This 10-K contains forward-looking statements. Our actual results could differ
materially from those set forth as a result of general economic conditions and
changes in the assumptions used in making such forward-looking statements. The
following discussion and analysis of our financial condition and results of
operations should be read together with the audited consolidated financial
statements and accompanying notes and the other financial information appearing
elsewhere in this report. The analysis set forth below is provided pursuant to
applicable Securities and Exchange Commission regulations and is not intended to
serve as a basis for projections of future events.
Overview
Longwen Group Corp. (the "Company"), was originally incorporated as
Expertelligence, Inc in the State of California on March 31, 1980 and
reincorporated in the State of Nevada on November 17, 2005. On January 23,
2017, after a series of various name changes, the Company amended its Articles
of Incorporation ("Charter Amendment") to affect the current name change of
Longwen Group Corp with trading symbol of "LWLW".
The Company underwent a change of control on January 21, 2016, at which time
Harold Minsky resigned in all officer positions. G. Reed Petersen and White Rim
Cattle Company LLC each purchased 25,000,000 shares of common stock of the
Company from Harold Minsky. Mr. Petersen is the Member Manager of White Rim
Cattle Company, LLC and thus can be considered a control person of all
50,000,000 shares of stock of the Company. Pursuant to a Board of Directors
meeting, Mr. Petersen was elected to and accepted all the officer positions
previously held by Harold Minsky.
On or about April 5, 2016, the Company affected a 1 for 750 share reverse split
of its issued and outstanding common stock. On such date, the Company's common
stock was reduced from 95,164,140 to 127,061 shares outstanding.
Effective November 29, 2016, G. Reed Peterson sold 66,667 shares of common stock
of the Company to Longwen Group Corporation (Cayman Island), a Cayman Island
company ("Longwen Cayman"). All of the shares held by Longwen Cayman are
restricted securities. As a result of the transactions, Mr. Petersen no longer
owns any of the Company's capital stock or securities and he and his affiliates
waived all loans and other amounts due to the Company. In addition, on such
date, Mr. Petersen resigned in all officer capacities from the Company, and Mr.
Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the
Company and President and Chief Executive Officer and Chief Financial Officer of
the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of
Board.
From August 2018 to June 2021, the Company was seeking potential business
mergers and acquisitions in order to increase its value of the common stock.
However, due to the impact of the Covid-19 pandemic, the progress was delayed
and the target was not successfully achieved.
On June 9, 2021, Anthony Lombardo ("Lombardo") filed an Application for
Appointment of Custodian ("Application") with the Eighth Judicial District Court
in Nevada to request the custodianship of the Company due to the Company's
non-response and late filing with the State of Nevada. On June 24, 2021, a
hearing was held on this Application, where Lombardo was named temporary
custodian of the Company. Subsequently after Lombardo's custodianship, Deanna
Johnson was appointed as the CEO, CFO and Secretary of the Company. On September
1, 2021, Deanna Johnson appointed Joseph Passalaqua ("Joseph") as CEO, CFO and
Secretary and resigned from all positions in the Company, On October 25, 2021,
Mr. Xizhen Ye ("Ye"), who was the officer and director of the Company prior to
Lombardo's custodianship, and Longwen Group Corporation, a Cayman Island
corporation, filed a Motion to Dissolve Custodianship ("Motion") with the Eighth
Judicial District Court of Nevada State. On January 12, 2022, in accordance with
a Settlement Agreement regarding Lombardo's custodianship, Mr. Ye was reinstated
his positions as the officer and director of the Company, along with the
reinstatement of the other Company's director, Lizhong Lu, who was also in place
prior to Lombardo's custodianship. On February 9, 2022, pursuant to the
Settlement Agreement, Joseph transferred 65,000,000 common stocks of the Company
owned by him to Mr. Ye. On February 17, 2022, the Eighth Judicial District Court
formally dismissed Lombardo's custodianship for the Company.
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On February 23, 2022, the Company entered into an Acquisition Agreement with a
third-party individual to acquire the 100% ownership of Hangzhou Longwen
Enterprise Management Co., Ltd. ("Hangzhou Longwen"), a wholly foreign-owned
enterprise ("WOFE") in Hangzhou, the People's Republic of China (the "PRC"), for
a total cash consideration of $1,000. As a result of the acquisition, Hangzhou
Longwen became the Company's wholly owned subsidiary in the PRC. Hangzhou
Longwen was originally registered on January 4, 2012 and has minimum operations
since its inception. The Company recognize $993 goodwill upon consummated the
acquisition.
