Company Quick10K Filing
Omphalos
Price-0.00 EPS-0
Shares115 P/E0
MCap-0 P/FCF0
Net Debt-0 EBIT-0
TEV-0 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-K 2019-12-31 Filed 2020-03-30
10-Q 2019-09-30 Filed 2019-11-13
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-28
10-Q 2018-09-30 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-02
10-K 2017-12-31 Filed 2018-03-29
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-03-29
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-10
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-04-12
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-12
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-25
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-28
10-Q 2012-09-30 Filed 2012-11-05
10-Q 2012-06-30 Filed 2012-08-10
10-Q 2012-03-31 Filed 2012-05-14
10-K 2011-12-31 Filed 2012-03-29
10-Q 2011-11-14 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-11
10-K 2010-12-31 Filed 2011-03-29
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-11
10-K 2009-12-31 Filed 2010-03-30
8-K 2020-05-15 Regulation FD, Other Events
8-K 2018-12-17 Enter Agreement, Sale of Shares, Exhibits

OMPS 10K Annual Report

Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. [Removed and Reserved.]
Part II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
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 Offices and Corporate Governance. Directors and Executive Officers
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
Item 15. Exhibits, Financial Statement Schedules.
Note 1. Organization and Summary of Significant Accounting Policies
Note 2. Property and Equipment
Note 3. Intangible Assets
Note 4. Income Taxes
Note 5. Related-Party Transactions
Note 6. Lease
Note 7. Subsequent Events
EX-31.1 exhibit31-1.htm
EX-31.2 exhibit31-2.htm
EX-32.1 exhibit32-1.htm
EX-32.2 exhibit32-2.htm

Omphalos Earnings 2019-12-31

Balance SheetIncome StatementCash Flow
1.50.80.2-0.5-1.1-1.82012201420172020
Assets, Equity
0.50.30.1-0.1-0.3-0.52012201420172020
Rev, G Profit, Net Income
0.40.20.1-0.1-0.2-0.42012201420172020
Ops, Inv, Fin

10-K 1 form10k.htm FORM 10-K Omphalos Corp.: Form 10-K - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the fiscal year ended December 31, 2019

OR

[   ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________to __________
.

Commission File Number: 000-32341

OMPHALOS, CORP.
(Exact name of registrant as specified in its charter)

Nevada

84-1482082

(State or other jurisdiction of incorporation or

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

organization)

 

Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1,
Luchu Dist., Taoyuan City 338
Taiwan
(Address of principal executive offices, Zip Code)

011-8863-322-9658
(Registrant's telephone number, including area code)

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

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share.

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

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


Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

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

Indicate by check mark whether registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)
Yes [X_] No [   ]

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

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

Large accelerated filer [   ]

Accelerated filer [   ]

Non-accelerated filer [X ]

Smaller reporting company [X]

  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 Exchange Act. [   ]

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter:

As of June 28, 2019, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $491,908 based on the closing price of $0.045 for the registrant’s common stock.

The number of shares of registrant's common stock outstanding, as of March 30, 2020 was 115,063,760.


TABLE OF CONTENTS

PART I

 

 
Item 1. Business 4
Item1A. Risk Factors 7
Item1B. Unresolved Staff Comments 12
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. [Removed and Reserved] 13
     
PART II    
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13
Item7A. Quantitative and Qualitative Disclosures about Market Risk 23
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 23
Item9A. Controls and Procedures 23
Item9B. Other Information 24
     
PART III    
Item10. Directors, Executive Officers and Corporate Governance 24
Item11. Executive Compensation 27
Item12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 28
Item13. Certain Relationships and Related Transactions and Director Independence 28
     
PART IV    
Item14. Principal Accountant Fees and Services 29
Item15. Exhibits, Financial Statement Schedules 29
     
SIGNATURES  

EX-31.1

 

 

EX-31.2

 

 

EX-32.1

 

 

EX-32.2

 

 


PART I

Item 1. Business.

Soyodo Group Holdings, Inc. ("Soyodo") was incorporated on May 15, 1997 as Quixit, Inc. under the laws of the state of Colorado. On January 16, 2003, TOP Group Corp., a New York corporation, purchased 4,400,000 shares of the company's common stock, which represented 88% of the company's outstanding capital stock at that time. Prior to the change in control, the company's purpose was to investigate opportunities to be acquired by a company that desired to be registered under the Securities Exchange Act of 1934, as amended. In March 2003, the company changed its state of incorporation from Colorado to Delaware, and changed its name from Quixit, Inc. to TOP Group Holdings, Inc. In August of 2005, the company changed its name from TOP Group Holdings, Inc. to Soyodo Group Holdings, Inc.

In the second quarter of 2005, the company decided to commence a chain of member-only stores in locations with large Chinese immigrant populations, offering Chinese culture-related merchandise such as books, pre-recorded CDs, stationery, gifts, and sports goods. Subsequently, six retail stores had been opened. On June 30, 2006, however, the Company started to concentrate on its wholesale operation and sold to its majority shareholder & principal executive officer all the six retail stores. Then on November 30, 2006, the company decided to go back to its original plan of investigate opportunities to be acquired and sold to its majority shareholder the remaining wholesale operation.

Omphalos Corp. was incorporated on February 13, 1991 under the laws of Republic of China (TWN), initially serving as a sales agent for an equipment and used machine dealer. Omphalos Corp. (B.V.I.) was incorporated on October 30, 2001 under the laws of the British Virgin Islands. All Fine Technology Co., Ltd. was incorporated on March 23, 2004 under the laws of Republic of China. All Fine Technology Co., Ltd. (B.V.I.) was incorporated on February 2, 2005 under the laws of the British Virgin Islands.

On July 4, 2007, Omphalos Corp. (BVI) acquired Omphalos (TWN) and All Fine Technology Co. (TWN), through a share exchange with the shareholders of these two entities. On October 19, 2007 Omphalos (BVI) purchased All Fine Tech (BVI).

On February 5, 2008, Soyodo Group Holdings, Inc. entered into and completed the transactions contemplated under a Share Exchange Agreement (the "Exchange Agreement") with each of the shareholders (the "Shareholders") of Omphalos Corp. (B.V.I.), a British Virgin Islands corporation, pursuant to which Soyodo purchased from the Shareholders all issued and outstanding shares of Omphalos Corp. (B.V.I.)' common stock in consideration for the issuance of an aggregate of 81,996,275 shares of Soyodo common stock (the "Share Exchange"). The Share Exchange resulted in a change in control of Soyodo with the Shareholders owning 81,996,275 shares of common stock of the Company out of a total of 90,191,275 issued and outstanding shares after giving effect to the Share Exchange. Shen-Peir Yang beneficially owned 55,347,485 shares of common stock and was elected a director and appointed as the Company's President. Chi Pi Yun beneficially owned 2,049,907 shares of common stock and was appointed as the Company's Chief Financial Officer. Li Shen-Ren beneficially owned 4,099,814 shares of common stock and was appointed as the Company's Chief Operating Officer. As a result of the Exchange Agreement, (i) Omphalos Corp. (B.V.I.) became a wholly-owned subsidiary of Soyodo and (ii) the Soyodo succeeded to the business of Omphalos Corp. (B.V.I.) as its sole business.

Effective April 18, 2008, Soyodo entered into an Agreement and Plan of Merger (the "Merger Agreement") with Omphalos, Corp., a Nevada corporation. Pursuant to the Merger Agreement, Soyodo was merged with and into the surviving corporation, Omphalos Corp. The articles of incorporation and bylaws of the surviving corporation became the articles of incorporation and bylaws of the Company, and the directors and officers of Soyodo became the members of the board of directors and officers of the Company. Following the execution of the Merger Agreement, the Company filed with the Secretary of State of Delaware and Nevada a Certificate of Merger. Omphalos, Corp. was incorporated on April 15, 2008, under the laws of the State of Nevada. The main purpose of the merger is to change Soyodo's name to Omphalos, Corp.

Omphalos, Corp. and these four corporations are referred to herein collectively as the "Company" or "Omphalos."


Overview of Business

Omphalos, through its wholly-owned subsidiaries which serve as third-party resellers, supplies a wide range of equipment and parts including refurbished and modified reflow soldering ovens and automated optical inspection machines for printed circuit board (PCB) manufacturers in Taiwan, China, and South Asian countries. Omphalos also provides after sale services such as maintenance and repairs to its customers and sells parts for the equipment for that purpose.

A reflow oven is a machine used primarily for reflow soldering of surface mount electronic components to printed circuit boards. Reflow soldering represents the most common means to attach a component to a circuit board, and typically consists of applying solder paste, positioning the components, and reflowing the solder in a specialized oven. The goal of the reflow process is to melt the powder particles in the solder paste, with the surfaces being joined together, and solidify the solder to create a strong metallurgical bond.

Omphalos markets its products in both Taiwan and China. Omphalos' clients are mainly big name Taiwanese electronics manufacturing giants, including Quanta Computer Inc., Universal Scientific Industrial Co., and Advantech in Taiwan, and QSMC, in China.

Products

Omphalos offers a wide range of products, including the following:

Tamura N2 Reflow Ovens. Omphalos offers the Tamura N2 Reflow Oven as its preferred choice for reflow soldering. The ovens have multiple temperature controlled heat emitting infrared radiation compartments that create a phase change in flux (Small Soldier Particles) turning the solid into a liquid. When cooled in the final compartment, the flux undergoes another phase change turning from a liquid back into a solid forming a bond between the surface mount component and etched circuit board. The Tamura Line takes the additional step of being an oxygen-free environment, instead it utilizes nitrogen gas to minimize oxidation.

