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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. iYes ☒ No
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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
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No
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files).
i
Yes
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No ☐
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
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Accelerated filer
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iNon-accelerated filer
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Smaller
reporting company
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Emerging Growth Company
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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.
i☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
i☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
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At
June 29, 2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant is approximately $i45 million.
The number of shares of registrant’s common stock outstanding, as of April 8, 2022 was i180,065,254
This Annual Report on Form 10-K contain “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,”“plans,”“will,”“forecasts,”“projects,”“intends,”“estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known
and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.
These risks and uncertainties, many of which are beyond our control, include, and are not limited to:
·
our growth strategies;
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our anticipated future operation and profitability;
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our future financing capabilities and anticipated need for working capital;
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the anticipated trends in our industry;
·
acquisitions of other companies or assets that we might undertake in the future;
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our operations in China and the regulatory, economic and political conditions in China; and
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current and future competition.
In addition, factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
On March 1, 2019, we formed Maosong Trading Co., Ltd. (“Maosong Trading”) under the laws of PRC.
During the year ended December 31, 2017, the Company paid the expenses of EITB in the amount of approximately $6,290. Additionally, the Company will continue to pay the expenses of EITB.
The principal executive office of EITB is located at 7F-1, No. 162, Sec. 2, Zhongshan N. Rd., Zhongshan District, Taipei City, 10452, Taiwan (Republic of China).
Yu-Cheng Yang, a shareholder of the Company, is the sole director of EITB.
Yu-Hsiang Chia is the branch manager of EITB. Mr. Chia holds 1,080,817 shares of the Company’s common stock.
Emperor Star International Trade Co., Ltd., (“Emperor Star”), was incorporated on November 16, 2015 under the laws of Taiwan. Emperor Star is in the business of marketing and distributing various consumer products, including detergents, nutrition supplements, and skin care products.
On May 3, 2017, the Company entered into and closed a Share Purchase and Sale Agreement (the “Purchase Agreement”) with Emperor Star to acquire all of the issued and outstanding shares of Emperor Star in consideration of $30,562 in cash. As a result of the transaction, Emperor Star became the Company’s wholly owned subsidiary. Upon consummation of the transaction, the Company has assumed the business of Emperor Star and ceased to be a shell company. Yu-Hsiang Chia currently serves as the officer and director of Emperor Star.
Yu-Hsiang Chia currently serves as the officer and director of Emperor Star. On May 26, 2020, EOS Inc. increased its investment in Emperor Star by $134,004 (NTD$4,000,000). The Company also received the contributions to Emperor Star from non-controlling interests in the amount of $33,398 (NTD$1,000,000). As a result, the Company owns 83% equity interest of Emperor Star as of June 30, 2020, which is no longer a wholly-owned subsidiary.
We have never been a party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.
General Business Overview
We are a distributor of various consumer products, such as skin care products, dietary supplements, electronic noise suppressing devices and water purifying machines. Based on the sales and trends of various consumer products, we from time to time select or drop the products that we distribute and sell.
We market and distribute skin care products manufactured by A.C. (USA), Inc. (“A.C.”), which is headquartered in the City of Industry, California and has offices in Taiwan. We market and distribute A.C. skin care products to resellers who will recognize the needs of their targeted customers in various regions in Asia, such as People’s Republic of China (“PRC”), Singapore and Malaysia. We acquire the products from A.C.’s Taiwan warehouses. Our strategy is to target spas, department stores and specialty stores that sell similar skin products. As of the date of this annual report, we have sold the A.C. Products to local distributors and specialty stores.
The skin care products that we will distribute are designed to address various skin care needs. Those products include moisturizers, serums, cleansers, toners, body care, exfoliators, acne and oil correctors, facial masks, cleansing devices and sun care products. A number of those products are developed for use on particular areas of the body, such as the face or hands or around the eyes.
We believe the Company, together with its subsidiaries, distributes highly innovative personal care products and ecologically friendly cleaning products in Taiwan and plans to expand its distribution to China, Malaysia, and Thailand. Emperor Star’s product line includes anti-aging products that address the key signs of aging to reinvigorate and provide youthful energy and nutrition supplements. The Company stopped the line of ecologically friendly cleaning products in 2018.
In April 2018, we, through Emperor Star, started purchasing a type of water purifying machines from Cosminergy Hitech Development Co., Ltd. (“Cosminergy”) and reselling such water purifying machines in certain Asian countries and regions. However, we decided not to continue the sales of Cosminergy’s water purifying machines in 2019.
In November 2019, we started the marketing, promotion, sales and distribution of certain electrical noise suppressing device (the “Calibrator”) globally provided by Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, based on an exclusive patent licensing and distribution agreement (the “Ultra Velocity Agreement”) between Ultra Velocity and us. However, due to the outbreak of coronavirus (“COVID-19”) in mainland China, Ultra Velocity and we terminated the Ultra Velocity Agreement in March 2020 and intended to redefine the cooperation model between the respective parties.
In addition, we provided inventory, membership and business management software that designed by CKS Information Co., Ltd. to our customers in the fiscal year of 2019.
Acquisition of Control Interest in A-Best
On August 7, 2019, the Company, A-Best Wire Harness & Components Co., Ltd (“A-Best”), a company formed under the laws of Taiwan, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a purchase agreement (the “Purchase Agreement”), pursuant to which, subject to the terms and conditions therein, the Company shall purchase thirty-one percent (31%) of the issued and outstanding equity interest in A-Best and as consideration, issue ten million (10,000,000) shares (the “Stock Consideration”) of its common stock (the “Common Stock”) to Ing-Ming Lai and pay Ing-Ming Lai fifty-five million (55,000,000) new Taiwanese dollars (“NTD”) (the “Cash
Consideration”). The Company currently owns twenty percent (20%) of equity securities in A-Best, and will subsequently own a total of fifty-one percent (51%) of issued and outstanding A-Best shares when Ing-Ming Lai completes transferring his 31% of A-Best’s equity to the Company in accordance with the Purchase Agreement. Pursuant to the Purchase Agreement, the Company shall use its best efforts to obtain its shareholder approval to increase the number of authorized common stock to allow legal issuance of the Stock Consideration to Ing-Ming Lai no later than December 31, 2019. In addition, pursuant to the Purchase Agreement, the
Company shall pay the Cash Consideration to Ing-Ming Lai if and only if the Company successfully completes an Initial Public Offering (the “IPO”) of its common stock, with gross proceeds of no less than $5,000,000 USD. The Purchase Agreement contains the customary confidentiality provision, representations and warranties. The Purchase Agreement also provides for mutual indemnification clauses. A-Best is a Taipei-based company that designs magnetic resonance speakers.
In connection with the Purchase Agreement, on August 7, 2019, the Company, A-Best, and Ing Ming Lai entered into an Exclusive Sales Agreement (the “Exclusive Sales Agreement”), pursuant to which the Company is granted the right as the exclusive distributor to sell all of A-Best’s products, including its Micro-ceramic magnetic resonance speakers in the world, and the right to use A-Best’s trademarks and copyrights in connection with the sale of such products. The term of the Exclusive Sales Agreement shall be three (3) years from execution and be automatically renewed for another term of three (3) years unless one party gives the other parties a written notice of termination three (3) months before the end of
the term.
In connection with the Purchase Agreement, on August 7, 2019, the Company and Ing-Ming Lai entered into a management agreement (the “Management Agreement”), pursuant to which the Company has agreed to maintain A-Best’s existing operations and Ing-Ming Lai’s positions as A-Best’s President and Chief Executive Officer of A-Best, until A-Best’s board of directors decides to terminate the terms of his positions. Pursuant to the Management Agreement, the Company shall also designate one individual to A-Best’s board of directors, and A-Best’s board of directors shall continue to maintain two director seats, where at least one of
the two directors is designated by the Company until the Parties either reach a shareholder agreement or A-Best receives additional capital investment in equity or debt. The Management Agreement became effective upon execution. For more information about this transaction, the Purchase Agreement, the Exclusive Sales Agreement and Management Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on August 13, 2019.
On December 30, 2019, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the “Termination Agreement”) to, among other things, terminate the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, all of which were dated August 7, 2019. The Company, A-Best and Mr. Ing-Ming Lai decided to terminate the three agreements primarily because they need more time to agree to a mutually beneficial way to cooperate with each other with respect to the sales of the Micro-ceramic magnetic resonance speakers that A-Best has developed. Pursuant to the Termination Agreement
which became effective on December 31, 2019, none of the three parties owes any compensation, payments, damages, penalties or liabilities to one another or has any obligations to perform under any of the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, except that each party agrees to keep confidential the business plans, research and development information obtained from performing the three agreements. For more information about the Termination Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on December 31, 2019.
On March 2, 2020, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best (collectively, the “Parties”) entered into a strategic alliance agreement (the “Strategic Alliance Agreement”), pursuant to which the Parties redefined their cooperation with respect to the sales and distribution of A-Best’s micro-ceramic speakers. In accordance with the Strategic Alliance Agreement, A-Best, Mr. Ing-Ming Lai and the Company terminated the Investment Cooperation Agreement dated January 12, 2019 entered by and among the Parties and as a result the
Company agreed to return 20% of the equity interest in A-Best to Mr. Ing-Ming Lai, which was valued at approximately $35
,
142
by the Parties.
Furthermore, subject to the terms and conditions of the Strategic Alliance Agreement, A-Best has granted the Company the exclusive sale and distribution right of A-Best’s micro-ceramic speakers in the world for one (1) year (the “Term”), which may be renewed with mutual consent of the Parties two months prior to the expiration of the Term, while A-Best retains its own right to sell and distribute the micro-ceramic speakers on its own. In consideration for the exclusive distribution right of A-Best’s speakers under the Strategic Alliance Agreement, the Company agreed to have A-Best keep the Company’s 10,000,000 shares of common stock, par value $0.001 per share, issued under
the Investment Cooperation Agreement and the Company may keep the revenue and profits generated from the sale of A-Best speakers until the total revenue from such speakers reaches $15 million U.S. dollars. This Strategic Alliance Agreement contains A-Best’s and Mr. Ing-Ming Lai’s joint representation regarding their intellectual property rights to A-Best ceramic speakers. For more information about this transaction and the Strategic Alliance Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on March 5, 2020.
