Company Quick10K Filing
Quick10K
JEM Capital
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-09 Officers, Exhibits
8-K 2019-05-22
8-K 2019-05-16
8-K 2019-04-15
8-K 2019-01-18
8-K 2018-03-15 Officers
FSNT Fuse Enterprises 91
SMRN Smartag International 43
ONS Oncobiologics 19
KWBT Kiwa Bio-Tech 17
DWOG Deep Well Oil & Gas 14
MGTI MGT Capital Investments 7
ABMC American Bio Medica 4
VNR Vanguard Natural Resources 0
DOTA Draper Oakwood Technology Acquisition 0
RXR Northstar/RXR New York Metro Real Estate 0
JEM 2018-12-31
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 Registrant's 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 Operation
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
Item 8 - Financial Statements and Supplementary Data
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A - Controls and Procedures
Item 9B - Other Information
Part III
Item 10 - Directors, Executive Officers and Corporate Governance
Item 11 - Executive Compensation
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 - Certain Relationships and Related Transactions, and Director Independence
Item 14 - Principal Accounting Fees and Services
Part IV
Item 15 - Exhibits, Financial Statement Schedules
Item 16 - Form 10-K Summary
EX-31 ex31_1.htm
EX-31 ex31_2.htm
EX-32 ex32_1.htm
EX-32 ex32_2.htm

JEM Capital Earnings 2018-12-31

JEM 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 jem10k_12312018.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, 2018

 

OR

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

For the transition period from to .

Commission file number 333-179130

 

J.E.M. Capital, Inc

(Exact name of registrant as specified in its charter)

   
Delaware 46-0525801
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

21/F., One Harbour Square, 181 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong

(Address of principal executive offices)

 

+ (852) 9625 0097

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
None None

 

Securities registered pursuant to Section 12(g) of the Act:

   
Title of each class Name of each exchange on which registered
None  

 

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

 

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

 

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

 

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

 

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

 

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

 

Large accelerated filer Accelerated filer
   
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)  
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act .

 

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

 

Aggregate market value of the voting stock held by non-affiliates: $1,249,364,200 as of June 30, 2018, based on the reported sales price of such stock of $140 on July 30, 2013. The voting stock held by non-affiliates on June 30, 2018 consisted of 8,924,030 shares of common stock. The registrant has used the reported sales price of the stock on July 30, 2013 to calculate the aggregate market value of the voting stock held by non-affiliates as of June 30, 2018 because there has been no trading in our stock since July 30, 2013.

 

Applicable Only to Registrants Involved in Bankruptcy Proceedings During the Preceding Five Years:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

 

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of March 16, 2019, there were 12,032,400 shares of common stock, par value $0.0001, issued and outstanding.

 

Documents Incorporated by Reference

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.

 

 

 

 1 
 

 

 

 

 

J.E.M. Capital, Inc.

 

Annual Report on Form 10-K

 
TABLE OF CONTENTS
 

 

Page

 

Item 1.

PART I

Business

 

 

Item 1A. Risk Factors  3
Item 1B. Unresolved Staff Comments  5
Item 2. Properties  5
Item 3. Legal Proceedings  5
Item 4. Mine Safety Disclosures  5

 

 

Item 5.

 

PART II

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

 

 

  6

Item 6. Selected Financial Data  7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations  7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk  11
Item 8. Financial Statements and Supplementary Data  11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  11
Item 9A. Controls and Procedures  11
Item 9B. Other Information  12
 

 

PART III

 
Item 10. Directors, Executive Officers and Corporate Governance  13
Item 11. Executive Compensation  15
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters  16
Item 13. Certain Relationships and Related Transactions and Director Independence    18
Item 14. Principal Accountant Fees and Services  18
 

 

PART IV

 
Item 15. Exhibits and Financial Statement Schedules  19
     
Item 16. Form 10-K Summary  19
     
  Signatures  20

 

 

 

 2 
 

 

 

PART I

 

This Annual Report on Form 10-K contains forward-looking statements. These statements may relate to, but are not limited to, expectations of potential target businesses and future operating results or financial performance, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential," "might," "would," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

 

There may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we do not plan to publicly update or revise any forward-looking statements contained in this Annual Report on Form 10-K after we file it, whether as a result of any new information, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

 

As used herein, except as otherwise indicated by context, references to "we,", "us," "our," or the "Company" refer to JEM Capital Inc.

 

ITEM 1 – BUSINESS

 

Corporate History

 

We were incorporated on September 14, 2011 in Delaware as "Eco Planet Corp." On October 21, 2013, we effected a 1-for-200 reverse stock split of our common stock, $0.0001 par value per share (the "Common Stock"), and changed our name to "Zosano, Inc." On October 31, 2013, we entered into a Stock Purchase Agreement with Zosano Pharma Corporation (formerly known as ZP Holdings, Inc.) pursuant to which we issued and sold 10,016,973 shares of Common Stock (the "Shares") to Zosano Pharma Corporation. As a result of our issuance and sale of the Shares to Zosano Pharma Corporation, a change in control of the Company occurred and Zosano Pharma Corporation became the owner of 99.9% of our outstanding Common Stock.

 

On November 14, 2016, Zosano Phama Corporation entered into Stock Purchase Agreements with eighteen (18) foreign investors (the "New Shareholders"), pursuant to which Zosano Pharma Corporation sold an aggregate of 10,016,973 shares of common stock of Zosano, Inc. (the "Company"), or approximately 99.9% of the issued and outstanding common stock of the Company, to the New Shareholders. As a result of the transaction, the New Shareholders acquired approximately 99.9% of the total votes entitled to be cast at any meeting of shareholders, giving them voting control of the Company. The New Shareholders obtained the funds for the purchase of the Company's common stock in the transaction from each of their available cash on hand.

 

On December 15, 2016, we filed Articles of Amendment to its Amended Articles of Incorporation (the "Articles of Amendment") with the Secretary of State of Delaware effecting a name change of the Company to J.E.M. Capital, Inc. (the "Corporate Action"). The Corporate Action and the Amended Articles became effective on March 15, 2017, following compliance with notification requirements of the Financial Industry Regulatory Authority. The new CUSIP number for the Company's common stock is 46619V107. On March 14, 2017, the Financial Industry Regulatory Authority (FINRA) approved the Corporate Action. The Company's stock is quoted on the OTCQB under the ticker symbol ZOSN, but beginning March 15, 2017, the Company's common stock will begin trading under the symbol JEMC.

 

On January 5, 2017, we entered into a Share Exchange Agreement with Essential Elements Limited, a British Virgin Islands company ("ESEL"), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital"). ESEL and JEM Capital currently have no operations but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.

 

Business Overview

 

On October 31, 2013, we underwent a change of control and implemented a business plan to seek and identify a privately held operating company desiring to become a publicly held company by merging with us through a reverse merger or acquisition. Our strategy is to identify a privately held operating company, which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged, desiring to become a publicly held company with access to U.S. capital markets by merging with us through a reverse merger or acquisition. However, we do not intend to combine with a company that may be deemed an investment company subject to the Investment Company Act of 1940. Private companies wishing to have their securities publicly quoted may seek to merge or effect another form of business combination with a shell company with a significant stockholder base. As a result of the merger or other business combination, the stockholders of the private company would hold a majority of the issued and outstanding shares of the shell company, which will likely cause substantially dilution to our current shareholder base. Typically, the directors and officers of the private company become the directors and officers of the shell company. Often the name of the private company becomes the name of the shell company.