Gryphon Laser Marking System. This system is placed at the beginning of the SMT production line where it Laser Etches a Uniquely Identifiable 2-Dimensional Barcode onto the surface of a printed circuit board. 2D barcodes allow for more data to be physically written to the circuit board, usually the threshold is when more than 20 characters need to be written, 2D barcoding is required. The 2D barcode helps to simplify Management Information System (MIS) by making more information available offline, such as an identification number, time of fabrication, plant of fabrication, etc. making it easier to track defects and finished products to their final destination. This barcode works best when combined with the Argus Management Information System throughout the fabrication process as its life will be tracked and analyzed. To date, the Company has not derived any significant revenues from this system.

During the year ended December 31, 2019, the Company obtained approximately 71% of the equipment and parts that it sells to its customers from one local suppliers, EPCiS Technology Co., Ltd. The vendor is a Taiwanese company.

Marketing

Most of the Omphalos' business is generated through personal relationships with its major customers. In addition, it may participate in trade shows and occasionally run advertisements in trade journals and newspapers.

Markets and Customers

Omphalos' customers include a number of major electronic manufacturing companies. For the year ended December 31, 2019, one customer accounted for more than 10% of the Company's total revenues, represented approximately 72% of its total net revenues.


Regulations

Omphalos is not subject to any significant government regulation that is particular to its business.

Competition

Omphalos's industry is highly competitive. Omphalos believes that its principal direct competitors are the manufacturers of the equipment themselves. These include Japanese companies such as Sayaka, Tamura Furukawa and Ishikawa.

There are also a number of companies in Asia that resell refurbished equipment. Our main competitors include Xucan Electronic Technology Co., Ltd. and Shenzhen Haimuxing Laser Technology Co., Ltd.

Some of these companies have significantly greater financial, technical and human resources than we do, as well as a wider range of products than we have. In addition, many of our competitors have much greater experience in marketing their products, as well as more established relationships with our target customers. Our competitors may also have greater name recognition and more extensive customer bases that they can use to their benefit. As a result, we may have difficulty maintaining our market share.

We believe that our competitive edge is our responsiveness to our customers' needs, both in terms of speed as well as in our ability to modify the equipment in accordance with the customers' instructions.

Intellectual Property

Omphalos has been granted the following patents:

Name

 

Patent No

 

Country

 

Patent Term

Automatically Marking and Reading/Distinguishing

 

I287752

 

Taiwan

 

expires 1.30.2050

Servo Motor Control Method and Apparatus Using
the Same

 

I325031

 

Taiwan

 

expires 4.19.2027

Laser Machining Module And Laser Machining Table

 

M411305

 

Taiwan

 

expires 2.3.2021

Automatic Board-Flipping Mechanism

 

M411758

 

Taiwan

 

expires 6.7.2026

Automatically Marking and Reading/Distinguishing

 

11/248,212

 

U.S.A

 

expires 6.7. 2026

Laser Machining Module And Laser Machining
Table

 

ZL20112
0073538.7

 

China

 

expires 3.18. 2021

Automatic Board-Flipping Mechanism

 

ZL20112
0073727.4

 

China

 

expires 3.18. 2021

Laser Machining Module And Laser Machining
Table

 

3175212

 

Japan

 

expires 4.4. 2022

Automatic Board-Flipping Mechanism

 

3175211

 

Japan

 

expires 4.4. 2022

Laser Machining Module And Laser Machining
Table

 

201120392907.9

 

China

 

expires 3.05.2021



In the future, we expect to expand the number and type of products we are able to provide to our customers. We intend to use our patents and improve or add functions to current products, and plan to use these patents in future products. The issued patents and applications relate to techniques developed by us for automatically labeling and inspecting, automatically marking and reading apparatus.

There can be no guarantee that the patents held by us will not be challenged or invalidated, that patents will be issued for any of our pending applications or that any claims allowed from existing or pending patents will be of sufficient scope or strength (or issue in the countries where products incorporating our technology may be sold) to provide meaningful protection or any commercial advantage to us. In any event, effective protection of intellectual property rights may be unavailable or be limited in certain countries.

Employees

As of March 30, 2020, Omphalos had seven full-time employees. None of its employees are represented by a labor union, and Omphalos considers its employee relations to be excellent. Omphalos seeks to use contract workers and anticipates maintaining a small full-time employee base.

Available Information

We file or furnish annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with the SEC. These reports will be available as soon as reasonably practical after such reports are electronically filed with, or furnished to, the SEC. All of these documents are available in print without charge to stockholders upon request. Our SEC filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file at the SEC's public reference rooms in Washington, D.C.

Item 1A. Risk Factors.

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or which we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected.

Risk Factors Related to Our Business.

We may need to raise capital to fund our operations, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our expansion efforts.

If in the future, we are not capable of generating sufficient revenues from operations and our capital resources are insufficient to meet future requirements, we may have to raise funds to continue the development, commercialization, marketing and sale of our products.

We cannot be certain that funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct our business. If we are unable to raise additional capital if required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of our products, obtain funds by entering into agreements on unattractive terms or restrict or cease our operations and go out of business.


Our declining operating revenues may cause substantial doubt about our ability to continue as a going concern.

Our audited financial statements for the years ended December 31, 2019 and 2018 were prepared based on the assumption that we will continue our operations as a going concern. We had net losses of $226,870 and $191,818 during the years ended December 31, 2019 and 2018, respectively. As a result, there may be substantial doubt about our ability to continue as a going concern. Our future is dependent upon our ability to implement our business plans and upon our future profitable operations.

The success of our business depends on our ability to successfully obtain a supply of merchandise for our buyers and to attract and retain active professional buyers to create sufficient demand for our sellers.

Our ability to increase our revenue and maintain profitability depends on whether we can successfully expand the supply of merchandise available for sale and attract and retain active professional buyers to purchase the merchandise. Our ability to attract sufficient quantities of suitable merchandise and new buyers will depend on various factors, some of which are out of our control. These factors include our ability to:

 

offer buyers a sufficient supply of merchandise;

 

develop and implement effective sales and marketing strategies;

 

comply with corporate seller requirements affecting marketing and disposition of certain categories of merchandise;

 

efficiently catalogue, handle, store, ship and track merchandise; and

 

achieve high levels of seller and buyer satisfaction with the trading experience.

Omphalos is exposed to risks as a result of ongoing changes in the semiconductor and semiconductor-related industries.

The global industries in which we operate are characterized by ongoing changes, including: (1) higher capital requirements for building and operating new semiconductor and LCD fabrication plants and the resulting effect on customers' ability to raise the necessary capital; (2) differing rates of market growth for, and capital investments by, various semiconductor device makers, such as memory (including NAND Flash and DRAM), logic and foundry, as well as LCD and solar manufacturers; (3) industry growth rates; (4) the increasing cost and decreasing affordability of research and development due to many factors, including decreasing line widths, the increasing number of materials, applications and process steps, and the greater complexity of process development and chip design; (5) the increasing difficulty for customers to move from product design to volume manufacturing; (6) the importance of reducing the cost of system ownership, due in part to the increasing significance of consumer electronics as a driver for semiconductor and LCD demand and the related focus on lower prices; (7) varying levels of business information technology spending; (8) the heightened importance to customers of system reliability and productivity, and the effect on demand for systems as a result of their increasing productivity, device yield and reliability; (9) the growing types and varieties of semiconductors and expanding number of applications across multiple substrate sizes, resulting in customers' divergent technical demands; (10) demand for shorter cycle times for the development, manufacture and installation of manufacturing equipment; (11) the challenge to semiconductor manufacturers of moving volume manufacturing from one technology node to the next smaller technology node, and the resulting impact on the technology transition rate and the rate of investment in capital equipment; (12) price trends for certain semiconductor devices and LCDs; (13) difficulties associated with transitioning to larger substrate sizes; and (14) the increasing importance of the availability of spare parts to assure maximum system uptime. If we do not successfully manage the risks resulting from the ongoing changes occurring in the semiconductor and semiconductor-related industries, its business, financial condition and results of operations could be materially and adversely affected.

The industries that Omphalos serves are volatile and unpredictable.

As a supplier to the global semiconductor, computer and related industries, we are subject to business cycles, the timing, length and volatility of which can be difficult to predict and which may vary by reportable segment. The industries have historically been cyclical due to sudden changes in customers' manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for customers' products, and inventory levels relative to demand. The effects on Omphalos of these changes in demand, including end-customer demand, are occurring more rapidly. These changes have affected the timing and amounts of customers' purchases and investments in technology, and continue to affect our orders, net sales, gross margin, contributed profit and results of operations.


We must effectively manage our resources to meet rapidly changing demand. During periods of decreasing demand for our products, we must be able to appropriately align our cost structure with prevailing market conditions, motivate and retain key employees, and effectively manage our supply chain. During periods of increasing demand, we must have sufficient inventory to meet customer demand; attract, retain and motivate a sufficient number of qualified individuals; and effectively manage our supply chain. If we are not able to timely and appropriately adapt to changes in industry cycles, our business, financial condition or results of operations may be materially and adversely affected.

Omphalos is exposed to risks associated with a highly concentrated customer base in the semiconductor and flat panel display industries.

Our semiconductor and other customer base historically have been, and is becoming even more, highly concentrated. For the year ended December 31, 2019, one major customer accounted for approximately 71.82% of Omphalos' total revenues. Orders from a relatively limited number of manufacturers have accounted for, and are expected to continue to account for, a substantial portion of our net sales. In addition, the mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year. If customers do not place orders, or they delay or cancel orders, we may not be able to replace the business. As our products are configured to customer specifications, changing, rescheduling or canceling orders may result in significant, non-recoverable costs. Major customers may also seek, and on occasion receive, pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us. In addition, certain customers have undergone significant ownership changes, have outsourced manufacturing activities, and/or have entered into strategic alliances or industry consortia that have increased the influence of key semiconductor manufacturers in technology decisions made by their partners, which may result in additional complexities in managing customer relationships and transactions. These factors could have a material, adverse effect on our business, financial condition and results of operations.

Omphalos is highly dependent on one supplier.

