Item 1A. RISK FACTORS.
AS A SMALLER REPORTING COMPANY, WE ARE NOT
REQUIRED TO PROVIDE A STATEMENT OF RISK FACTORS. NONETHELESS, WE ARE VOLUNTARILY PROVIDING RISK FACTORS HEREIN. THIS ANNUAL REPORT CONTAINS
CERTAIN STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY. YOU ARE CAUTIONED THAT SUCH STATEMENTS
ARE ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH
STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS ANNUAL REPORT, INCLUDING THE MATTERS SET FORTH BELOW,
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
An investment in our common
stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to
other information in this Annual Report in evaluating our company and its business before purchasing shares of our common stock. Our business,
operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your
investment due to any of these risks.
20
Risks Related To Our Business
Because we are currently considered a “shell
company” within the meaning of Rule 12b-2 under the Exchange Act, the ability of holders of our common stock to re-sell their shares
may be limited by applicable regulations.
We are currently considered
a “shell company” within the meaning of Rule 12b-2 under the Exchange Act and Rule 405 of the Securities Act of 1933,
as a result of the consummation of the Merger on December 31, 2020. Accordingly, the ability of holders of our common stock
to re-sell their shares may be limited by applicable regulations. Specifically, shares of common stock which are considered “restricted
securities” may not be sold except through a qualified registration statement under the Securities Act, pursuant to Section 4(1)
of the Securities Act, or by meeting the conditions of Rule 144(i) under the Securities Act.
We have a history of losses, which raise
substantial doubt about our ability to continue as a going concern.
As of December 31, 2020, we
had an accumulated deficit of approximately $7.2 million and a working capital deficit of approximately $0.7 million. In addition, reported
as part of loss from operations of discontinued component, our revenues decreased by $383,755 to $225,419 in 2020 compared with 2019,
mainly due to the slowdown in the growth of the health product industry in China. Our cash as of December 31, 2020, was $0.
On December 31, 2020, we became
a shell company. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future.
In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control,
such as the unpredictability of customers’ expectations and demands, the level of competition and general economic conditions.
We are a shell company and may never be
able to effectuate our business plan.
As a result of the Merger,
the Company ceased operations and is now seeking a business combination with a private entity whose business would present an opportunity
for its shareholders. We intend to seek, investigate and, if such investigation warrants, engage in a business combination with a private
entity whose business presents an opportunity for our shareholders. As a shell company with limited resources we may not be able to successfully
effectuate our business plan. There can be no assurance that we will ever achieve any revenues or profitability. The revenue and income
potential of our proposed business and operations is unproven as the lack of operating history makes it difficult to evaluate the future
prospects of our business. We require financing to acquire businesses and implement our business plan. We cannot assure you that we will
be successful in obtaining financing or acquiring businesses, or in operating those acquired businesses in a profitable manner.
We expect losses in the future because we
have no revenue.
As we have no current revenue,
we are expecting losses over the next twelve (12) months because we do not yet have any revenues to offset the expenses associated with
our business plan. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are
unable to generate revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption
as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating
revenues or ever achieve profitable operations.
If our business plans are not successful,
we may not be able to continue operations as a going concern and our stockholders may lose their entire investment in us.
We will, in all likelihood,
sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result
in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable
business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.
If we cannot continue as a going concern, our stockholders may lose their entire investment in us.
21
We do not have any agreement for a business
combination or other transaction.
We have no arrangement, agreement
or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. We cannot
assure you that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination.
Management has not identified any particular industry or specific business within an industry for evaluation. We cannot guarantee that
we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that future funds allocated to
the purchase of our shares will not be invested in a company with active business operations.
Future success is highly dependent on the
ability of management to locate and attract a suitable acquisition.
The success of our proposed
plan of operation will depend to a great extent on the operations, financial condition and management of the identified target company.
While business combinations with entities having established operating histories are preferred, there can be no assurance that we will
be successful in locating candidates meeting such criteria. The decision to enter into a business combination will likely be made without
detailed feasibility studies, independent analysis, market surveys or similar information which, if we had more funds available to it,
would be desirable. In the event we complete a business combination, the success of our operations will be dependent upon management of
the target company and numerous other factors beyond our control. We cannot assure you that we will identify a target company and consummate
a business combination.
There is competition for those private companies
suitable for a merger or combination transaction of the type contemplated by management.
We are in a highly competitive
market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination.