 

 3 
 

 

From October 31, 2013 to November 14, 2016, we have no capital and must depend on Zosano Pharma Corporation, the holder of 99.9% of our outstanding voting securities, to provide us with the necessary funds to implement our business plan. As the result of sales of shares to New Shareholders on November 14, 2016, we must depend on the New Shareholders to provide us with the necessary funds to implement our business plan. We continue to evaluate business opportunities that we may pursue, but we have not reached any definitive agreement or understanding with any person concerning a merger or other business combination.

 

From January 5, 2017, Earnest Leung appointed Chief Executive Officer and Chairperson of the Board, will be primarily responsible for evaluating business combination opportunities. We believe that business opportunities may come to our attention from various sources, professional advisors such as attorneys and accountants, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals. We have no plan, understanding, agreements, or commitments with any individual for such person to act as a finder of opportunities for us.

 

We can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited resources that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances that any business combination, if one occurs, will be on terms that are favorable to our current stockholders or us.

 

We do not propose to restrict our search for a business combination candidate to any particular geographical area or industry, and, therefore, we are unable to predict the nature of our future business operations. Our management's discretion in the selection of business opportunities is unrestricted, subject to the availability of such opportunities, economic conditions and other factors.

 

Any entity that has an interest in being acquired by, or merging into us, is expected to be an entity that desires to become a public company and establish a public trading market for its securities. In connection with such a merger or acquisition, it is anticipated that an amount of common stock constituting control of us would be issued by us.

 

Evaluation and Selection of Business Opportunities

 

Certain types of business acquisition transactions may be completed without requiring us to first submit the transaction to our stockholders for their approval. If the proposed transaction is structured in such a fashion, our stockholders will not be provided with financial or other information relating to the candidate prior to the completion of the transaction.

 

If the structure of a proposed business combination or business acquisition transaction requires the approval of our stockholders, and we are a company required to file reports under the Exchange Act, then we will be required to provide our stockholders with information as applicable under Regulations 14A and 14C under the Exchange Act. Currently, however, we are not required to file reports under the Exchange Act.

 

The analysis of business opportunities will be undertaken by or under the supervision of Earnest Leung, our Chief Executive Officer. In analyzing potential merger candidates, our management will consider, among other things, the following factors:

 

·potential for future earnings and appreciation of value of securities;
·perception of how any particular business opportunity will be received by the investment community and by our stockholders;
·ability, following the business combination, to qualify securities for listing on a national securities exchange;
·historical results of operation;
·liquidity and availability of capital resources;
·competitive position as compared to other companies of similar size and experience within the industry segment as well as within the industry as a whole;
·strength and diversity of existing management or management prospects that are scheduled for recruitment;
·amount of debt and contingent liabilities; and
·the products and/or services and marketing concepts of the target company.

 

No single factor will control the selection of a business opportunity. Our management will attempt to analyze all factors appropriate to each opportunity and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Because of our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the business opportunity to be acquired. Although we expect to analyze specific proposals and select a business opportunity in the near future, we are unable to predict when we may consummate a business transaction.

 

Before making a decision to participate in a business transaction, we will generally request that we be provided with written materials regarding the business opportunity containing as much relevant information as possible, including, but not limited to, a description of products, services and company history; management resumes; financial information; available projections, with related assumptions upon which they are based; an explanation of proprietary products and services; evidence of existing patents, trademarks, or service marks, or rights thereto; present and proposed forms of compensation to management; a description of transactions between such company and its affiliates during the relevant periods; a description of present and required facilities; an analysis of risks and competitive conditions; a financial plan of operation and estimated capital requirements; audited consolidated financial statements, or if audited consolidated financial statements are not available, unaudited consolidated financial statements, together with reasonable assurance that audited consolidated financial statements would be able to be produced in order to file a Current Report on Form 8-K to be filed with the Securities and Exchange Commission ("SEC") upon consummation of the business combination.

 

 4 
 

 

 

We believe that various types of potential candidates might find a business combination with us to be attractive. These include candidates desiring to create a public market for their securities in order to enhance liquidity for current stockholders, candidates which have long-term plans for raising capital through public sale of securities and believe that the prior existence of a public market for their securities would be beneficial, and candidates who plan to acquire additional assets through issuance of securities rather than for cash and believe that the development of a public market for their securities will be of assistance in that process. Companies which have a need for an immediate cash infusion are not likely to find a potential business combination with us to be a prudent business transaction alternative.

 

Employees

 

Currently we have two employees including executive officers. We rely exclusively on the expertise of executive officers. Our management expects to use consultants, attorneys and accountants as necessary. The need for employees and their availability will be addressed in connection with the decision on whether or not to acquire or participate in specific business opportunities.

 

Available Information

 

Historically we have filed periodic reports under the Exchange Act. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.

 

 

ITEM 1A – RISK FACTORS

 

As a smaller reporting company, this Item is not applicable to us.

 

 

ITEM 1B – UNRESOLVED STAFF COMMENTS

 

None

 

ITEM 2 – PROPERTIES

 

Currently we maintain a mailing address at Hong Kong at 21/F., One Harbour Square, 181 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong and our telephone number at this address is (852) 9625-0097. Other than this mailing address, we do not maintain any other office facilities, and do not anticipate the need for maintaining any office facilities at any time in the foreseeable future. We do not pay any rent or other fees for the use of the mailing address. Our management does not believe we will establish a separate office until we have completed a business acquisition transaction. It is not possible to predict what arrangements will actually be made with respect to future office facilities.

 

 

ITEM 3 - LEGAL PROCEEDINGS

 

We are not a party to or otherwise involved in any pending legal proceedings.

 

 

ITEM 4 – MINE SAFETY DISCLOSURES

 

Not applicable.

 

 5 
 

 

 

PART II

 

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock is quoted for trading on the OTC Bulletin Board and OTC Markets, OTCQB tier of OTC Link ATS, and has been quoted since July 10, 2012. Our current trading symbol is "JEMC". There have been a limited number of trades of our common stock since our stock has been quoted on OTCQB. In 2013, 500 shares of our common stock traded during the quarter ended September 30, 2013 at $0.70 per share (or 2.5 shares of our common stock at $140.00 per share, giving effect to the 1-for-200 reverse split of our common stock effected on October 21, 2013). No shares were traded in 2018 and 2017.

 

The following table sets forth the high and low bid information for each quarter within the fiscal years ended December 31, 2017 and December 31, 2018, as reported by OTC Markets, adjusted to reflect the 1-for-200 reverse stock split of our common stock effected on October 21, 2013. The information reflects prices between dealers and does not include retail markup, markdown, or commission, and may not represent actual transactions.

  

      Bid Prices

Year Ended

December 31,

  Period   High   Low
           
2017   First Quarter   $ 140.00   $ 140.00
    Second Quarter   $ 140.00   $ 140.00
    Third Quarter   $ 140.00   $ 140.00
    Fourth Quarter   $ 140.00   $ 140.00

 

2018

 

 

First Quarter

 

 

$ 140.00

 

 

$ 140.00

    Second Quarter   $ 140.00   $ 140.00
    Third Quarter   $ 140.00   $ 140.00
    Fourth Quarter   $ 140.00   $ 140.00

 

The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 requires additional disclosure by brokers and dealers relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions that we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

 

Holders

 

As of March 23, 2019, there were 12,032,400 shares of our common stock outstanding held by 63 holders of record and additional shares held in brokerage accounts. Of these shares, 9,425,380 shares are held by non-affiliates and 1,527 shares were free-trading. On the cover page of this filing we valued 8,924,030 shares held by non-affiliates at $1,249,364,200 as of June 30, 2018, based on the sales price of the common stock of $140 on July 30, 2013 as reported by OTC Markets, OTCQB tier of OTC Link ATS. We used the reported sales price of the common stock on July 30, 2013 to calculate the aggregate market value of the shares held by non-affiliates as of June 30, 2018 because there has been no trading in our stock since July 30, 2013.