For the year ended December 31, 2019, Omphalos obtained 70.91% of the equipment and parts that it sells to its customers from one vendor. If the vendor was to cease supplying us with products for any reason, this would force us to find alternative sources for our products. A change in suppliers could cause a delay in availability of products and a possible loss of sales, which could adversely affect our operating results.

Manufacturing interruptions or delays could affect our ability to meet customer demand, while the failure to estimate customer demand accurately could result in excess or obsolete inventory.

Our business depends on our ability to supply equipment, services and related products that meet the rapidly changing technical and volume requirements of our customers, which depends in part on the timely delivery of parts, components and subassemblies (collectively, parts) from suppliers. Some key parts may be subject to long lead-times and/or obtainable only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers in developing regions, including China and Southeast Asian countries. Significant interruptions of manufacturing operations or the delivery of services as a result of: (1) the failure or inability of suppliers to timely deliver quality parts; (2) volatility in the availability and cost of materials; (3) difficulties or delays in obtaining required export approvals; (4) information technology or infrastructure failures; (5) natural disasters (such as earthquakes, floods or storms); or (6) other causes (such as regional economic downturns, pandemics, political instability, terrorism, or acts of war), could result in delayed deliveries, manufacturing inefficiencies, increased costs or order cancellations. Moreover, if actual demand for our products is different than expected, we may purchase more/fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. Any or all of these factors could materially and adversely affect our business, financial condition and results of operations.

Unfavorable global economic conditions, including as a result of health and safety concerns, could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from the outbreak of COVID-19. The outbreak in China has resulted in the temporary closures of factories as mandated by the provincial governments in various provinces of China from late January to March, which has adversely affected our ability to supply equipment, services and related products to our customers. Due to the Chinese factories’ shutdowns and traffic restrictions during the outbreak in China and potential shutdowns and traffic restrictions in the countries where our suppliers are located, our supply chain and business operations of our suppliers may be affected. Disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, could have adverse ripple effects on our manufacturing output and delivery schedule. We also face difficulties in collecting our accounts receivables due to the effects of COVID-19 on our customers and risk gaining a large amount of bad debt. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate.

Although China has already begun to recover from the outbreak of COVID-19, the epidemic continues to spread on a global scale and there is the risk of the epidemic returning to China in the future, thereby causing further business interruption. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. If our future sales continue to decline significantly, we may risk facing bankruptcy due to our recurring fixed expenses. The extent to which COVID-19 impacts our results will depend on many factors and future developments, including new information about COVID-19 and any new government regulations which may emerge to contain the virus, among others.

We may not be able to effectively manage our growth, which may harm our profitability.


Our strategy envisions expanding our business. If we fail to effectively manage our growth, our financial results could be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand our business development capabilities, our systems and processes and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We cannot assure you that we will be able to:

 

meet our capital needs;

 

expand our systems effectively or efficiently or in a timely manner;

 

allocate our human resources optimally;

 

identify and hire qualified employees or retain valued employees; or

 

incorporate effectively the components of any business that we may acquire in our effort to achieve growth.

If we are unable to manage our growth, our operations and our financial results could be adversely affected by inefficiency, which could diminish our profitability.

Loss of Sheng-Peir Yang, our Chief Executive Officer, could impair our ability to operate.

If we lose our key employee, Sheng-Peir Yang, our Chief Executive Officer, our business could suffer. Our success is highly dependent on our ability to attract and retain qualified technical and management personnel. We are highly dependent on our management. Mr. Yang has an employment agreement with the Company. However, the loss of Mr. Yang's services could have a material adverse effect on our operations. If we were to lose this individual, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies. We do not have key-man life insurance in place for any person working for us.

Our management team does not have extensive experience in public company matters, which could impair our ability to comply with legal and regulatory requirements.

Our management team has had limited public company management experience or responsibilities. This could impair our ability to comply with legal and regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws including filing required reports and other information required on a timely basis. There can be no assurance that our management will be able to implement and effect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

RISKS RELATED TO OUR COMMON STOCK

There has been a limited trading market for our common stock. There is no assurance of an established public trading market, which would adversely affect the ability of our investors to sell their securities in the public markets.

It is anticipated that there will continue to be a limited trading market for the Company's common stock, quoted on the OTCQB. The lack of an active public market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active public market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration.


You may have difficulty trading and obtaining quotations for our common stock.

The common stock may not be actively traded, and the bid and asked prices for our common stock quoted on the OTCQB may fluctuate widely. As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the liquidity of the common stock, and would likely reduce the market price of our common stock and hamper our ability to raise additional capital.

The market price of our common stock may, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:

 

dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we may make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;

 

announcements of new acquisitions, discoveries or other business initiatives by our competitors;

 

our ability to take advantage of new acquisitions, discoveries or other business initiatives;

 

quarterly variations in our revenues and operating expenses;

 

changes in the valuation of similarly situated companies, both in our industry and in other industries;

 

changes in analysts' estimates affecting the Company, our competitors and/or our industry;

 

changes in the accounting methods used in or otherwise affecting our industry;

 

additions and departures of key personnel;

 

fluctuations in interest rates and the availability of capital in the capital markets; and

 

significant sales of our common stock, including sales by the investors and/or future investors in future offerings we expect to make to raise additional capital.

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and/or our results of operations and financial condition.

We do not expect to pay dividends in the foreseeable future.

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in the common stock.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

Our internal controls over financial reporting, while they appear to be sufficient for our needs, may have weaknesses and conditions that will need to be addressed, the disclosure of which may have an adverse impact on the price of our common stock. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or operating results. In addition, management's assessment of our internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal controls over financial reporting or disclosure of management's assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.


We are controlled by current officers, directors and principal stockholders.

Our directors, executive officers and principal stockholders and their affiliates beneficially own approximately 90% of the outstanding shares of our common stock. So long as our directors, executive officers and principal stockholders and their affiliates control a majority of our fully diluted equity, they will continue to have the ability to elect our directors and determine the outcome of votes by our stockholders on corporate matters, including mergers, sales of all or substantially all of our assets, charter amendments and other matters requiring stockholder approval.

This controlling interest may have a negative impact on the market price of our common stock by discouraging third-party investors.

Applicable SEC rules governing the trading of "penny stocks" limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.

Shares of common stock may be considered a "penny stock" and be subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such stock.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal executive offices are located at Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1, Luchu District, Taoyuan City 338, Taiwan and No.92, Bagu Rd., Luchu District, Taoyuan City 338, Taiwan.

Omphalos does not own any real property. The Company leases an office and a warehouse from the wife of our sole director, Mr. Yang. The office maintains administration and sales facilities and the warehouse maintains inventory. The locations of the office and warehouse are Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1, Luchu District, Taoyuan City, 338Taiwan and No.92, Bagu Rd., Luchu District, Taoyuan City 338, Taiwan, respectively. The office space is approximately 3,700 square feet, and the warehouse space is approximately 3,334 square feet.

Generally, Omphalos maintains short-term leases for its office and warehouse, with options to renew, where possible. The terms of the lease for office and warehouse have been extended to January 31, 2022 and October 1, 2020, respectively. The Company paid a monthly rent of approximately $2,783 for the periods ended December 31, 2019 and 2018. Accordingly, rent expense under the office and warehouse lease agreements amounted to approximately $33,396 and $34,300 for the periods ended December 31, 2019 and 2018, respectively.

Item 3. Legal Proceedings.

None


Item 4. [Removed and Reserved.]

PART II

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

Our common stock is quoted on the OTCQB under the trading symbol "OMPS."

The following table sets forth, for the period indicated, the range of the high and low sales prices of our common stock, as reported by the OTCQB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

Year Ended December 31,                                
            First     Second     Third     Fourth  
                                 
2019     High   $ *   $ 0.045   $ 0.065   $ 0.06  
      Low   $ *   $ 0.045   $ 0.065   $ 0.035  
                                 
2018     High   $ *   $ 0.045   $ *   $ *  
      Low   $ *   $ 0.045   $ *   $ *  
                                 
2017     High   $ 0.10   $ *   $ 0.10   $ 0.045  
      Low   $ 0.10   $ *   $ 0.10   $ 0.045  

*no public trading volume

There were approximately 72 common stock holders of record of our common stock as of March 30, 2020.

Although we paid dividends on our common stock in 2008 totaling $175,260, or approximately $0.00583 per share, we paid no dividends on our common stock in 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 or 2019. We do not have a policy of paying regular dividends and do not expect to pay any dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings for our business. The payment of any future dividends on our common stock will be determined by our Board of Directors and will depend on business conditions, our financial earnings and other factors.

Recent Transactions Involving Unregistered Securities

None

Item 6. Selected Financial Data.

Not applicable.

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

Forward Looking Statements

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



 

1.

Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

 

 

 

 

2.

Our ability to generate customer demand for our services;

 

 

 

 

3.

The intensity of competition; and

 

 

 

 

4.

General economic conditions.

All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements. This MD&A should also be read in conjunction with the Item 1.A. "Risk Factors."

Overview

The Company, through Omphalos Corp. - Taiwan, is in the business of supplying a wide range of equipment and parts including reflow soldering ovens and Automated Optical Inspection (AOI) machines to printed circuit board (PCB) manufacturers in Taiwan and China. The clients are mainly Taiwanese and Chinese electronics manufacturing companies, including EPCiS Technology Co., Ltd., Delta Electronics (Jiangsu) Ltd., and Wistron Corporation.

The major equipment manufacturer Omphalos represents is TAMURA, which has complete technical support licensed from the original manufacturers.

The Company operates in an industry characterized by rapid technological changes. It will need additional investments to complete the development and improvement necessary for the development and production of the testing equipment and parts for PCB assembly processes.

The Company's business strategy is to increase its market share by expanding into other industries. Since PCB has a vast application range, the Company is currently researching and developing many additional uses for testing equipment and parts.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Basis of Consolidation - The consolidated financial statements include the accounts of Omphalos Corp. and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated.