We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions
of small private and public entities. A large number of established and well-financed entities, including small public companies and venture
capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities
have significantly greater financial resources, technical expertise and managerial capabilities than we do. Consequently, we will be at
a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive
factors may reduce the likelihood of our identifying and consummating a successful business combination.
We have not conducted market research to
identify business opportunities, which may affect our ability to identify a business to merge with or acquire.
We have neither conducted
nor have others made available to us results of market research concerning prospective business opportunities. Therefore, we have no assurances
that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination
or other transactions for formal evaluation by us, such that it may be expected that any such target business or transaction will present
such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available.
There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business
opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our
stockholders.
22
Management intends to devote only a limited
amount of time to seeking a target company, which may adversely impact our ability to identify a suitable acquisition candidate.
While seeking a business combination,
our sole officer and director anticipates devoting limited time to our affairs in total. Our sole officer has not entered into a written
employment agreement with us and is not expected to do so in the foreseeable future. This limited commitment may adversely impact our
ability to identify and consummate a successful business combination.
We are dependent on the services
of our sole officer to obtain capital required to implement our business plan and for identifying, investigating, negotiating and integrating
potential acquisition opportunities. The loss of services of our sole officer could have a substantial adverse effect on us. The expansion
of our business will be largely contingent on our ability to attract and retain highly qualified corporate and operations level management
team. We cannot assure you that we will find suitable management personnel or will have financial resources to attract or retain such
people if found.
The time and cost of preparing a private
company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private
companies.
Target companies that fail
to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require reporting
companies to provide certain information about significant acquisitions, including audited consolidated financial statements for the company
acquired.
The time and additional costs
that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation
of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may
be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.
Any potential acquisition or merger with
a foreign company may subject us to additional risks.
If we enter into a business
combination with a foreign concern, we will be subject to risks inherent in business operations outside of the United States. These risks
include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks
related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies
may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development,
rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.
We will need to raise additional capital
to execute our business plan. If our operations do not produce the necessary cash flow, or if we cannot obtain needed funds, we may be
forced to reduce or cease our activities with consequent loss to investors.
We have a need for cash in
order to pay obligations currently due in a timely manner, and to finance our business operations. Our continued operations will depend
upon the sustainability of cash flow from our ability to raise additional funds, as required, through equity or debt financing. There
is no assurance that we will be able to obtain additional funding when it is needed, or that such funding, if available, will be obtainable
on terms acceptable to us. If we cannot obtain needed funds, we may be forced to reduce or cease our activities with consequent loss to
investors. In addition, should we incur significant presently unforeseen expenses or delays, we may not be able to accomplish our goals.
23
If we fail to develop and maintain an effective
system of internal controls, we may not be able to accurately report our financial results or prevent fraud, as a result, current and
potential shareholders could lose confidence in our financial reports, which could harm our business and the trading price of our Common
Stock.
Effective internal controls
are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002
requires us to evaluate and report on our internal controls over financial reporting. We plan to comply with Section 404 by strengthening,
assessing and testing our system of internal controls to provide the basis for our report. The process of strengthening our internal controls
and complying with Section 404 is expensive and time consuming, and requires significant management attention, especially given that we
have not yet undertaken any efforts to comply with the requirements of Section 404. We cannot be certain that the measures we will undertake
will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able
to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will
be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we discover a material weakness
in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence
in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative
sanctions, including the suspension of trading, ineligibility for listing on the OTC Markets, one of the national securities exchanges,
and the inability of registered broker-dealers to make a market in our Common Stock, which would further reduce our stock price.
Investors may experience difficulties in
effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based upon United States
laws, including the federal securities laws or other foreign laws against us or our management.
Our president and all of our
officers are nationals and residents of the PRC. All the assets of these persons are located outside the United States and in the PRC.
As a result, it may not be possible to effect service of process within the United States or elsewhere outside the PRC upon these persons. In
addition, uncertainty exists as to whether the PRC courts would recognize or enforce judgments of United States courts obtained against
such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state
thereof, or be competent to hear original actions brought in the PRC against us or such persons predicated upon the securities laws of
the United States or any state thereof.
If we are found to be in violation of current
or future PRC laws, rules or regulations regarding the legality of foreign investment in the PRC with respect to our ownership structure,
we could be subject to severe penalties.