On
M
arch
2, 2020, the
Company returned 20% equity interest in A-Best to Mr. Ing-Ming Lai pursuant to the Strategic Alliance Agreement.
On November 25, 2019, the Company and Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, entered into an exclusive patent licensing and distribution agreement (the “Exclusive Patent Licensing and Distribution Agreement”), pursuant to which, subject to the terms and conditions therein, Ultra Velocity granted the Company an exclusive license to the patent (Patent M566970 registered in Taiwan) to its electrical noise suppressing device (the “Calibrator”) and the exclusive right to market, promote, distribute and sell the Calibrator globally. In accordance with the Agreement and in consideration for the exclusive patent license and distribution right to
the Calibrator, the Company agreed to issue Ultra Velocity three million (3,000,000) restricted shares of its common stock after the execution of this Agreement and upon the shareholder approval to increase the number of authorized capital of the Company (the “Shareholder Approval”). The term of this Agreement was ten years, commencing from the dare thereof. However, on March 30, 2020, the Company and Ultra Velocity terminated the Exclusive Patent Licensing and Distribution Agreement via a mutually agreed written notice, effective March 24, 2020.
On May 1, 2015, we entered into a written Distribution Agreement with A.C. (USA), Inc. (“A.C.”) pursuant to which we have an exclusive right to market and distribute in Taiwan certain skin care products manufactured by A.C. for a period of 5 years (the “Distribution Agreement”). Pursuant to the provisions of the Distribution Agreement, we will market and promote the A.C. Products as defined therein in the Territory as amended to include PRC, Singapore and Malaysia in addition to Taiwan. Accordingly, we are the exclusive distributor for those A.C. Products in the above Territories.
On April 30, 2018, we, through our Emperor Star, entered into a distribution agreement (the “Cosminergy Distribution Agreement”) with Cosminergy Hitech Development Co., Ltd. (Cosminergy”) pursuant to which we started purchasing a type of water purifying machines from Cosminergy and reselling the water purifying machines in certain Asian areas and countries. The Cosminergy Distribution Agreement expired on April 30, 2019 and we did not renew it.
We, through one of our wholly-owned subsidiaries, entered into a product supply agreement (“Fortune King Product Supply Agreement”) with Fortune King (HK) Trading Limited (“Fortune King”), a company formed under the laws of Hong Kong, to provide and sell any products that Fortune King orders from EOS and its subsidiaries. Pursuant to the Fortune King Product Supply Agreement, we agreed to provide products ordered by Fortune King within five business days from the order date and the products we sell should have the expiration date/shelf life at least one year from the supply date. The Fortune King Product Supply Agreement became effective on October 1, 2018 and was extended to September
30, 2021. We provide marketing information on the products we sell and training services to Fortune King. During the year ended December 31, 2018 and nine months ended September 30, 2019, the majority of EOS’ sales of Nine Layer Transformation Hair Cream, Deep Seawater Mineral Extract, Lifegenes, Youthgenes, and household water purifying machines were to Fortune King. As of June 30, 2019, Fortune King was a related party of us because the founder and officer of Fortune King was a shareholder of EOS. On or about June 30, 2019, the founder and officer of Fortune King transferred her equity interest in the Company and therefore Fortune King is no longer a related party to the
Company.
Skin Care Products- A.C. Products
Moisturizing Mask
– contains highly concentrated hydrating and anti-wrinkle ingredients that are specifically targeted for anti-wrinkle effects. This product adds moisture to the skin and brings out a natural healthy glow. Key ingredients are collagen, glycerin, hyaluronic acid, purified water and silk hydrolyzed protein. Rose water contributes a relaxing effect.
Acne Mask
– contains a special formula that penetrates into the skin to clean pores, removes dirt and helps balance oil secretion. While purifying, Acne Mask, also, hydrates and moisturizes the skin with the designed calming and luminous effect. Ingredients include aloe vera extract, eucalyptus, lemon extract, hydrogenated castor oil, chamomile extract and sorbitol.
Brightening Mask
– contains concentrated L-ascorbic acid and natural botanical extracts that are good for evening skin tones and hydrating the skin. Application of the mask after exposure to sun can help minimize sun damage and clarify the skin. Key ingredients include carbopol, perfume, diglycerin, hyaluronic acid, aloe vera extract, mulberry extract, ginseng extract, collagen, rose water, hydrogenated castor oil, kojic acid and berry extract.
Levo-H Serum
– is formulated to provide maximum hydration to the skin, as well as to reduce fine lines. After using this product, we hope the customers feel their skin moisturized and radiant.
Levo-C Serum
– is designed to diminish ultraviolet damages and even out overall skin tone. This product has a high concentrate L-ascorbic acid and can clarify skin, leaving it with a healthy glow.
Cosminergy Water Purifying Machines
The Cosminergy water purifying machines contain anion ceramic and silicon ceramic which can remove from water particles, sediments, chemical contaminants, like heavy metals and hydrogen sulfide to purify water. We believe the Cosminergy water purifying machines will be popular in the areas where the water quality is relatively poor. We believe the Cosminergy water purifying machines can effectively kill and stop the reproduction of bacteria in the water.
We believe our market is retailers who recognize the needs of the targeted consumers. Our strategy is to target spas, department stores and specialty stores that sell similar skin care products. We hope that our product positioning will assist in the marketing and distribution of those skin care products. We anticipate that we will reach our targeted reseller market by the following types of resellers:
Spas and Health Clubs
– Most high quality day spas and health clubs (and many upscale spas at resort properties) use generic products. Our goal will be to develop affiliations with select spas in urban areas and vacation destinations to whom we will market and sell those skin care products.
Lifestyle Retailers
– We anticipate that the skin care products will be lifestyle-based rather than the typical soaps and potions of natural product retailers. These retailers exist in almost every city and have developed loyal and sophisticated customer bases.
Additionally, we anticipate that we will market those skin care products to cosmetic specialty retailers and boutique department stores.
We believe that the targeted in users of those skin care products are between the ages of 20 and 65 and are predominantly female. We believe they are urban professionals with at least some college level education. The targeted users have active lifestyles and are concerned about social and environmental issues. Mind and body wellness are important to them. They belong to a health club; take yoga, pilates or taichi lessons. The maintenance of a youthful appearance are a part of their life.
Cosminergy Water Purifying Machines
In 2018, we mainly distributed the Cosminergy water purifying machines in PRC (including Hong Kong), Taiwan and Singapore through retailers in those regions and countries. In April 2019, we ceased the distribution of Cosminergy water purifying machines. We intend to find another strategic supplier for other types of water purification equipment.
Calibrators
We started the sales and distribution of automobile carbon reduction machines or Calibrators for Ultra Velocity in November 2019. During the year ended December 31, 2019, we generated a gross revenue of approximately $350,000 in the Asian market.
Patents and Trademarks
At the present we do not own any patents or trademarks. However, we had obtained the exclusive license to the patent (Patent M566970 registered in Taiwan) to the Calibrator from Ultra Velocity pursuant to the Exclusive Patent Licensing and Distribution Agreement, which was terminated on March 24, 2020.
Need for any Government Approval
There is no approval required for the marketing and distribution of those A.C. Products in Taiwan; provided, however, pursuant to the Statute for the Control of Cosmetic Hygiene promulgated by the Ministry of Health and Welfare in Taiwan, we are required to file an application with the Ministry of Health and Welfare in Taiwan for reference purposes.
We have been informed by appropriate representatives of A.C. that the skin care products we plan to market and distribute pursuant to the Distribution Agreement are classified as cosmetics not containing any medical, poisonous or potent drugs under the Republic of China Statute for Control of Cosmetic Hygiene. Accordingly, those products are not necessarily subject to any inspection to obtain approval for their sales. The labeling of those packages clearly indicate in Chinese the name and address of the manufacturer, the name of the product, the ingredients, the usage and directions, the weight, the manufacturing date, the expiration date, the name and address of the importer. We were informed by those representatives that those skin care products are, currently, appropriate for marketing and distribution in Taiwan. In the year of 2018, the Customs of Hong Kong, Malaysia and Singapore approved the imports of the A.C. Products that we brought
to the three regions and countries. We were in the process of preparing additional documents for the Customs of the PRC with respect to the imports of the A.C. Products.
Environmental Laws
Our operations focused on sales and distribution and therefore are not subject to any environmental laws.
Employees and Employment Agreements of the Company, EITB and Emperor Star
The Company, EITB and Emperor Star have a total of eight employees. Our President, He Siang Yang, who, currently, devotes 20 or more hours a week to our business, is responsible for the primary operation of our business. There is no outstanding employment agreement.
12 Month Growth Strategy
Our goal is to maximize shareholder value. To achieve that goal, we intend to expand our operations and evaluate and cultivate new and alternative revenue generating opportunities. We are committed to marketing and distributing skin care products. While strategic and wisely executed marketing campaigns are key to expanding our operations; offering innovative skin care products should position us in the best possible way for long term success.
Item 1A. Risk Factors.
Not applicable for smaller reporting companies.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We do not own any real property. Our principal executive office is presently located at 7F.-1, No. 162, Sec. 2, Zhongshan N. Rd., Zhongshan District, Taipei City 10452, Taiwan (Republic of China). EOS’s Taiwan branch and Emperor Star operate from this Taipei location. Taiwan. Emperor Star and EOS Taiwan Branch entered into the office leases which commenced on June 15, 2019 and terminated on September 28, 2020. The Emperor Star entered into a new office lease which commenced on June 15, 2021 and will end on June 14, 2022.
Item 3. Legal Proceedings.
