Overview
Apex was incorporated on March 31, 2015, under the laws of the State of Nevada.
On June 15, 2015, Tadas Dabasinskas, who at the time was our sole director and
officer, purchased 4,000,000 shares of our common stock for $4,000 in cash. In
November 2016, we sold 1,080,000 shares of our common stock to 31 individuals at
$0.04 per share, for aggregate gross proceeds of $43,200, in a registered public
offering pursuant to a registration statement on Form S-1 (file number:
333-207109. The" Initial Registration Statement") that had been declared
effective by the Securities and Exchange Commission on October 4, 2016.
On March 23, 2018, Tadas Dabasinkas, the then majority shareholder, sole
director and sole officer of the Company, entered into stock purchase agreements
and sold an aggregate 4,000,000 shares of the common stock of the Company, or
approximately 78.7% of the issued and outstanding shares of common stock of the
Company as of such date, being all of the shares owned by Mr. Dabasinkas, for an
aggregate $443,079 in cash. The purchasers of the shares were Sumunity Group,
Inc. ("Sumunity") and Harbor Torrance Family Trust ("Harbor"), which purchased
1,200,000 and 2,800,000 shares, respectively. Harbor also acted in part as agent
for Bo Qian in purchasing 800,000 of the shares initially purchased by Harbor,
which shares were resold by Harbor to Mr. Qian on or about March 31, 2018 for
the same price at which they were purchased by Harbor from Mr. Dabasinkas (such
transaction is sometimes referred as the "Change-of-Control Transaction" in this
annual report). The Company received no proceeds from the Change-of-Control
Transaction. None of the purchasers is an affiliate of Mr. Dadasinkas.
The source of the funds used by Sumunity to purchase the shares was cash on hand
from a capital contribution to Sumunity from certain of its shareholders. Those
shareholders include entities whose own shareholders include Meijuan Fu as
described below, Ms. Fu was appointed Chief Financial Officer of the Company in
connection with the transaction described above. Additionally, Ms. Fu is the
Chief Executive Officer and Chief Financial Officer of Sumunity. Harbor is also
a principal shareholder of Sumunity. As also described below, effective June 30,
2018, Ms. Fu resigned as a director, Chief Financial Officer and Secretary of
the Company.
The source of the funds used by Harbor to purchase the shares was a private
loan, including funds from Xiaoya Deng, who, as described below, was appointed
as a director of the Company in connection with the transaction described above.
The loan is repayable in five years and bears interest at 5% per annum.
The source of the funds used by Mr. Qian to purchase the shares was personal
funds. Effective June 30, 2018, Mr. Qian was appointed a director of the
Company.
In connection with the Change-of-Control Transaction, and on the same date, (i)
Mr. Dabasinkas resigned as director of the Company and from all officer
positions with the Company, including Chief Executive Officer and President;
(ii) Xiaoya Deng, Meijuan Fu and Yuen Wong Moon were appointed as directors of
the Company; (iii) Jeff Bodnar was appointed as Chief Executive Officer and
President of the Company; and (iv) Meijuan Fu was appointed as Chief Financial
Officer and Secretary of the Company. Effective June 30, 2018, Ms. Fu resigned
as a director, Chief Financial Officer and Secretary of the Company.
On March 23, 2018, in connection with the Change-of-Control transaction, all of
the Company's outstanding loan balance owed to Mr. Dabasinkas, in the amount of
$3,731, was fully forgiven by Mr. Dabasinkas. The loans were interest free,
unsecured, and payable on demand.
Recent Development
Since our inception on March 31, 2015 until the Change-of-Control Transaction on
March 23, 2018, we were was in the steam room products distribution business.
Following the Change-of-Control Transaction on March 23, 2018, our new
management decided to pursue a different business from the steam room products
distribution business. The Company completed the last sale of steam room
products by making delivery on April 6, 2018 of inventory ordered by a customer
in February 2018. The steam room sales activities were discontinued after April
6, 2018.
We intended to pursue one or more business opportunities using Blockchain
technology related products and services in various areas, such as e-commerce
platforms offering online retail service involving Blockchain-as-a-service.
However, we have not found partners or successfully engaged any partner at the
costs and terms acceptable to us to design and maintain such platform for us. We
are considering adjusting our business plan and conducting market research on
certain adjustments.