 

Warrants

 

We do not have any warrants to purchase our common stock outstanding.

 

Dividends

 

No dividends were declared or paid for the year ended December 31, 2018 and 2017.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

There are no outstanding options or warrants to purchase shares of our common stock under any equity compensation plans.

 

Currently, we do not have any equity compensation plans and we have never had such a plan. As a result, we did not have any options, warrants or rights outstanding as of December 31, 2018 or 2017.

 

Recent Issuance of Unregistered Securities

 

None.

 

 6 
 

 

  

 

ITEM 6 – SELECTED FINANCIAL DATA

 

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

 

 

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes included on page F-1 of this Annual Report on Form 10-K. This Annual Report on Form 10-K of J.E.M. Capital, Inc. contains forward-looking statements, principally in this Section and "Business." Generally, you can identify these statements because they use words like "anticipates," "believes," "expects," "future," "intends," "plans," and similar terms. These statements reflect only our current expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue reliance on these forward-looking statements which apply only as of the date of this annual report. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation of belief will be accomplished.

 

We believe it is important to communicate our expectations to our investors. There may be events in the future, however, that we are unable to predict accurately or over which we have no control. Any risk factors listed in this filing, as well as any cautionary language in this annual report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events to differ materially from those anticipated, include, but are not limited to, changes in investment and business strategies; general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in various tax laws; and the availability of key management and other personnel.

 

Overview

 

We were incorporated on September 14, 2011 in Delaware as "Eco Planet Corp." On October 21, 2013, we effected a 1-for-200 reverse stock split of our common stock, $0.0001 par value per share (the "Common Stock"), and changed our name to "Zosano, Inc." On October 31, 2013, we entered into a Stock Purchase Agreement with Zosano Pharma Corporation (formerly known as ZP Holdings, Inc.) pursuant to which we issued and sold 10,016,973 shares of Common Stock (the "Shares") to Zosano Pharma Corporation. As a result of our issuance and sale of the Shares to Zosano Pharma Corporation, a change in control of the Company occurred and Zosano Pharma Corporation became the owner of 99.9% of our outstanding Common Stock.

 

On November 14, 2016, Zosano Phama Corporation entered into Stock Purchase Agreements with eighteen (18) foreign investors (the "New Shareholders"), pursuant to which Zosano Pharma Corporation sold an aggregate of 10,016,973 shares of common stock of Zosano, Inc. (the "Company") or approximately 99.9% of the issued and outstanding common stock of the Company, to the New Shareholders. As a result of the transaction, the New Shareholders acquired approximately 99.9% of the total votes entitled to be cast at any meeting of shareholders, giving them voting control of the Company. The New Shareholders obtained the funds for the purchase of the Company's common stock in the transaction from each of their available cash on hand.

 

On November 21, 2016, we obtained written consent by the holder of the majority of the voting power of the Company's capital stock approving amendments to the Company's Articles of Incorporation to change the Company's name from Zosano, Inc. to J.E.M. Capital Inc. The Company has filed Articles of Amendment with the Secretary of State of Delaware, which will become effective upon compliance with notification requirements of the Financial Industry Regulatory Authority.

 

On January 5, 2017, we entered into a Share Exchange Agreement with Essential Elements Limited, a British Virgin Islands company ("ESEL"), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital"). ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.

 

We are a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). As a shell company, we have no operations and assets. Our current business plan is to identify a privately held operating company, which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged, desiring to become a publicly held company with access to U.S. capital markets by merging with us through a reverse merger or acquisition. We can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited resources that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances that any business combination, if one occurs, will be on terms that are favorable to our current stockholders or us.

 

 7 
 

 

 

 

 

Year Ended December 31, 2018 Compared To Year Ended December 31, 2017 

Years Ended

December 31,

   2018  2017
Operating expenses:          
General and administrative expenses  $87,413   $160,418 
Total operating expenses   87,413    160,418 
           
Operating loss   (87,413)   (160,418)
           
Net loss  $(87,413)   (160,418)
           

 

 8 
 

 

 

Revenue

 

We have never generated any revenue. We do not expect to generate any revenues before we merge with a privately-held operating company desiring to become a publicly-held company. After a successful merger transaction, we do not know when, or if, we will generate revenue as that will be in the control of the private company that merges with us.

 

Operating expenses

 

Our operating expenses primarily consisted of general and administrative expenses, such as salary and related expenses, audit and review fees, tax returns preparation fees, transfer agent services, Edgar filing costs, franchise and business taxes, and other professional services. Operating expenses for the year ended December 31, 2018 and 2017 were $87,413 and $160,418, respectively. We anticipate our operating expenses will be approximately $80,000 to $160,000 per year until we successfully merge with a privately-held operating company.

 

Net loss

 

Net loss for the fiscal year ended December 31, 2018 was $87,413, or $0.00 per share, as compared to $160,418, or $0.00 per share for the year ended December 31, 2017. The decrease in net loss was due to the decrease in salary and related expenses paid for the year ended December 31, 2018. We will continue to operate at a net loss until we merge with a privately-held operating company desiring to become a publicly-held company. After a successful merger transaction, we do not know when, or if, we will operate at a net profit as that will be in the control of the private company that merges with us. We anticipate our net loss will primarily consist of our operating expenses until we successfully merge with a private company.

 

Liquidity and Capital Resources

 

During the years ended December 31, 2018 and 2017, because of our operating losses, we did not generate positive operating cash flows. Our cash on hand as of December 31, 2018 and 2017 was $164 and $166 respectively and our monthly cash flow burn rate is minimal due to our lack of operations. Our current cash needs are being satisfied by stockholders. We do not believe we will be able to satisfy our cash needs internally until we consummate a merger transaction with a private company, and even then there is no assurance we will be able to do so.

Our cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2018 compared to December 31, 2017 are as follows:

 

   December 31,  December 31,   
   2018  2017  Change
Cash  $164   $166   $(2)
Prepaid expenses and other current assets   -    550    (550)
Total Current Assets   164    716    (552)
Property and equipment, net   496    996    (500)
Total Assets   660    1,712    (1,052)
                
Total Current Liabilities   110,820    24,459    86,362 
Total Liabilities   110,820    24,459    86,362 

 

Assets and Liabilities

 

As of December 31, 2018, and 2017, we had assets mainly related to office equipment. We had liabilities totaling $110,821 and $24,459 as of December 31, 2018 and 2017, respectively. As of December 31, 2018, our liabilities consisted of accrued expenses related to salary, office expenses, audit fees, transfer agent services, legal fees and payable to shareholder. As of December 31, 2017, our liabilities consisted of accrued expenses related to salary, office expenses, audit fees, transfer agent services and legal fees.

 

 

 9 
 

 

 

Stockholders' Deficit

 

Stockholders’ deficit consisted primarily of shares issued to founders in the amount of $1,203, capital raised to fund our operations of $55,589, and additional capital provided to settle obligations for $245,679, offset by the accumulated deficit of $412,631 as of December 31, 2018.