We are currently not a party to any material legal or administrative proceedings and are not aware of any pending legal or administrative proceedings against us. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is currently quoted on the OTCQB under the symbol “EOSS.” There has not been any significant trading to date in the Company’s common stock. The table below presents the high and low bid for our common stock for each quarter for the years ended December 31, 2021 and 2020. These prices reflect inter-dealer prices, without retail markup, markdown, or commission, and may not represent actual transactions.
There were approximately 359 holders of record of our common stock as of April 8, 2022.
Common Stock
As of April 8, 2022, the outstanding number of shares of our common stock was 180,065,254. All our outstanding common shares are legally issued, fully paid and non-assessable.
Each share of our common stock entitles the shareholder one vote on any and all matters such shareholder is entitled to vote at a shareholders’ annual or special meeting. There are no cumulative voting rights, which mean that the shareholder or shareholders owning 50% of the issued and outstanding shares in our capital stock can elect the entire board of directors. Therefore, any shareholder or shareholders, cumulatively with less than 50% of the voting power, cannot elect any director to the board of directors on their won. Pursuant to the provisions of Section 78.320 of the Nevada Revised Statues (the “NRS”), at least a majority of the outstanding shares of capital stock entitled to vote must be present, in person or by proxy, at any meeting in favor of the action exceeds the number of votes cast in opposition to the action, provided, however, that directors may be elected by a plurality of the votes of the shares present at the
meeting and entitled to vote. Certain fundamental corporate changes, such as the liquidation and business combination, require the approval of holders of a majority of the outstanding shares entitled to vote.
Holders of our common stock have no pre-emptive rights nor conversion rights. There are no redemption or sinking fund provisions applicable to our common stock.
Preferred Stock
As of
April 8, 2022, the outstanding number of shares of our preferred stock was 1,500,000.
Each stock is entitled to 1,000 votes of common stock without dividend rights.
Dividends
The holders of our common stock are entitled to receive dividends on a pro rata based on the number of shares held, when and if declared by our Board of Directors, from funds legally available for that purpose. NRS Section 78.288 prohibits us from declaring dividends where, after giving effect to the distribution of the dividend we would not be able to pay our debts as they become due in the normal course of business; or except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution. We do not, however, intend
to pay any dividends in the foreseeable future and currently intend to retain all future earnings to finance our business.
Our shareholders are not entitled to preference as to dividends or interest; pre-emptive rights to purchase new issues of shares; preference upon liquidation; or any other special rights or preferences.
There are no restrictions on dividends under any loan or other financing arrangements.
We paid no dividends on our common stock in the fiscal year of 2018. We do not have a policy of paying regular dividends and do not expect to pay any dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings for our business. The payment of any future dividends on our common stock will be determined by our Board of Directors and will depend on business conditions, our financial earnings and other factors.
Outstanding Stock Options, Warrants and Convertible Securities
We have no outstanding stock options, warrants or convertible securities as of December 31, 2021.
Equity Compensation Plans, Bonus Plans
As of December 31, 2021, we had no equity incentive plans outstanding. We have no Compensation Committee.
Pension Benefits
As of December 31, 2021, we did not have any defined benefit pension plans.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plans.
Debt Securities
We have no debt securities outstanding.
Repurchase Programs
There is currently no share repurchase program pending.
On January 15, 2019, A-Best, its majority shareholder Ing Ming Lai, a Taiwanese individual, and the Company entered into an Investment Cooperation Agreement (the “Investment Agreement”), pursuant to which we issued 10 million shares of our common stock to Ing Ming Lai. The Company made such an issuance in reliance on an exemption from registration set forth in section 4(2) of the Securities Act of 1933, as amended.
Item 6. Selected Financial Data.
As a smaller reporting company, we are not required to provide the information under this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Some of the statements contained in this Form 10-K that are not historical facts are “forward-looking statements” which can be identified by the use of terminology such as “estimates,”“projects,”“plans,”“believes,”“expects,”“anticipates,”“intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying
the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
1.
Our ability to attract and retain management and key employees;
2.
Our ability to generate customer demand for our products;
3.
The intensity of competition; and
4.
General economic conditions.
All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.
Overview
Description of Business
General Information
EOS Inc. (“we,”“us,”“our,” or the “Company”) was incorporated in the State of Nevada on April 3, 2015.
On or about November 18, 2016, the Company formed EOS INC. TAIWAN BRANCH, a Taiwanese corporation (“EITB”) and the Company owns 100% of EITB. Yu-Cheng Yang, a shareholder and director of the Company, is the sole director of EITB. Yu-Hsiang Chia is the branch manager of EITB.
Emperor Star International Trade Co., Ltd., (“Emperor Star”), was incorporated on November 16, 2015 under the laws of Taiwan. Emperor Star is in the business of marketing and distributing various consumer products, including detergents, nutrition supplements, and skin care products.
On May 3, 2017, the Company entered into and closed a Share Purchase and Sale Agreement (the “Purchase Agreement”) with Emperor Star to acquire all issued and outstanding shares of Emperor Star in consideration of $30,562 in cash. As a result of the transaction, Emperor Star became the Company’s wholly owned subsidiary. Upon consummation of the transaction, the Company has assumed the business of Emperor Star and ceased to be a shell company. Yu-Hsiang Chia currently serves as the officer and director of Emperor Star. On May 26, 2020, EOS Inc. increased its investment in Emperor
Star by $134,004 (NTD$4,000,000). The Company also received the contributions to Emperor Star from non-controlling interests in the amount of $33,398 (NTD$1,000,000). As a result, the Company owns 83% equity interest of Emperor Star as of June 30, 2020, which is no longer a wholly-owned subsidiary.
On September 20, 2018, the Company set up another wholly-owned subsidiary, EOS International Inc. (“EOS(BVI)”), under the laws of British Virgin Islands. EOS(BVI) is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifying machines. On March 1, 2019, EOS(BVI) set up a wholly-owned subsidiary, Shanghai Maosong Co., Ltd (“Maosong”), under the laws of People’s Republic of China. Maosong is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifying machines in China. As of the date of this report, Maosong has a registered capital of USD $100,000, but no capital has actually been paid
into Maosong.
We have never been a party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.
We do not own any real property. Our principal executive office is presently located at 7F.-1, No. 162, Sec. 2, Zhongshan N. Rd., Zhongshan District, Taipei City 10452, Taiwan (Republic of China). EITB and Emperor Star operate from this Taipei location. Taiwan. Emperor Star and EITB entered into the office leases which commenced on June 15, 2019 and will end on June 14, 2022. The office occupies approximately 1,388 square feet and the average amount of office rent (including the maintenance fees) is approximately $2,016 per month. Before this location, our former principal executive office was at 372 Linsen N. Road, Suite 519, Zhongshan District, Taipei City, 104, Taiwan. Our then monthly rent for that office space was $1,280 and that lease expired on June 30, 2019.
General Business Overview
EOS Inc. markets and distributes a variety of consumer products selected based on its understanding of the demand for each of its products. EOS conducts its business primarily in Asia, including the People’s Republic of China (“PRC”), Taiwan, Singapore and Malaysia. The principal products that EOS markets and sells through its subsidiaries include Nine Layer Transformation Hair Cream, Deep Seawater Mineral Extract, and Lifegenes & Youthgenes. Nine Layer Transformation Hair Cream is hair-coloring product that darkens the user’s hair color to brown or black while nourishing the hair. Deep Seawater Mineral Extract is a dietary supplement that is designed to enhance the overall health and appearance of the consumer. Both Lifegenes and Youthgenes are dietary supplements designed to improve the consumer’s health. In addition to the four major
products, EOS also sells and distributes other dietary supplements and skin care products from time to time as it deems profitable. During the year ended December 31, 2021 and 2020, the net sales of dietary supplements and skin care products were $68
,
840 and $73,317, which represented approximately 13.28% and 3.78% of the total net sales for that period, respectively.
On April 30, 2018, we, through our Emperor Star, started purchasing a type of water purifying machines from Cosminergy Hitech Development Co., Ltd. (“Cosminergy”) and reselling the water purifying machines in certain Asian areas and countries. The sales generated from selling the water purifying machines for the year ended December 31, 2021 and 2020 were $107,826 and $1,376,795, respectively, accounting for approximately 20.80% and 71.05% of the total revenue of the said period, respectively.
In November 2019, we started the marketing, promotion, sales and distribution of certain electrical noise suppressing device (the “Calibrator”) globally provided by Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, based on an exclusive patent licensing and distribution agreement (the “Ultra Velocity Agreement”) between Ultra Velocity and us. However, due to the outbreak of coronavirus (“COVID-19”) in mainland China, Ultra Velocity and we terminated the Ultra Velocity Agreement in March 2020 and intended to redefine the cooperation model between the respective parties. During the year ended December 31, 2021 and 2020, the net sales of calibrator were $305,868 and $400,061. which represented approximately 58.99% and 20.65% of the total net sales for that period, respectively.
In addition, we provided inventory, membership and business management software that designed by CKS Information Co., Ltd. to our customers in the fiscal year of 2019. During the year ended December 31, 2021 and 2020, the software business line generated $35,953 and $87,613 respectively, accounting for approximately 6.93% and 4.52% of the total net sales for that period, respectively.