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We must raise significant amount of capital, in the form of equity and/or debt,
unless and until we have sufficient cash flow from operations. We do not
anticipate any significant additional revenue until and unless we begin to
execute on our plan of operations. There is no assurance we will ever reach that
stage. While there is an informal arrangement with one of our principal
shareholders to provide loans to fund our working capital needs at present,
there is no commitment from any person for any such capital and there can be no
assurances that capital will be available to us on favorable terms, or at all.
After the Change-of-Control Transaction, we entered into an agreement dated
April 26, 2018 (the "ADC Agreement"), with Chongqing Puxin Blockchain Technology
Co., Ltd. ("Puxin"), a cryptocurrency mining company in China, pursuant to which
we would contribute $2 million to a new company, Apex Data Center Inc. ("ADC"),
incorporated by Puxin, in exchange for an 80% equity in ADC. Puxin would retain
20% of the equity of ADC. ADC would build a "mining pool," or a facility with
rig machines that mine cryptocurrencies, for a hosting or management fee, with
the capability of accommodating up to 100,000 dedicated servers in a facility to
be built in Washington State. As of the date of this annual report, we provided
$20,000 of the required working capital amount, the source of which were loans
from one of our principal shareholders. Though we entered into the ADC Agreement
with a good intention to commence to the mining business, we were not able to
raise sufficient fund at terms and conditions acceptable to us to carry out our
obligations within the timeframe given by the ADC Agreement and the parties
terminated the ADC Agreement on April 1, 2019 by entering into a termination and
release agreement (the "Termination Agreement"). The Termination Agreement is
filed as Exhibit 10.2 to the Amendment to the Quarterly Report on Form 10-Q
dated May 21, 2019. The certificate of dissolution of ADC was filed with the
State of Washington on May 13, 2019. No liquidating distribution was made to
either Puxin or us. We deconsolidated ADC from our balance sheet as of June 30,
2019 and recorded a loss from investment in subsidiary for $4,000.
On July 23, 2018, Sumunity entered into a securities purchase agreement with the
Company and Harbor (the "SPA"). Pursuant to the SPA, Sumunity agreed to sell the
1,200,000 shares of the Company, representing Sumunity's 100% equity interest in
the Company to Harbor for a consideration of $100,000. As a result, Harbor holds
3,200,000 shares of the Company, representing 63% of the issued and outstanding
shares of the Company.
Plan of Operations and Current Status
We planned to establish e-commerce platforms offering online retail service (the
"E-Commerce Platforms Project") with Blockchain-as-a-service that is intended
for all our customers who will join our e-commerce platforms as vendors and
suppliers. However, during the past six months, we were not able to find
partners or engage any partner at the costs and terms acceptable to us to design
and develop the Blackchain-as-a-service platform for us and provide technical
support at a reasonable cost that we can afford at this moment. We are currently
considering adjusting our business plan and forming development strategy based
on market research.
On June 28, 2019, we filed a registration statement on Form S-1 (No. 333-232453)
(the "Registration Statement") under the Securities Act in connection with our
self-underwritten public offering of up to 10,000,000 shares of Common Stock
(the "Offering"). The shares of Common Stock in our Offering were sold at an
offering price of $1.00 per share (the "Offering Price"). We plan to use the
proceeds of this Offering to fund E-Commerce Platforms Project which will be
adjusted once we complete our market research. However, if we are not unable to
overcome the difficulties of obtaining additional financing and capital from the
market, it may be extremely difficult for us to start the establishment of
e-commerce platform that could fuel the organic growth of our business.
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Results of Operations
We have incurred recurring losses to date. Our financial statements have been
prepared assuming that we will continue as a going concern and, accordingly, do
not include adjustments relating to the recoverability and realization of assets
and classification of liabilities that might be necessary should we be unable to
continue in operation.
We expect we will require additional capital to meet our long-term operating
requirements. We expect to raise additional capital through, among other things,
the sale of equity or debt securities, although there can be no guarantee that
we will be able to raise such capital or, if we are able to, that the terms of
such financing will be favorable to our current shareholders.