 

Sources and Uses of Cash

 

As of December 31, 2018 and 2017, we had cash of $164 and $166, respectively, no significant change in cash position.

 

Cash Flows from Operating Activities. For the fiscal year ended December 31, 2018, our net cash used in operations was $47,947 compared to net cash used in operations of $149,189 for the fiscal year ended December 31, 2017. This was mainly attributable to decrease in expenses for the year ended December 31, 2018.

 

Cash Flows from Investing Activities. During the fiscal year ended December 31, 2017, our net generated from investing activities was $2,184 which was attributable to the net effect of proceeds from disposal and purchase of equipment during the fiscal year ended December 31, 2017.

 

Cash Flows from Financing Activities. Net cash flows provided by financing activities in the fiscal year ended December 31, 2018 was $47,945, compared to net cash provided by financing activities of $147,171 in the same period in 2017. Net cash provided by financing activities in 2018 and 2017 were primarily due to investment through settlement of the Company's obligations and advance from shareholder’s loan.

 

Going Concern

 

Our independent auditors have added an explanatory paragraph to their audit opinion issued in connection with our consolidated financial statements for our fiscal year ended December 31, 2018 and 2017 regarding our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to locate a private company to merge with and our ability to successfully borrow money from our shareholders.

 

The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

Contractual Obligations

 

We have no contractual obligations as of December 31, 2018.

 

Off Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Critical Accounting Policies

 

Use of Estimates

 

The Company's consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as accounting for income tax valuation allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

 

Principles of Consolidation

 

The consolidated financial statements include the financial statements of J.E.M Capital Inc. and its subsidiaries for which it is the primary beneficiary. Upon making this determination, the Company is deemed to be the primary beneficiary of the entity, which is then required to be consolidated for financial reporting purposes. All significant intercompany transactions and balances have been eliminated upon consolidation.

 

Business acquisitions

 

During the year ended December 31, 2017, the Company completed business acquisitions that were individually and in the aggregate insignificant. The Company has accounted for all of its acquisitions using the acquisition method. The operating results of each acquisition have been included in the consolidated financial statements since the respective dates of acquisition. There were no business acquisitions for the year ended December 31, 2018.

 

 10 
 

 

 

 

Income Taxes

 

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

 

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Once this threshold has been met, the Company's measurement of its expected tax benefits is recognized in its consolidated financial statements. The Company accrues interest on unrecognized tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense.

 

The Company' income tax returns are subject to examination for three years from the date filed or the due date, whichever is later. The Company did not identify any material uncertain tax positions.

 

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the recently issued accounting standards will not have a material impact on the Company's financial position or results of operations upon adoption.

 

 

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

 

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

For consolidated financial statements and notes filed as part of this Annual Report, see Index to Consolidated Financial Statements beginning on page F-1 of this Annual Report.

 

 

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A – CONTROLS AND PROCEDURES

 

(a)Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our principal executive and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2018, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial officer has concluded that as of December 31, 2018, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective to satisfy the objectives for which they are intended.

 

(b)Management Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:

 

 11 
 

 

 

 

·          Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of our assets;

   
·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
   
·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that resources may become severely limited.

 

Under the supervision and with the participation of our management, including our principal executive and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, our management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2018, due to the material weaknesses described below.

 

A material weakness is a deficiency, or a combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the Company’s consolidated financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or combination of control deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with government.

 

Our management, with the participation and under the supervision of our Chief Executive Officer, Earnest Leung and our Chief Financial Officer, Shirley Cheng, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control- Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, Dr. Leung and Ms. Cheng determined that our internal control over financial reporting was effective as of December 31, 2018.

 

(c)Changes in Internal Control over Financial Reporting

 

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

 

Other than as described above, there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

ITEM 9B – OTHER INFORMATION

 

None.

 

 

 12 
 

 

 

PART III

 

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

The following table sets forth the names and ages of our directors, director nominees, and executive officers, the principal offices and positions with the Company held by each person as of March 23, 2019.

 

 

Name   Age   Position(s)

 

Leung Chi Wah Earnest

 

 

62

 

 

Chief Executive Officer and Chairman of Board of Directors

Cheng Sze Ki   40   Chief Financial Officer, Director and Corporate Secretary
MingJing Xia   49   Director
Yulong Yang   41   Director

 

Our Board of Directors is divided into three classes designated as Class I, Class II and Class III, respectively, with each class serving staggered three-year terms. The text of the classified board amendment can be found in Article V, Section A.2 of our Amended and Restated Certificate of Incorporation, as amended, filed as an exhibit to our Current Report on Form 8-K filed with the Commission on November 6, 2013.

 

On February 2016, stockholders holding a majority of our issued and outstanding stock, acting by written consent, elected Konstantinos Alataris as the Company's sole director. Each director serves until his or her successor has been duly elected and qualified, or until the director's earlier death, resignation or removal. On February 3, 2016, our Board of Directors appointed Konstantinos Alataris as the Company's Chief Executive Officer, President and Treasurer to hold office until the election and qualification of his successor or until his earlier death, resignation or removal.

 

On the November 14, 2016, Dr. Konstantinos Alataris, the sole officer and Director of the Company, submitted his resignation from all executive officer positions with the Company, including Chief Executive Officer and President, effective immediately, and as a member of the Board. On the Closing Date, Cheng Sze Ki (Shirley) was appointed the sole director of the Company. Following such appointment, Ms. Cheng appointed the following officers and directors of the Company:

 

John H YEUNG Chairperson of the Board and CEO
CHENG, Sze Ki (Shirley) Chief Financial Officer, Director and Corporate Secretary
FANG, Xihong Director
ZHANG, Wei Director

 

We announced that effective January 5, 2017, John H. Yeung resigned from his positions as Chief Executive Officer and Chairperson of the Board of Directors. Mr. Yeung remains a member of the Board of Directors. Mr. Yeung's resignation was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices. Also on January 5, 2017, the Board of Directors of the Company appointed Leung Chi Wah Earnest as a Director of the Company, and appointed Dr. Leung as Chairman of the Board of Directors. Dr. Leung was also appointed the Chief Executive Officer of the Company by the Board of Directors on the same date. Also on January 5, 2017, the Board of Directors of the Company appointed Sun Dicha as a Director of the Company.

 

On March 15, 2018, Mr. John H Yeung, Mr. Fang Xihong, Mr. Zhang Wei and Mr. Sun Dicha, Directors of the Company notified the Company of their intention to resign from their position as a director of the Company for personal reasons, Mr. John H Yeung, Mr. Fang Xihong, Mr. Zhang Wei and Mr. Sun Dicha s’ resignation will become effective on March 16, 2018 and their resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

On January 18, 2019, the Board of Directors of the Company appointed Mr. MingJing Xia and Mr. Yulong Yang as Directors of the Company.

 

We do not currently intend to hold an annual meeting of stockholders until after we consummate a business transaction, and thus may not be in compliance with Section 211(b) of the General Corporation Law of the State of Delaware. Therefore, if our stockholders want us to hold an annual meeting prior to our consummation of a business transaction, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the General Corporation Law of the State of Delaware.

