONG-TERM INVESTMENT

 

On January 15, 2019, the Company, A-Best Wire Harness & Components Co., Ltd. (“A-Best” or the “Investee”), a company formed under the laws of Taiwan, and Mr. Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into an investment cooperation agreement (the “Investment Cooperation Agreement”), pursuant to which the Company issued 10 million shares of its common stock to Mr. Ing-Ming Lai to purchase twenty percent (20%) of the issued and outstanding equity in A-Best. On May 24, 2019, the Company consummated the shareholder registration of A-Best with the Investment Commission of Ministry of Economic Affairs of Taiwan and issued 10 million shares of its common stock to Mr. Ing-Ming Lai to acquire 20% of the issued and outstanding equity in A-Best.

 

On March 2, 2020, the Company, A-Best, and Ing-Ming Lai, (collectively, the “Parties”) entered into a strategic alliance agreement (the “Strategic Alliance Agreement”), pursuant to which the Parties redefined their cooperation with respect to the sales and distribution of A-Best’s micro-ceramic speakers. In accordance with the Strategic Alliance Agreement, A-Best, Mr. Ing-Ming Lai and the Company terminated the Investment Cooperation Agreement dated January 15, 2019 entered by and among the Parties and as a result the Company agreed to return 20% of the equity interest in A-Best to Mr. Ing-Ming Lai, which was valued at approximately $33,411 by the Parties.

 

Furthermore, subject to the terms and conditions of the Strategic Alliance Agreement, A-Best has granted the Company the exclusive sale and distribution right of A-Best’s micro-ceramic speakers in the world for one (1) year (the “Term”), which may be renewed with mutual consent of the Parties two months prior to the expiration of the Term, while A-Best retains its own right to sell and distribute the micro-ceramic speakers on its own. In consideration for the exclusive distribution right of A-Best’s speakers under the Strategic Alliance Agreement, the Company agreed to have A-Best keep the Company’s 10,000,000 shares of common stock issued under the Investment Cooperation Agreement and the Company may keep the revenue and profits generated from the sale of A-Best speakers until the total revenue from such speakers reaches $15 million U.S. dollars.

 

On April 22, 2020, the Company returned 20% equity interest in A-Best to Mr. Ing-Ming Lai pursuant to the Strategic Alliance Agreement. As of April 22, 2020, the Company holds 20% equity interest in A-Best and uses equity method to account for its equity investment as prescribed in ASC 323, Investments—Equity Method and Joint Ventures (“ASC 323”). Equity method adjustments include the Company’s proportionate share of investee’s income or loss and other adjustments required by the equity method. For the period from January 1, 2020, to April 22, 2020, the share of loss from investment accounted for using equity method was $2,848. As a result of the return of equity interest, the Company also recognized loss on investment in equity securities of $17,902 for the same period.

 

Summarized financial information for the Company’s equity method investee, A-Best, is as follows:

 

Balance Sheets

 

 

 

April 22,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Current assets

 

$ 38,303

 

 

$ 42,818

 

Noncurrent assets

 

 

779

 

 

 

857

 

Current liabilities

 

 

1,406,166

 

 

 

1,372,351

 

Shareholders’ deficit

 

 

(1,367,084 )

 

 

(1,328,676 )

 

 
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Statement of Operation

 

 

 

For the period from January 1, 2020 to April 22, 2020.

 

Net sales

 

$ 854

 

Gross profit

 

 

498

 

Net loss

 

 

(14,240 )

 

 

 

 

 

Share of loss from investment accounted for using equity method

 

 

(2,848 )

 

On May 26, 2020, EOS Inc. increased its investment in Emperor Star by $134,004 (NTD$4,000,000). The Company also received the contributions to Emperor Star from non-controlling interests in the amount of $33,398 (NTD$1,000,000). As a result, the Company owns 83% equity interest of Emperor Star as of December 31, 2020, which is no longer a wholly-owned subsidiary.

