HANJIAO GROUP, INC. Item 2.01 Completion of an Acquisition or Disposition of Assets.
OnAugust 6, 2020 ,AS Capital, Inc. (the "Company" or "ASIN") andHanJiao International Holding Limited , a private limited liability company incorporated under the laws of theBritish Virgin Islands ("HJ") and HJ's shareholders entered into a Share Acquisition Agreement (the "Share Exchange Agreement") to acquire up to one hundred (100) Ordinary Shares of HJ held by its five shareholders (the "HJ Shares"), representing 100% of the issued and outstanding securities of HJ, for 86,000,000 shares of our common stock at a per share price ofUS$0.46 , (the "Share Exchange"). The share acquisition was consummated onAugust 6, 2020 . As a result, we entered into the business of selling healthcare and other related products to middle-aged and elderly market segments inthe People's Republic of China ("PRC" orChina ") through its online to offline platform, and HJ shareholders received 86,000,000 shares of the Company's common stock (the "Shares"). It is our understanding that HJ shareholders are notU.S. Persons within the meaning of Regulations S. Accordingly, the Shares were issued pursuant to the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, Regulation D and Regulation S promulgated thereunder. The foregoing description of the Share Exchange Agreement is qualified in its entirety by reference to the Share Exchange Agreement which is filed as Exhibit 10.1 to this Current Report and is incorporated herein by reference.
HJ is engaged in the sale of healthcare and other related products to the middle-aged and elderly market segments in the PRC through its internet platform and offline service centers.
In connection with the acquisition, effective fromAugust 6, 2020 , the following individuals were appointed to serve in the capacities set forth next to their names until his or her successor(s) shall be duly elected or appointed, unless he or she resigns, is removed from office or is otherwise disqualified from serving as an executive officer or director of the Company:Name Positions Tian Xiangyang Chief Executive Officer, Director and Chairperson of the Board of Director Shan Yonghua Chief Financial Officer, and Director Tian Zhihai Chief Operating Officer and DirectorYin Jianen Secretary and DirectorWang Jirui Director 2
Prior to the acquisition, the Company was considered as a shell company due to
its nominal assets and limited operation. Upon the acquisition, HJ and its
subsidiaries and affiliated entities will comprise the ongoing operations of the
combined entity and its senior management will serve as the senior management of
the combined entity. HJ is deemed to be the accounting acquirer for accounting
purposes. The transaction will be treated as a recapitalization of the Company.
Accordingly, the consolidated assets, liabilities and results of operations of
the Company will be the historical financial statements of HJ, and the Company's
assets, liabilities and results of operations will be consolidated with HJ and
subsidiaries, beginning on the acquisition date. HJ was the legal acquiree. The
Company was the legal acquirer but HJ is deemed to be the accounting acquirer in
the reverse merger. The historical financial statements prior to the acquisition
are those of the accounting acquirer (HJ and subsidiaries). Historical
stockholders' equity of the accounting acquirer prior to the merger are
retroactively restated (a recapitalization) for the equivalent number of shares
received in the merger. Operations prior to the merger are those of the
accounting acquirer. After completion of the share exchange transaction, the
Company's consolidated financial statements include the assets and liabilities,
the operations and cash flow of the accounting acquirer.
CORPORATE HISTORY
Overview
On August 6, 2020 , we consummated the acquisition of One Hundred (100) Shares of
HJ, representing 100% of the issued and outstanding stock of HJ. HJ is a holding
company that, through its subsidiaries and variable interest entity, is engaged
in the business of selling healthcare and other related products to the
middle-aged and elderly market segments in the PRC through its internet platform
and offline service centers. HJ's consolidated business is conducted through
Beijing Luji Technology Co., Ltd. , a variable interest entity formed in Beijing,
China on March 27, 2007 .
Prior to our acquisition of HJ, we were a shell company with nominal assets and limited operations. Our former business objective was to seek long term growth through one or more business combinations with operating companies. History
We were incorporated onJune 15, 2006 under the laws of theState of Nevada asJupiter Resources, Inc. 75,000,000 shares of common Stock par value$0.001 and no other classes of stock were authorized. OnMarch 27, 2007 , we entered into an agreement with Ms.Helen Louise Robinson ofVernon, British Columbia , whereby she agreed to sell to us one mineral claim located approximately 30 kilometers northwest ofVernon, British Columbia in an area having the potential to contain silver or copper mineralization or deposits. In order to acquire a 100% interest in this claim, we paid$7,500 toMs. Robinson . However, we were unable to keep the mineral claim in good standing due to lack of funding and our interest
in it lapsed.