We currently reside solely
in the PRC. As a result, our subsidiaries in the PRC are regarded as FIEs under PRC law and we are subject to PRC law limitations on foreign
ownership of PRC companies. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations,
including, but not limited to, the laws and regulations governing our healthcare products distribution and production businesses.
Accordingly, it is possible
that the relevant PRC authorities could, at any time, assert that any portion of our existing or future ownership structure and businesses
violate existing or future PRC laws, regulations or policies. It is also possible that the new laws or regulations governing our
business operations in the PRC that have been adopted or may be adopted in the future will prohibit or restrict foreign investment in,
or other aspects of, any of our PRC Operating Entities’ and our current or proposed businesses and operations. The effectiveness
of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws
and regulations that affect existing and proposed future businesses may also be applied retroactively.
24
The PRC government has broad
discretion in dealing with violations of laws and regulations, including:
● levying fines;
● confiscating our income;
● revoking business and other licenses;
● requiring us to discontinue any portion or all of our business;
● requiring us to restructure our ownership structure or operations; and
● requiring actions necessary for compliance.
In particular, licenses and
permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot
predict the effect of the interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you that
our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As
a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain
services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial
portion of our business operations, which, in turn, could materially and adversely affect our business, financial condition and results
of operations.
Risks Relating to Investment in Our Securities
An active public market for our common stock
may not develop or be sustained, which would adversely affect the ability of our investors to sell their securities in the public market.
We cannot predict the extent
to which an active public market for our common stock will develop or be sustained.
Shares eligible for future sale may adversely
affect the market price of our common stock, as the future sale of a substantial amount of outstanding stock in the public marketplace
could reduce the price of our common stock.
Holders of a significant number
of our shares and/or their designees may be eligible to sell our shares of common stock by means of ordinary brokerage transactions in
the open market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”), subject to certain limitations. In
general, pursuant to Rule 144, a non-affiliate stockholder (or stockholders whose shares are aggregated) who has satisfied a six-month
holding period, and provided that there is current public information available, may sell all of its securities. Rule 144 also permits
the sale of securities, without any limitations, by a non-affiliate that has satisfied a one-year holding period. Any substantial
sale of common stock pursuant to any resale prospectus or Rule 144 may have an adverse effect on the market price of our common stock
by creating an excessive supply.
If we fail to maintain effective internal
controls, we may not be able to accurately Report our financial results or prevent fraud, and our business, financial condition, results
of operations and reputation could be materially and adversely affected.
The effectiveness of our internal
controls is essential to the integrity of our business and financial results. Our public Reporting obligations currently place and are
expected to continue to place a strain on our management, operational and financial resources and systems. We have implemented measures
to enhance our internal controls, and plan to take steps to further improve our internal controls. We cannot assure you that the measures
taken to improve our internal controls will be effective. If we fail to maintain effective internal controls in the future, our business,
financial condition, results of operations and reputation may be materially and adversely affected.
Compliance with changing regulation of corporate
governance and public disclosure will result in additional expenses.
Changing laws, regulations
and standards relating to corporate governance and public disclosure, including SOX and related SEC regulations, have created uncertainty
for public companies and significantly increased the costs and risks associated with accessing the public markets and public Reporting. Our
management team will need to invest significant management time and financial resources to comply with both existing and evolving standards
for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention
from revenue generating activities to compliance activities.
25
We do not foresee paying cash dividends
in the near future.
We do not plan to declare
or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for
funding growth. As a result, investors should not rely on an investment in our securities if they require the investment to produce
dividend income.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES.
Prior to the consummation
of the Merger on December 31, 2020, our main offices and manufacturing facilities were located in Baodi District, Tianjin City, PRC. We
were issued a Land Use Right Certificate by the People’s Government of Tianjin City with an expiration date of October 10,
2057, and received a Property Ownership Certificate for approximately 27,500 square meters of land and constructed nine buildings thereon
in Baodi District, Tianjin City, PRC. Among the nine buildings, four buildings were used for production, two for employee and franchisee
training, one for employee accommodation, one for storage, and one for parking.
After the consummation of
the Merger, we own no properties.
Item 3. LEGAL PROCEEDINGS.
We have no knowledge of any
material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff
or defendant in any material proceeding or pending litigation.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
26
PART II
Item 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
There is a limited public
market for our common shares. Our Common Stock has been trading on the Over-the-Counter (“OTC”) Markets OTCQB under the symbol
“GTVI” since September 11, 2009. Trading in stocks quoted on the OTC Markets is often thin and is characterized by wide
fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot
assure you that there will be a market in the future for our common stock.