On August 7, 2019, the Company, A-Best Wire Harness & Components Co., Ltd (“A-Best”), a company formed under the laws of Taiwan, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a purchase agreement (the “Purchase Agreement”), pursuant to which, subject to the terms and conditions therein, the Company shall purchase thirty-one percent (31%) of the issued and outstanding equity interest in A-Best and as consideration, issue ten million (10,000,000) shares (the “Stock Consideration”) of its common stock (the “Common Stock”) to Ing-Ming Lai and pay Ing-Ming Lai fifty-five million (55,000,000) new Taiwanese dollars (“NTD”) (the “Cash
Consideration”). The Company currently owns twenty percent (20%) of equity securities in A-Best, and will subsequently own a total of fifty-one percent (51%) of issued and outstanding A-Best shares when Ing-Ming Lai completes transferring his 31% of A-Best’s equity to the Company in accordance with the Purchase Agreement. Pursuant to the Purchase Agreement, the Company shall use its best efforts to obtain its shareholder approval to increase the number of authorized common stock to allow legal issuance of the Stock Consideration to Ing-Ming Lai no later than December 31, 2019. In addition, pursuant to the Purchase Agreement, the
Company shall pay the Cash Consideration to Ing-Ming Lai if and only if the Company successfully completes an Initial Public Offering (the “IPO”) of its common stock, with gross proceeds of no less than $5,000,000 USD. The Purchase Agreement contains the customary confidentiality provision, representations and warranties. The Purchase Agreement also provides for mutual indemnification clauses. A-Best is a Taipei-based company that designs magnetic resonance speakers.
In connection with the Purchase Agreement, on August 7, 2019, the Company, A-Best, and Ing Ming Lai entered into an Exclusive Sales Agreement (the “Exclusive Sales Agreement”), pursuant to which the Company is granted the right as the exclusive distributor to sell all of A-Best’s products, including its Micro-ceramic magnetic resonance speakers in the world, and the right to use A-Best’s trademarks and copyrights in connection with the sale of such products. The term of the Exclusive Sales Agreement shall be three (3) years from execution and be automatically renewed for another term of three (3) years unless one party gives the other parties a written notice of termination three (3) months before the end of
the term.
In connection with the Purchase Agreement, on August 7, 2019, the Company and Ing-Ming Lai entered into a management agreement (the “Management Agreement”), pursuant to which the Company has agreed to maintain A-Best’s existing operations and Ing-Ming Lai’s positions as A-Best’s President and Chief Executive Officer of A-Best, until A-Best’s board of directors decides to terminate the terms of his positions. Pursuant to the Management Agreement, the Company shall also designate one individual to A-Best’s board of directors, and A-Best’s board of directors shall continue to maintain two director seats, where at least one of
the two directors is designated by the Company until the Parties either reach a shareholder agreement or A-Best receives additional capital investment in equity or debt. The Management Agreement became effective upon execution. For more information about this transaction, the Purchase Agreement, the Exclusive Sales Agreement and Management Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on August 13, 2019.
On December 30, 2019, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the “Termination Agreement”) to, among other things, terminate the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, all of which were dated August 7, 2019. The Company, A-Best and Mr. Ing-Ming Lai decided to terminate the three agreements primarily because they need more time to agree to a mutually beneficial way to cooperate with each other with respect to the sales of the Micro-ceramic magnetic resonance speakers that A-Best has developed. Pursuant to the Termination Agreement
which became effective on December 31, 2019, none of the three parties owes any compensation, payments, damages, penalties or liabilities to one another or has any obligations to perform under any of the Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, except that each party agrees to keep confidential the business plans, research and development information obtained from performing the three agreements. For more information about the Termination Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on December 31, 2019.
On March 2, 2020, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best (collectively, the “Parties”) entered into a strategic alliance agreement (the “Strategic Alliance Agreement”), pursuant to which the Parties redefined their cooperation with respect to the sales and distribution of A-Best’s micro-ceramic speakers. In accordance with the Strategic Alliance Agreement, A-Best, Mr. Ing-Ming Lai and the Company terminated the Investment Cooperation Agreement dated January 12, 2019 entered by and among the Parties and as a result the
Company agreed to return 20% of the equity interest in A-Best to Mr. Ing-Ming Lai, which was valued at approximately $35,142 by the Parties.
Furthermore, subject to the terms and conditions of the Strategic Alliance Agreement, A-Best has granted the Company the exclusive sale and distribution right of A-Best’s micro-ceramic speakers in the world for one (1) year (the “Term”), which may be renewed with mutual consent of the Parties two months prior to the expiration of the Term, while A-Best retains its own right to sell and distribute the micro-ceramic speakers on its own. In consideration for the exclusive distribution right of A-Best’s speakers under the Strategic Alliance Agreement, the Company agreed to have A-Best keep the Company’s 10,000,000 shares of common stock, par value $0.001 per share, issued under
the Investment Cooperation Agreement and the Company may keep the revenue and profits generated from the sale of A-Best speakers until the total revenue from such speakers reaches $15 million U.S. dollars. This Strategic Alliance Agreement contains A-Best’s and Mr. Ing-Ming Lai’s joint representation regarding their intellectual property rights to A-Best ceramic speakers. For more information about this transaction and the Strategic Alliance Agreement, please refer to the current report on Form 8-K which was filed with the Securities and Exchange Commission on March 5, 2020.
On November 25, 2019, the Company and Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under the laws of Taiwan, entered into an exclusive patent licensing and distribution agreement (the “Exclusive Patent Licensing and Distribution Agreement”), pursuant to which, subject to the terms and conditions therein, Ultra Velocity granted the Company an exclusive license to the patent (Patent M566970 registered in Taiwan) to its electrical noise suppressing device (the “Calibrator”) and the exclusive right to market, promote, distribute and sell the Calibrator globally. In accordance with the Agreement and in consideration for the exclusive patent license and distribution right to
the Calibrator, the Company agreed to issue Ultra Velocity three million (3,000,000) restricted shares of its common stock after the execution of this Agreement and upon the shareholder approval to increase the number of authorized capital of the Company (the “Shareholder Approval”). The term of this Agreement was ten years, commencing from the dare thereof. However, on March 30, 2020, the Company and Ultra Velocity terminated the Exclusive Patent Licensing and Distribution Agreement via a mutually agreed written notice, effective March 24, 2020.
On
M
arch
2, 2020, the
Company returned 20% equity interest in A-Best to Mr. Ing-Ming Lai pursuant to the Strategic Alliance Agreement.
On April 12, 2021, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the “Termination Agreement”) to terminate the agreement of Strategic Alliance Agreement (the “Strategic Alliance Agreement”) dated March 2, 2020. In the agreement, Ing-Ming Lai has proceed to effect a return of a total of 10,000,000 shares in EOS INC, back to the company.
The Board of Directors of this Corporation authorized the return of the 10,000,000 EOSS shares from Ing Ming Lai.
Distribution Agreements and Supply Agreement
On May 1, 2015, we entered into a written Distribution Agreement with A.C. (USA), Inc. (“A.C.”) pursuant to which we have an exclusive right to market and distribute in Taiwan certain skin care products manufactured by A.C. for a period of 5 years (the “Distribution Agreement”). Pursuant to the provisions of the Distribution Agreement, we will market and promote the A.C. Products as defined therein in Taiwan. Accordingly, we are the exclusive distributor for those A.C. Products in Taiwan.
On April 30, 2018, we, through our Emperor Star, entered into a distribution agreement (the “Cosminergy Distribution Agreement”) with Cosminergy Hitech Development Co., Ltd. (Cosminergy”) pursuant to which we started purchasing a type of water purifying machines from Cosminergy and reselling the water purifying machines in certain Asian areas and countries. The Cosminergy Distribution Agreement expired on April 30, 2019 and we did not renew it.
We, through one of our wholly-owned subsidiaries, entered into a product supply agreement (“Fortune King Product Supply Agreement”) with Fortune King (HK) Trading Limited (“Fortune King”), a company formed under the laws of Hong Kong, to provide and sell any products that Fortune King orders from EOS and its subsidiaries. Pursuant to the Fortune King Product Supply Agreement, we agreed to provide products ordered by Fortune King within five business days from the order date and the products we sell should have the expiration date/shelf life at least one year from the supply date. The Fortune King Product Supply Agreement became effective on October 1, 2018 and was extended to September
30, 2021. We provide marketing information on the products we sell and training services to Fortune King. During the year ended December 31, 2018 and nine months ended September 30, 2019, the majority of EOS’ sales of Nine Layer Transformation Hair Cream, Deep Seawater Mineral Extract, Lifegenes, Youthgenes, and household water purifying machines were to Fortune King. As of June 30, 2019, Fortune King was a related party of us because the founder and officer of Fortune King was a shareholder of EOS. On or about June 30, 2019, the founder and officer of Fortune King transferred her equity interest in the Company and therefore Fortune King is no longer a related party to the
Company.
Critical Accounting Policies and Estimates
Principles of Consolidation
The accompanying audited consolidated financial statements, including the accounts of EOS Inc. and its wholly owned subsidiaries in Taiwan, British Virgin Islands, and People’s Republic of China, have been prepared in conformity with accounting principles generally accepted in the United States of America. Since the Company and Emperor Star are entities under common control prior to the acquisition of Emperor Star, the transaction is accounted for as a restructuring transaction. All the assets and liabilities of Emperor Star were transferred to the Company at their respective carrying amounts on the date of transaction. The
Company has recast prior period financial statements to reflect the conveyance of Emperor Star’s common shares as if the restructuring transaction had occurred as of the earliest date of the financial statements. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. The nature of and effects on earnings per share (EPS) of nonrecurring intra-entity transactions involving long-term assets and liabilities is not required to be eliminated and EPS amounts have been recast to include the earnings (or losses) of the transferred net assets.
The functional currency of the subsidiaries in Taiwan is the New Taiwan dollars and the subsidiary in People’s Republic of China is the Chinese Yuan, or Renminbi; however, the accompanying unaudited consolidated financial statements have been translated and presented in United States Dollars ($). In the accompanying unaudited consolidated financial statements and notes, “$”, “US$” and “U.S. dollars” mean United States dollars, “NT$” and “NT dollars” mean New Taiwan dollars, and “RMB” means Chinese Yuan, or Renminbi.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve breakeven operating results over an
extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Management has determined that no impairments of long-lived assets currently exist as of December 31, 2021 and 2020.
Long-term Equity Investment
The Company acquires equity investment to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
☐
Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gain (loss) on equity investments.
☐
Non-marketable cost method investments when the equity method does not apply.
Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the
use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.