Going Concern - The Company has incurred net losses during the past two years and had an accumulated deficit of $2,447,010 and $2,220,140 as of December 31, 2019 and 2018, respectively. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business. This presentation presumes funds will be available to finance ongoing research and development, operations and capital expenditures and permit the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.


There can be no assurances that there will be adequate financing available to the Company and the 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 outcome of this uncertainty.

The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: (1) Tightly budgeting and controlling all expenses; (2) Expanding product lines and recruiting a strong sales team to significantly increase sales revenue and profit; (3) The Company plans to continue actively seeing additional funding opportunities to improve and expand upon its product lines.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

Accounts Receivable - Accounts receivable are carried at original invoice amount less estimates made for doubtful receivables. Management determines the allowance for doubtful accounts on a quarterly basis based on a review of the current status of existing receivables, account aging, historical collection experience, subsequent collections, management's evaluation of the effect of existing economic conditions, and other known factors. The provision is provided for the above estimates made for all doubtful receivables. Account balances are charged off against the allowance only when the Company considers it is probable that a receivable will not be recovered. Recoveries of trade receivables previously written off are recorded when received. Allowance for doubtful debts amounted to $0 as of December 31, 2019 and 2018, respectively.

Inventory - Inventory is carried at the lower of cost or market. Cost is determined by using the specific identification method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and charges to operations for known and anticipated inventory obsolescence. Inventory consists substantially of finished goods. Allowance for slow-moving inventory amounted to $414,498 and $436,409 at December 31, 2019 and 2018, respectively.

Property and Equipment - Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets as follows:

Furniture and fixtures

 

3 years

 

Machinery and equipment

 

3 to 5 years

 

Leasehold improvements

 

55 years

 

Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in the statement of income for the period. The accumulated depreciation was $97,751 and $121,865 at December 31, 2019 and 2018, respectively. Depreciation expense was $864 and $2,687 for the years ended December 31, 2019 and 2018, respectively.


Intangible Assets - Include cost of patent applications that are deferred and charged to operations over their useful lives. The accumulated amortization is $40,938 and $36,778 at December 31, 2019 and 2018, respectively. Amortization expense was $3,237 and $3,316 for the years ended December 31, 2019 and 2018, respectively.

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

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

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

Merchandise Sales: The Company recognizes net revenues from machinery product sales when customers obtain control of the Company's products, which typically occurs upon delivery to customer. Product revenues are recorded at the net sales price, or "transaction price," which includes applicable reserves for variable consideration, including discounts, allowances, and returns.

Trade discount and allowances: The Company generally provides invoice discounts on product sales to its customers for prompt payment. The Company estimates that, based on its experience, its customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

Product returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. For special ordered and customized machinery, no sales returns were allowed.


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

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

Revenue by Major Products

    For the year ended  
    December 31, 2019     December 31, 2018  
Laser Machine $ 129,460   $ 439,972  
Machine Parts   56,839     87,661  
Total $ 186,299   $ 527,633  

Revenue by Geography

    For the year ended  
    December 31, 2019     December 31, 2018  
Asia Pacific $ 186,299   $ 527,633  
Total $ 186,299   $ 527,633  

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

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

Practical
Expedient

Description

Reassessment of expired or existing contracts

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

Use of hindsight

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

Reassessment of existing or expired land easements

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

Separation of lease and non- lease components

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

Short-term lease recognition exemption

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

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


The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months as of January 1, 2019. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, unamortized lease incentives provided by lessors, and restructuring liabilities.

The adoption of ASC 842 had a substantial impact on the Company's consolidated balance sheets. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, adoption of this standard resulted in the recognition of operating lease right-of-use assets of $85,704 and operating lease liabilities of $85,704 comprised of $33,019 of current operating lease liabilities and $52,685 of non-current operating lease liabilities on the consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit.

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

Research and Development Expenses - Research and development costs are generally expensed as incurred. The Company did not incur any significant research and development expenses during the years ended December 31, 2019 and 2018.

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

Loss Per Share - The Company has adopted Accounting Standards Codification subtopic 260-10, Earnings Per Share ("ASC 260-10") which specifies the computation, presentation and disclosure requirements of earnings per share information. Basic earnings per share have been calculated based upon the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of the diluted loss per share if their effect would be anti-dilutive. For the years ended December 31, 2019 and 2018, the Company did not have any common equivalent shares.

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



 

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

 

 

 

 

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

 

 

 

 

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

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, prepaid expenses, accounts payable, accrued liabilities, and due to related parties, approximate to fair value due to their relatively short maturities. The carrying amounts of the Company's long-term debt approximate to their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms.

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

Statement of cash flows - Cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Translation Adjustment - The accounts of the Company were maintained, and its financial statements were expressed, in New Taiwan Dollar ("NTD"). Such financial statements were translated into U.S. Dollars ("$" or "USD") in accordance ASC 830, "Foreign Currency Matters", with the NTD as the functional currency. According to the financial statements, all assets and liabilities are translated at the current exchange rate, stockholders' equity (deficit) are translated at the historical rates, and income statement items are translated at an average exchange rate for the period.

Comprehensive Income (Loss) - Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders' equity and statements of operations and comprehensive income (loss).

Reclassifications - Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.

Recently Issued Accounting Pronouncements

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


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

Results of Operations

The following table presents the consolidated results of the Company for the years ended December 31, 2019 and 2018.

      Years ended December 31,     Change in
      2019     2018     $   %
Net sales   $ 186,299   $ 527,633   $ (341,334 ) (64.7 )%
Cost of sales     132,286     308,996     (176,710 ) (57.2 )%
Gross profit     54,013     218,637     (164,624 ) (75.3 )%
Selling, general and administrative expenses     261,361     386,626     (125,265 ) (32.4 )%
Loss from operations     (207,348 )   (167,989 )   (39,359 ) 23.4 %
Other expenses, net     (19,522 )   (23,829 )   4,307   (18.1 )%
Loss before provision for income tax     (226,870 )   (191,818 )   (35,052 ) 18.3 %
Provision for income taxes     -     -     -   -
Net Loss   $ (226,870 ) $ (191,818 ) $ (35,052 ) 18.3 %

Net Sales: Net sales were $186,299 for the year ended December 31, 2019, compared to $527,633 for the year ended December 31, 2018, representing a decrease of $341,334, or 64.7%. Net sales from our laser machine sold were $129,460 and $439,972 for the years ended December 31, 2019 and 2018, respectively. Net sales from our service rendered to customers and parts sold were $56,839 and $87,661 for the years ended December 31, 2019 and 2018, respectively. The decrease in sales was primarily a result of the decrease in the selling quantity of laser machine. Due to the highly competitive market, we sold two pieces and eight pieces of reflow soldering ovens and automated optical inspection machines and laser marking system to printed circuit board (PCB) manufacturers during the years ended December 31, 2019 and 2018, respectively.

Cost of Sales: Cost of sales was $132,286 for the year ended December 31, 2019, as compared to $308,996 for the year ended December 31, 2018, representing a decrease of $176,710, or 57.2%. The decrease in cost of sales during the year ended December 31, 2019 was mainly attributable to the decrease in sales as compared to 2018.

Gross Margin: Gross profit was $54,013 for the year ended December 31, 2019, compared to $218,637 for the year ended December 31, 2018, representing a decrease of $164,624, or 75.3%. Gross profit as a percent of net sales was 29.0% in 2019, compared to 41.4% in 2018. The decrease in gross profit percentage was because we sold automated optical inspection machines with lower margins during the year ended December 31, 2019.

Selling, General and Administrative Expenses: Selling, general and administrative expenses were $261,361 or 140.3% of net sales, for the year ended December 31, 2019, as compared to $386,626 or 73.3% of net sales for the year ended December 31, 2018, representing a decrease of $125,265 or 32.4%. The decrease in selling, general and administrative expenses was primarily due to the decreases in payroll expenses, insurance expenses, traveling expenses, and commission expenses, partially offset by the increase in professional expenses.


Loss from Operations: Loss from operations has increased by $39,359, or 23.4% to $207,348 for the year ended December 31, 2019 from $167,989 for the year ended December 31, 2018. The increase in loss from operations for the year ended December 31, 2019, compared with loss from operations for the year ended December 31, 2018, was a result of the decrease in net sales.

Other Expenses, net: Other expenses, net was $19,522 for the year ended December 31, 2019, as compared to $23,829 for the year ended December 31, 2018. This change was primarily attributable to the increase in gain on disposal of fixed assets during the year ended December 31, 2019.

Net Loss: Net loss was $226,870 for the year ended December 31, 2019, as compared to $191,818 for the year ended December 31, 2018. The increase in net loss was due to the reasons described above.

Liquidity and Capital Resources

Our consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses during the past two years and had an accumulated deficit of $2,447,010 and $2,220,140 as of December 31, 2019 and 2018, respectively. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business. This presentation presumes funds will be available to finance ongoing research and development, operations and capital expenditures and permit the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.

There can be no assurances that there will be adequate financing available to the Company and the 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 outcome of this uncertainty. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until it becomes profitable. If we are unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Management's Plan to Continue as a Going Concern

The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: (1) Tightly budgeting and controlling all expenses; (2) Expanding product lines and recruiting a strong sales team to significantly increase sales revenue and profit; (3) The Company plans to continue actively seeking additional funding opportunities to improve and expand upon its product lines.

Our principal sources of liquidity are cash and cash equivalents, and cash flow from operations. As of December 31, 2019, we had working capital deficit of $1,048,555 as compared to working capital deficit of $1,097,896 as of December 31, 2018. Our cash and cash equivalent have decreased from $55,499 at December 31, 2018 to $4,596 at December 31, 2019.