 

To our knowledge, no director or executive officer of the Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past ten years. To our knowledge, no promoter or control person of the Company has been involved in any legal proceeding listed in paragraphs (1) through (6) of Item 401(f) of Regulation S-K in the past five years. The following is a brief description of the business experience of our current sole director and executive officer:

 

 13 
 

 

 

 

Earnest Leung, has over 20 years' experience in the investment banking industry. Dr. Leung is currently serves as the Network CN Inc's director since May 11, 2009, and as Chief Executive Officer and Chairperson of the Board of the Company since July 15, 2009. Since November 2004, he has worked as a financial advisor and consultant in Hong Kong and currently serves as a director of Keywin Holdings Limited, an investment company, and of Statezone Ltd, a financial consulting company owned and controlled by Dr. Leung. From June 2009 to August 2011, he also served as a director and chief executive officer of China Boon Holdings Limited, which is listed on Hong Kong Main Board engaging in the distribution of consumer electronic products and home appliances as well as trading of scrap metals and leather and extending its business to cemetery business in 2009. Prior to that, Dr. Leung served, from September 1994 to October 2004, as Senior Director and Head of Investment, Asia for American Express Bank. Dr. Leung also held various senior investment positions with BNP Paribas Bank, New Zealand Insurance and Bank of America Trust. Dr. Leung holds an honorary doctor degree from International American University. Dr. Leung was appointed as a director because of his extensive knowledge of capital markets through his various senior positions in financial institutions and because of his in-depth business management experience.

 

Shirley Cheng Sze Ki, has served as the Network CN Inc.'s (NWCN) Chief Financial Officer since February 2015, and she has served as NWCN's Interim Chief Financial Officer and Corporate Secretary, since April 2012. She has served as the Finance Manager of NCN Group Management Limited, NWCN's subsidiary, since March 2008. Prior to that, Ms. Cheng served from 2004 to 2008 as an auditor with PricewaterhouseCoopers, an international firm of certified public accountants. Ms. Cheng holds a Bachelor's Degree in Business Administration with a major in Accountancy from the Hong Kong Baptist University and is an associate member of the Hong Kong Institute of Certified Public Accountants.

 

MingJing Xia is a passionate investor on blockchain and its core technology. He joined the blockchain industry in 2016 and founded ZhongAo International Holding Group Co., Ltd that same year, the company has since grown to members over 160,000 in 2018 with operation in major Asian cities such as Seoul, Hong Kong, Shanghai, Shenzhen and Chongqing. Throughout his career since 1991, Mr Xia has managed teams over 20,000, he is good at public relation. Mr Xia has been an educator and trainer for 25 years (1991-2016).  Mr Xia earned his bachelor degree from Chongqing Normal University of China in June of 1991.

Yulong Yang is currently the owner and director of Picasso Digital Assets Investment Management (UK) Co., Ltd which was registered (June 8, 2018) in the United Kingdom and another Picasso Digital Assets Investment company registered in Hong Kong in April 2018, he has managed over 50 IT technical personnel worldwide. Mr. Yang is also the director (since 2016) of ZhongAo International Holding Group Co., Ltd which has operation in major Asian cities such as Seoul, Hong Kong, Shanghai, Shenzhen and Chongqing.  In his recent business endeavor of blockchain and anti-counterfeiting & traceability. During his earlier career from 2004 to 2013, Mr. Yang is a seasoned investor and good at in sales, business operation and managing teams.  Mr Yang graduated from Chongqing College of Electronic Engineering of China in June 1998.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Not applicable.

 

Code of Ethics

 

We have not adopted a written code of ethics, because we believe and understand that our officers and directors adheres to and follows ethical standards without the necessity of a written policy. Additionally, due to the fact we do not have operations, adopting a code of ethics is unnecessary at this time.

 

Audit Committee

 

We do not currently have an audit committee.

 

Compensation Committee

 

We do not currently have a compensation committee.

 

 

 14 
 

 

 

ITEM 11 - EXECUTIVE COMPENSATION

 

As of December 31, 2018, there were only two Executive Officers including Chief Executive Officer and Chief Financial Officer in the Company. The Company’s Chief Executive Officer and Chief Financial Officer during fiscal year 2018 and 2017 are set forth below:

 

  Name Position
Earnest Leung Chief Executive Officer and Chairperson of the Board
Shirley Cheng Sze Ki Chief Financial Officer, Director and Corporate Secretary

 

Summary Compensation Table

 

The following table sets forth information concerning all compensation awarded to, earned by or paid during fiscal year 2018 and 2017, to the Named Executive Officers:

 

Name and

Principal

Position

Year

(1)

Salary

($)

Bonus

($)

Stock

Awards

($)

Options

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Change in

Pension Value

 and

Nonqualified

Deferred

Compensation

Earnings

($)

(2)

All Other

Compensation

($)

Total

($)

Earnest Leung,

Chief Executive

Officer and

Director

2018

2017

 

 

 

 

-

27,244

-

-

-

-

-

-

-

-

-

-

-

769

-

28,013

                   

Shirley Cheng Sze Ki, Chief

Financial Officer, Director and Corporate

Secretary

2018

2017

33,846

48,547

-

-

-

-

-

-

-

-

-

-

1,692

2,000

35,538

50,547

                   

 

(1)The executive compensation for the Company’s Chief Executive Officer and Chief Financial Officer for fiscal 2018 and 2017 primarily consisted of base salary only. Base salaries are reviewed annually and may be adjusted to realign salaries with market levels after taking into account individual responsibilities, performance and experience.

 

(2)All other compensation only represents a monthly contribution paid by the Company into a mandatory provident fund for the benefit of each of the Company’s Chief Executive Officer and Chief Financial Officer.

 

Employment Contracts

 

The Company entered into an executive employment agreement with Dr. Earnest Leung in connection with his services to the Company as our Chief Executive Officer. Under the terms of the agreement, Dr. Leung will receive a monthly salary of HK$50,000 (approximately $6,410) and on May 1, 2017, Dr. Leung agreed to withheld his salary. Shirley Cheng Sze Ki was appointed as the Company’s Chief Financial Officer and is entitled to a monthly salary of HK$40,000 (approximately $5,128) and on July 1, 2017, the Company and Ms Cheng agreed to reduce the salary to HK$22,000 (approximately $2,821). The employment may be terminated by the Company at any time without notice or payment, in the event that any of the executives engage in misconduct or dereliction of duty.

 

Option/SAR Grants

 

We do not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any director since our inception; accordingly, no stock options have been granted or exercised by any of the officers or directors since we were founded.

 

Long-Term Incentive Plans and Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of the officers or directors or employees or consultants since we were founded.

 

Compensation of Directors

 

 

 15 
 

 

 

 

Overview

 

All the compensation packages for each of directors are approved by the Board of Directors.  The following table provides information about the compensation earned by directors who served during fiscal year 2018:

  

Name of director(3)  

Fees Earned

or Paid(1)

in Cash

($)

   

Stock

Awards(2)

($)

   

Option

Awards

($)

   

Non-Equity

Incentive Plan

Compensation

($)

   

Change in

Pension Value

and Nonqualified

Deferred

Compensation

Earnings($)

   

All Other

Compensation

($)

   

Total

($)

 
                                                           
Earnest Leung     12,000       -       -       -       -       -       12,000    
                                                           
Shirley Cheng     -       -       -       -       -       -       -    

______

(1)   For the service periods from January 2018 to December 2018, both the Chairperson of the Board were entitled to a monthly cash compensation of $1,000.

 

(2)As required by SEC rules, amounts in the column “Stock Awards” present the aggregate grant date fair value of awards made each year computed in accordance with ASC Topic 718. The grant date fair value of each of the directors’ award is measured based on the closing price of our common stock on the date of grant. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards. Under generally accepted accounting principles, compensation expense with respect to stock awards granted to our employees, executives and directors is generally recognized over the requisite services period.