 

Note 4. SECURITY DEPOSITS

 

On November 21, 2019, the Company and Shuang Hua International Culture Media Co, Ltd. (“Shuang Hua”), a corporation formed under laws of Taiwan, entered into an exclusive copyright and distribution agreement (the “Agreement”), pursuant to which, subject to the terms and condition therein, Shuang Hua granted the Company an exclusive right to produce, market, distribute and sell the bilingual films and electronic books of which the copyrights owned by Shuang Hua. In accordance to the agreement, the Company shall pay Shuang Hua a refundable deposit of in the aggregate amount of $2,894,000, before December 31, 2021.

 

As of December 31, 2020 and December 31, 2019, the Company has paid $1,030,000 and $120,000 to Shuang Hua, respectively, and are recorded as security deposits. Due to Covid-19 in 2020, the Company has not started its business plan with the exclusive copyright and distribution agreement.

 

Note 5. RELATED PARTY TRANSACTIONS

 

Related party – Sales

 

The Company had sales to Fortune King (HK) Trading Limited, (“Fortune King”), a Hong Kong company. As of June 30, 2019, Fortune King had been a related party of the Company because the founder and officer of Fortune King was a shareholder of the Company. On or about June 30, 2019, the founder and officer of Fortune King transferred her equity interest in the Company and therefore Fortune King is no longer a related party to the Company. 

 

Sales to Fortune King amounted to $378,458 and $ 2,171,766 for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and December 31, 2020, accounts receivable from Fortune King was $79,206 and $ 2,151,192, respectively.

  

Due to shareholders

 

 The Company has advanced funds from its directors and shareholders for working capital purposes. As of December 31, 2020 and December 31, 2019 there were $107,791 and $96,114 advance outstanding, respectively. The Company has agreed that the outstanding balances bear 0% interest rate and are due upon demand after thirty days of written notice by the director and shareholder.

 

Note 6. STOCKHOLDERS’ EQUITY

 

On June 1, 2020, the Company and Fortune King entered into a sales collaboration agreement (the “Sales Collaboration Agreement”), pursuant to which, subject to the terms and condition therein, Fortune King agreed to provide promotional and marketing service of the Company’s products within six years from January 2020, to December 2025. Fortune King is obligated to perform such service regardless of whether the Company sells products to Fortune King during the designated period. In accordance with the Sales Collaboration Agreement and in consideration for the service provided by Fortune King, the Company shall issue 3,000,000 shares of common stock to Fortune King for the promotional and marketing service of $1,500,000. The shares were issued on December 29, 2020.

 

 
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Note 7. INCOME TAXES

 

United States

EOS, Inc. is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period. As of December 31, 2020, the Company had net operating loss carry forwards of $1,531,515 that may be available to reduce future years’ taxable income. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements as their realization is determined not likely to occur and, accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. No tax benefit has been realized since a 100% valuation allowance has offset deferred tax asset resulting from the net operating losses.

  

British Virgin Islands

EOS International Inc. is incorporated in British Virgin Islands and are not required to pay income tax.

 

Taiwan

The subsidiary of EOS Inc. and Emperor Star are incorporated in Taiwan. According to the amendments to the “Taiwan Income Tax Act” enacted by the office of the President of Taiwan on February 7, 2018, an increase in the statutory income tax rate from 17% to 20% and decrease in the undistributed earning tax from 10% to 5% are effective from January 1, 2018.

 

People’s Republic of China (“PRC”)

Under the Enterprise Income Tax (“EIT”) Law of the PRC, the standard EIT rate is 25%. The PRC subsidiary of the Company is subject to PRC income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they operate. No provision for income taxes have been made as Maosong had no taxable income as of and for the year ended December 31, 2020.

 

Provision for income tax consists of the following:

 

 

 

For the Years Ended

December 31,

 

 

 

2020

 

 

2019

 

Current income tax

 

 

 

 

 

 

U.S.