On
OnMarch 30, 2009 ,Jupiter Resources, Inc. (the "Company") entered into a binding letter of intent (the "Letter of Intent") withNatProv Holdings, Inc. , aBritish Virgin Islands corporation ("Natprov"). Pursuant to the terms of the Letter of Intent, Natprov and the Company were to commence the negotiation and preparation of a definitive share exchange agreement which contained customary representations, warranties and indemnities as agreed upon by Natprov, the Company and the shareholders of Natprov, whereby the Company, Natprov and the shareholders of Natprov were to complete a share exchange transaction (the "Transaction") on or beforeMay 26, 2009 , subject to certain conditions precedent to the closing of the Transaction.
On
3
OnMay 01, 2009 , we filed a Certificate of Designation to designate 36,000 shares of Series A Convertible Preferred Stock, out of the 10 million preferred stock. These shares have no votes for matters brought before the common shareholders, only with matters regarding the Series A shares where they will be the only voters. They can convert into common but cannot at anytime convert to hold more than 4.95% of the issued and outstanding common shares of the Company. OnMay 14, 2009 , we entered into a preferred stock purchase agreement dated as ofApril 30, 2009 (the "Preferred Stock Purchase Agreement") under which the Company sold an aggregate of 36,000 shares of its Series A convertible preferred . . .
Item 5.01 Changes in Control of Registrant.
The information regarding change of control of the Company in connection with the Share Exchange set forth in Item 2.01, "Completion of an Acquisition or Disposition of Assets" is incorporated herein by reference.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.
The information regarding departure and election of directors and departure and appointment of principal officers of the Company in connection with the Share Exchange set forth in Item 2.01, "Completion of Acquisition or Disposition of Assets" is incorporated herein by reference.
Item 5.06 Change in Shell Company Status.
Prior to the Share Exchange, we were a "shell company" (as such term is defined
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")). As a result of the Share Exchange, we have ceased to be a
shell company. The information contained in this Current Report constitutes the
current "Form 10 information" necessary to satisfy the conditions contained in
Rule 144(i)(2) under the Securities Act of 1933, as amended (the "Securities
Act").
74
HanJiao International Holding Limited
Consolidated Financial Statements (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
TABLE OF CONTENTS
Page
Unaudited Condensed Consolidated Balance Sheets as of
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the F-3
Three Months Ended
Unaudited Condensed Consolidated Statements of Changes in Shareholders' F-4
Equity for the Three Months Ended
Unaudited Condensed Consolidated Statements of Cash Flows for the Three F-5
Months Ended
Notes to Unaudited Condensed Consolidated Financial Statements F-6
F-1
HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2020 2019
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 13,449,805 $ 28,919,817
Advance to suppliers 6,720,321 266,237
Inventories, net 1,495,026 1,601,151Prepayments and other current assets 891,487
196,272
Due from related parties, net 32,279
112,218
Total current assets 22,588,918 31,095,695
Long-term investment, net 11,237,029 11,412,441
Property and equipment, net 230,371 263,640
Deposits 45,129 46,487
Total assets $ 34,101,447 $ 42,818,263
Liabilities and shareholders' equity
Current liabilities
Taxes payable $ 19,021,322 $ 19,647,502
Dividends payable - 4,300
Due to related parties 245,201 1,013,396
Accrued expenses 3,052,886 4,823,543Other payables and other current liabilities 6,549,220
6,865,487
Total current liabilities 28,868,629 32,354,228
Total liabilities 28,868,629 32,354,228
Commitments and contingencies - - Shareholders' equity Ordinary shares: par value$1 per share, 50,000 shares authorized; 100 shares issued and outstanding at March 31, 2020 and December 31, 2019 * 100
100
Additional paid-in capital * 7,249,775 7,249,775
Statutory reserves 1,687,125 1,687,125
(Deficit) retained earnings (3,011,234 ) 2,136,211Accumulated other comprehensive loss (692,948 ) (609,176 ) Total shareholders' equity 5,232,818
10,464,035
Total liabilities and shareholders' equity$ 34,101,447
$ 42,818,263
* Giving retroactive effect to the corporate reorganization effected on
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-2
HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three Months Ended
March 31,
2020 2019
Revenues $ 34,331 $ 6,154,767
Cost of revenues (38,781 ) (4,289,840 )
Gross (loss) profit (4,450 ) 1,864,927
Operating expenses:General and administrative expenses 1,132,466
1,467,663
Selling expenses 1,272,914 649,846
Finance (income), net (182,138 ) (198,109 )
Total operating expenses 2,223,242 1,919,400
Operating loss (2,227,692 ) (54,473 )
Other income (expenses)
Other expenses, net (2,191,729 ) (455,841 )
Total other expenses, net (2,191,729 ) (455,841 )
Loss before provision for income taxes (4,419,421 )
(510,314 )
Provision for income taxes - 29,313
Net loss $ (4,419,421 ) $ (539,627 )
Other comprehensive (loss) income
Foreign currency translation adjustment (83,772 )
346,577
Comprehensive loss $ (4,503,193 ) $ (193,050 )
Earnings per ordinary share
Basic and diluted* $ (44,194 ) $ (5,396 )
Weighted average number of ordinary shares outstanding
Basic and diluted* 100 100
* Giving retroactive effect to corporate reorganization effected on
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-3
HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Accumulated
Ordinary shares* Additional other Total
Number of paid-in Statutory Retained comprehensive shareholders'
shares Amount capital reserves earnings loss equity
Balance as of December
31, 2018 100 $ 100 $ 7,249,775
- - - - (111,616 ) - (111,616 )
Net loss - - - - (539,627 ) - (539,627 )
Foreign currency
translation - - - - - 346,577 346,577
Balance as of March 31,
2019 (unaudited) 100 $ 100 $ 7,249,775 $ 1,547,861 $ 5,204,181 $ (99,345 ) $ 13,902,572
Accumulated other
Ordinary shares* Additional Retained comprehensive Total
Number of paid-in Statutory earnings income shareholders'
shares Amount capital reserves (deficit) (loss) equity
Balance as of December 31,
2019 100 $ 100 $ 7,249,775
- - - - (728,024 ) - (728,024 )
Net loss - - - - (4,419,421 ) - (4,419,421 )
Foreign currency
translation - - - - - (83,772 ) (83,772 )
Balance as of March 31,
2020 (unaudited) 100 $ 100 $ 7,249,775 $ 1,687,125 $ (3,011,234 ) $ (692,948 ) $ 5,232,818 * Giving retroactive effect to the corporate reorganization effected on
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-4
HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
March 31,
2020 2019
Cash flows from operating activities
Net loss $ (4,419,421 ) $ (539,627 )
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 29,661 40,765
Provision for (reversal of) bad debt expense 17,161 (9,418 ) Provision for slow-moving inventories 33,859 - Changes in operating assets and liabilities: Advance to suppliers (6,573,489 )
73,330
Inventories 48,895 (196,642 ) Due from related parties, net 79,403 (74,349 ) Prepayments and other current assets (708,189 )
(182,670 )
Advance from customers - 568,248
Taxes payable (329,120 ) 1,118,560
Accrued expenses (1,722,302 ) -Other payables and other current liabilities 11,730 (227,782 ) Net cash (used in) provided by operating activities (13,531,812 )
570,415
Cash flows from investing activities Purchases of property and equipment - (3,925 ) Net cash (used in) investing activities -
(3,925 )
Cash flows from financing activities Repayment of loans from related parties (197,360 ) - Repayment of loans from third parties (792,373 ) - Dividends paid (732,322 ) (111,615 ) Net cash (used in) financing activities (1,722,055 )
(111,615 )
Effect of exchange rate changes on cash and cash equivalents (216,145 )
446,313
Net decrease in cash and cash equivalents (15,470,012 )
901,188
Cash and cash equivalents at beginning of period 28,919,817
18,019,617
Cash and cash equivalents at end of period$ 13,449,805
Supplemental disclosures of cash flow information: Cash paid for income taxes$ 62,737 $ 24,646 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F-5 HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts in U.S. dollars unless otherwise stated)
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
HanJiao International Holding Limited ("HanJiao") is a holding company incorporated in theBritish Virgin Islands onJuly 5, 2018 . HanJiao and its wholly owned subsidiaries, variable interest entity ("VIE") and its subsidiary (collectively, the "Company") are primarily engaged in the sale of healthcare and other related products to the middle-aged and elderly market segments inthe People's Republic of China (the "PRC") through its internet platform and offline service centers.LuJi Technology International Holding Limited ("Luji Technology"), a holding company incorporated in theBritish Virgin Islands onJuly 5, 2018 , is wholly owned by HanJiao.