 

Potential Payments upon Termination or Change-in Control

 

The employment agreements with current Named Executives may be terminated by giving the other party one-month advanced notice. Other than as disclosed above, the Company does not have change-in-control arrangements with any of its current Named Executives, and the Company is not obligated to pay severance or other enhanced benefits to executive officers, unless otherwise stated in Hong Kong Employment Ordinance, upon termination of their employment. Accordingly, there is no potential payments payable to our current Named Executive Officers upon termination or change-in control.

 

 

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth, as of March 23, 2019, certain information with respect to the Company's equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company's outstanding equity securities; and (iii) all Directors and Executive Officers as a group. 

 

 

 16 
 

 

 

 

Title of Class

Name and Address

of Beneficial Owner

Nature of Beneficial Ownership Number of Shares Percent of Class (1) Percent of Total Voting Control of Company
Common Stock Leung Chi Wah Earnest

Chief Executive Officer and Chairman of Board of Directors

- 0%

 

 

0%

Common Stock Cheng Sze Ki

Chief Financial Officer, Secretary and Director

0%

 0%

           
Common Stock MingJing Xia Director -   0% 0% 
           
Common Stock Yulong Yang Director - 0%  0% 
           

Common Stock

All Directors and Officers

-

-

 -

Common Stock Cihan Huang, 21/F, One Harbour Square, No.181, Hoi Bun Road, Kwun Tong, Hong Kong 5% + Shareholder 1,403,780 11.67%

 11.67%

Common Stock Jingzhi Yang, Room 1003, No.159 Tingyuan Road, Dajiating Garden, Haizhu District,Guangzhou,Guangdong, PRC

5% + Shareholder

 

 

1,002,700 8.33%

 

 

8.33%

Common Stock

Meile Zhou, 2A-6, City Shangu, Tonggu Road,

Nanshan District, Shenzhen, Guangdong, PRC

5% + Shareholder 1,203,240 10.00% 10.00%
Common Stock Wong Wing Kong, Room 1002, 5th Building, Quanhai Garden, Xin Zhou Road, Futian District, Shenzhen, Guangdong, PRC 5% + Shareholder 1,202,273 9.991%

 9.991%

Common Stock

Wing Yan Sharon Lo, Flat B, 20/F, BayviewPark, Chai Wan, Hong Kong.

5% + Shareholder 701,890 5.83% 5.83%
Common Stock Yuk Chor Wong, Flat 7C, 114 Broadway, Mei Foo Sun Chuen, Kowloon, Hong Kong. 5% + Shareholder 1,202,500 9.99% 9.99%
Common Stock

Yun-Qiu Ouyang, Room 22, 6th Street, Cuishan

Lantian Garden, HuaNan Country Garden, Panyu District Guangzhou, Guangdong, PRC

5% + Shareholder 601,620 5.00%

 

 

5.00%

Common Stock Tu Shen Sheng, 53 Bulkeley Street, Hung Hom, Kowloon, Hong 5% + Shareholder 1,197,000 9.95% 9.95%
Common Stock Total Shares Owned by Persons Named above   8,914,003 74.08 74.08%

 

 

(1)Based on 12,032,400 shares outstanding as of March 23, 2019. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person

 

We are not aware of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.

 

 

 17 
 

 

 

 

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

We have not entered into any material transactions or series of transactions that would be considered material in which any director or executive officer or beneficial owner of 5% or more of any class of our capital stock, or any immediate family member of any of the preceding persons, had a direct or indirect material interest.

 

We do not have a written policy concerning the review, approval, or ratification of transactions with related persons.

 

 

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table sets forth the aggregate fees billed for each of the fiscal years ended December 31, 2018 and 2017 for: (i) professional services rendered by our principal accountant for the independent audit of our annual consolidated financial statements and review of consolidated financial statements included in our Quarterly Reports on Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; (ii) assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not included in the professional services described in clause (i) above; (iii) professional services rendered by the principal accountant for tax compliance, tax advice and tax planning; and (iv) products and services provided by the principal accountant that are not included in the services described in clauses (i) through (iii) above. The Company appointed Union Power HK CPA Limited to audit the annual consolidated financial statements for the fiscal year ended December 31, 2018 and 2017, having reviewed the company's consolidated financial statements for the quarters ended March 31, June 30 and September 30, 2018 and 2017.

 

Year Ended December 31,

   2018  2017
Audit Fees  $21,000   $20,359 
Audit-Related Fees  $-   $- 
Tax Fees  $-   $- 
All Other Fees  $-   $- 

 

All of the fees described above for the years ended December 31, 2018 and 2017, were approved by the Board of Directors.

   

 

 18 
 

 

 

 

 

PART IV

 

ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)(1) Financial Statements

 

For consolidated financial statements and footnotes filed as part of this Annual Report, see the Index to Consolidated Financial Statements beginning on page F-1 of this Annual Report.

 

 

(a)(2) Financial Statement Schedules

 

We do not have any financial statement schedules required to be supplied under this Item.

 

 

(a)(3) Exhibits

 

Refer to (b) below.

 

(b) Exhibits  
3.1 (1)   Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware on September 24, 2013
     
3.2 (1)   Certificate of Amendment to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware on October 1, 2013
     
3.3 (1)   Certificate of Amendment to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware on October 11, 2013
     
3.4 (1)   Certificate of Amendment to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware on October 17, 2013
     
3.5   Certificate of Amendment to Amended and Restated Certificate of Incorporation of Zosano, Inc. filed with the Secretary of State of the State of Delaware on December 15, 2016
     
3.5 (2)   Bylaws of Zosano, Inc.
     
10.1 (1)   Stock Purchase Agreement dated as of October 31, 2013 by and between Zosano, Inc. and ZP Holdings, Inc
     
10.2(3)   Share Exchange Agreement as of January 5, 2017 by and between J.E.M. Capital, Inc., Essential Element Limited and the shareholders of Essential Element Limited
     
31.1*   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
     
31.2*   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
     
32.1*   Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2*   Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS**   XBRL Instance Document
     
101.SCH**   XBRL Taxonomy Extension Schema Document
     
101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF**   XBRL Extension Definition Linkbase Document
     
101.LAB**   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

 

 

* Filed herewith.

 

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

 

(1)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on November 6, 2013.
(2)Incorporated by reference from our Registration Statement on Form S-1 filed with the Commission on January 23, 2012.
(3)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 5, 2016.

 

 

ITEM 16 - FORM 10-K SUMMARY

 

None.

 

 

 19 
 

 

  

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Dated:  April 1, 2019   J.E.M. Capital Inc.
   
     
  By:   /s/ Earnest Leung
    Earnest Leung
    Chief Executive Officer
   

(Principal Executive Officer)

 

 

 

Dated:  April 1, 2019    
   
     
  By:   /s/ Cheng Sze Ki
    Cheng Sze Ki
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

 

Power of Attorney

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Earnest Leung and Sze Ki Cheng, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes may do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

 

Name

 

/s/ Earnest Leung

Title

 

Chief Executive Officer and Director

Date

 

 April 1, 2019

Earnest Leung (Principal Executive Officer)  
/s/ Sze Ki Cheng Chief Financial Officer and Director  April 1, 2019
Sze Ki Cheng (Principal Financial and Accounting Officer)  

 

 

/s/ MingJing Xia

 

 

Director

 

 

 April 1, 2019

MingJing Xia    
/s/ Yulong Yang Director  April 1, 2019
Yulong Yang    

 

 

 20 
 

 

 

J.E.M. CAPITAL, INC.