 

$ -

 

 

$ -

 

Taiwan

 

 

92,357

 

 

 

-

 

PRC

 

 

-

 

 

 

-

 

Sub total

 

 

92,357

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Deferred income tax

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

 

 

 

 

Deferred tax assets for NOL carry forwards

 

 

(59,256 )

 

 

(4,521 )

Valuation allowance

 

 

59,256

 

 

 

4,521

 

Net changes in deferred income tax (benefit)

 

 

-

 

 

 

-

 

Total income tax provision

 

$ 92,357

 

 

$ -

 

   

 
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The following is a reconciliation of the statutory tax rate to the effective tax rate:

 

 

 

For the Years Ended

December31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

U.S. statutory income tax rate

 

 

21 %

 

 

21 %

Taiwan unified income tax rate

 

 

20 %

 

 

20 %

PRC standard EIT rate

 

 

25 %

 

 

25 %

Changes in valuation allowance

 

 

(46 )%

 

 

(66 )%

Other

 

 

(20 )%

 

-

%

Effective combined income tax rate

 

 

0 %

 

 

0 %

 

Significant components of the Company’s deferred taxes as of December 31, 2020 and December 31, 2019 were as follows:

 

 

 

December 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$ 177,784

 

 

$ 116,077

 

Less: Valuation allowance

 

 

(177,784 )

 

 

(116,077 )

Deferred tax assets, net

 

$ -

 

 

$ -

 

   

Note 8. COMMITMENTS AND CONTINGENCIES

 

Sales Collaboration Agreement

On June 1, 2020, the Company and Fortune King entered into a sales collaboration agreement (the “Sales Collaboration Agreement”), pursuant to which, subject to the terms and condition therein, Fortune King agreed to provide promotional and marketing service of the Company’s products within six years from January 2020, to December 2025. Fortune King is obligated to perform such service regardless of whether the Company sells products to Fortune King during the designated period. In accordance with the Sales Collaboration Agreement and in consideration for the service provided by Fortune King, the Company shall issue 3,000,000 shares of common stock to Fortune King for the promotional and marketing service of $1,500,000. The shares were issued on December 29, 2020.

 

The Company recognized the stock-based compensation of marketing expenses based on quarterly basis, with a quarterly marketing expenses of $62,500, total up have 24 quarters.

 

Copyright and Distribution Agreement

 

On November 21, 2019, the Company and Shuang Hua International Culture Media Co, Ltd. (“Shuang Hua”), a corporation formed under laws of Taiwan, entered into an exclusive copyright and distribution agreement (the “Agreement”), pursuant to which, subject to the terms and condition therein, Shuang Hua granted the Company an exclusive right to produce, market, distribute and sell the bilingual films and electronic books of which the copyrights owned by Shuang Hua. In accordance to the agreement, the Company shall pay Shuang Hua a refundable deposit of in the aggregate amount of $2,894,000, before December 31, 2021. As of December 31, 2020, the Company has paid $1,030,000 to Shuang Hua.

 

Note 9. SUBSEQUENT EVENTS

 

Reversed stock split

 

The Company's board of directors and stockholders authorized a reverse stock split of its outstanding common stock at a ratio of 1-for-1000 without any change in the par value per share which will become effective upon approval by FINRA.

 

Return of EOSS shares

 

On April 12, 2021, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the “Termination Agreement”) to terminate the agreement of Strategic Alliance Agreement (the “Strategic Alliance Agreement”) dated March 2, 2020. In the agreement, Ing-Ming Lai has proceed to effect a return of a total of 10,000,000 shares in EOS Inc, back to the Company.

 

Management has evaluated subsequent events through the date which the financial statements are available to be issued. All subsequent events requiring recognition as of December 31, 2020 have been incorporated into these consolidated financial statements and there are no other subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”

 

******

 

 
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Table of Contents

  

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

 

None.

 

Item 9A. Controls and Procedures.

 

Management’s Report of Internal Control over Financial Reporting

 

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2020, the end of the year covered by this annual report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, who is the same person. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer concluded that, due to our limited internal audit function and our very limited staff, our disclosure controls were not effective as of December 31, 2020, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the chief executive officer/chief financial officer, as appropriate to allow timely decisions regarding disclosure. This Annual Report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC.

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of July 31, 2018. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2020, management identified material weaknesses related to (i) our internal audit functions (ii) inadequate levels of review of the financial statements, (iii) a lack of segregation of duties within accounting functions and (iv) the absence of any independent directors. Therefore, our internal controls over financial reporting were not effective as of December 31, 2020.

