The unaudited consolidated financial
statements of the registrant for the three and nine months ended September 30, 2019 and consolidated financial statements for 2018
follows. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an
integral part of these consolidated financial statements.
Notes to Unaudited Consolidated Financial
Statements
1. Basis of Presentation
The accompanying interim consolidated
financial statements are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis
as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which includes
normal recurring adjustments or a description of the nature and amount of any adjustments other than normal recurring adjustments,
necessary for a fair presentation of the financial positions and results of operations for the periods presented. The financial
data and other information disclosed in these notes to the interim consolidated financial statements are also unaudited. The results
for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year
ending December 31, 2019 or for any other interim period or for any future year. These consolidated financial statements should
be read in conjunction with the Company’s audited consolidated financial statements appearing in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2018. The disclosures made in the unaudited interim consolidated financial
statements generally do not repeat those in the annual statements.
There have been no material changes
to the significant accounting policies during the three and nine months ended September 30, 2019, as compared to the significant
accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2018.
2. Summary of Significant Accounting Policies
Nature of Operations
J.E.M. Capital, Inc. (the Company) was
incorporated under the laws of the State of Delaware on September 14, 2011 and has had limited operations since inception. The
Company’s current business plan is to seek to identify a privately held operating company desiring to become a publicly held
company by merging with the Company through a reverse merger or acquisition. The Company is a shell company as defined in Rule
12b-2 promulgated under the Securities Exchange Act of 1934. As a shell company, the Company has no operations and material assets.
On January 5, 2017, the Company entered
into a Share Exchange Agreement (the “Agreement”) with Essential Elements Limited, a British Virgin Islands company
(“ESEL”), and Leung Chi Wah Earnest (“Mr. Leung”), the principal shareholder of ESEL, pursuant to which
the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common
stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued
and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong (“JEM Capital”).
ESEL and JEM Capital currently have
no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong
and China. ESEL has incurred material expenses setting up such structure.
Risks and Uncertainties
The Company’s activities are subject
to significant risks and uncertainties, including failure to identify a privately held operating company desiring to merge with
the Company, failure to complete a reverse merger transaction, and inability to secure funding to continue as a going concern.
(See Note 3 regarding going concern discussion.)
J.E.M. CAPITAL, INC.
Notes to Unaudited Consolidated Financial
Statements
Use of Estimates
The accompanying condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S.
GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. The preparation of the accompanying condensed
consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the condensed
consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results
could differ from those estimates.
Principles of Consolidation
The unaudited consolidated financial
statements include the financial statements of the Company and its subsidiaries for which it is the primary beneficiary. Upon making
this determination, the Company is deemed to be the primary beneficiary of the entity, which is then required to be consolidated
for financial reporting purposes. All significant intercompany transactions and balances have been eliminated upon consolidation.
Equipment, net
Equipment is stated at cost less accumulated
depreciation and impairment losses, if any. Depreciation is provided on a straight-line basis, less estimated residual values
over the assets’ estimated useful lives. The estimated useful lives are as follows:
Computer hardware and software
|
3 years
|
When equipment is retired or otherwise
disposed of, the related cost, accumulated depreciation and provision for impairment loss, if any, are removed from the respective
accounts, and any gain or loss is reflected in the consolidated statements of operations. Repairs and maintenance costs on equipment
are expensed as incurred.
Impairment of Long-Lived Assets
Long-lived assets, such as equipment,
are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not
be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds the sum of the undiscounted
cash flows expected to be generated from the asset’s use and eventual disposition. An impairment loss is measured as the
amount by which the carrying amount exceeds the fair value of the asset calculated using an undiscounted cash flow analysis. There
was no impairment of long-lived assets for the three and nine months ended September 30, 2019 and 2018.
Fair value of financial instruments
ASC Topic 825, “Financial Instruments”,
requires disclosing fair value to the extent practicable for financial instruments which are recognized or unrecognized in the
balance sheets. The fair values of the financial instruments are not necessarily representative of the amount that could be realized
or settled, nor does the fair value amount consider the tax consequences of realization or settlement. For certain financial instruments,
including deposits paid, accounts payable and accrued expenses, the fair values were determined based on the near-term maturities
of such the assets and obligations.
Revenue
The Company has yet to generate revenue
from operations for the three and nine months ended September 30, 2019 and 2018.
J.E.M. CAPITAL, INC.
Notes to Unaudited Consolidated Financial
Statements
Net Loss per Common Share
Basic loss per share is computed by
dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding
during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased
to include the number of additional common shares that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the three
and nine months ended September 30, 2019 and 2018.