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018

 

Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Financial Statements  
   
Consolidated Balance Sheets as of December 31, 2018 and 2017 F-3
   
Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017 F-4
   
Consolidated Statement of Stockholders' Deficit for the Years Ended December 31, 2018, and 2017 F-5
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017 F-6
   
Notes to Consolidated Financial Statements F-7

 

 

 

 F-1 
 

 

 

 

Report of Independent Registered Public Accounting Firm

 

 

The Board of Directors and Stockholders of:

J.E.M. Capital, Inc.

 

Opinion

 

We have audited the accompanying consolidated balance sheets of J.E.M. Capital, Inc. and its subsidiaries (collectively referred to as the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended, and 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 as of December 31, 2018 and 2017, and the consolidated results of operations and its cash flows for the years then ended, in conformity with the accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

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

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

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

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net losses of $87,413 and $160,418 for the years ended December 31, 2018 and 2017, respectively. Additionally, the Company used net cash in operating activities of $47,947 and $149,189 for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018 and 2017, the Company recorded stockholders’ deficit of $110,160 and $22,747, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

UNION POWER HK CPA LIMITED

Certified Public Accountants

We have served as the Company’s auditor since 2017.

 

Hong Kong SAR

1 April 2019

 

 

 F-2 
 

 

J.E.M. CAPITAL INC.

CONSOLIDATED BALANCE SHEETS

 

 

   December 31,
   2018  2017
ASSETS
Current assets:          
Cash  $164   $166 
Deposit   -    550 
Total current assets   164    716 
           
Equipment, Net   496    996 
           
Total assets  $660   $1,712 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities:          
Accounts payable and accrued expenses  $62,875   $24,459 
Due to shareholder   47,945      
           
Total current liabilities   110,820    24,459 
           
Total liabilities   110,820    24,459 
           
Commitments and contingencies   -    - 
           
Stockholders' deficit:          
Preferred stock, par value $0.0001 per share, 5,000,000 shares authorized as of December 31, 2018 and December 31, 2017; none issued or outstanding as of December 31, 2018 and December 31, 2017
   -    - 
Common stock, $0.0001 par value; 195,000,000 shares authorized as of December 31, 2018 and 2017, 12,032,400 shares and 12,032,400 shares issued and outstanding as of December 31, 2018 and 2017   1,203    1,203 
Additional paid-in capital   301,268    301,268 
Accumulated deficit   (412,631)   (325,218)
Total stockholders' deficit   (110,160)   (22,747)
           
Total liabilities and stockholders' deficit  $660   $1,712 
           

 

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

 

 

 F-3 
 

 

 

J.E.M. CAPITAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

  Year Ended December 31,
  2018   2017
Operating expense:      
     General and administrative  $              87,413   $               160,418
   Total operating expense          87,413   160,418
Loss before provision for income taxes       (87,413)            (160,418)
Provision for income taxes -   -
Net loss  $           (87,413)    $           (160,418)
       
Net loss per common share - basic and diluted  $                  (0.00)    $                (0.00)
Weighted average number of common shares outstanding - basic and diluted 12,032,400      12,004,929


 

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

 

 

 F-4 
 

 

 

 

J.E.M. CAPITAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

 

 

   Common Stock  Additional Paid-in  Accumulated  Total Stockholders’
   Shares  Amount  Capital  Deficit  (Deficit)
Balance - December 31, 2016   10,027,000   $1,003   $154,097   $(164,800)  $(9,700)
     Issued shares   2,005,400    200    -    -    200 
Contribution from stockholders   -    -    147,171    -    147,171 
Net loss   -    -    -    (160,418)   (160,418)
Balance - December 31, 2017   12,032,400    1,203    301,268    (325,218)   (22,747)
Net loss   -    -    -    (87,413)   (87,413)
Balance - December 31, 2018   12,032,400   $1,203   $301,268   $(412,631)  $(110,160)

 


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

 

 

 F-5 
 

 

 

 

J.E.M. CAPITAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

 

 

    Year Ended December 31,
   2018  2017
Operating activities:          
Net loss  $(87,413)  $(160,418)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   500    1,133 
Changes in assets and liabilities          
    Decrease in deposit   550    - 
Increase in accounts payable and accrued liabilities   38,416    10,096 
Net cash used in operating activities   (47,947)   (149,189)
           
Investing activities:          
Proceeds from disposal of fixed assets   -    2,633 
Purchase of equipment   -    (449)
Net cash generated from investing activities   -    2,184 
           
Financing activities:          
Contribution from stockholders   -    147,171 
Advance from shareholder   47,945    - 
Net cash generated from financing activities   47,945    147,171 

 

Net (decrease) increase in cash

   (2)   166 
Cash – beginning of year   166    - 
Cash – end of year  $164   $166 

 

Supplemental disclosure:

Cash paid during the year for:

Interest

  $-   $- 
Interest taxes  $-    - 

 

 

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

 

 

 F-6 
 

 

 

 

J.E.M. CAPITAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

1.Organization and principal activities

 

Nature of Operations

 

J.E.M. Capital Inc. (the "Company") has limited operations. The Company was incorporated under the laws of the State of Delaware on September 14, 2011.

 

On October 31, 2013, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement") with Zosano Pharma Corporation, formerly known as ZP Holdings, Inc., a Delaware corporation (Zosano Pharma), pursuant to which the Company issued and sold to Zosano Pharma 10,016,973 shares of the Company common stock, $0.0001 par value, for an aggregate cash purchase price of $365,000. As a result of the issuance and sale of the Company's common stock to Zosano Pharma pursuant to the Purchase Agreement, a change in control of the Company occurred (in which Zosano Pharma acquired control of the Company). Immediately following the change in control transaction, 10,027,000 shares of the Company's Common Stock were issued and outstanding. The 10,016,973 shares of common stock issued and sold to Zosano Pharma pursuant to the Purchase Agreement represent approximately 99.9% of the Company's issued and outstanding common stock.

 

On November 14, 2016, Zosano Phama entered into Stock Purchase Agreements with eighteen (18) foreign investors (the "New Shareholders"), pursuant to which Zosano Pharma sold an aggregate of 10,016,973 shares of common stock of Zosano, Inc. or approximately 99.9% of the issued and outstanding common stock of the Company, to the New Shareholders.

 

On January 5, 2017, the Company entered into a Share Exchange Agreement (the "Agreement") with Essential Elements Limited, a British Virgin Islands company ("ESEL"), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital").

 

ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.

 

2.Summary of Significant Accounting Policies

 

Risks and Uncertainties

 

The Company's activities are subject to significant risks and uncertainties, including failure to identify a privately held operating company desiring to merge with the Company, failure to complete a reverse merger transaction, and inability to secure funding to continue as a going concern. (See Note 3 regarding going concern discussion.)

 

Basis of Presentation and Use of Estimates

 

The Company's consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as accounting for income tax valuation allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

 

Business acquisitions

 

During the year ended December 31, 2017, the Company completed business acquisitions that were individually and in the aggregate insignificant. The Company has accounted for all of its acquisitions using the acquisition method. The operating results of each acquisition have been included in the consolidated financial statements since the respective dates of acquisition. There were no business acquisitions for the year ended December 31, 2018.

 

Principles of Consolidation

 

The consolidated financial statements include the financial statements of J.E.M Capital Inc. and its subsidiaries for which it is the primary beneficiary. Upon making this determination, the Company is deemed to be the primary beneficiary of the entity, which is then required to be consolidated for financial reporting purposes. All significant intercompany transactions and balances have been eliminated upon consolidation.