The OTC Markets is a quotation
service that displays real-time quotes, last-sale prices, and volume information in over-the-counter, or the OTC, equity securities, and
may not necessarily represent actual transactions.
OTCQB securities are not listed or traded on the floor of an organized
national or regional stock exchange. Instead, OTCQB securities transactions are conducted through a telephone and computer network connecting
dealers in stocks. OTCQB issuers are traditionally smaller companies that do not meet the financial and other listing requirements of
a regional or national stock exchange.
Holders of Our Common Stock
As
of December 31, 2020, we had 430 shareholders of record of our common stock. The
holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders
of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to the common stock.
Dividends
In January 2021, the Company
distributed an aggregate amount of $119,070 at the price of $0.045 per share to all its shareholders other than Crystal Globe, which represents
2,646,000 shares of our common stock. Said amount represented the Merger Consideration paid to the Company in connection with the Merger
described in “Item 1. Entry into a Material Definitive Agreement” above. Since the remaining 17,408,000 shares of our common
stock is owned by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares is offset.
Except for above, we have
not paid dividends on our common stock and do not anticipate paying such dividends in the foreseeable future. The declaration of any future
cash dividends is at the discretion of our Board and depends upon our earnings, if any, our capital requirements and financial position,
our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable
future, but rather to reinvest earnings, if any, in our business operations.
Stock Option Grants
To date, we have not granted
any stock options.
Registration Rights
We have not granted registration
rights to any person.
Recent Sales of Unregistered Securities
None.
Securities authorized for issuance under equity compensation
plans
In 2020 and 2019, we have
not granted any securities authorized for issuance under equity compensation plans.
Penny Stock Regulations
Our shares of common stock
are subject to the “penny stock” rules of the Securities Exchange Act of 1934 and various rules under this Act. In general
terms, “penny stock” is defined as any equity security that has a market price less than $5.00 per share, subject to certain
exceptions. The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded
on a national securities exchange meeting specified criteria set by the SEC, issued by a registered investment company, and excluded from
the definition on the basis of price (at least $5.00 per share), or based on the issuer’s net tangible assets or revenues. In the
last case, the issuer must meet one of the following requirements: (i) net tangible assets must exceed $3,000,000 if the issuer has
been in continuous operation for at least three years; or (ii) net tangible assets must exceed $5,000,000 if the issuer has been
in operation for less than three years; or (iii) the issuer’s average revenues for each of the past three years must exceed
$6,000,000.
27
Trading in shares of penny
stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established
customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual
income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these
rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser’s
written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require
the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose
the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally,
monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers
to trade or maintain a market in our common stock, to the extent it is penny stock, and may affect the ability of shareholders to sell
their shares.
Item 6. SELECTED FINANCIAL DATA.
We are a smaller Reporting
company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.
Item 7. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
The following discussion
should be read in conjunction with our consolidated financial statements and notes to those consolidated financial statements, included
elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results
and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various
factors, including those set forth under “Risk factors” and elsewhere in this prospectus.
FORWARD-LOOKING STATEMENTS:
Certain statements made in
this Report may constitute “forward-looking statements on our current expectations and projections about future events.” These
forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause our actual results, performance,
or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements. In some cases you can identify forward-looking statements by some words such as “may,” “should,” “potential,”
“continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and
are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements
are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements
are made as of the date of this Report, and we assume no obligation to update these forward-looking statements whether as a result of
new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties,
the forward-looking events discussed in this Report might not occur and actual results and events may vary significantly from those discussed
in the forward-looking statements.
Overview
General
We are incorporated in the
state of Nevada. Prior to the consummation of the Merger as of December 31, 2020, we, through our PRC Operating Entities, were engaged
in the manufacture, distribution and sales of tourmaline-related healthcare products, including knit goods, daily healthcare and personal
care products, and wellness house and activated water machine products, that were coated, embedded or filled with tourmaline. Most of
our products, such as clothing, bedding, and mattresses are purchased as finished products which we then coated and/or infused with liquid
or granular tourmaline using one or more of our manufacturing techniques. We conducted all of our operations in Tianjin City, China and
distributed most of our products to 49 franchisees in China as of December 31, 2020. Our franchisees, in turn, sell the products to their
customers. All of our revenues as of December 31, 2020 have been generated by sales to customers located in the PRC and reported as part
of loss from operations of discontinued component.