 

Management has determined that our internal controls contain material weaknesses due to the absence of segregation of duties, as well as lack of qualified accounting personnel and excessive reliance on third party consultants for accounting, financial reporting and related activities. The lack of any separation of duties, with the same person, who is our only employee who serves as both chief executive officer and chief financial officer, and who does not have an accounting background and serves on a part-time basis, makes it unlikely that we will be able to implement effective internal controls over financial reporting in the near future.

 

Due to our size and nature, segregation of all conflicting duties is not possible. However, to the extent possible, we plan to implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals if and when we have sufficient income to enable us to hire such individuals, and we cannot give any assurance that we will be able to hire such personnel. Our financial condition makes it difficult for us to implement a system of internal controls over financial reporting.

 

Until we generate significantly greater revenues and employ accounting personnel, it is doubtful that we will be able implement any system which provides us with any degree of internal controls over financial reporting. Due to the nature of this material weakness in our internal control over financial reporting, there is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements could not be prevented or detected.

 

A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

None. 

 

 
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Table of Contents

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Director and Executive Officer of the Company

Name

Age

Position

He-Siang Yang

69

Chief Executive Officer (“CEO”), President, Secretary, Treasurer and Chairman of the Board(1)

Yu-Cheng Yang

41

Director and General Manager(2)

Lai-Chen Kwok

77

Director(3)

__________
(1) Mr. Yang will serve as a director until the next annual shareholder meeting.
(2) Mr. Yang will serve as a director until the next annual shareholder meeting.
(3) Mr. Kwok will serve as a director until the next annual shareholder meeting 

 

The term of office of each director of the Company ends at the next annual meeting of the Company’s stockholders or when such director’s successor is elected and qualifies. No date for the next annual meeting of stockholders is specified in the Company’s Bylaws or has been fixed by the Board of Directors. The term of office of each officer of the Company ends at the next annual meeting of stockholders, or when such officer’s successor is elected and qualifies.

 

Background of the Executive Officers and Directors of the Company

 

The following information sets forth the background and business experience of our directors and executive officers.

 

He-Siang Yang, CEO, President, Secretary, Treasurer and Director

 

Mr. Yang obtained a Bachelor of Science degree in mathematics from the National Taiwan Ocean University in Taiwan. From 2009 through 2015, Mr. Yang served as the president of U-Power in Taipei, Taiwan. Mr. Yang performed those duties normally associated with a president, including, but not limited to business development, management and business oversight. From 2015 to the present, Mr. Yang has been the president of EOS Trading Company Limited, a Hong Kong company.

 

On April 3, 2017, Mr. Yang was appointed as the President, Secretary, Treasurer and Director of the Company.

 

Yu Cheng Yang, Director and General Manager

 

Mr. Yang graduated from Jin Wen University of Science and Technology in 2003 with a Bachelor’s Degree in Hotel Management.

 

From 2009 through 2015, Mr. Yang was on the board of directors of and employed by U-Power Co., located in Taipei, Taiwan, which was in the business of developing e-commerce platforms and related server maintenance. Mr. Yang’s duties with U-Power Co. were the development, implementation and management of various business policies.

 

In April, 2015, Mr. Yang became the President and sole director of the Company. On April 3, 2017, Mr. Yang resigned as President, Secretary and Treasurer of the Company. Mr. Yang is also the sole director of EITB.

 

 
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Table of Contents

 

Lai Chen Kwok, Director

 

Mr. Kwok obtained a Bachelor of the Arts degree in English from the Overseas Chinese University, a private university in Taiwan.

 

From 2008 through 2015, Mr. Kwok served as a financial planner at Prudential Hong Kong Limited, a Hong Kong insurance company.

 

On April 3, 2017, Mr. Kwok was appointed as a Director of the Company.

 

Yu-Hsiang Chia, Branch Manager of EITB and Director of Emperor Star

 

Mr. Yu-Hsiang Chia, 52, graduated from Fu Jen University located in New Taipei City, Taiwan, with a bachelor’s degree in Japanese. From 2013 to 2016, Mr. Chia served as a vice president of Advantage Universal Limited Co., a Taiwan company, which was in the business of distribution of imported products. From 2016 to present, Mr. Chia serves as a vice president of Emperor Star International Trade Co., Ltd., which was in the business of distribution of supplements and cleaning products. Mr. Chia’s main duties include management and business oversight. In June 2017, Mr. Chia became the branch manager of Emperor Star.