 

 F-7 
 

 

 

 

J.E.M. CAPITAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2.Summary of Significant Accounting Policies - Continued

 

Equipment, net

 

Equipment is stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is provided on a straight-line basis, less estimated residual values over the assets’ estimated useful lives. The estimated useful lives are as follows:

 

Computer hardware and software 3 years

 

When equipment is retired or otherwise disposed of, the related cost, accumulated depreciation and provision for impairment loss, if any, are removed from the respective accounts, and any gain or loss is reflected in the consolidated statements of operations. Repairs and maintenance costs on equipment are expensed as incurred.

 

Impairment of Long-Lived Assets

 

Long-lived assets, such as equipment, are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds the sum of the undiscounted cash flows expected to be generated from the asset’s use and eventual disposition. An impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the asset calculated using a undiscounted cash flow analysis. There was no impairment of long-lived assets for the years ended December 31, 2018 and 2017.

 

Fair value of financial instruments

 

ASC Topic 825, “Financial Instruments”, requires disclosing fair value to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheets. The fair values of the financial instruments are not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement. For certain financial instruments, including deposit, accounts payable and accrued expenses, the fair values were determined based on the near term maturities of such the assets and obligations.

 

Revenue

 

The Company has yet to generate revenue from operations for the years ended December 31, 2018 and 2017.

 

Net Loss per Common Share

 

Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the years ended December 31, 2018 and 2017.

 

Income Taxes

 

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

 

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Once this threshold has been met, the Company's measurement of its expected tax benefits is recognized in its consolidated financial statements. The Company accrues interest on unrecognized tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense.

 

The Company' income tax returns are subject to examination for three years from the date filed or the due date, whichever is later. The Company did not identify any material uncertain tax positions.

 

 

 F-8 
 

 

 

 

J.E.M. CAPITAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2.Summary of Significant Accounting Policies - Continued

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), to make leasing activities more transparent and comparable, requiring most leases to be recognized by lessees on their balance sheets as right-of-use assets, along with corresponding lease liabilities. ASU 2016-02 is effective for annual periods beginning after December 31, 2018 and interim periods within that year, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements as the Company does not have any lease commitments at the reporting date.

 

In July 2017, the FASB issued ASU 2017-11 “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”, to simplify the accounting for certain financial instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. The amendments also address navigational concerns within the FASB Accounting Standards Codification® related to an indefinite deferral available to private companies with mandatorily redeemable financial instruments and certain noncontrolling interests, one that created significant “pending content” in the Codification. The FASB decided to reclassify the indefinite deferral as a scope exception, which does not have an accounting effect. The amendments are effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact of ASU 2017-11 on its consolidated financial position, results of operations and cash flows.

 

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

 

3.        Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenues to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of December 31, 2018, the cash resources of the Company were insufficient to continue to conduct its normal business operations. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

 F-9 
 

 

 

J.E.M. CAPITAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

4.General and Administrative Expenses

 

The Company has been engaged in activities related to the setup and formation of the company. The following summarizes the type of expenses incurred:

 

  Year Ended December 31,
  2018   2017
General and administrative expense:      
Professional fees $                   28,466   $                   30,400
Filing fees 6,414   7,363
Franchise tax expense 409   400
Salary and related expenses 35,538   104,018
Director’s fee 12,000   -
Depreciation 500   1,133
Other office expenses 4,086   17,104
Total general and administrative expense $ 87,413      $160,418

 

5.                    Stockholders’ Equity

 

Preferred Stock

 

In September 2013, the Company adopted an amended and restated certificate of incorporation by which the Company is authorized to issue 5,000,000 shares of preferred stock with a $0.0001 par value. As of December 31, 2018, there were no shares of preferred stock issued or outstanding.

 

Common Stock, Stock Split and Dividend

 

In September 2013, the Company adopted an amended and restated certificate of incorporation by which the Company is authorized to issue 195,000,000 shares of common stock with a $0.0001 par value, which amended and restated certificate of incorporation went effective on October 21, 2013.

 

In anticipation of the acquisition of the Company’s common stock by Zosano Pharma and on October 21, 2013, the Company completed a 1-for-200 reverse stock split. As a result, existing stockholders held an aggregate of 10,027 shares on a post-split basis. All share and per share amounts have been retroactively restated for the effect of this split.

 

On October 31, 2013, the Company issued 10,016,973 shares of common stock to Zosano Pharma in exchange for an aggregate cash purchase price of $365,000. Concurrently with the receipt of the proceeds from the sale of its common stock to Zosano Pharma, the Company declared a dividend of the purchase price to its stockholders of record immediately prior to the closing of the purchase transaction.

 

On January 5, 2017, the Company entered into a Share Exchange Agreement with Essential Elements Limited, a British Virgin Islands company (“ESEL”), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong (“JEM Capital”). ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.

 

The Company is authorized to issue 195,000,000 shares of common stock with a $0.0001 par value. As of December 31, 2018, and 2017, 12,032,400 shares and 12,032,400 shares of common stock were issued and outstanding, respectively.

 

As of December 31, 2018, and 2017, the Company did not have any dilutive securities, such as stock options, warrants or convertible securities, issued or outstanding.

 

 

6.                    Due to shareholder

 

 During year ended December 31, 2018, the Company received loan of $47,945 from its shareholder. As of December 31, 2018, the Company recorded an amount of $47,945 payable to its shareholder. The amount is unsecured, bears no interest and is repayable on demand.

 

 

 F-10 
 

 

 

 

J.E.M. CAPITAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

7.                    Income Taxes

 

Income is subject to taxation in various countries in which the Company and its subsidiaries operate or are incorporated. The loss before income taxes by geographical locations for the year ended December 31, 2018, and 2017 were summarized as follows:

 

          Year Ended December 31,
              2018   2017
           
    United States          $           46,789       $      37,624
    Foreign         40,624              122,794
             $           87,413    $      160,418

 

The Company had accumulated tax losses of approximately $188,000 and $141,000 as of December 31, 2018 and 2017, respectively, which will expires between 2031 and 2037.

 

The net operating loss carryforwards indicated above represent the principle component of the Company's deferred tax assets as of December 31, 2018 and December 31, 2017. Deferred tax assets of approximately $52,000 and $39,000 as of December 31, 2018 and December 31, 2017, respectively, will be offset by valuation allowance of the same amounts as realization of such assets is uncertain.

 

  December 31,
  2018   2017

Deferred tax assets:

Net operating loss carryforwards

 

$ 52,363

 

 

$ 39,323

Total deferred tax assets 52,363                   39,323
Less: Valuation allowance (52,363)                 (39,323)
Net deferred tax assets $                           -   $                          -

 

Movement in valuation allowance:

 

  December 31,
  2018   2017
At the beginning of the year   $               39,323   $              55,760
Current year addition /(deduction) 13,040               (16,377)
At the end of the year $                 52,363   $                39,323

 

The provision for income taxes differs from the expected provision determined by applying the federal statutory rate to the income before income taxes. The reasons for the difference are state and local income taxes and various non-deductible expenses.

 

As a result of the reduction of the corporate income tax rate from 35% to 21% due to the Tax Cuts and Jobs Act which was enacted on December 22, 2017, U.S. GAAP requires companies to remeasure their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the period of enactment. (the change in deferred tax balances would have a corresponding change to valuation allowance thereby resulting in no income tax expense for the year).

 

 

 

 

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