    For the  
    Years Ended  
    December 31,  
    2019     2018  
Net cash provided by (used in) operating activities $ (63,531 ) $ 33,693  
Net cash provided by investing activities   12,961     -  
Net cash provided by (used in) financing activities   -     -  
Effect of exchange rate change on cash and cash equivalents   (333 )   (1,245 )
Net (decrease) increase in cash and cash equivalents $ (50,903 ) $ 32,448  

Net cash flow used in operating activities was $63,531 during the year ended December 31, 2019, as compared to net cash flow provided by operating activities of $33,693 during the year ended December 31, 2018. The decrease of $97,224 of cash provided by operating activities was primarily due to the increase in net loss and the decrease in due to related parties for working capital purpose, partially offset by the decrease in prepaid and other assets and the increase in accrued expenses during the year ended December 31, 2019.

Net cash provided by investing activities was $12,961 and $0 during the years ended December 31, 2019 and 2018, respectively.

The Company did not have any cash flow used in or provided by financing activities during the years ended December 31, 2019 and 2018.

In light of the significant decreases in our net sales over the past fiscal year and current uncertain market and economic conditions, we are aggressively managing our cost structure and cash position to ensure that we will meet our financial obligations while preserving the ability to make investments that will enable us to respond to customer requirements and achieve long-term profitable growth. We currently believe that our cash and cash equivalents, working capital, and cash generated from operations, will be sufficient to meet our forecasted operating expenses and capital expenditures through 2020.

Capital Expenditures

Total capital expenditures during the years ended December 31, 2019 and 2018 were $0.

Currency Exchange Fluctuations

Translation Adjustment - The accounts of the Company were maintained, and its financial statements were expressed, in New Taiwan Dollar ("NTD"). Such financial statements were translated into U.S. Dollars ("$" or "USD") in accordance ASC 830, "Foreign Currency Matters", with the NTD as the functional currency. According to the financial statements, all assets and liabilities are translated at the current exchange rate, stockholders' equity (deficit) are translated at the historical rates, and income statement items are translated at an average exchange rate for the period.

As of December 31, 2019 and December 31, 2018 the exchange rates between the NTD and the USD ($) were NTD1=$0.0334 and NTD1=$0.03267, respectively. The weighted-average rates of exchange between NTD and USD were NTD1=$0.0324 and NTD1=$0.03319 for the years ended December 31, 2019 and December 31, 2018, respectively. Total translation adjustment recognized as of December 31, 2019 and December 31, 2018 is $472,669 and $516,668, respectively.

Inflation

Our opinion is that inflation has not had, and is not expected to have, a material effect on our operations.


Climate Change

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as of December 31, 2019 and December 31, 2018.

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

We are a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K and are not required to provide information under this item.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements of Omphalos, Corp, including the notes thereto, together with the report thereon of KCCW Accountancy Corp. is presented beginning at page F-1.

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

None.

Item 9A. Controls and Procedures.

Management's Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of our "disclosure controls and procedures" ("Disclosure Controls"), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of December 31, 2018, the end of the year covered by this annual report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, who is the same person and our sole employee. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer concluded that, due to our limited internal audit function and our very limited staff, our disclosure controls were not effective as of December 31, 2018, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the chief executive officer/chief financial officer, as appropriate to allow timely decisions regarding disclosure. This Annual Report does not include an attestation report of the Company's registered accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC.

Management's Report of Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"). In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2019, management identified material weaknesses related to (i) our internal audit functions (ii) inadequate levels of review of the financial statements, (iii) a lack of segregation of duties within accounting functions and (iv) the absence of any independent directors. Therefore, our internal controls over financial reporting were not effective as of December 31, 2019.


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

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

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

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

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

Changes in Internal Control Over Financial Reporting

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

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Offices and Corporate Governance. Directors and Executive Officers

                                    Name

 

Age

 

                            Position

Sheng-Peir Yang

 

63

 

President, CEO, and Sole Director

Pi-Yun Chu

 

49

 

Chief Financial Officer


Shen-Peir Yang, President, Chief Executive Officer and Director

Mr. Yang is the Company's sole director. He has been President and Chief Executive Officer of Omphalos since 1991. He holds a degree in Mechanical Engineering from National Taipei University of Technology. Having run the Company's business for almost 20 years, he is very well-qualified, having extensive knowledge of the performance of our business in a variety of economic cycles, to effectively manage our operations during these challenging economic times.

Pi-Yun Chu, Chief Financial Officer

Ms. Yun has been with Omphalos since 2000. During that time she functioned in various accounting related positions. She was appointed our Chief Financial Officer in October 2007. Ms. Yun has done extensive accounting coursework. Our director and officers hold office until the earlier of their resignation, or removal or until their successors have been duly elected and qualified.

There are no family relationships among our director or executive officers.

To our knowledge, during the last ten years, none of our director and executive officers (including those of our subsidiaries) been subject to any of the following:

 

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

 

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

 

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


 

(i)

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

 

 

 

 

(ii)

Engaging in any type of business practice; or

 

 

 

 

(iii)

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


 

The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this item, or to be associated with persons engaged in any such activity;

 

 

 

 

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

 

 

 

 

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

 

 

 




 

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


 

(i)

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

 

   

 

(ii)

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

 

   

 

(iii)

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


 

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

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

The Company is not aware of any securities transaction during the fiscal year ended December 31, 2019, or subsequent thereto what would require a filing pursuant to Section 16 of the Exchange Act of 1934, as amended.

Audit Committee Financial Expert

Our current director acts as our audit committee. The current director was elected President in connection with the merger and is not independent. By virtue of his education, business experience and specific experience with the financial reports for the Company, Mr. Sheng-Peir Yang satisfies the requirements for service as an audit committee financial expert, except for his position as the Company's President, which disqualifies him as an "independent" director, as the term is used in Item 407 of Regulation S-K. An informal search is under way to identify a suitable candidate for service on the Board of Directors as an independent director who would be qualified as an audit committee financial expert.

Audit Committee

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

Limitation on Liability and Indemnification of Directors and Officers

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

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


Code of Ethics

We have not as yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as we have had only to executive officers and we have not been able to establish a process for auditing compliance or reporting noncompliance. We plan to adopt a code of ethics as independent directors are added to the Board of Directors and additional executive officers are engaged by the Company, when it will be in a better position to implement a process for assuring continued compliance with such code of ethics, at which time, it will be available in print to any person who requests it and on our website, when our website is completed. Any amendments and waivers to the code will also be available in print and on our website.

Item 11. Executive Compensation.

SUMMARY COMPENSATION TABLE

                                    Non-              
                                    qualified              
                                    Deferred              
                              Non-Equity     Compen-     All other        
Name and                 Stock     Option     Incentive     sation     compen-        
principal     Salary     Bonus     Awards     Awards     Plan     Earnings     sation     Total  
position Year   ($)     ($)     ($)     ($)     ($)     ($)     ($)     ($)  
Sheng-Peir                                                  
Yang 2019 $ 18,039     -     -     -     -     -     -   $ 18,039  
CEO and 2018 $ 19,945     -     -     -     -     -     -   $ 19,945  
President 2017 $ 22,594     -     -     -     -     -     -   $ 22,594  
                                                   
Pi-Yun Chu 2019 $ 11,163     -     -     -     -     -     -   $ 11,163  
CFO 2018 $ 10,993     -     -     -     -     -     -   $ 10,993  
  2017 $ 14,526     -     -           -     -     -   $ 14,526  

We have entered into the following employment agreements:

 

Sheng-Peir Yang entered into an employment agreement with Omphalos on November 30, 2007, to serve as its Chief Executive Officer for a term of two (2) years at a monthly salary of New Taiwan Dollars ("NTD") 185,000(equivalent to $6,185). Effective on February 1, 2017, Mr. Yang agreed to reduce his monthly salary to NTD45,800, equivalent to $1,531. Mr. Yang is required to comply with the non- competition provision contained within the employment agreement. Either party, with proper notice, may terminate the employment agreement, and the employment agreement will be governed and construed by the laws of Taiwan. The agreement has renewed annually and remains in effect.

 

Pi-Yun Chu entered into an employment agreement with Omphalos on November 30, 2007, to serve as its Chief Financial Officer for a term of two (2) years at a monthly salary of NTD55,200 (equivalent to $1,845). Effective on May 1, 2017, Ms. Chu agreed to reduce her monthly salary to NTD27,600, equivalent to $923. Ms. Chu is required to comply with the non-competition provision contained within the employment agreement. Either party, with proper notice, may terminate the employment agreement, and the employment agreement will be governed and construed by the laws of Taiwan. The agreement has renewed annually and remains in effect.


Outstanding Equity Awards at Fiscal Year-End

As of our fiscal years ended December 31, 2019 and 2018, we did not have any stock option plan or stock incentive plan and there were no outstanding equity awards as of our fiscal years ended December 31, 2019 and 2018. No equity awards were granted during the year ended December 31, 2019.

COMPENSATION OF DIRECTORS

Our Director did not receive compensation for services as a director. Our director did not receive any reimbursement for travel or other expenses incurred in connection with attending meetings of the board and its committees, if any.

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth the number of shares of common stock beneficially owned as of March 30, 2020 by (i) those persons or groups known to us to beneficially own more than 5% of our common stock; (ii) each director; (iii) each executive officer; and (iv) all directors and executive officers as a group. The information is determined in accordance with Rule 13d-3 promulgated under the Exchange Act based upon information furnished by persons listed or contained in filings made by them with the SEC or by information provided by such persons directly to us. Except as indicated below, each of the stockholders listed below possesses sole voting and investment power with respect to their shares and the address of each person is c/o Omphalos, Corp.

              Percentage of  
        Common Stock     Common Stock  
        Beneficially     Beneficially  
Name of Beneficial Owner       Owned     Owned (1)  
Sheng-Peir Yang       103,449,162     89.9%  
                 
Pi-Yun Chu       683,302     0.6%*  
                 
All officers and directors as a group (2 persons)       104,132,464     90.5%  

* Denotes less than 1%

Beneficial ownership percentages give effect to the completion of the Share Exchange, and are calculated based on shares of common stock issued and outstanding and is based on a total of 115,063,760 shares of common stock that were issued and outstanding as of March 30, 2020. Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act. The number of shares beneficially owned by a person includes shares of common stock underlying options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 30, 2020. The shares issuable pursuant to the exercise of those options or warrants are deemed outstanding for computing the percentage ownership of the person holding those options and warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite that person's name, subject to community property laws, where applicable, unless otherwise noted in the applicable footnote.