 

Mr. Chia owns 1,081,317 shares of the Company’s common stock.

 

To our knowledge, during the last ten years, none of our directors and executive officers has been subject to any of the following:

 

·

A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 

·

Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

·

The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

(i)

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

(ii)

Engaging in any type of business practice; or

 

(iii)

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;

 

 
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·

The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or commodity laws, or to be associated with persons engaged in any such activity;

 

·

Found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;

 

·

Found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 

·

The subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 

 

(i)

Any federal or state securities or commodities law or regulation; or

 

(ii)

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 

(iii)

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

·

The subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

No Compensation to Directors.

 

No director has received any cash or other compensation for serving as a director, and we do not plan to pay any cash or other compensation to any person for serving as a director. Our directors are entitled to reimbursement for reasonable out-of-pocket expenses incurred in connection with our business. Our Board of Directors may award special remuneration to any director undertaking any special services on our behalf, other than services ordinarily required of a director.

 

Code of Ethics; Financial Expert

 

We do not have a Code of Ethics. We do not have a financial expert on our Board of Directors.

 

Committees of the Board of Directors

 

Concurrent with having sufficient members and resources, our Board of Directors will establish an audit committee and a compensation committee. The audit committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate our system of internal controls. The compensation committee will manage any stock option plan we may establish and review and recommend compensation arrangements for our officers. No final determination has yet been made as to the memberships of these committees or when we will have sufficient members and resources to establish those committees.

 

Potential Conflicts of Interest

 

As we do not have an audit committee or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. Thus, there is a potential conflict of interest, in that our directors and officers have the authority to determine issues concerning management compensation and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors.

 

We plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.

 

 
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Directors Independence

 

Our Board of Directors is composed of three members, who do not qualify as independent directors in accordance with the published listing requirements of the NASDAQ rules. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the directors, not any of his or her family members has engaged in various types of business dealings with us. In addition, our Board of Directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. If our Board of Directors made these determinations, our Board of Directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.

 

Term of Office

 

Each of our directors is appointed to hold office until the next annual meeting of our stockholders or until his or her respective successor is elected and qualified, or until he or she resigns or is removed in accordance with the applicable provisions of Nevada law. Our officers are appointed by our Board of Directors and hold office until removed by our Board of Directors or until their resignation.

 

Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of our common stock. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

 

We intend to ensure to the best of our ability that all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent (10%) beneficial owners are complied.

 

We were not aware of any securities transaction during the fiscal year ended December 31, 2020, or subsequent thereto that would require a filing pursuant to Section 16 of the Securities Exchange Act of 1934, as amended was not reported accordingly.

 

Audit Committee Financial Expert

 

Our current directors act as our audit committee. The current directors are not independent. An informal search is under way to identify a suitable candidate for service on the Board of Directors as an independent director who would be qualified as an audit committee financial expert.

 

Audit Committee

 

We have not yet formed an audit committee, and all of our directors currently act as our audit committee. At the present time, we believe that our directors are capable of analyzing and evaluating our consolidated financial statements and understanding internal controls and procedures for financial reporting. The Company, however, recognizes the importance of good corporate governance and intends to add additional directors to the Board of Directors and appoint an audit committee comprised entirely of independent directors, including at least one financial expert.

 

Limitation on Liability and Indemnification of Directors and Officers

 

Our articles of incorporation provide that no director or officer shall have any liability to the Company if that person acted in good faith and with the same degree of care and skill as a prudent person in similar circumstances.

 

Our articles of incorporation and bylaws provide that we will indemnify our directors and officers and may indemnify our employees or agents to the fullest extent permitted by law against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices or positions with us. However, nothing in our articles of incorporation or bylaws protects or indemnifies a director, officer, employee or agent against any liability to which that person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of that person’s office or position. To the extent that a director has been successful in defense of any proceeding, the Nevada Revised Statutes provide that the director shall be indemnified against reasonable expenses incurred in connection with the proceeding.

 

 
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Table of Contents

 

Item 11. Executive Compensation.