Other-Than-Temporary Impairment
The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
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Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gain (loss) on equity investments.
☐
Non-marketable equity investments based on the Company’s assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the operating performance of the investee; adverse changes in market conditions and the regulatory or economic environment; changes in operating structure or management of the investee; additional funding requirements; and the investee’s ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value
might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gain (loss) on equity investments.
Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the
Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Merchandise sales: The Company recognizes sales revenues from merchandise sales when customers obtain control of the Company’s products, which typically occurs upon delivery to customer. Merchandise sales revenues are recorded at the sales price, or “transaction price”.
Software sales: The Company does not develop the software products on its own. When the Company receives a purchase order from the customer, the Company would engage with the third-party software company to customize and develop the software products. The Company recognizes software revenues upon completion of the installation and testing, and transfer the control of the software products to the customer. Software revenues are recorded at the fixed sales price, or “transaction price”, pursuant to the sales contracts.
The Company may also charge the customer maintenance service fees on a straight-line basis over the service period pursuant to the sales contract. The Company concluded that the performance obligation for the maintenance service is distinct. Therefore, such maintenance service revenue can be separated from other elements in the arrangement.
Trade discount and allowances: The Company generally does not provide invoice discounts on product sales to its customers for prompt payment.
Product returns
:
The Company generally does not provide customers with the right to return a product for a full or partial refund, a credit, or an exchange for another product.
To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
The following tables provide details of revenue by major products and by geography.
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 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.
In addition, the adoption of the standard did not have a material impact on the Company’s results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
Advertising Costs
Advertising costs are expensed at the time such advertising commences. Advertising expenses were $399 and $22,840 for the year ended December 31, 2021 and 2020, respectively.
Post-retirement and Post-employment Benefits
The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Taiwan Labor Pension Act (the “Act”). Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which
were expensed as incurred, were $5,873 and $5,377 for the year ended December 31, 2021 and 2020, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.
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.
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Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
·
Level 3 – Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.
The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, advance to suppliers, prepaid expenses, accounts payable, accrued expenses, and due to shareholders, approximate fair value because of to their relatively short maturities.
Net Income Per Share
Basic income per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during each period.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
Concentration of Credit Risk
Cash and cash equivalents
: The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions in Taiwan, but these investments may be in excess of the insurance limits of Taiwan Central Deposit Insurance Corporation (the “TCDIC”). The Company does not enter into financial instruments for hedging, trading or speculative purposes. Concentration of credit risk with respect to trade and notes receivables is limited due to the wide variety of customers and markets in which the
Company transacts business, as well as their dispersion across many geographical areas. As of December 31, 2021, the Company had approximately $13,916 in excess of TCDIC insured limits. The Company has not experienced any losses in such accounts.
Customers
: The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.
For the year ended December 31, 2021, two customers accounted for more than 10% of the Company’s total revenues, representing approximately 56% and 39% of its total revenues, and 84% and 11% of accounts receivable in aggregate at December 31, 2021.
For the year ended December 31, 2020, one customer accounted for more than 10% of the Company’s total revenues, representing approximately 88% of its total revenues, and 95% of accounts receivable in aggregate at December 31, 2020.
: The Company’s inventory is purchased from various suppliers.
For the year ended December 31, 2021, three suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately 26%, 57% and 10% of total net purchase, and 0% of accounts payable in aggregate at December 31, 2021, respectively:
For the year ended December 31, 2020, four suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately 45%, 27%, 13% and 12% of total net purchase, and 0%, 98%, 0% and 0% of accounts payable in aggregate at December 31, 2020, respectively:
Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) and Renminbi (“RMB”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars and Renminbi, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.
Translation Adjustment
The accounts of the Company’s subsidiaries were maintained, and their financial statements were expressed in New Taiwan Dollar (“NTD”) and Renminbi (“RMB”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, “Foreign Currency Matters”, with the NTD and RMB as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, common stock and additional paid-in capital are translated at the historical rates, and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under accumulated other comprehensive income (loss) as a component of stockholders’
equity.
Comprehensive Income (loss)
Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income (loss) on its consolidated statements of operations and other comprehensive income (loss).
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within
those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 2023.
Results of Operations
The following presents the consolidated results of the Company for the years ended December 31,2021 and December 31,2020.
Net Revenue
:
Net revenue was $518,487 for the year ended December 31, 2021, representing a decrease of $1,419,299, or 73%, as compared to $1,937,786 for the year ended December 31, 2020. The decrease was primarily due to the impact of the epidemic, the sales revenue of water purifier machine decreased compared with the prior year.
Cost of sales was $312,951 for the year ended December 31, 2021, representing an increase of $4,643 or 2%, as compared to $308,308 for the year ended December 31, 2020. Such increase was mainly due to the increase in the sales of automobile carbon reduction machine. The automobile carbon reduction machines will come at a high cost to the company.
Gross Profit
:
Gross profit was $205,536 for the
year ended December 31, 2021, compared to $1,629,478 for the same period in 2020. Gross profit as a percentage of net sales was 40% for the year ended December 31, 2021, compared to 84% in the same period in 2020. The change in gross margin was because
s
ales of products with higher gross margins decreased, resulting in lower gross margins.
Selling, General and Administrative Expenses
:
Selling, general and administrative expenses consist primarily of office rent, salary and related costs for personnel and facilities, and professional service fees. Selling, general and administrative expenses were $1,274,616 for the year ended
December 31, 2021, representing
de
crease of $1,097,058 or 46%, as compared to $2,371,674 for the year ended December 31, 2020. The decrease in selling, general and administrative expenses was primarily attributable to the decrease in bad debt expense.
Income (Loss) from Operations:
Loss from operations was $1,069,080 for the year ended December 31, 2021 compared to loss from operations of $742,196 for the year ended December 31, 2020, representing a
n
increase of $326,884 or 44%. Such increase
was primarily due to the decrease in sales.
Other Income (expenses):
Other loss was $15,893 for the year ended December 31, 2021, reflecting an increase of $3,199 or 25%, compared to other loss of $12,694 for the year ended December 31, 2020. The increase was mainly attributable to the increase in loss of foreign currency exchange.
Net Income (Loss):
As a result of the above factors, we had net loss was $1,101,565 for the year ended December
31, 2021, as compared to net in of $771,147 for the year ended December 31, 2020, representing an increase in loss of $330,418 or 43%.
We had a working capital of $1,245,783 on December 31, 2021, compared to the working capital of $
2,255,403
on December
31, 2020. The increase in working capital was primarily attributable to the security deposit reclassify to current asset and
decrease in accounts payable
.
Net cash used in operating activities was $194,254 during the year ended December 31, 2021, as compared to $
362,441
for the year ended December 31, 2020. The decrease in net cash used in operating activities in the amount of $
168,193
was primary attributable to the decrease in security deposits and other assets and account payable, partially offset by the increase in net income and advance to suppliers.
Net
cash used in investing activities was $352 during the year ended December 31, 2021, as compared to $2,218 for the year ended December 31, 2020. The decrease in net cash used in investing activities was due to the slight decrease in the acquisition of property, plant and equipment.
Net cash provided by financing activities was $95,271 during the year ended December 31, 2021, as compared to $199,966 for the year ended December 31, 2020. The decrease in net cash provided by financing activities was due to the repayment to related party payable and proceeds from borrowing.
Net change in cash and
cash equivalents was a decrease of $98,341 for the year ended December 31, 2021, as compared to $173,112 for the year ended December 31, 2020.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2021.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As
a smaller reporting company, we are not required to provide the information required by this item.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of EOS, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of EOS, Inc. together with its subsidiaries (“the
Company”) as of December 31, 2021 and 2020, and the related consolidated statements of loss and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity
with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter
The
Company has significant transactions with related parties, which are described in Note 5 to the financial statements. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite conditions of competitive, free market dealings may not exist.
Preferred stock ($ii0.001/
par value, ii5,000,000/ shares authorized, ii1,500,000/
and iizero/ shares issued and outstanding as at December
31, 2021 and 2020, respectively)
i1,500
i-
Common stock ($ii0.001/
par value, ii575,000,000/ shares authorized, ii180,065,254/
and ii74,123/ shares issued and outstanding as at December
31, 2021 and 2020, respectively)
i180,065
i74
Additional paid in capital
i29,060
i186,474
Accumulated income
i722,925
i1,803,259
Other comprehensive income
i133,056
i111,776
Total shareholders’ equity
i1,066,606
i2,101,583
Non-controlling interest
i19,562
i40,305
Total Equity
i1,086,168
i2,141,888
Total liabilities and shareholders’ equity
$
i2,130,059
$
i2,794,522
The accompanying notes are an integral part of these consolidated financial statements.
Note
1. NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
i
Organization
EOS Inc. was incorporated on April 3, 2015 in the State of Nevada. The Company’s business plan is to market and distribute skin care products, including masks and serums.
Emperor Star International Trade Co., Ltd., (“Emperor Star”), was incorporated on November 16, 2015 under the laws of Taiwan. Emperor Star is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifiers.
On May 3, 2017, the
Company entered into and closed a Share Purchase and Sale Agreement (the “Purchase Agreement”) with Emperor Star and the shareholder of Emperor Star to acquire all issued and outstanding shares of Emperor Star in consideration of $i30,562 in cash. As a result of the Purchase, Emperor Star becomes the Company’s wholly owned subsidiary. Upon consummation of the Purchase, the
Company has assumed the business of Emperor Star and ceased to be a shell company.
On September 20, 2018, the Company set up another wholly-owned subsidiary, EOS International Inc. (“EOS(BVI)”), under the laws of British Virgin Islands. EOS(BVI) is in the business of marketing and distribution of various products, including nutrition supplements, skin care products, and water purifiers.
On March 1, 2019, EOS(BVI) set up a wholly-owned subsidiary, Shanghai Maosong Co., Ltd (“Maosong”), under the laws of People’s Republic of China. Maosong is in the business of marketing and distribution
of various products, including nutrition supplements, skin care products, and water purifiers in China. As of the date of this report, Maosong has a registered capital of USD $i100,000, but no capital has actually been paid into Maosong.