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

Our sole director, Mr. Yang, is a named executive officer of the Company and, accordingly, is not "independent" for purposes of any securities market requirements.

Omphalos does not own any real property. The Company leases an office from the wife of our sole director, Mr. Yang. The annual rent of NT$672,000 (NT$56,000 monthly), is approximately US$21,744.


Item 14. Principal Accounting Fees and Services.

Summary of Principal Accounting Fees for Professional Services Rendered

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

    Year     Year  
    Ended     Ended  
    December     December  
    31, 2019     31, 2018  
             
Audit Fees $ 31,000   $ 31,000  
Audit-Related Fees   -     -  
Tax Fees   -     -  
All Other Fees   -     -  
  $ 31,000   $ 31,000  

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

We do not have an independent audit committee and the full Board of Directors, therefore, serves as the audit committee for all purposes relating to communication with our auditors and responsibility for our audit. All engagements for audit services, audit- related services and tax services are approved in advance by our full Board of Directors. Our Board of Directors has considered whether the provision of the services described above for the fiscal year ended December 31, 2019, is compatible with maintaining the auditor's independence.

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

Item 15. Exhibits, Financial Statement Schedules.

1.

Financial Statements: See "Index to Consolidated Financial Statements" in Part II, Item 8 of the Form 10-K.

 

 

2.

Financial Statement Schedule: Schedules are included in the Consolidated Financial Statements or notes of this Form 10-K or are not required.

 

 

3.

Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K.




Exhibit Number

 

Description

2.1

 

Share Exchange Agreement dated February 5, 2008, between the Company and the parties set forth on the signature page thereof, incorporated by reference to Exhibit 2.1 to the Company’s current report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on February 11, 2008.

3.1

 

Certificate of Incorporation of the Company (incorporated by reference to the Company's proxy statement on Schedule 14A filed with the Commission on March 5, 2003 (the "Proxy Statement").

3.2

 

Articles of Amendment to the Articles of Incorporation of the Company (incorporated by reference to the Proxy Statement).

3.3

 

Agreement and Plan of Merger between Quixit, Inc., a Colorado corporation, and TOP Group Corporation (now known as SOYODO Group Holdings, Inc.), a Delaware corporation (incorporated by reference to the Proxy Statement).

3.4

 

By-Laws of the Company (incorporated by reference to the ProxyStatement).

3.5

 

Amended and Restated Certificate of Incorporation of the Company Incorporated by reference to the information statement on Schedule 14c filed with the SEC on March 15, 2005).

3.6

 

Articles of Amendment to the Articles of Incorporation of the Company (incorporated by reference to the information statement on Schedule 14C filed with SEC on August 26, 2005).

3.7

 

Amended and Restated By-Laws of Omphalos, Corp., incorporated by reference to Exhibit 3.7 of the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2009.

10.1

 

Employment Agreement with Pi-Yun Chu, incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K/A, filed with the SEC on February 20, 2008.

10.2

 

Employment Agreement with Shen-Ren Li, incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K/A, filed with the SEC on February 20, 2008.

10.3

 

Employment Agreement with Sheng-Peir Yang, , incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K/A, filed with the SEC on February 20, 2008.

10.4

 

Purchase and Sale Agreement with Tamura Corporation, incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 29, 2011.

10.5

 

Lease Agreement for property, incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 29, 2011.

10.6

 

Debt Conversion Agreement dated November 30, 2018 by and among Omphalos, Corp., Sheng-Peir Yang, Omphalos Corp. (Taiwan), and All Fine Technology Co., Ltd. (Taiwan), incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K, filed with the SEC on January 4, 2019.

21

 

List of Subsidiaries, incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 29, 2011.

31.1

 

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002++

31.2

 

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002++

32.1

 

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

32.2

 

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

101.INS  
101.SCH  
101.CAL  
101.DEF  
101.LAB  
101.PRE  

++filed herewith


SIGNATURES

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

   

Omphalos, Corp.

     

Dated: March 30, 2020

By:

/s/ Sheng-Peir Yang

   

Sheng-Peir Yang

   

Chief Executive Officer

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

                                    Name

 

Title

 

Date

 

 

 

 

 
/s/Sheng-Peir Yang

 

Chief Executive Officer and

 

March 30, 2020

 

 

Director (Principal Executive Officer)

 

 

Sheng-Peir Yang

 

 

 

 
 

 

 

 

 

/s/Pi-Yun Chu

 

Chief Financial Officer (Principal

 

 
 

 

Financial and Accounting Officer)

 

March 30, 2020

Pi-Yun Chu

 

 

 

 


OMPHALOS, CORP.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2019 AND 2018 AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONTENTS

  Page
   
Report of Independent Registered Public Accounting Firm 1
   
Consolidated Balance Sheets 2
   
Consolidated Statements of Operations and Comprehensive Income (Loss) 3
   
Consolidated Statements of Change in Stockholders' Equity 4
   
Consolidated Statements of Cash Flows 5
   
Notes to Consolidated Financial Statements 6- 15


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Omphalos Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Omphalos Corp. and its subsidiaries ( "the Company") as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with the U.S. generally accepted accounting principles.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that Omphalos Corp. will continue as a going concern. As described in Note 1 to the consolidated financial statements, the Company has incurred recurring losses from operations, has a working capital deficit, and is in need of additional capital to grow its operations so that it can become profitable. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with regard to these matters are described in Note 1. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Change in Accounting Principle

As discussed in Note 1 and 6 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

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

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

/s/ KCCW Accountancy Corp.

We have served as the Company's auditor since 2008.
Diamond Bar, California
March 30, 2020


OMPHALOS, CORP.
CONSOLIDATED BALANCE SHEETS

    December 31,     December 31,  
    2019     2018  
Assets            
             
Current assets            
          Cash and cash equivalents $ 4,596   $ 55,499  
          Accounts receivable, net   3,268     16,918  
          Inventory, net   64,358     86,708  
          Prepaid and other current assets   23,684     40,776  
                  Total current assets   95,906     199,901  
             
Leasehold improvements and equipment, net   453     4,153  
Operating lease right-of-use assets   56,127     -  
Intangible assets, net   10,011     13,056  
Deposits   2,844     2,782  
                                                    Total Assets $ 165,341   $ 219,892  
             
Liabilities and Stockholders' Equity            
Current liabilities            
          Accounts payable $ 20,915   $ 17,268  
          Accrued salaries and bonus   11,924     6,468  
          Accrued expenses   31,659     31,167  
          Advance from customers   -     744  
          Due to related parties   881,527     752,113  
          Loan from shareholders - current portion   167,000     490,037  
          Operating lease liability - current portion   31,436     -  
                  Total current liabilities   1,144,461     1,297,797  
             
Non-current liabilities            
          Loan from shareholders, less current portion   835,000     490,037  
          Operating lease liability, less current portion   24,691     -  
                  Total liabilities   2,004,152     1,787,834  
             
Stockholders' deficit            
Common stock, $0.0001 par value, 120,000,000 shares
            authorized, 115,063,760 shares issued and outstanding as of
            December 31, 2019 and 2018
  11,507     11,507  
          Additional paid-in capital   124,023     124,023  
          Accumulated other comprehensive income   472,669     516,668  
          Accumulated deficit   (2,447,010 )   (2,220,140 )
                                            Total stockholders' deficit   (1,838,811 )   (1,567,942 )
             
                                                    Total Liabilities and Stockholders' Deficit $ 165,341   $ 219,892  

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


OMPHALOS, CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

    2019     2018  
             
Sales, net $ 186,299   $ 527,633  
             
Cost of sales   132,286     308,996  
             
Gross profit   54,013     218,637  
             
Selling, general and administrative expenses   261,361     386,626  
             
Loss from operations   (207,348 )   (167,989 )
             
Other income (expenses)            
          Interest income   62     175  
          Interest expense   (29,160 )   (29,871 )
          Gain (loss) on foreign currency exchange   (571 )   5,867  
          Gain on disposal of fixed asset   10,147     -  
                            Total other income (expenses)   (19,522 )   (23,829 )
             
Loss before provision for income taxes   (226,870 )   (191,818 )
             
Provision for income taxes         -  
             
Net loss $ (226,870 ) $ (191,818 )
Weighted average number of common shares:            
          Basic and diluted   115,063,760     37,515,814  
             
Net loss per share:            
          Basic and diluted $ (0.00 ) $ (0.01 )
             
Other Comprehensive Loss:            
Net loss $ (226,870 ) $ (191,818 )
Foreign currency translation adjustment, net of tax   (43,999 )   50,946  
Comprehensive Loss $ (270,869 ) $ (140,872 )

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


OMPHALOS, CORP.
CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

      Common Stock     Additional     Accumulated     Accumulated Other
Comprehensive
       
      Shares     Amount     Paid-in Capital     Deficit     Income     Total  
                                       
Balance at December 31, 2017     30,063,760   $ 3,007   $ 47,523   $ (2,028,322 ) $ 465,722   $ (1,512,070 )
  Debt conversion     85,000,000     8,500     76,500     -     -     85,000  
  Translation adjustment     -     -     -     -     50,946     50,946  
  Net loss     -     -     -     (191,818 )   -     (191,818 )
Balance at December 31, 2018     115,063,760   $ 11,507   $ 124,023   $ (2,220,140 ) $ 516,668   $ (1,567,942 )
  Translation adjustment     -     -     -     -     (43,999 )   (43,999 )
  Net loss     -     -     -     (226,870 )   -     (226,870 )
Balance at December 31, 2019     115,063,760   $ 11,507   $ 124,023   $ (2,447,010 ) $ 472,669   $ (1,838,811 )