Twelve Months Ended June 30, 2019 Compared to the Twelve Months Ended June 30,
2018
For the year ended June 30, 2019, we generated $0 in steam room products
revenues, resulting in a decrease of $94,264 from the $94,264 revenue recognized
in the previous year ended June 30, 2018. We incurred $0 in cost of goods sold
for the year ended June 30, 2019, resulting in a decrease of $83,679 from the
$83,679 cost of goods sold for the year ended June 30, 2018. The gross profit
for the year ended June 30, 2019 was $0, compared to the $10,584 gross profit
for the previous year, representing a net decrease of in gross profit of
$10,584.
Operating Expenses
For the year ended June 30, 2019, we incurred operating expenses of $626,067,
consisting primarily of legal and professional fee, salaries and wages, rent and
consulting fee. The fiscal year 2019 operating expenses represent an increase of
$538,083 over the total operating expenses of $87,984 for the same period ended
June 30, 2018.
Income Taxes Provision (Benefit)
For the year ended June 30, 2019, we do not have income taxes provision
(benefit), compared to $1,298 for the previous year. The income tax benefit for
the year ended June 30, 2018 results from a March 31, 2018 reversal of
previously accrued income tax payable in the amount of $1,298.
Net Loss
Net Loss attributable to Apex for the year ended June 30, 2019, was $630,489, an
increase of $558,157 over the $72,332 net loss for the year ended June 30, 2018.
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Liquidity and Capital Resources
At June 30, 2019, we had bank overdraft of $8,697, which decreased by $80,196
from cash ending balance $71,499 at June 30, 2018. Our current asset was other
receivable of $960 as of June 30, 2019.
We had $758,994 in total current liabilities as of June 30, 2019, including a
loan from related parties of $655,545, accrued expense of $62,555, other payable
of $26,987, bank overdraft $8,697, and payroll tax payable of $5,209 as compared
to $156,000 in total current liabilities at June 30, 2018.
We had a working capital deficit of $758,034 as of June 30, 2019, compared to a
working capital deficit at $83,356 as of June 30, 2018. For the period from
inception (March 31, 2015) to June 30, 2019, we had an accumulated net loss of
$753,214. We have a negative net worth attributable to Apex in the amount of
$702,283 as of June 30, 2019. This raises substantial doubt about our ability to
continue as a going concern within one year after the date that the consolidated
financial statements are issued.
Our independent registered public accountant has issued a going concern opinion.
This means that there is substantial doubt that we can continue as an ongoing
business for the next 12 months unless we obtain additional capital to pay our
expenses. We have generated an aggregate $377,095 in revenues since inception
but we do not anticipate any significant additional revenue until and unless we
begin to execute on our plan of operations. There is no assurance we will ever
reach that stage.
Our ability to continue as a going concern is dependent upon our ability to
successfully execute our new business plan and generate profitable operations in
the future, and/or to obtain the necessary financing to meet our obligations and
repay our liabilities arising from normal business operation as and when they
become due. Management intends to finance operating costs for the foreseeable
future with loans from related parties and the issuance of equity and/or debt.
There is no commitment from any person for any such capital and there can be no
assurances that capital will be available to us on favorable terms, or at all.
At June 30, 2019, there were outstanding liabilities of $758,994. We received
loans in the aggregate principal amount of $655,545 from our new principal
shareholders from the date of the change-of-control transaction through June 30,
2019. The shareholder loan is payable on demand and carries an interest rate of
0%.
This shareholder has informally agreed to continue to lend us some of the funds
needed for some of our operating expenses, but he has no legal obligation to do
so and may discontinue making any such loans at any time. Our failure to achieve
the necessary levels of profitability or obtain the additional significant
funding required to meet our expenses and other financial obligations, would be
detrimental to us and result in the inability to execute our plan of operations,
even having to cease operations completely.
Going Concern
The accompanying consolidated financial statements and notes have been prepared
assuming that the Company will continue as a going concern for one year after
the date the consolidated financial statements were issued.
For the period from inception (March 31, 2015) to June 30, 2019, the Company had
an accumulated net loss of $753,214. The Company also had a negative net worth
of $702,283 as of June 30, 2019. This raises substantial doubt about the
Company's ability to continue as a going concern within one year after the date
that the consolidated financial statements are issued.