28
Beginning in 2009, we developed
a franchise network to distribute our healthcare knit goods, daily healthcare products and personal care products. Through these franchisees,
we were able to significantly increase sales of our healthcare knit goods segment and daily healthcare and personal care segment. In 2010,
we began distributing our wellness house and activated water machine products through our franchise network. As of December 31, 2020,
we had 49 franchisees compared to 82 as of December 31, 2019. However, after the consummation of the Merger, we became a shell company
as of December 31, 2020 and maintained no franchisee after then.
We are a holding company with
no material operations of our own. Prior to the consummation of the Merger as of December 31, 2020, all of our operations were conducted
through Joway Shengshi and its three subsidiaries, Joway Technology, Joway Decoration and Shengtang Trading. Joway Shengshi engaged in
the manufacture and distribution of tourmaline health-related products such as knit goods, and daily healthcare and personal care products.
Joway Technology and Joway Decoration engaged in the manufacture and distribution of activated water machines and wellness houses. We
utilized our Shengtang Trading subsidiary to purchase raw materials, which were then sold to Joway Shengshi and Joway Decoration.
As a holding company, our
ability to pay dividends and other cash distributions to our shareholders prior to the consummation of the Merger depended in part upon
dividends and other distributions paid to us by our PRC subsidiaries. The amount of dividends paid by our PRC subsidiaries to us primarily
depended on the service fees paid to our PRC subsidiaries from Joway Shengshi and its subsidiaries, and, to a lesser degree, our PRC subsidiaries’
retained earnings. Conducting our operations through contractual arrangements with Joway Shengshi and its subsidiaries had a risk that
we may lose the power to direct the activities that most significantly affect the economic performance of Joway Shengshi and its subsidiaries,
which may result in our being unable to consolidate their financial results with our results and may impair our access to their cash flow
from operations and thereby reduce our liquidity.
On November 20, 2020, Joway
Health entered into a Merger Agreement with Dynamic Elite, Crystal Globe and Merger Sub. The Merger Agreement provides that, upon the
terms and subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into Dynamic Elite
(the “Merger”), with Dynamic Elite continuing as the surviving corporation as a wholly-owned subsidiary of Crystal Globe.
The special committee of the Board of Directors of the Company unanimously approved the Merger Agreement and the transactions contemplated
thereby.
Pursuant to the terms of the
Merger Agreement dated November 20, 2020, as of December 31, 2020, the Effective Time of the Merger, the 10,000 ordinary shares of common
stock of Dynamic Elite issued and outstanding immediately which were held by the Company, were cancelled. In accordance with the Merger
Agreement, Crystal Globe has offered to pay cash consideration of $0.045 per share for the outstanding shares of the common stock of the
Company as Merger Consideration. As of November 20, 2020, the Company had 20,054,000 shares of common stock outstanding.
The Company is obligated to
distribute the Merger Consideration to its shareholders in an amount equal to such shareholder’s proportionate share of the Merger
Consideration based on such shareholders’ percentage of the outstanding common stock of the Company In January 2021, the Company
distributed an aggregate amount of $119,070 at $0.045 per share to its shareholders other than Crystal Globe, which represents 2,646,000
shares of our common stock. Said amount represented the Merger Consideration paid to the Company in connection with the Merger. Since
the remaining 17,408,000 shares of our common stock is owned by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares
is offset.
As a result of the consummation
of the Merger, we became a shell company as of December 31, 2020.
Going Concern Uncertainties
The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying
consolidated financial statements, for the years ended December 31, 2020 and 2019, we incurred net losses of $2.3 million and $1.2 million,
respectively. In addition, we reported cash out flow of $0.2 million and $0.1 million from our continuing operating activities for the
years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $7.2 million. Management
believes these factors raise substantial doubt about our ability to continue as a going concern for the next twelve months.
29
The continuation of our company
as a going concern through the next twelve months is dependent upon (1) the continued financial support from our stockholders or external
financing. Management believes that our existing stockholders will provide the additional cash to meet our obligations as they become
due, and (2) that it will be able to implement its business plan to expand our company’s operations and generate sufficient revenues
to meet its obligations.