Beijing Hongtao Management Consulting Co., Ltd. ("Beijing Hongtao"), a wholly foreign-owned enterprise ("WFOE") was established in the PRC onOctober 11, 2018 and it is a wholly owned subsidiary of Inooka. Beijing Hongtao currently provides consulting and technical services toBeijing Luji Technology Co., Ltd. ("Beijing Luji" or "VIE") was incorporated in the PRC onMarch 27, 2007 . Beijing Luji establishedGuoyi Investment Fund Management (Beijing) Co., Ltd. ("Beijing Guoyi") with registered capital ofRMB 50 million (approximatelyUS$973,000 ) onFebruary 19, 2016 .
The following table shows how the Company is organized:
[[Image Removed]]
Reorganization and Variable Interest Entities
OnMay 15, 2019 , Beijing Hongtao, Beijing Luji and their shareholders entered into a series of contractual arrangements (the "VIE Agreements") to control and receive the economic benefits of Beijing Luji's business. The VIE Agreements are designed to provide Beijing Hongtao with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Beijing Luji, including absolute control rights and the rights to the assets, property, revenue and income of Beijing Luji. F-6 HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts inU.S. dollars unless otherwise stated) To complete the corporate reorganization, the shareholders of Luji Technology transferred their respective ownership interest in Luji Technology in exchange for their respective ownership interest in HanJiao onSeptember 16, 2019 (the "Share Transfer"). Based on theFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ('ASC') Topic 805, the VIE Agreements executed between the Beijing Hongtao and Beijing Luji and the Share Transfer constituted a reorganization of entities under common control since all these entities were controlled by the same major shareholders before and after the reorganization. As such, the Company's consolidated financial statements have been prepared as if the reorganization had occurred retroactively and the existing corporate structure had been in existence throughout all periods presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted inthe United States of America ("US GAAP") for interim financial information pursuant to the rules and regulations of theSecurities and Exchange Commission ("SEC"). The unaudited condensed consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses of the subsidiaries and VIEs. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. Interim results are not necessarily indicative of results to be expected for the full year. The information included in this report should be read in conjunction with the information included in the Company's annual report for the year endedDecember 31, 2019 . Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the financial statements of HanJiao, its wholly-owned subsidiaries, WOFE, the VIE and its subsidiary. All inter-company transactions and balances have been eliminated upon consolidation.
VIE Agreements with Beijing Hongtao
The Company does not have a direct equity ownership interest in Beijing Luji but relies on the VIE Agreements to control and receive the economic benefits of Beijing Luji's business. The Company relies on contractual arrangements with its variable interest entity to operate its online to office (O2O) business in the PRC in which foreign investment is restricted or prohibited. The O2O platform integrates the Company's e-commerce platform with physical outlets (service centers) to connect consumers and merchants in a dynamic marketplace. Pursuant to the VIE Agreements, HanJiao, through Beijing Hongtao, is able to exercise effective control over, bears the risks of, enjoys substantially all of the economic benefits its VIE and its subsidiary and has an exclusive option to purchase all or part of the equity interests in the VIE when and to the extent permitted by PRC law. The Company's management concluded that Beijing Luji and its subsidiary are variable interest entities of the Company and Beijing Hongtao is the primary beneficiary of Beijing Luji and its subsidiary. As such, the financial statements of the VIE and its subsidiary are included in the unaudited condensed consolidated financial statements of the Company.
During three months ended
F-7
HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in U.S. dollars unless otherwise stated)
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in
conformity with US GAAP 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 unaudited condensed
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period.
Significant accounting estimates reflected in the Company's unaudited condensed
consolidated financial statements include the allowance for doubtful accounts
and slow-moving inventory, and the useful lives of property and equipment. Since
the use of estimates is an integral component of the financial reporting
process, actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company followsFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") FASB ASC Section 820, "Fair Value Measurements and Disclosures." ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs, other than . . .
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