The ability to continue as a going concern is dependent upon the Company's
ability to successfully execute its business plan and generate profitable
operations in the future, and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operation
when they become due. Management intends to finance operating costs over the
next 12 months with loans from related parties or the issuance of equity and
debt securities.
The failure to achieve the necessary levels of profitability or obtain the
additional funding would be detrimental to the Company.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to investors.
Critical Accounting Policies
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
Due to the limited level of operations, the Company has not had to make material
assumptions or estimates other than the assumption that the Company is a going
concern.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
Fair Value of Financial Instruments
The Company adopted the guidance of ASC Topic 820 for fair value measurements
which 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-Inputs are unadjusted quoted prices in active markets for identical
assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets and liabilities
in markets that are not active, inputs other than quoted prices that are
observable, and inputs derived from or corroborated by observable market data.
Level 3-Inputs are unobservable inputs which reflect the reporting entity's own
assumptions on what assumptions the market participants would use in pricing the
asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable, inventories, advances to suppliers, prepaid
expenses, short-term loans, accounts payable, accrued expenses, advances from
customers, VAT and service taxes payable and income taxes payable approximate
their fair market value based on the short-term maturity of these instruments.
ASC Topic 825-10 "Financial Instruments" allows entities to voluntarily choose
to measure certain financial assets and liabilities at fair value (fair value
option). The fair value option may be elected on an instrument-by-instrument
basis and is irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that
instrument should be reported in earnings at each subsequent reporting date. The
Company did not elect to apply the fair value option to any outstanding
instruments.
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Development Stage Entity
The Company decided to early adopt ASU 2014-10 which eliminates the definition
of a development stage entity, eliminates the development stage presentation and
disclosure requirements under ASC 915, and amends provisions of existing
variable interest entity guidance under ASC 810.
Leases
In February 2016, the FAS issued ASU 2016-02, "Leases (Topic 842)" ("ASU
2016-02"). The new standard establishes a right-of-use ("ROU") model that
requires a lessee to record an ROU asset and a lease liability on the balance
sheet for all leases with terms longer than 12 months. Leases will be classified
as either finance or operating, with classification affecting the pattern of
expense recognition in the income statement. A modified retrospective transition
approach is required for lessees for capital and operating leases existing at,
or entered into after, the beginning of the earliest comparative period
presented in the financial statements, with certain practical expedients
available. The new standard is effective for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years. In July
2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements"
("ASU 2018-11") and ASU 2018-10, "Codification Improvements to Topic 842,
Leases" ("ASU 2018-10"). ASU 2018-11 provides for an additional optional
adoption method of ASU 2016-02, allowing for the application of the new standard
as of the adoption date and recognizes a cumulative effect adjustment to the
opening balance of retained earnings in the period of adoption. ASU 2018-10
provides corrections and updates to the previously issued codification regarding
Topic 842. Various areas of the codification were impacted from the update. The
two standards follow the effective dates of ASU 2016-02. The Company's
non-cancellable leases consist of an office leases for 63 months for 6,543
square feet expiring in March 2024. The new standard, including subsequent
amendments is effective for our interim and annual periods beginning July 1,
2019. The Company will adopt the new guidance in the first quarter of fiscal
year 2020 using the alternative modified transition basis, thereby recognizing
the cumulative effect of initially applying Topic 842 as an adjustment to
opening balance sheet on the adoption date, without revising the balances in
comparative periods. The Company plans to elect the package of transitional
practical expedients allowing, among other provisions, the Company not to
reassess under the new standard its prior conclusions about lease
identification, lease classification and initial direct cost, for any existing
leases on the adoption date.
The Company has substantially completed its evaluation of the new lease guidance
implementation and assessed the effect of the adoption on its financial
statements. In connection with the adoption of the new guidance, the Company
expects to recognize ROU asset for approximately $879,000 and lease liability of
approximately $947,000 in its balance sheet as of July 1, 2019, with no impact
to its results of operations and cash flows. The difference between the leased
assets and lease liabilities represents the net position of existing prepaid
rent and deferred rent liabilities balance, resulting from historical
straight-lining of operating leases, which will be effectively reclassified upon
adoption to reduce the measurement of the leased assets.