 

EXECUTIVE SUMMARY COMPENSATION TABLE BY THE COMPANY

 

Name and Principal Position

 

Year

 

Salary

FY ($)

 

 

Bonus ($)

 

 

Stock

Awards

($)

 

 

Option

Awards

($)

 

 

Non-Equity

Incentive

Plan

Compensation

($)

 

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)

 

 

All

Other

Compensation

($)

 

 

Total ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

He Siang Yang,

 

2020

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

CEO, President, Secretary,

 

2019

 

 

58,235

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

58,235

 

Treasurer, and Director(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yu Cheng Yang,

 

2020

 

 

229,042

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

229,042

 

Director and General Manager(1)

 

2019

 

 

171,494

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

171,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lai Chen Kwok,

 

2020

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Director(1)

 

2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yu-Hsiang Chia,

 

2020

 

 

29,683

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,683

 

Branch Manager(1)

 

2019

 

 

26,319

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26,319

 

____________
(1) We have not entered into any employment agreements. 

 

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

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth the number of shares of common stock beneficially owned as of April 13, 2021 by (i) those persons or groups known to us to beneficially own more than 5% of our common stock; (ii) each director; (iii) each executive officer; and (iv) all directors and executive officers as a group. The information is determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) based upon information furnished by persons listed or contained in filings made by them with the SEC or by information provided by such persons directly to us. Except as indicated below, each of the stockholders listed below possesses sole voting and investment power with respect to their shares and the address of each person is c/o EOS Inc. 

  

The Company

 

 

 

 

 

 

 

Name of Beneficial Owner

 

Common Stock Beneficially

Owned

 

 

Percentage of Common Stock Beneficially owned (1)

 

Officers and directors as a group

 

 

 

 

 

 

Yu Cheng Yang

 

 

30,000,000

 

 

 

40.47 %

He Siang Yang

 

 

10,000,000

 

 

 

13.49 %

Lai Chen Kwok

 

 

900,500

 

 

 

1.21 %

All officers and directors as a group (3 person)

 

 

40,900,500

 

 

 

55.17 %

5% or more shareholders

 

 

 

 

 

 

 

 

Ing-Ming Lai

 

 

10,000,000

 

 

 

13.49 %

Total

 

 

50,900,500

 

 

 

68.67 %

 

 
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Table of Contents

  

Beneficial ownership percentages are calculated based on shares of common stock issued and outstanding and is based on a total of 74,122,997 shares of common stock that were issued and outstanding as of April 13, 2021. Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act. The number of shares beneficially owned by a person includes shares of common stock underlying options or warrants held by that person that are currently exercisable or exercisable within 60 days of April 13, 2021. The shares issuable pursuant to the exercise of those options or warrants are deemed outstanding for computing the percentage ownership of the person holding those options and warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite that person’s name, subject to community property laws, where applicable, unless otherwise noted in the applicable footnote.

  

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Related Party Transactions

 

The Company had sales to Fortune King (HK) Trading Limited, (“Fortune King”), a Hong Kong company. As of June 30, 2019, Fortune King had been a related party of the Company because the founder and officer of Fortune King was a shareholder of the Company. On or about June 30, 2019, the founder and officer of Fortune King transferred her equity interest in the Company and therefore Fortune King is no longer a related party to the Company. 

 

Sales to Fortune King amounted to $378,458 and $ 2,171,766 for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and December 31, 2020, accounts receivable from Fortune King was $77,243 and $ 2,151,192, respectively.

  

Due to shareholders

 

The Company has advanced funds from its directors and shareholders for working capital purposes. As of December 31, 2020 and December 31, 2019 there were $107,791 and $96,114 advance outstanding, respectively. The Company has agreed that the outstanding balances bear 0% interest rate and are due upon demand after thirty days of written notice by the director and shareholder.

 

Director Independence

 

None of our directors is deemed “Independent” as defined by the NASDAQ Marketplace Rules and meets the independence standards set forth in Rule 10A-3 of the Exchange Act.

 

Item 14. Principal Accounting Fees and Services.

 

Summary of Principal Accounting Fees for Professional Services Rendered

 

The following table presents the aggregate fees for professional audit services and other services rendered by KCCW Accountancy Corp. 