Stock-based Compensation
The Company adopted ASC Topic 718, using
a modified prospective application transition method, which establishes accounting for stockbased awards in exchange for employee
services. Under this application, the Company is required to record stock-based compensation expense for all awards granted after
the date of adoption and unvested awards that were outstanding as of the date of adoption. ASC Topic 718 requires that stock-based
compensation cost is measured at grant date, based on the fair value of the award, and recognized as expense over the requisite
services period. The stock-based compensation expenses are recognized on a straight-line basis over the shorter of the period over
which services are to be received or the vesting period.
Income Taxes
The Company accounts for income taxes
under ASC Topic 740, Income Tax. Deferred tax assets and liabilities are provided for the future tax effects attributable to temporary
differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, and for
the expected future tax benefits from items including tax loss carry forwards.
Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or reversed. The expense or benefit related to adjusting deferred tax assets and liabilities as a result
of a change in tax rates is recognized in income or loss in the period that includes the enactment date.
The Company recognizes and measures
uncertain tax positions and records tax benefits when it is more likely than not that the tax position will be sustained on examination
by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements
from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon
ultimate settlement. The Company recognizes interest and penalties as a component of income tax expense if applicable. For the
three and nine months ended September 30, 2019 and 2018, the Company had not recognized any interest or penalties on its consolidated
financial statements.
Recent Accounting Pronouncements
The Company has implemented all new
accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial
statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on our financial position or results of operations.
3. Going Concern
The accompanying consolidated financial
statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The
Company has not established any source of revenues to cover its operating costs, and as such, has incurred an operating loss since
inception. Further, as of September 30, 2019, the cash resources of the Company were insufficient to continue to conduct its normal
business operations. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
J.E.M. CAPITAL, INC.
Notes to Unaudited Consolidated Financial
Statements
4. General and Administrative
Expenses
The following summarizes the type of expenses incurred during
the three and nine months ended September 30, 2019 and 2018:
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Consolidated and unaudited)
|
|
(Consolidated and unaudited)
|
|
General and administrative expense:
|
|
|
|
|
|
|
|
|
Professional fees
|
|
$
|
4,350
|
|
|
$
|
7,037
|
|
|
$
|
13,050
|
|
|
$
|
22,166
|
|
Filing fees
|
|
|
-
|
|
|
|
1,760
|
|
|
|
-
|
|
|
|
4,300
|
|
Franchise tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
409
|
|
Salary and related expenses
|
|
|
6,000
|
|
|
|
11,885
|
|
|
|
6,000
|
|
|
|
35,654
|
|
Depreciation
|
|
|
-
|
|
|
|
125
|
|
|
|
125
|
|
|
|
375
|
|
Loss on write off of equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
371
|
|
|
|
-
|
|
Other office expenses
|
|
|
-
|
|
|
|
381
|
|
|
|
-
|
|
|
|
2,135
|
|
Total general and administrative expense
|
|
$
|
10,350
|
|
|
$
|
21,188
|
|
|
$
|
19,546
|
|
|
$
|
65,039
|
|
5. Commitments and contingencies
Contingencies
The Company accounts for loss contingencies
in accordance with ASC Topic 450 and other related guidelines. As of September 30, 2019 and December 31, 2018, the Company’s
management is of the opinion that there are no commitments and contingencies to account for.
6. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 5,000,000
shares of preferred stock with a $0.0001 par value. As of September 30, 2019 and December 31, 2018, there were no shares of preferred
stock issued or outstanding.
Common Stock
On January 5, 2017, the Company entered
into a Share Exchange Agreement with Essential Elements Limited, a British Virgin Islands company (“ESEL”), and Leung
Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common
stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the
issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company
organized under the laws of Hong Kong (“JEM Capital”). ESEL and JEM Capital currently have no operations, but include
the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred
material expenses setting up such structure.
J.E.M. CAPITAL, INC.
Notes to Unaudited Consolidated Financial
Statements
On June 21, 2019, the Company passed
a unanimous written consent of the Board of Directors to issue 1,000,000 and 1,000,000 common shares to Mr. MingJing Xia (“Mr.
Xia”) and Mr. Yulong Yang (“Mr. Yang”), respectively. These shares were issued on the same date to Mr. Xia for
his service in the capacity of Chief Financial Officer and Chairman of the Board, and issued to Mr. Yang for his service in the
capacity of Chief Executive Officer and member of the Board, for their first year’s services commencing from 1 July 2019.