Basic and Diluted Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45
"Earnings per Share", which requires presentation of both basic and diluted
earnings per share on the face of the statement of operations. Basic earnings
(loss) per share is computed by dividing net earnings (loss) available to common
stockholders by the weighted average number of outstanding common shares during
the period. Diluted earnings (loss) per share gives effect to all dilutive
potential common shares outstanding during the period. Dilutive earnings (loss)
per share excludes all potential common shares if their effect is anti-dilutive.
The Company has no potential dilutive instruments, and therefore, basic and
diluted earnings (loss) per share are equal.
Revenue Recognition
The company follows the guidelines of ASC 605-15 for revenue recognition.
Revenue is recognized when all the following conditions have been met:
a. the customer has prepaid for the product;
b. the product has been shipped from either Apex Resources or one of our
suppliers; and
c. the product has been delivered and signed for by the customer as evidenced
by the shipping company.
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The company is the primary obligor in the sales transaction. We are able to
select suppliers based upon the customer's needs, we do not have a key supplier,
we have sales agreements with multiple suppliers and we are able to set the
price of the product to the customer. Customers are allowed to return the
products within 30 days for exchange or refund if defects in manufacturing are
identified. The company does not believe the 30-day exchange or refund will have
a material impact on our revenue recognition as any product which has a defect
in manufacturing will be returned to the supplier for replacement or refund for
the customer based upon pursuant law and the Uniform Commercial Code.
Based on the above, the Company determined that the revenue recognition for the
sales is in accordance with the FASB ASC 605-15-25-1.
Income Taxes
We use the asset and liability method of accounting for income taxes in
accordance with ASC Topic 740, "Income Taxes." Under this method, income tax
expense is recognized for the amount of: (i) taxes payable or refundable for the
current year and (ii) deferred tax consequences of temporary differences
resulting from matters that have been recognized in an entity's consolidated
financial statements or tax returns. 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
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax
assets reported if based on the weight of the available positive and negative
evidence, it is more likely than not some portion or all of the deferred tax
assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's consolidated financial statements and prescribes a
recognition threshold and measurement attribute for the consolidated financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. We have no material uncertain tax positions for any
of the reporting periods presented.
Income taxes are calculated and accrued for U.S. taxes only. The company did not
accrue any Lithuanian taxes under Lithuanian corporate rules, as we believe our
business activities prior to the April 7, 2018 discontinuance of steam room
products sales generated no taxable income under the local tax rules.
Recent Accounting Pronouncements
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting
Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income. The amendments in this update affect any
entity that is required to apply the provisions of Topic 220, Income Statement -
Reporting Comprehensive Income, and has items of other comprehensive income for
which the related tax effects are presented in other comprehensive income as
required by the US GAAP. The amendments in this update are effective for all
entities for fiscal years beginning after December 15, 2018, and interim periods
within those fiscal years. Early adoption of the amendments in this update is
permitted, including adoption in any interim period, (1) for public business
entities for reporting periods for which financial statements have not yet been
issued and (2) for all other entities for reporting periods for which financial
statements have not yet been made available for issuance. The amendments in this
update should be applied either in the period of adoption or retrospectively to
each period (or periods) in which the effect of the change in the U.S. federal
corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We do not
believe the adoption of this ASU would have a material effect on our financial
statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic
820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair
Value Measurement," which makes a number of changes meant to add, modify or
remove certain disclosure requirements associated with the movement amongst or
hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.
The amendments in this update modify the disclosure requirements on fair value
measurements based on the concepts in FASB Concepts Statement, Conceptual
Framework for Financial Reporting-Chapter 8: Notes to Financial Statements,
including the consideration of costs and benefits. The amendments on changes in
unrealized gains and losses, the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value measurements, and the
narrative description of measurement uncertainty should be applied prospectively
for only the most recent interim or annual period presented in the initial
fiscal year of adoption. All other amendments should be applied retrospectively
to all periods presented upon their effective date. The amendments are effective
for all entities for fiscal years beginning after December 15, 2019, and interim
periods within those fiscal years, with early adoption permitted. The Company is
currently evaluating the potential impacts of ASU 2018-13 on its financial
statements.
The Company believes that there were no other accounting standards recently
issued that had or are expected to have a material impact on our financial
position or results of operations, except for the new Topic 842 lease standard
as discussed above.
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