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


OMPHALOS, CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

    2019     2018  
Cash flows from operating activities            
          Net loss $ (226,870 ) $ (191,818 )
          Adjustments to reconcile net income to net cash used in operating
activities:
           
          Amortization and depreciation   4,101     6,003  
          Gain on disposal of fixed assets   (10,147 )   -  
          Changes in assets and liabilities:            
                    Decrease in accounts receivable   13,609     26,299  
                    Decrease in inventory   23,563     28,459  
                    Decrease (increase) in prepaid and other assets   17,465     (20,030 )
                    Increase in accounts payable   3,163     433  
                    Increase (decrease) in accrued expenses   4,953     (22,604 )
                    (Decrease) increase in advance from customers   (738 )   756  
                    Increase in due to related parties   107,370     206,195  
                                Net cash (used in) provided by operating activities   (63,531 )   33,693  
             
Cash flows from investing activities            
          Proceeds from disposal of equipment   12,961     -  
                                Net cash provided by investing activities   12,961     -  
             
Effect of exchange rate changes on cash and cash equivalents   (333 )   (1,245 )
             
Net (decrease) increase in cash and cash equivalents   (50,903 )   32,448  
             
Cash and cash equivalents            
          Beginning   55,499     23,051  
          Ending $ 4,596   $ 55,499  
             
Supplemental disclosure of cash flows            
          Cash paid during the year for:            
          Interest expense $ 4,860   $ 27,382  
          Income tax $ -   $ -  
             
Non-cash financing and investing activities            
          Shareholder's debt conversion $ -   $ 85,000  

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


OMPHALOS, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - Omphalos Corp. was incorporated as TOP Group Holdings, Inc. under the laws of Delaware in March 2003 and later changed its name to Soyodo Group Holdings, Inc. (the "Soyodo") in August 2005. On February 5, 2008, Soyodo acquired the outstanding shares of Omphalos Corp. Omphalos Corp. (the "Omphalos BVI) was incorporated on October 30, 2001 under the laws of the British Virgin Islands. For accounting purposes, the acquisition was treated as a recapitalization of Omphalos BVI. Omphalos BVI owns 100% of Omphalos Corp. (Taiwan), All Fine Technology Co., Ltd. (Taiwan), and All Fine Technology Co., Ltd. (B.V.I.). Omphalos Corp. (Taiwan) was incorporated on February 13, 1991 under the laws of Republic of China. All Fine Technology Co., Ltd. (Taiwan) was incorporated on March 23, 2004 under the laws of Republic of China. All Fine Technology Co., Ltd. (B.V.I.) was incorporated on February 2, 2005 under the laws of the British Virgin Islands. Omphalos Corp. (B.V.I.) and its subsidiaries supplies a wide range of equipment and parts including reflow soldering ovens and automated optical inspection machines for printed circuit board (PCB) manufacturers in Taiwan and China.

Effective April 18, 2008 Soyodo entered into an Agreement and Plan of Merger (the "Merger Agreement") with Omphalos, Corp., a Nevada corporation. Pursuant to the Merger Agreement, Soyodo was merged with and into the surviving corporation, Omphalos Corp. The certificate of incorporation and bylaws of the surviving corporation became the certificate of incorporation and bylaws of the Company, and the directors and officers of Soyodo became the members of the board of directors and officers of the Company. Following the execution of the Merger Agreement, the Company filed a Certificate of Merger with the Secretary of State of Delaware and Nevada. Omphalos, Corp wasincorporated on April 15, 2008 under the laws of the state of Nevada. The main purpose of the merger is to change the company's name to Omphalos, Corp.

Basis of Consolidation- The consolidated financial statements include the accounts of Omphalos Corp. and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated.

Going Concern-The Company has incurred a net loss of $226,870 and $191,818 during the years ended December 31, 2019 and 2018, respectively. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business. This presentation presumes funds will be available to finance ongoing research and development, operations and capital expenditures and permit the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.

There can be no assurances that there will be adequate financing available to the Company and the 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 outcome of this uncertainty.

The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: (1) Tightly budgeting and controlling all expenses; (2) Expanding product lines and recruiting a strong sales team to significantly increase sales revenue and profit in 2019; (3) The Company plans to continue actively seeking additional funding opportunities to improve and expand upon its product lines.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


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

Accounts Receivable - Accounts receivables are carried at original invoice amount less estimates made for doubtful receivables. Management determines the allowance for doubtful accounts on a quarterly basis based on a review of the current status of existing receivables, account aging, historical collection experience, subsequent collections, management's evaluation of the effect of existing economic conditions, and other known factors. The provision is provided for the above estimates made for all doubtful receivables. Account balances are charged off against the allowance only when the Company considers it is probable that a receivable will not be recovered. Recoveries of trade receivables previously written off are recorded when received. Allowance for doubtful debts amounted to $0 as of December 31, 2019 and 2018.

Inventory - Inventory is carried at the lower of cost or market. Cost is determined by using the specific identification method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and charges to operations for known and anticipated inventory obsolescence. Inventory consists substantially of finished goods. Allowance for slow-moving inventory amounted to $414,498 and $436,409 at December 31, 2019 and 2018, respectively.

Property and Equipment - Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets as follows:

Furniture and fixtures

 

3 years

 

Machinery and equipment

 

3 to 5 years

 

Leasehold improvements

 

55 years

 

Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in the statement of income for the period.

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

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


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

Merchandise Sales: The Company recognizes net revenues from machinery product sales when customers obtain control of the Company's products, which typically occurs upon delivery to customer. Product revenues are recorded at the net sales price, or "transaction price," which includes applicable reserves for variable consideration, including discounts, allowances, and returns.

Trade discount and allowances: The Company generally provides invoice discounts on product sales to its customers for prompt payment. The Company estimates that, based on its experience, its customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

Product returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. For special ordered and customized machinery, no sales returns were allowed.

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

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

Revenue by Major Products

    For the year ended  
    December 31, 2019     December 31, 2018  
Laser Machine $ 129,460   $ 439,972  
Machine Parts   56,839     87,661  
Total $ 186,299   $ 527,633  

Revenue by Geography

    For the year ended  
    December 31, 2019     December 31, 2018  
Asia Pacific $ 186,299   $ 527,633  
Total $ 186,299   $ 527,633  

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

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



Practical
Expedient

Description

Reassessment of expired or existing contracts

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

Use of hindsight

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

Reassessment of existing or expired land easements

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

Separation of lease and non- lease components

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

Short-term lease recognition exemption

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

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

The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months as of January 1, 2019. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, unamortized lease incentives provided by lessors, and restructuring liabilities.

The adoption of ASC 842 had a substantial impact on the Company's consolidated balance sheets. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, adoption of this standard resulted in the recognition of operating lease right-of-use assets of $85,704 and operating lease liabilities of $85,704 comprised of $33,019 of current operating lease liabilities and $52,685 of non-current operating lease liabilities on the consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit.

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

Research and Development Expenses - Research and development costs are generally expensed as incurred. The Company did not incur any significant research and development expenses during the years ended December 31, 2019 and 2018.


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

Loss Per Share - The Company has adopted FASB Accounting Standards Codification subtopic 260-10, Earnings Per Share ("ASC 260-10") which specifies the computation, presentation and disclosure requirements of earnings per share information. Basic earnings per share have been calculated based upon the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of the diluted loss per share if their effect would be anti-dilutive. For the years ended December 31, 2019 and 2018, the Company did not have any common equivalent shares.

Concentrations -

Credit Risk: Financial instruments that subject the Company to credit risk consist primarily of trade accounts receivable and investments. The Company performs ongoing credit evaluations of its customers and maintains an allowance for potential credit losses. The Company regularly evaluates securities to determine whether there has been any diminution in value that is deemed to be other than temporary.

Customers: The Company sells equipment and parts to printed circuit board (PCB) manufacturers in Taiwan, China, and Malaysia. The Company performs ongoing credit evaluations of its customers' financial condition and generally, requires no collateral. For the year ended December 31, 2019, two customers accounted for more than 10% of the Company's total revenues, represented approximately 73.81% and 11.12% of its total revenues, and 0% of accounts receivable at December 31, 2019. For the year ended December 31, 2018, one customer accounted for more than 10% of the Company's total revenues, represented approximately 84.21% of its total revenues, and 0% of accounts receivable at December 31, 2018.

 

 

 

Sales for the year

 

 

A/R balance as of December 31,

 

Customer

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

A

 

$

137,506

 

$

444,155

 

$

-

 

$

-

 

B

 

 

20,717

 

 

-

 

 

-

 

 

-

 

C

 

 

16,885

 

 

-

 

 

-

 

 

-

 

D

 

 

-

 

 

34,377

 

 

-

 

 

15,591

 

E

 

 

-

 

 

2,802

 

 

-

 

 

1,235

 

Suppliers: For the year ended December 31, 2019, two vendors accounted for more than 10% of the Company's total purchase, represented approximately 70.91% and 23.09% of its total purchase. For the year ended December 31, 2018, 29.4% of the Company's inventory was purchased from one vendor.

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



 

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

 

 

 

 

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

 

 

 

 

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

The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, prepaid expenses, accounts payable, accrued liabilities, and due to related parties, approximate to fair value due to their relatively short maturities. The carrying amounts of the Company's long-term debt approximate to their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms.

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

Statement of Cash Flows - Cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Translation Adjustment - The accounts of the Company were maintained, and its financial statements were expressed, in New Taiwan Dollar ("NTD"). Such financial statements were translated into U.S. Dollars ("$" or "USD") in accordance ASC 830, "Foreign Currency Matters", with the NTD as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder's equity are translated at the historical rates and income statement items are translated at an average exchange rate for the period.

The resulting translation adjustments are reported under other comprehensive income as a component of stockholders' equity.

Comprehensive Income (Loss) - Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its consolidated statements of stockholders' equity and consolidated statements of operations and comprehensive income (loss).

Reclassifications - Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.