On June 2, 2020, EOS(BVI) i83.33%
owner, and Shanghai Qifan Qiye Management Co., Ltd. (“Qifan”) i16.67% owner of Maosong resolute to change the registered capital of Maosong to RMB i1,200,000,000
(i1.2 billion) and that EOS to contribute certain Intellectual Property as registered capital of Shanghai Maosong. Intellectual Property owned by EOS International Inc was valued at RMB
i1,000,000,000
(i1 billion) and Intellectual Property owned by Qifan was valued at RMB i200,000,000
(i200 million).
On July 13, 2021, EOS(BVI), MaoSong, and Qifan entered into a Shareholder Agreement where Qifan (i) delegate its i16.67%
equity voting rights, powers, or benefits in Maosong to EOS(BVI); (ii) grant EOS(BVI) an irrevocable, unconditional, exclusive option to purchase Maosong’s equity interest; (iii) the right to receive any proceeds from the Maosong’s Equity Interest; (iv) pledge its existing or any prospective Maosong equity interest to EOS Int’l; as a result EOS(BVI) retains 100% control of MaoSong and the i16.67% noncontrolling interest are consolidated.
/
i
Principles
of Consolidation
The accompanying consolidated financial statements, including the accounts of EOS Inc. and its wholly owned subsidiaries in Taiwan, British Virgin Islands, and People’s Republic of China, have been prepared in conformity with accounting principles generally accepted in the United States of America. Since the Company and Emperor Star are entities under common control prior to the acquisition of Emperor Star, the transaction is accounted for as a restructuring transaction. All assets and liabilities of Emperor Star were transferred to the Company
at their respective carrying amounts on the date of transaction. The Company has recast prior period financial statements to reflect the conveyance of Emperor Star’s common shares as if the restructuring transaction had occurred as of the earliest date of the consolidated financial statements. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. The nature of and effects on earnings per share (EPS) of non-recurring intra-entity transactions involving long-term assets and liabilities is not required to be eliminated and EPS amounts have been recast to include the earnings (or losses) of the transferred net assets.
The functional currency of the subsidiaries in Taiwan is the New Taiwan
dollars and the subsidiary in People’s Republic of China is the Chinese Yuan, or Renminbi; however, the accompanying consolidated financial statements have been translated and presented in United States Dollars ($). In the accompanying consolidated financial statements and notes, “$”, “US$” and “U.S. dollars” mean United States dollars, “NT$” and “NT dollars” mean New Taiwan dollars, and “RMB” means Chinese Yuan, or Renminbi
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates.
i
Classification
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net income nor retained earnings.
i
Cash
and Cash Equivalents
Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less.
i
Accounts Receivable
Accounts receivable are stated at carrying value less estimates made for doubtful receivables. An allowance for impairment of trade receivables is established if
the collection of a receivable becomes doubtful. Such receivable becomes doubtful when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. A bad debt expense is recognized in the statement of comprehensive income. However, if the payment received after it has been designated as uncollectible, bad debt recovery is recognized in the statement of comprehensive income.
i
Inventory
Inventory
is stated at the lower of cost and net realizable value. Net realizable value (NRV) is defined as estimated selling prices less costs of completion, disposal, and transportation. Inventory consists mainly of finished goods held for resale. Cost is determined on a weighted average cost method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.
i
Property
and Equipment
Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the istraight-line
method, including property and equipment under capital leases, generally is five years. Depreciation expense is $i1,887 and $i2,269 for the years ended December 31, 2021 and 2020,
respectively.
The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company
be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve breakeven operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also
requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Management has determined that no impairments of long-lived assets currently exist as of December 31, 2021 and 2020.
i
Long-term Equity Investment
The
Company acquires equity investment to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
·
Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gain (loss) on equity investments.
·
Non-marketable
cost method investments when the equity method does not apply.
Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee.
Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.
i
Other-Than-Temporary
Impairment
The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
·
Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and the Company’s ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The
Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gain (loss) on equity investments.
·
Non-marketable equity investments based on the Company’s
assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the operating performance of the investee; adverse changes in market conditions and the regulatory or economic environment; changes in operating structure or management of the investee; additional funding requirements; and the investee’s ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings
capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gain (loss) on equity investments.
i
Revenue Recognition
Pursuant to ASC 606, the
Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers
to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Merchandise sales: The Company recognizes sales revenues from merchandise sales when customers obtain control of the Company’s products, which typically occurs upon delivery to customer. Merchandise sales revenues are recorded at the sales price, or “transaction price”.
Software sales: The Company does not develop the software products on its own. When the
Company receives a purchase order from the customer, the Company would engage with the third-party software company to customize and develop the software products. The Company recognizes software revenues upon completion of the installation and testing, and transfer the control of the software products to the customer. Software revenues are recorded at the fixed sales price, or “transaction price”, pursuant to the sales contracts. The Company may also charge the customer maintenance service fees on a straight-line basis over the service period pursuant to the sales contract.
The Company concluded that the performance obligation for the maintenance service is distinct. Therefore, such maintenance service revenue can be separated from other elements in the arrangement.
Trade discount and allowances: The Company generally does not provide invoice discounts on product sales to its customers for prompt payment.
Product returns
:
The Company generally does not provide customers with the right to return a product for a full or partial refund, a credit, or an exchange
for another product.
To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
The following tables provide details of revenue by major products and by geography.
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 842.
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.
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.
i
Advertising Costs
Advertising costs are expensed at the time such advertising commences. Advertising expenses were $i399
and $i22,840 for the year ended December 31, 2021 and 2020, respectively.
/
i
Post-retirement
and Post-employment Benefits
The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Taiwan Labor Pension Act (the “Act”). Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The
Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $i5,873 and $i5,377
for the years ended December 31, 2021 and 2020, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.
FASB ASC 820, “Fair Value Measurements” defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs
be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
·
Level
1 – Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.
·
Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date,
such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
·
Level 3 – Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would
use in pricing the asset or liability.
The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, advance to suppliers, prepaid expenses, accounts payable, accrued expenses, and due to shareholders, approximate fair value because of to their relatively short maturities.
i
E
ar
nings
(Loss) Per Share
Basic earnings (loss)
per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during each year.
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.
i
Concentration of Credit Risk
Cash and cash equivalents
: The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions in Taiwan, but these investments may be in excess of the insurance limits of Taiwan Central Deposit Insurance Corporation (the “TCDIC”). The Company does not enter into financial instruments for hedging, trading or speculative purposes. Concentration of credit risk with respect to trade and notes receivables is limited due to the wide variety of customers and markets in which the
Company transacts business, as well as their dispersion across many geographical areas. As of December 31, 2021 and 2020, the Company had approximately $i0 and $i9,913
in excess of TCDIC insured limits
, respectively.
The Company has not experienced any losses in such accounts.
Customers
: The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.
For the year ended December 31, 2021, two customers accounted for more than 10% of the Company’s total revenues, representing approximately i56% and i39%
of its total revenues, and i84% and i11%
of accounts receivable in aggregate at December 31, 2021.
For the year ended December 31, 2020, one customer accounted for more than 10% of the Company’s total revenues, representing approximately i88% of its total revenues, and i95%
of accounts receivable in aggregate at December 31, 2020.
: The Company’s inventory is purchased from various suppliers.
For the year ended December 31, 2021, three suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately i26%, i57%
and i10% of total net purchase, and i0%
of accounts payable in aggregate at December 31, 2021, respectively:
For the year ended December 31, 2020, four suppliers accounted for more than 10% of the Company’s total net purchase, representing approximately i36%, i23%,
i22% and i10%
of total net purchase, and i0%, i98%,
i0% and i0%
of accounts payable in aggregate at December 31, 2020, respectively:
Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) and Renminbi (“RMB”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars and Renminbi, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.
i
Translation Adjustment
The accounts of the Company’s subsidiaries were maintained, and their financial statements were expressed in New Taiwan Dollar (“NTD”) and Renminbi (“RMB”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, “Foreign Currency Matters”, with the NTD and RMB as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, common stock and additional paid-in capital are translated at the historical rates, and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under accumulated other comprehensive income (loss) as a component of stockholders’
equity.
i
Comprehensive Income (loss)
Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income (loss) on its consolidated statements of operations and other comprehensive income (loss).
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Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within
those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 1
,
2023.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
its car with remaining lease terms of i37 months and photocopier with remaining lease terms of i15 months, respectively. The
Company does not have any other leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its leases as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.
Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based primarily on its lease term
in Taiwan which is approximately i2.44%.
Operating lease expenses were $i54,482 and $
i24,304
for the years ended 31 December,2021 and 2020, respectively.
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The components of lease expense and supplemental cash flow information related to leases for the year ended are as follows:
On January 15, 2019, the Company, A-Best Wire Harness & Components Co., Ltd. (“A-Best” or the “Investee”), a company formed under the laws of Taiwan, and
Mr. Ing-Ming Lai, a Taiwanese individual and the majority shareholder of A-Best, entered into an investment cooperation agreement (the “Investment Cooperation Agreement”), pursuant to which the Company issued i10 million shares of its common stock to Mr. Ing-Ming Lai to purchase twenty percent (i20%)
of the issued and outstanding equity in A-Best. On May 24, 2019, the Company consummated the shareholder registration of A-Best with the Investment Commission of Ministry of Economic Affairs of Taiwan and issued i10 million shares of its common stock to Mr. Ing-Ming Lai to acquire i20%
of the issued and outstanding equity in A-Best.
On March 2, 2020, the Company, A-Best, and Ing-Ming Lai, (collectively, the “Parties”) entered into a strategic alliance agreement (the “Strategic Alliance Agreement”), pursuant to which the Parties redefined their cooperation with respect to the sales and distribution of A-Best’s micro-ceramic speakers. In accordance with the Strategic Alliance Agreement, A-Best, Mr. Ing-Ming Lai and the Company terminated the Investment Cooperation Agreement dated January 15, 2019 entered by and among the Parties and as a result the
Company agreed to return 20% of the equity interest in A-Best to Mr. Ing-Ming Lai, which was valued at approximately $i35,142 by the Parties.
