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" or "HanJiao") 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 . . .
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").
76
HanJiao International Holding Limited and Subsidiaries
Unaudited Condensed Consolidated Financial Statements As of and
For the Six Months Ended June 30, 2020 and 2019
TABLE OF CONTENTS
Page
Unaudited Condensed Consolidated Balance Sheets as of
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) F-3
Income for the Three and Six months Ended
Unaudited Condensed Consolidated Statements of Changes in Shareholders' F-4
Equity for the Six months Ended
Unaudited Condensed Consolidated Statements of Cash Flows for the Six 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
June 30, December 31,
2020 2019
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 5,900,232 $ 28,919,817
Advance to suppliers 6,119,435 266,237
Inventories, net 2,097,919 1,601,151Prepayments and other current assets 743,868
196,272
Due from related parties, net 2,922
112,218 Total current assets 14,864,376 31,095,695 Long-term investment, net 11,245,917 11,412,441 Property and equipment, net 212,603 263,640
Deposits and other assets, non current 1,817,165
46,487
Total assets$ 28,140,061 $
42,818,263
Liabilities and shareholders' equity Current liabilities Taxes payable$ 18,954,369 $ 19,647,502 Dividends payable - 4,300 Due to related parties 211,879 1,013,396 Accrued expenses 67,462 4,823,543
Other payables and other current liabilities 7,463,795
6,865,487 Total current liabilities 26,697,505 32,354,228 Total liabilities 26,697,505 32,354,228
Commitments and contingencies -
-
Shareholders' equity Ordinary shares: par value$1 per share, 50,000 shares authorized; 100 shares issued and outstanding atJune 30, 2020 andDecember 31, 2019 * 100
100
Additional paid-in capital * 7,249,775
7,249,775
Statutory reserves 1,687,125
1,687,125
(Deficit) retained earnings (6,792,595 )
2,136,211
Accumulated other comprehensive loss (701,849 ) (609,176 ) Total shareholders' equity 1,442,556
10,464,035
Total liabilities and shareholders' equity$ 28,140,061 $
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) INCOME
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenues $ 94,172 $ 44,903,321 $ 128,503 $ 51,058,088
Cost of revenues (166,535 ) (32,998,463 ) (205,316 ) (37,288,303 )
Gross (loss) profit (72,363 ) 11,904,858 (76,813 ) 13,769,785
Operating expenses: General and administrative expenses 739,714 2,697,573 1,872,180 4,165,236 Selling expenses 2,385,503 981,181 3,658,417 1,631,027 Finance expenses (income), net 11,984 293,254 (170,154 ) 95,145 Total operating expenses 3,137,201 3,972,008
5,360,443 5,891,408
Operating (loss) income (3,209,564 ) 7,932,850
(5,437,256 ) 7,878,377
Other income (expenses) Other expenses, net (577,276 ) (705,447 ) (2,769,005 ) (1,161,288 ) Total other expenses, net (577,276 ) (705,447 )
(2,769,005 ) (1,161,288 )
(Loss) income before provision for income taxes (3,786,840 ) 7,227,403 (8,206,261 ) 6,717,089 Provision for income taxes - 1,406,460 - 1,435,773 Net (loss) income$ (3,786,840 ) $ 5,820,943
Other comprehensive (loss) income Foreign currency translation adjustment (8,901 ) (376,028 )
(92,673 ) (29,451 )
Comprehensive (loss) income$ (3,795,741 ) $ 5,444,915
Earnings per ordinary share Basic and diluted*$ (37,868 ) $ 58,209
Weighted average number of ordinary shares outstanding Basic and diluted* 100 100 100 100
* 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 $ 1,547,861 $ 5,855,424 $ (445,922 ) $ 14,207,238
Dividends declared - - - - (294,817 ) - (294,817 )
Net income - - - - 5,281,316 - 5,281,316Foreign currency translation - - - - - (29,451 ) (29,451 ) Balance as ofJune 30, 2019 (unaudited) 100$ 100 $ 7,249,775 $ 1,547,861 $ 10,841,923 $ (475,373 ) $ 19,164,286 Accumulated Ordinary shares* Additional Retained other Total Number of paid-in Statutory earnings comprehensive shareholders' shares Amount capital reserves (deficit) loss equity Balance as of December 31, 2019 100$ 100 $ 7,249,775 $ 1,687,125 $ 2,136,211 $ (609,176 ) $ 10,464,035 Dividends declared - - - - (722,545 ) - (722,545 ) Net loss - - - - (8,206,261 ) - (8,206,261 ) Foreign currency translation - - - - - (92,673 ) (92,673 ) Balance as ofJune 30, 2020 (unaudited) 100$ 100 $ 7,249,775 $ 1,687,125 $ (6,792,595 ) $ (701,849 ) $ 1,442,556
* 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 Six Months Ended
June 30,
2020 2019
Cash flows from operating activities Net (loss) income$ (8,206,261 ) $
5,281,316
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization
49,950 71,470
Provision for (reversal of) bad debt expense (1,835 ) (8,058 ) Provision for slow-moving inventories 168,148
-
Changes in operating assets and liabilities: Advance to suppliers (5,896,718 ) (219,452 ) Inventories (691,798 ) (559,824 ) Due from related parties, net 108,386
10,421,183
Prepayments and other current assets (564,135 )
356,775 Advance from customers 22,008 5,593,144 Taxes payable (409,198 ) 8,868,504 Accrued expenses (4,717,406 ) (1,906,081 )
Other payables and other current liabilities 905,182
4,351,753
Net cash (used in) provided by operating activities (19,233,677 ) 32,250,730
Cash flows from investing activities Purchases of property and equipment (1,773,998 ) (8,607 ) Investment in equity investee - (11,749,994 ) Net cash used in investing activities (1,773,998 )
(11,758,601 )
Cash flows from financing activities Repayment of loans from related parties (229,618 )
-
Repayment of loans from third parties (786,414 )
-
Dividends paid (726,815 ) (110,832 ) Net cash used in financing activities (1,742,847 )
(110,832 )
Effect of exchange rate changes on cash and cash equivalents (269,063 ) (183,787 ) Net (decrease) increase in cash and cash equivalents (23,019,585 ) 20,197,510 Cash and cash equivalents at beginning of period 28,919,817 18,019,617 Cash and cash equivalents at end of period$ 5,900,232 $
38,217,127
Supplemental disclosures of cash flow information: Cash paid for income taxes$ 62,754 $ 24,474 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:
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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 - GOING CONCERN
As indicated in the accompanying unaudited condensed consolidated financial statements, the Company had a net loss of approximately$8.2 million for the six months endedJune 30, 2020 ; negative working capital and deficit of approximately$11.8 million and$6.8 million , respectively, as ofJune 30, 2020 . Management of the Company has considered whether there is substantial doubt about its ability to continue as a going concern due to consecutive quarterly losses from operations in the first half of 2020 as a result of COVID-19; and evaluated its available cash balance against its working capital requirements over the next twelve months. While management cannot accurately predict the full impact of COVID-19 on the Company's business, management believes that its business will turnaround in the second half of 2020 and expects to make a net profit for the full year of 2020. Based on its latest cash flows projection, management believes that the Company is able to generate sufficient cash flows from operations to meet its working capital requirements for year 2020; and that its capital resources are currently sufficient to maintain its business operations for the next twelve months. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and/or classification of the recorded asset amounts and/or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and related notes 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 . F-7 HANJIAO INTERNATIONAL HOLDING LIMITED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (amounts inU.S. dollars unless otherwise stated) 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 . . .
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