 

 

 

Year Ended

December 31,

2020

 

 

Year Ended

December 31,

2019

 

 

 

 

 

 

 

 

Audit Fees

 

$ 35,000

 

 

 

20,000

 

 

 

 

 

 

 

 

 

 

Tax Fees

 

 

-

 

 

 

1,000

 

All Other Fees

 

 

-

 

 

 

 

 

Total

 

$ 35,000

 

 

 

21,000

 

  

Audit Fees consist of fees billed for the annual audit of our consolidated financial statements and other audit services including the provision of consents and the review of documents filed with the SEC. 

   

We do not have an independent audit committee and directors, therefore, serves as the audit committee for all purposes relating to communication with our auditors and responsibility for our audit. All engagements for audit services, audit- related services and tax services are approved in advance by our Board of Directors. Our Board of Directors has considered whether the provision of the services described above for the fiscal year ended December 31, 2020, is compatible with maintaining the auditor’s independence.

 

 
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All audit and non-audit services that may be provided by our principal accountant to us shall require pre-approval by the Board of Directors. Further, our auditor shall not provide those services to us specifically prohibited by the SEC, including bookkeeping or other services related to the accounting records or financial statements of the audit client; financial information systems design and implementation; appraisal or valuation services, fairness opinion, or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions; human resources; broker-dealer, investment adviser, or investment banking services; legal services and expert services unrelated to the audit; and any other service that the Public Company Oversight Board determines, by regulation, is impermissible.

 

Item 15. Exhibits and Financial Statement Schedules.

 

(a)(1) List of Financial statements included in Part II hereof

 

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to the Financial Statements

 

(a)(2) List of Financial Statement schedules included in Part IV hereof: None.

 

(a)(3) Exhibits

 

The following exhibits are included herewith: 

 

Exhibit

Number

Description

3.1

Articles of Incorporation of the Company, as amended[1]

3.2

Bylaws of the Company[2]

4.1

 

Description of Securities

10.1

 

Purchase Agreement dated August 7, 2019, by and among EOS Inc., A-Best Wire Harness & Components Co., Ltd., and Ing-Ming Lai [3]

10.2

 

Exclusive Sales Agreement dated August 7, 2019, by and among EOS Inc., A-Best Wire Harness & Components Co., Ltd., and Ing-Ming Lai[4]

10.3

 

Management Agreement dated August 7, 2019 between EOS Inc. and Ing-Ming Lai [5]

10.4

 

Exclusive Patent and Licensing and Distribution Agreement dated November 25, 2019 by and between EOS Inc. and Ultra Velocity Technology, Ltd. [6]

10.5

 

Strategic Alliance Agreement dated March 2, 2020 [7]

10.6

 

Termination Notice to Exclusive Patent and Licensing and Distribution Agreement dated November 25, 2019 by and between EOS Inc. and Ultra Velocity Technology, Ltd. [8]

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002+

32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act+

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act+

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

_____________

+

Filed herewith

***

XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

[1]

Incorporated by reference to Exhibits 3.1 and 3.2 to the Company’s Form S-1 filed on September 10, 2015 and Exhibit 3.4 to the Company’s Form S-1 Amendment No. 1 filed on October 21, 2015.

[2)

Incorporated by reference to Exhibit 3.3 to the Company’s Form S-1 filed on September 10, 2015.

[3]

Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on August 13, 2019.

[4]

Incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed on August 13, 2019

[5]

Incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K filed on August 13, 2019

[6]

Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on November 26, 2019.

[7]

Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on March 5, 2020.

[8]

Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on April 1, 2020.

 

Item 16. 10-K Summary.

 

Not applicable.
 

 
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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

EOS Inc.

 

Dated: April 15, 2021

By:

/s/ He-Siang Yang

He-Siang Yang

Principal Executive Officer

Principal Financial Officer

President and Chairman of the Board

 

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.

 

EOS Inc.

 

Signature

Title

Date

 

/s/ He-Siang Yang

Principal Executive Officer, Principal Financial Officer

April 15, 2021

He-Siang Yang

President and Chairman of the Board

 

/s/ Yu Cheng Yang

Director

April 15, 2021

Yu Cheng Yang

 

/s/ Lai Chen Kwok

Director

April 15, 2021

Lai Chen Kwok

 

33