Both of Mr. Xia and Mr. Yang are entitled to a monthly salary of $1,000 during this period. In connection with these stock grants
and in accordance with ASC Topic 718, the Company recognized $6,000 of non-cash stock-based compensation included in general and
administrative expenses on the consolidated statements of operations for the three and nine months ended September 30, 2019.
The Company is authorized to issue 195,000,000
shares of common stock with a $0.0001 par value. As of September 30, 2019 and December 31, 2018, 14,032,400 shares and 12,032,400
shares of common stock were issued and outstanding, respectively.
As of September 30, 2019 and December
31, 2018, the Company did not have any dilutive securities, such as stock options, warrants or convertible securities, issued or
outstanding.
7. Related Party
Transactions
During the nine months ended September
30, 2019 and 2018, the Company received loans of $12,436 and $37,813 from its shareholder, respectively. As of September 30, 2019
and December 31, 2018, the Company recorded an amount of $60,381 and $47,945, respectively, payable to its shareholder. The amount
is unsecured, bears no interest and is repayable on demand.
On June 21, 2019, the Company passed
a unanimous written consent of the Board of Directors to issue 1,000,000 and 1,000,000 common shares to Mr. MingJing Xia (“Mr.
Xia”) and Mr. Yulong Yang (“Mr. Yang”), respectively. These shares were issued on the same date to Mr. Xia for
his service in the capacity of Chief Financial Officer and Chairman of the Board, and issued to Mr. Yang for his service in the
capacity of Chief Executive Officer and member of the Board, for their first year’s services commencing from 1 July 2019.
Both of Mr. Xia and Mr. Yang are entitled to a monthly salary of $1,000 during this period.
8. Income taxes
Income is subject to taxation in various
countries in which the Company and its subsidiaries operate or are incorporated. The loss before provision for income taxes by
geographical locations for the three and nine months ended September 30, 2019 and 2018 were summarized as follows:
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Consolidated and unaudited)
|
|
(Consolidated and unaudited)
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
10,350
|
|
|
$
|
11,060
|
|
|
$
|
19,050
|
|
|
$
|
35,307
|
|
Foreign
|
|
|
-
|
|
|
|
10,128
|
|
|
|
496
|
|
|
|
29,732
|
|
|
|
$
|
10,350
|
|
|
$
|
21,188
|
|
|
$
|
19,546
|
|
|
$
|
65,039
|
|
The Company had accumulated tax losses
of approximately $207,000 and $188,000 as of September 30, 2019 and December 31, 2018, respectively, which will expire between
2031 and 2037.
The net operating loss carryforwards
indicated above represent the principle component of the Company's deferred tax assets as of September 30, 2019 and December 31,
2018. Deferred tax assets of approximately $43,000 and $52,000 as of September 30, 2019 and December 31, 2018, respectively, will
be offset by valuation allowance of the same amounts as realization of such assets is uncertain. No deferred tax assets have been
recognised in respect of the accumulated net operating losses made by the foreign subsidiaries, as these subsidiaries have not
commenced business and derived income in so far, and the tax losses that incurred are not able to be carry forward and offset against
future profits in their respective tax jurisdictions.
J.E.M. CAPITAL, INC.
Notes to Unaudited Consolidated Financial
Statements
|
|
September 30,
2019
|
|
December 31,
2018
|
Deferred tax assets:
Net operating loss carryforwards
|
|
$
|
43,456
|
|
|
$
|
52,363
|
|
Total deferred tax assets
|
|
|
43,456
|
|
|
|
52,363
|
|
Less: Valuation allowance
|
|
|
(43,456
|
)
|
|
|
(52,363
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Movement in valuation allowance:
|
|
September 30,
2019
|
|
December 31,
2018
|
At the beginning of the period/year
|
|
$
|
52,363
|
|
|
$
|
39,323
|
|
Current period/year (reduction)/addition
|
|
|
(8,907
|
)
|
|
|
13,040
|
|
At the end of the period/year
|
|
$
|
43,456
|
|
|
$
|
52,363
|
|
The provision for income taxes differs
from the expected provision determined by applying the federal statutory rate to the income before income taxes. The reasons for
the difference are state and local income taxes and various non-deductible expenses. As a result of the reduction of the corporate
income tax rate from 35% to 21% due to the Tax Cuts and Jobs Act which was enacted on December 22, 2017, U.S. GAAP requires companies
to remeasure their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in
the period of enactment. (the change in deferred tax balances would have a corresponding change to valuation allowance thereby
resulting in no income tax expense for the year).
The Company' income tax returns are
subject to examination for three years from the date filed or the due date, whichever is later.
The Company did not identify any material
uncertain tax positions.