Furthermore, subject to the terms and conditions of the Strategic Alliance Agreement, A-Best has granted the
Company the exclusive sale and distribution right of A-Best’s micro-ceramic speakers in the world for one (1) year (the “Term”), which may be renewed with mutual consent of the Parties two months prior to the expiration of the Term, while A-Best retains its own right to sell and distribute the micro-ceramic speakers on its own. In consideration for the exclusive distribution right of A-Best’s speakers under the Strategic Alliance Agreement, the Company agreed to have A-Best keep the Company’s 10,000,000 shares of common stock issued under the Investment Cooperation Agreement and the Company may keep the revenue and profits generated from the sale of A-Best speakers until the total revenue from such speakers
reaches $i15 million U.S. dollars.
Company returned i20%
equity interest in A-Best to Mr. Ing-Ming Lai pursuant to the Strategic Alliance Agreement. As of April 22, 2020, the Company holds 20% equity interest in A-Best and uses equity method to account for its equity investment as prescribed in ASC 323, Investments—Equity Method and Joint Ventures (“ASC 323”). Equity method adjustments include the Company’s proportionate share of investee’s income or loss and other adjustments required by the equity method. For the period from January 1, 2020, to April 22, 2020, the share of loss from investment accounted for using equity method was $i2,848.
As a result of the return of equity interest, the Company also recognized loss on investment in equity securities of $i17,902 for the same period.
Summarized financial information for the Company’s equity method investee,
A-Best, is as follows:
Share
of loss from investment accounted for using equity method
(i2,848
)
On
May 26, 2020, EOS Inc. increased its investment in Emperor Star by $i134,004 (NTD$4,000,000). The Company also received the
contributions to Emperor Star from non-controlling interests in the amount of $i33,398
(NTD$1,000,000). As a result, the Company owns i83% equity interest of Emperor Star as of December 31, 2020, which is no longer a wholly-owned subsidiary.
On April 12, 2021, A-Best, and Mr. Ing-Ming Lai entered
into a termination agreement (the “Termination Agreement”) to terminate the agreement of Strategic Alliance Agreement dated March 2, 2020. In the agreement, Ing-Ming Lai has proceeded to return a total of i10,000,000 shares in EOS Inc, back to the Company.
The Board of Directors of this Corporation authorized
the return of the i10,000,000 EOSS shares from Ing Ming Lai.
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Note 4. SECURITY DEPOSITS
On
November 21, 2019, the Company and Shuang Hua International Culture Media Co, Ltd. (“Shuang Hua”), a corporation formed under laws of Taiwan, entered into an exclusive copyright and distribution agreement (the “Agreement”), pursuant to which, subject to the terms and condition therein, Shuang Hua granted the Company an exclusive right to produce, market, distribute and sell the bilingual films and electronic books of which the copyrights owned by Shuang Hua. In accordance to the agreement, the Company shall pay Shuang Hua a refundable deposit of in the aggregate amount of $i2,894,000,
before December 31, 2021.
As of December 31, 2021 and December 31, 2020, the Company has paid $i1,030,000 and $i1,030,000
to Shuang Hua, respectively, and are recorded as security deposits. Due to Covid-19 in 2020, the Company has not started its business plan with the exclusive copyright and distribution agreement.
advanced funds from its directors and shareholders for working capital purposes. As of December 31, 2021 and 2020 there were $i30,858 and $i107,791
advance outstanding, respectively. The Company has agreed that the outstanding balances bear i0% interest rate and are due upon demand after thirty days of written notice by the director and shareholder.
On July 8, 2021, the
Company issued the i90,000,000 shares of common stock to repayment of $i59,219 owed
to Mr. Yang.
On September
30, 2020, TWD 3,000,000 (approximately $i107,750) term loan was granted to the Company for working capital with repayment period of 60 months. The term loan is subject to an interest charge at i1%
per annum for ithe first 9 months of the term loan; interest charges on the term loan from 10th to 60th is 3.5% per annum.
On September 30, 2020, TWD 2,000,000 (approximately $i71,833)
term loan was granted to the Company for employee salary with repayment period of 30 months. The term loan is subject to an interest charge at i1.5% per annum for ithe
first 9 months of the term loan; interest charges on the term loan from 10th to 60th is 1.845% per annum.
Loan from Bank of Taiwan
On May 7, 2021, TWD 4,000,000 (approximately $i143,666) term loan was granted to the
Company for employee salary with repayment period of 60 months. The term loan is subject to an interest charge at i1% per annum for ithe first 8 months of the term loan; interest
charges on the term loan from 9th to 60th is 1.9% per annum.
On May 7, 2021, TWD 1,000,000 (approximately $i35,917) term loan was granted to the Company for employee salary with repayment period of 60 months. The term loan is subject to an
interest charge at i1.5% per annum for ithe first 8 months of the term loan; interest charges on the term loan from 9th to 60th is 2% per annum.
As
of December 31, 2021, the outstanding balance of the term loan is $i284,180, of which $i80,047 is due within one year and classified as short term, and $i204,133 is
due after one year, and has classified as long term.
As of December 31, 2020, the outstanding balance of the term loan is $i166,985, of which $i44,457 is
due within one year and classified as short term, and $i122,528 is due after one year, and has classified as long term.
Interest expenses were $i3,142 and $i494 for
the year ended December 31, 2021 and 2020, respectively.
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Note 7. STOCKHOLDERS’ EQUITY
Preferred Stock
On July
8, 2021, the board of directors of the Company amended its stock designation and the Company is authorized to issue i5,000,000 shares of Series A Preferred Stock with par value $i0.001.
Each stock is entitled to 1,000 votes of common stock without dividend rights.
On July 8, 2021, the Company issued i1,500,000 shares of Series A Preferred Stock to Co-Innovation Group Limited for proceeds of $i1,500,
the amount is recorded as a reduction to additional paid-in capital of $i1,500.
Common Stock
On August 18, 2021, the Company completed and closed a series of transactions to reorganize the
Company’s structure and to develop its business by acquiring certain minority control interest of its subsidiary and intellectual properties. Pursuant to the Intellectual Property Transfer Agreement, the Company to issue i75,000,000 shares of Common Stock to the transferors for the intellectual properties in consideration of the transfer. Pursuant to the Shareholders’ Agreement of Shanghai Maosong Trading Co., Ltd and Equity Pledge Agreements, the
Company issue
d
i15,000,000 shares of Common Stock to the transferors for the minority controlling interests of its subsidiary. Upon completion of the transactions above, EOS International Inc became a wholly controlled subsidiary of the Company.
On July 8, 2021, the
Company issued i75,000,000 shares of Common Stock at $i0.001 per
share to convert outstanding debt owed to Co-Innovation Group Limited in the amount of $i75,000.
On July 8, 2021, the Company issued i15,000,000 shares
of Common Stock at $i0.001 per share to convert outstanding debt owed to World Capital Holding Ltd in the amount of $i15,000.
On
April 12, 2021, A-Best, and Mr. Ing-Ming Lai entered into a termination agreement (the “Termination Agreement”) to terminate the agreement of Strategic Alliance Agreement dated March 2, 2020. In the agreement, Ing-Ming Lai has proceeded to return a total of i10,000,000
On
March 31, 2021, the Company’s board of directors and stockholders authorized a reverse stock split of its outstanding common stock at a ratio of i1-for-1000 without any change in the par value per share which became effective on April 7, 2021 upon approval by FINRA. The number of shares and price per share in the financial statements have been retrospectively adjusted accordingly to reflect this reverse stock split.
On
March 16, 2021, the authorized shares of common stock were increased from i75,000,000 to i575,000,000 shares and the par value remains at $i0.001.
On
June 1, 2020, the Company and Fortune King entered into a sales collaboration agreement (the “Sales Collaboration Agreement”), pursuant to which, subject to the terms and condition therein, Fortune King agreed to provide promotional and marketing service of the Company’s products within six years from January 2020, to December 2025. Fortune King is obligated to perform such service regardless of whether the Company sells products to Fortune King during the designated period. In accordance with the Sales Collaboration Agreement and in consideration for the service provided by Fortune King, the
Company shall issue i3,000,000 shares of common stock to Fortune King for the promotional and marketing service of $i1,500,000.
The i3,000,000 shares were issued on December 29, 2020.
EOS, Inc. is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company has no taxable income for the period. As of December
31, 2021, the Company had net operating loss carry forwards of $
i1,101,565
that may be available to reduce future years’ taxable income. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements as their realization is determined not likely to occur and, accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating
to these tax loss carry-forwards. No tax benefit has been realized since a i100% valuation allowance has offset deferred tax asset resulting from the net operating losses.
British Virgin Islands
EOS International Inc. is incorporated in British Virgin Islands and are not required to pay income tax.
Taiwan
iThe
subsidiary of EOS Inc. and Emperor Star is incorporated in Taiwan. According to the amendments to the “Taiwan Income Tax Act” enacted by the office of the President of Taiwan on February 7, 2018, statutory income tax rate increased from i17% to i20%
and undistributed earning tax decreased from i10% to i5%, effective from January
1, 2018./
When the net profit is less than or equal to i30 million Taiwan dollars, income tax accrual amount is based on the gross profit rate of the industry according to the tax law in Taiwan.
The company calculated the income
tax accrual amount based on gross profit rate of i16%.
People’s Republic of China (“PRC”)
Under the Enterprise Income Tax (“EIT”) Law of the PRC, the standard EIT rate is i25%.
The PRC subsidiary of the Company is subject to PRC income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they operate. No provision for income taxes have been made as Maosong had no taxable income as of and for the year ended December 31, 2021.