On October 11, 2022, the Company and its subsidiary, Hangzhou Longwen entered
into an Acquisition Agreement with a third-party individual to acquire the 100%
ownership of Hangzhou Yusu Trading Co., Ltd. ("HZYS"), a limited liability
company in Hangzhou, the People's Republic of China (the "PRC"), for a total
cash consideration of RMB 1,000 or about USD $141. Upon consummated, HZYS became
Hangzhou Longwen's wholly owned subsidiary in the PRC. HZYS was originally
registered on April 20, 2020 and has minimum operations since its inception.
On March 3, 2023, Hangzhou Longwen established a new subsidiary, Huzhou Wohong
Fishery Co., Ltd. ("HWF"), to operate the aquacultural breeding, wholesale and
retail of aquaculture products and etc.
Revenue
The Company currently generates revenues through provision of consulting
services, online product sales and aquaculture product sales through its
subsidiaries.
Professional Expense
Professional expenses principally consist of costs associated with our
consultant.
General and Administrative Expense
General and administrative expenses include the expenses for personnel in
executive and other administrative functions, other commercial costs necessary
to support the commercial operation of our products and services. General and
administrative expenses also include depreciation and impairments of office
furniture and equipment.
Interest Expense
Interest expense primarily consists of interest expense incurred for loans
received from individual third parties.
Income taxes
The Company accounts for income taxes under ASC 740, "Income Taxes." Under the
asset and liability method of ASC 740, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the consolidated financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. 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 income in the period the enactment occurs. A valuation
allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations.
Results of Operations
Results of Operations for the Years Ended on December 31, 2022 and 2021
For the year ended December 31, 2022, revenue increased $41,137 from $nil during
the prior year. The increase in revenue is primarily due to the revenue
increasing from our consulting services section, which generated through our
fully owned subsidiary, Hangzhou Longwen in China.
Comparing to the year ended December 31, 2021, the selling, general and
administrative expenses increased $249,191 for the year ended December 31, 2022.
The increase of selling, general and administrative expenses are mainly due to
the increased operations for our subsidiaries in China, as well as to be
compliant with the filing requirements of the Securities and Exchange Commission
and OTC Markets as a public company.
During the year ended December 31, 2022, the Company had professional fees of
$106,482, which consisted of financial consulting fees. The increase in
professional fees is primarily due to the increased needs in financial
consulting as a result of public company listed on the OTC Markets.
In November 2022, the Company issued 4,250,000 common shares to four individual
consultants with a total fair value in the amount of $425,000, which resulted in
the increase in share-based compensation.
23
Liquidity and Capital Resources
The Company had total assets in the amount of $405,661 and $nil as of December
31, 2022 and December 31, 2021, respectively.
As of December 31, 2022, the Company had cash of $68,121, comparing to $nil as
at December 31, 2021. The Company had working capital deficit of $8,172 as of
December 31, 2022 comparing working capital deficit of $13,550 as of December
31, 2021.
During the year ended December 31, 2022, the Company had cash used in operating
activities in the amount of $342,186 comparing to nil in the prior year. The
change in cash used in operating activities is mainly due to the increase in
operations. The cash provided by financing activities increased $426,696 in the
current year comparing to the prior year. The increase is mainly due to the
issuance of common shares for cash and loan proceeds from a shareholder.
Going Concern Assessment
The Company demonstrates adverse conditions that raise substantial doubt about
the Company's ability to continue as a going concern. These adverse conditions
are negative financial trends, specifically cash outflow from operating
activities, operating losses, accumulated deficit and other adverse key
financial ratios.
Management's plan to alleviate the substantial doubt about the Company's ability
to continue as a going concern include attempting to improve its business
profitability, its ability to generate sufficient cash flow from its operations
and execute the business plan of the Company in order to meet its operating
needs on a timely basis. However, there can be no assurance that these plans and
arrangements will be sufficient to fund the Company's ongoing capital
expenditures and other requirements.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event that the
Company cannot continue as a going concern.
Off-Balance Sheet Arrangements
We have no 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 stockholders.
Critical Accounting Policies
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these consolidated financial statements requires making
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. The estimates are based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
The critical accounting policies are discussed in further detail in the notes to
the accompanying audited consolidated financial statements appearing elsewhere
in this prospectus. Management believes that the application of these policies
on a consistent basis enables us to provide useful and reliable financial
information about our operating results and financial condition.
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