Recently Issued Accounting Pronouncements

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


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

NOTE 2. PROPERTY AND EQUIPMENT

The following is a summary of the Company's property and equipment as of December 31:

    2019     2018  
Machinery and equipment $ 69,598   $ 68,075  
Vehicle   16,677     46,275  
Leasehold improvements   11,929     11,668  
    98,204     126,018  
Less: accumulated depreciation   (97,751 )   (121,865 )
Property and equipment, net $ 453   $ 4,153  

Depreciation expense for the years ended December 31, 2019 and 2018 were $864 and $2,687 respectively.

NOTE 3. INTANGIBLE ASSETS

Summary of our intangible assets is as follows:

    December 31,     December 31,  
    2019     2018  
Amortized intangible assets:            
  Patents $ 50,949   $ 49,834  
  Accumulated amortization   (40,938 )   (36,778 )
Intangible assets, net $ 10,011   $ 13,056  

Amortization of intangible assets was $3,237 and $3,316 for the years ended December 31, 2019 and 2018, respectively.

Estimated amortization for the next five years and thereafter is as follows:

2020   3,230  
2021   2,788  
2022   948  
2023   761  
2024   761  
Thereafter   1,523  
  $ 10,011  


NOTE 4. INCOME TAXES

U.S.A

The Company is incorporated in the State of Nevada in the United States of America and is subject to the U.S. federal and state taxation. No provision for income taxes have been made as the Company has no taxable income.

On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the "Tax Act") was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate ("Federal Tax Rate") from 35% to 21% effective January 1, 2018. The 21% Federal Tax Rate will apply to earnings reported for the full 2018 fiscal year. In addition, the Company must re-measure its net deferred tax assets and liabilities using the Federal Tax Rate that will apply when these amounts are expected to reverse.

Income before income taxes for the years ended December 31, 2019 and 2018 includes the results of operations of Taiwan and British Virgin Islands.

British Virgin Islands

Omphalos Corp. (B.V.I.) and All Fine Technology Co., Ltd. (B.V.I.) are incorporated in British Virgin Islands and are not required to pay income tax.

Taiwan

Omphalos Corp. and All Fine Technology Co., Ltd. are incorporated in Taiwan and are subject to Taiwan tax law. The statutory tax rate under Taiwan tax law is 17%. According to the amendments to the "Income Tax Act" enacted by the office of the President of the Republic of China on February 7, 2018, an increase in the statutory income tax rate from 17% to 20% and decrease in the undistributed earning tax from 10% to 5% are effective from January 1, 2018. This increase in the statutory income tax rate does not affect the amounts of the current taxes recognized as of December 31, 2019 and for the year then ended. All Fine Technology Co., Ltd. incurred losses for the years 2019 and 2018. As a result, no tax liability was incurred. Omphalos Corp.'s losses were qualified for net operating losses carryforward for ten years for income tax purposes under Taiwan tax law. The Company believes that it is more likely than not that the net operating loss will not be utilized in the future. Therefore, the Company has provided full valuation allowance for the deferred tax assets arising from the losses as of December 31, 2019 and 2018.

The provision for income taxes calculated at the statutory rates in the combined statements of income is as follows for the years ended December 31:

    2019     2018  
Current provision:            
Computed (provision for) income taxes at statutory rates in U.S. $ -   $ -  
Computed (provision for) income taxes at statutory rates in BVI   -     -  
Computed (provision for) income taxes at statutory rates in Taiwan   -     -  
Total current provision   -     -  
             
Deferred provision:            
U.S   -     -  
BVI   -     -  
Taiwan- Net operating loss carryforward   -     -  
Valuation allowance   -     -  
Total deferred provision   -     -  
Provision for income taxes $ -   $ -  


The following is a reconciliation of the statutory tax rate to the effective tax rate for the years ended December 31, 2019 and 2018:

    2019     2018  
U.S. Federal tax (benefit) at statutory rate   (21% )   (21% )
Valuation allowance   21%     21%  
Foreign statutory tax (benefit) - Taiwan   (20% )   (20% )
Other (a)   20%     20%  
Effective tax rate   0%     0%  

(a)

Other represents expenses incurred by the Company that are not deductible for Taiwan income taxes and changes in valuation allowance for Taiwanese entities for the years ended December 31, 2019 and 2018, respectively.

NOTE 5. RELATED-PARTY TRANSACTIONS

Operating Leases

The Company leases its facility from a shareholder under an operating lease agreement which expires on January 31, 2019. On January 31, 2019, the lease term was extended for another three years, which expires on January 31, 2022. The monthly base rent is approximately $1,812. Rent expense under this lease agreement amounted to approximately $21,744 and $22,300 for the years ended December 31, 2019 and 2018, respectively.

Loan from related party

On July 26, 2013, the Company entered a loan agreement bearing interest at a fixed rate at 3% per annum with its shareholder to advance NT$5,000,000, equivalent approximately $167,168 for working capital purpose. The term of the loan started from July 30, 2013 with maturity date on July 29, 2015. On July 31, 2015, the loan with the same amount of NT$5,000,000, equivalent approximately $167,168, and the same fixed interest rate of 3% per annum was extended for another two years starting from August 1, 2015 with maturity date on July 31, 2017. On August 1, 2017, the loan with the same amount of NT$5,000,000, equivalent approximately $167,168, and the same fixed interest rate of 3% per annum was extended for another three years starting from August 1, 2017 with maturity date on July 31, 2020.

On December 31, 2013, the Company entered another loan agreement bearing interest at a fixed rate at 3% per annum with its officer and shareholder to advance NT$5,000,000, equivalent approximately $167,168 for working capital purpose. The term of the loan started from January 1, 2014 with maturity date on December 31, 2015. On December 31, 2015, the loan with the same amount of NT$5,000,000, equivalent approximately $167,168, and the same fixed interest rate of 3% per annum was extended for another two years starting from January 1, 2016 with maturity date on December 31, 2018. On January 1, 2019, the loan with the same amount of NT$5,000,000, equivalent approximately $167,168, and the same fixed interest rate of 3% per annum was extended for another three years starting from January 1, 2019 with maturity date on December 31, 2021.

On July 5, 2015, the Company entered another loan agreement bearing interest at a fixed rate at 3% per annum with its shareholder to advance NT$10,000,000, equivalent approximately $334,336, for working capital purpose. The term of the loan started from July 1, 2015 with maturity date on June 30, 2018. On July 1, 2018, the loan with the same amount of NT$10,000,000, equivalent approximately $334,336, and the same fixed interest rate of 3% per annum was extended for another three years starting from July 1, 2018 with maturity date on June 30, 2021.

On July 1, 2016, the Company entered another loan agreement bearing interest at a fixed rate at 3% per annum with its shareholder to advance NT$10,000,000, equivalent approximately $334,336, for working capital purpose. The term of the loan started from July 1, 2016 with maturity date on June 30, 2019. On July 1, 2019, the loan with the same amount of NT$10,000,000, equivalent $334,336, and the same fixed interest rate of 3% per annum was extended for another three years starting from July 1, 2019 with maturity date on June 30, 2022.


As of December 31, 2019 and December 31, 2018, there were $1,002,000 and $980,074 loans outstanding, of which $167,000 and $490,037 was presented under current liabilities, respectively.

Interest expense was $29,122 and $29,871 for the years ended December 31, 2019 and 2018, respectively.

Advances from related party

The Company also has advanced funds from its officer and shareholder for working capital purposes. The Company has not entered into any agreement on the repayment terms for these advances. The advances bear no interest rate and are due upon demand by shareholders.

On November 30, 2018, the Company and Mr. Sheng-Peir Yang, the chief executive officer and chairman of the Company entered into a debt conversion agreement (the "Debt Conversion Agreement"). Pursuant to the Debt Conversion Agreement, the Company agreed to issue Mr. Yang 85,000,000 shares of its $0.0001 par value common stock at a conversion price of $0.001 per share in exchange for Mr. Yang's forgiveness of $85,000 that Mr. Yang provided in the form of debt to fund the business operations of the Company.

As of December 31, 2019 and December 31, 2018, there were $881,527 and $752,113 advances outstanding, respectively. The outstanding balance bears no interest and is due upon request.

NOTE 6. LEASE

The Company has no finance leases. The Company's leases primarily include office and warehouse facility spaces and copy machine under various operating lease arrangements. The Company's operating leases have remaining lease terms of up to three years.

Balance sheet information related to the Company's leases is presented below:

 

 

 

December 31, 2019

 

 

Operating Leases

 

 

 

 

Operating lease ROU assets

$

56,127

 

 

 

 

 

 

 

Operating lease liability, current portion

 

31,436

 

 

Operating lease liability, less current portion

 

24,691

 

 

      Total operating lease liabilities

$

56,127

 

The following provides details of the Company's lease expenses:

 

 

 

Year Ended

 

 

 

 

December 31, 2019

 

 

Operating lease expenses

$

33,057

 

 

 

$

33,057

 

Other information related to leases is presented below:



 

 

Year Ended

 

 

December 31, 2019

 

Cash Paid For Amounts Included In Measurement of Liabilities:

 

 

Operating cash flows from operating leases

33,057

 

 

 

 

Weighted Average Remaining Lease Term:

 

 

Operating leases

1.67 years

 

 

 

 

Weighted Average Discount Rate:

 

 

Operating leases

1.28%

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:

 

 

 

Operating leases

 

 

2020

$

31,921

 

 

2021

 

22,903

 

 

2022

 

1,947

 

 

2023

 

-

 

 

2024

 

-

 

 

Total future minimum lease payments, undiscounted

 

56,771

 

 

Less: Imputed interest

 

(644

)

 

Present value of future minimum lease payments

$

56,127

 

NOTE 7. SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date which the financial statements are available to be issued. All subsequent events requiring recognition as of December 31, 2019 have been incorporated into these financial statements and there are no additional subsequent events that require disclosure in accordance with FASB ASC Topic 855, "Subsequent Events."

******