These conditions raise substantial
doubt about our company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect
the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may
result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding
and implement its strategic plan provides the opportunity for our company to continue as a going concern.
Important Factors Affecting our Results of Operations and Existing
Trends
Price of Raw Materials
Prior to the consummation
of the Merger as of December 31, 2020, tourmaline powder and textiles are the most important raw materials used in the production of our
products. The price of tourmaline powder remained stable in 2020. The average price of textiles that we purchased and the average sales
prices of our products were stable in fiscal year 2020 and 2019.
Growth of the Chinese economy
Prior to the consummation
of the Merger, we operated our manufacturing facilities in China and derived all of our revenues from sales to customers in China. As
such, economic conditions in China affected virtually all aspects of our operations, including the demand for our products, the availability
and prices of our raw materials and our other expenses. According to the National Bureau of Statistics, China’s gross domestic product
in 2020 declined to 2.3% compared with 6.1% in 2019.
Costs of being a public company
We expect that compliance
with our obligations as a U.S. public company will require significant management time and significantly increase our general and administrative
expenses, including insurance, legal and financial compliance costs.
Foreign currency translation
Our financial statements are
expressed in U.S. dollars but the functional currency of our operating subsidiaries prior to the consummation of the Merger is in
RMB. Our results of operations are translated at average exchange rates during the relevant financial Reporting periods, assets and liabilities
are translated at the unified exchange rate at the end of these periods and equity is translated at historical exchange rates. Adjustments
resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive
income.
Description of Selected Income Statement Items
Operating expenses. Our
total operating expenses consist of audit fee, attorney fee and general and administrative expenses. General and administrative expenses
consist primarily of employee remuneration from directors and general office expenses.
Other loss. Our
other loss consists primarily of other loss from bank service fee.
Income taxes. The
Company was established under the laws of the State of Nevada and is subject to U.S. federal income tax and Nevada Annual Reporting requirements.
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Results of Operations
The following table sets forth
certain information regarding our results of operations.
For the year ended December 31,
INCOME TAXES - -
NET LOSS FROM CONTINUING OPERATIONS $ (222,859 ) $ (118,583 )
Year Ended December 31, 2020 Compared to December
31, 2019
Operating expenses. For the year
ended December 31, 2020, our total operating expenses was $222,607, increased by $104,161, or 87.9%, from $118,446 for the year ended
December 31, 2019. This increase was mainly due to the increase of attorney fee, as a result of the Merger.
Loss from operations. As a result
of the foregoing, our loss from operations was $222,607 for the year ended December 31, 2020, compared to $118,446 for the year ended
December 31, 2019. This was mainly due to the increase in operating expenses.
Income taxes. Our income tax expenses
did not incur for the years ended December 31, 2020 and 2019.
Net loss from continuing operations. For
the year ended December 31, 2020, our net loss was $222,859 compared to $118,583 for the year ended December 31, 2019. The increased loss
was primarily due to the increased operating expenses.
Operating loss from discontinued operations.
As of December 31, 2020, we sold all of our subsidiaries and VIEs to Crystal Globe, one of our major shareholders. With a result,
operating results from our subsidiaries and VIEs during the years ended December 31, 2020 and 2019 were reported as part of loss from
operations of our discontinued component.
For the year ended December 31, 2020, revenue
from our discontinued operations was $225,419 compared to $609,174 for the year ended December 31, 2019, a decrease of $383,755, or 63%.
This decrease was mainly due to the downturn of the health care industry in China.
For the year ended December 31, 2020, cost of
goods sold from our discontinued operations was $117,632 compared to $295,705 for the year ended December 31, 2019, a decrease of $178,073,
or 60.2%. This decrease was mainly due to the decrease in sales.
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Liquidity and Capital Resources
We do not have cash at the beginning and the end
of the year ended December 31, 2020.
Our cash flow information summary is as follows:
For the year ended December 31,
Net cash provided by (used in):
Net Cash Used in Operating Activities
Net cash used in operating activities was $564,761
for the year ended December 31, 2020, which included cash used in the discontinued operations of $382,246, compared to $772,117 for the
year ended December 31, 2019, which included cash used in the discontinued operations of $664,534. This was mainly due to an increase
of $104,276 in net loss from our continuing operations.
For the year of 2020, cash was mainly used to
cover the loss from continuing operations of $222,859.
For the year of 2019, cash was mainly used to
cover the loss from continuing operations of $118,583.