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Provision for income tax consists of the following:
On November 21, 2019, the Company and Shuang Hua International Culture Media Co, Ltd. (“Shuang Hua”), a corporation formed under laws of Taiwan, entered into an exclusive copyright and distribution agreement (the “Agreement”), pursuant to which, subject to the terms and condition therein, Shuang Hua granted the Company an exclusive right to produce, market, distribute and sell the bilingual films and electronic books of which the copyrights owned by Shuang
Hua. In accordance to the agreement, the Company shall pay Shuang Hua a refundable deposit of in the aggregate amount of $i2,894,000, before December 31, 2021. As of December 31, 2021, the Company
has paid $i1,030,000 to Shuang Hua
and remaining outstanding payable of $i1,864,000
to Shuang Hua
.
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Note 10. 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, 2021 have been incorporated into these
consolidated financial statements and there are no other subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
.
Management’s Report of Internal Control over Financial Reporting
We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2020, the end of the year covered by this annual report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, who is the same person. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer concluded that, due to our
limited internal audit function and our very limited staff, our disclosure controls were not effective as of December 31, 2020, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the chief executive officer/chief financial officer, as appropriate to allow timely decisions regarding disclosure. This Annual Report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public
accounting firm pursuant to temporary rules of the SEC.
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of July 31, 2018. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2021, 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, 2021.
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.
Chief Executive Officer (“CEO”), President, Secretary, Treasurer and Chairman of the Board
(1)
Yu-Cheng Yang
42
Director and General Manager
(2)
Lai-Chen Kwok
78
Director
(3)
(1)
Mr. Yang will serve as a director until the next annual shareholder meeting.
(2)
Mr. Yang will serve as a director until the next annual shareholder meeting.
(3)
Mr. Kwok will serve as a director until the next annual shareholder meeting
The term of office of each director of the Company ends at the next annual meeting of the Company’s stockholders or when such director’s successor is elected and qualifies. No date for the next annual meeting of stockholders is specified in the Company’s Bylaws or has been fixed by the Board of Directors. The term of office of each officer of the Company ends at the next annual meeting of stockholders, or when such officer’s successor is elected and qualifies.
Background of the Executive Officers and Directors of the Company
The following information sets forth the background and business experience of our directors and executive officers.
He-Siang Yang, CEO, President, Secretary, Treasurer and Director
Mr. Yang obtained a Bachelor of Science degree in mathematics from the National Taiwan Ocean University in Taiwan. From 2009 through 2015, Mr. Yang served as the president of U-Power in Taipei, Taiwan. Mr. Yang performed those duties normally associated with a president, including, but not limited to business development, management and business oversight. From 2015 to the present, Mr. Yang has been the president of EOS Trading Company Limited, a Hong Kong company.
On April 3, 2017, Mr. Yang was appointed as the President, Secretary, Treasurer and Director of the Company.
Mr. Yang graduated from Jin Wen University of Science and Technology in 2003 with a Bachelor’s Degree in Hotel Management.
From 2009 through 2015, Mr. Yang was on the board of directors of and employed by U-Power Co., located in Taipei, Taiwan, which was in the business of developing e-commerce platforms and related server maintenance. Mr. Yang’s duties with U-Power Co. were the development, implementation and management of various business policies.
In April, 2015, Mr. Yang became the President and sole director of the Company. On April 3, 2017, Mr. Yang resigned as President, Secretary and Treasurer of the Company. Mr. Yang is also the sole director of EITB.
Yu-Hsiang Chia, Branch Manager of EITB and Director of Emperor Star
Mr. Yu-Hsiang Chia, 52, graduated from Fu Jen University located in New Taipei City, Taiwan, with a bachelor’s degree in Japanese. From 2013 to 2016, Mr. Chia served as a vice president of Advantage Universal Limited Co., a Taiwan company, which was in the business of distribution of imported products. From 2016 to present, Mr. Chia serves as a vice president of Emperor Star International Trade Co., Ltd., which was in the business of distribution of supplements and cleaning products. Mr. Chia’s main duties include management and business oversight. In June 2017, Mr. Chia became the branch manager of Emperor Star.
Mr. Chia owns 1,081,317 shares of the Company’s common stock.
To our knowledge, during the last ten years, none of our directors and executive officers has been subject to any of the following:
·
A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
·
Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
·
The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
(i)
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii)
Engaging in any type of business practice; or
(iii)
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or commodity laws, or to be associated with persons engaged in any such activity;
·
Found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;
·
Found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
·
The subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
(i)
Any federal or state securities or commodities law or regulation; or
(ii)
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
(iii)
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
·
The subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
No Compensation to Directors.
No director has received any cash or other compensation for serving as a director, and we do not plan to pay any cash or other compensation to any person for serving as a director. Our directors are entitled to reimbursement for reasonable out-of-pocket expenses incurred in connection with our business. Our Board of Directors may award special remuneration to any director undertaking any special services on our behalf, other than services ordinarily required of a director.
Code of Ethics; Financial Expert
We do not have a Code of Ethics. We do not have a financial expert on our Board of Directors.
Committees of the Board of Directors
Concurrent with having sufficient members and resources, our Board of Directors will establish an audit committee and a compensation committee. The audit committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate our system of internal controls. The compensation committee will manage any stock option plan we may establish and review and recommend compensation arrangements for our officers. No final determination has yet been made as to the memberships of these committees or when we will have sufficient members and resources to establish those committees.
Potential Conflicts of Interest
As we do not have an audit committee or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. Thus, there is a potential conflict of interest, in that our directors and officers have the authority to determine issues concerning management compensation and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors.
We plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.
Our Board of Directors is composed of three members, who do not qualify as independent directors in accordance with the published listing requirements of the NASDAQ rules. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the directors, not any of his or her family members has engaged in various types of business dealings with us. In addition, our Board of Directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. If our Board of Directors made these determinations, our Board of Directors would have reviewed and discussed information provided
by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
Term of Office
Each of our directors is appointed to hold office until the next annual meeting of our stockholders or until his or her respective successor is elected and qualified, or until he or she resigns or is removed in accordance with the applicable provisions of Nevada law. Our officers are appointed by our Board of Directors and hold office until removed by our Board of Directors or until their resignation.
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of our common stock. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
We intend to ensure to the best of our ability that all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent (10%) beneficial owners are complied.
We were not aware of any securities transaction during the fiscal year ended December 31, 2021, or subsequent thereto that would require a filing pursuant to Section 16 of the Securities Exchange Act of 1934, as amended was not reported accordingly.
Audit Committee Financial Expert
Our current directors act as our audit committee. The current directors are not independent. An informal search is under way to identify a suitable candidate for service on the Board of Directors as an independent director who would be qualified as an audit committee financial expert.
Audit Committee
We have not yet formed an audit committee, and all of our directors currently act as our audit committee. At the present time, we believe that our directors are capable of analyzing and evaluating our consolidated financial statements and understanding internal controls and procedures for financial reporting. The Company, however, recognizes the importance of good corporate governance and intends to add additional directors to the Board of Directors and appoint an audit committee comprised entirely of independent directors, including at least one financial expert.
Limitation on Liability and Indemnification of Directors and Officers
Our articles of incorporation provide that no director or officer shall have any liability to the Company if that person acted in good faith and with the same degree of care and skill as a prudent person in similar circumstances.
Our articles of incorporation and bylaws provide that we will indemnify our directors and officers and may indemnify our employees or agents to the fullest extent permitted by law against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices or positions with us. However, nothing in our articles of incorporation or bylaws protects or indemnifies a director, officer, employee or agent against any liability to which that person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of that person’s office or position. To the extent that a director has been successful in defense of any proceeding, the Nevada Revised Statutes provide that the director shall be indemnified against reasonable expenses incurred in connection with the proceeding.
We have not entered into any employment agreements.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of common stock beneficially owned as of April 8, 2022 by (i) those persons or groups known to us to beneficially own more than 5% of our common stock; (ii) each director; (iii) each executive officer; and (iv) all directors and executive officers as a group. The information is determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) based upon information furnished by persons listed or contained in filings made by them with the SEC or by information provided by such persons directly to us. Except as indicated below, each of the stockholders listed below possesses sole voting and investment power with respect to their shares and the address of each person is c/o EOS Inc.
Beneficial ownership percentages are calculated based on shares of common stock issued and outstanding and is based on a total of 180,065,254 shares of common stock that were issued and outstanding as of April 8, 2022. Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act. The number of shares beneficially owned by a person includes shares of common stock underlying options or warrants held by that person that are currently exercisable or exercisable within 60 days of April 8, 2022. 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.
Due to shareholders
The Company has advanced funds from its directors and shareholders for working capital purposes. As of December 31, 2021 and December 31, 2020 there were $30,858 and $107,791 advance outstanding, respectively. The Company has agreed that the outstanding balances bear 0% interest rate and are due upon demand after thirty days of written notice by the director and shareholder.
Director Independence
None of our directors is deemed “Independent” as defined by the NASDAQ Marketplace Rules and meets the independence standards set forth in Rule 10A-3 of the Exchange Act.
Item 14. Principal Accounting Fees and Services.
Summary of Principal Accounting Fees for Professional Services Rendered
The following table presents the aggregate fees for professional audit services and other services rendered by Onestop Assurance PAC.
consist of fees billed for the annual audit of our consolidated financial statements and other audit services including the provision of consents and the review of documents filed with the SEC.
We do not have an independent audit committee and directors, therefore, serves as the audit committee for all purposes relating to communication with our auditors and responsibility for our audit. All engagements for audit services, audit- related services and tax services are approved in advance by our Board of Directors. Our Board of Directors has considered whether the provision of the services described above for the fiscal year ended December 31, 2021, 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 and Financial Statement Schedules.
(a)(1) List of Financial statements included in Part II hereof
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to the Financial Statements
(a)(2) List of Financial Statement schedules included in Part IV hereof: None.
XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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.
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.