Net Cash Used in Investing Activities
Net cash used in investing activities was $79,446
for the year ended December 31, 2020, compared to $89,472 for the year ended December 31, 2019. No cash provided by (used in) our continuing
operations for the years ended December 31, 2020 and 2019. The net cash out flow from our investing activities in 2020 and 2019 was from
our discontinued operations.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was
$607,077 for the year ended December 31, 2020, which included cash provided by the discontinued operations of $424,562, compared to $836,529
for the year ended December 31, 2019, which included cash provided by the discontinued operations of $728,946.
Since the Company has no cash, Mr. Jinghe Zhang,
our President, Chief Executive Officer and director, agreed to advance operating capital to the Company. During the years of 2020 and
2019, we received $158,930 and $55,625, respectively, of these advances. As of December 31, 2020, the total unpaid principal balance due
to Mr. Jinghe Zhang for advances was $233,693.
Joway Shengshi, a company of the discontinued
operations, was owned 99% of the equity interest by Mr. Jinghe Zhang. During the years of 2020 and 2019, we received $23,585 and $51,958
of advances from Joway Shengshi, respectively. As of December 31, 2020, the total unpaid principal balance due to Joway Shengshi for advances
was $459,853.
Off Balance Sheet Items
Under SEC regulations, we
are required to disclose off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to
which any entity that is not consolidated with us is a party, under which we have:
● any obligation under certain guarantee contracts,
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We do not have any off-balance
sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating
lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements
in accordance with generally accepted accounting principles in the United States.
Critical Accounting Policies
Management’s discussion
and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States. Our financial statements reflect the selection
and application of accounting policies which require management to make significant estimates and judgments. Management bases its estimates
on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.
Actual results may differ
from these estimates under different assumptions or conditions. We believe that the following reflect the more critical accounting policies
that currently affect our financial condition and results of operations.
Going Concern
The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying
consolidated financial statements, for the years ended December 31, 2020 and 2019, we incurred net losses of $2.3 million and $1.2 million,
respectively. In addition, we reported cash out flow of $0.2 million and $0.1 million from our continuing operating activities for the
years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $7.2 million. Management
believes these factors raise substantial doubt about our ability to continue as a going concern for the next twelve months.
The continuation of our company
as a going concern through the next twelve months is dependent upon (1) the continued financial support from our stockholders or external
financing. Management believes that our existing stockholders will provide the additional cash to meet our obligations as they become
due, and (2) that it will be able to implement its business plan to expand our company’s operations and generate sufficient revenues
to meet its obligations.
These conditions raise substantial
doubt about our company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect
the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may
result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding
and implement its strategic plan provides the opportunity for our company to continue as a going concern.
Basis of Presentation
The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”). The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying consolidated
financial statements have been translated and presented in United States Dollars (“USD”). All significant inter-company transactions
and balances have been eliminated. The consolidated financial statements include all adjustments that, in the opinion of management, are
necessary to make the financial statements not misleading.
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Use of Estimates
The preparation of the consolidated
financial statements is in conformity with generally accepted accounting principles in the United States of America, which require 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management
makes these estimates using the best information available at the time the estimates are made. Actual results could differ from those
estimates.
Reclassification
Certain prior year balances
were reclassified to conform to the current year’s presentation with consideration of reflecting all of the Company’s subsidiaries
and VIEs as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any
of the periods presented.
Basis of Consolidation
For the periods prior to the
sale of Dynamic Elite, its subsidiaries, and controlled VIEs, the Company consolidated financial statements include Dynamic Elite, its
wholly owned subsidiaries, and controlled VIEs. All significant inter-company accounts and transactions have been eliminated in the consolidation.
Foreign Currencies Translation
Transactions denominated in
currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates
of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the
functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in
the statement of operations. The reporting currency of our company is the United States Dollar (“US$”). Our subsidiaries in
the PRC maintain their books and records in their local currency, the Renminbi Yuan (“RMB”), which is the functional currency
as it is the primary currency of the economic environment in which these entities operate.
In general, for consolidation
purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with
ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses
are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements
of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’
equity.
Other Comprehensive Income
Other comprehensive income
is defined as the change in equity during the period from transactions and other events, excluding the changes resulting from investments
by owners and distributions to owners. Other comprehensive income is not included in the computation of income tax expense or benefit.
Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.
Fair Value of Financial Instruments
Financial Accounting Standards