WAVE SYNC: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)
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The following discussion and analysis of our results of operations and financial condition since the Company's inception should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Prospectus. All statements, other than statements of historical facts, included in this report are forward-looking statements. When used in this report, the words "may," "will," "should," "would," "anticipate," "estimate," "possible," "expect," "plan," "project," "continuing," "ongoing," "could," "believe," "predict," "potential," "intend," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, availability of additional equity or debt financing, changes in sales or industry trends, competition, retention of senior management and other key personnel, availability of materials or components, ability to make continued product innovations, casualty or work stoppages at our facilities, adverse results of lawsuits against us and currency exchange rates. Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Readers of this report are cautioned not to place undue reliance on these forward-looking statements, as there can be no assurance that these forward-looking statements will prove to be accurate and speak only as of the date hereof. Management undertakes no obligation to publicly release any revisions to these forward-looking statements that may reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. This cautionary statement is applicable to all forward-looking statements contained in this report. 3 Critical Accounting Policies Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in
C. Principles of consolidation
The consolidated financial statements include the financial statements of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation The consolidated financial statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of those wholly-owned subsidiaries. As ofDecember 31, 2019 and 2018, the detailed identities of the consolidating subsidiaries are as follows: Place of Attributable Registered Name of Company incorporation equity interest % capitalEGOOS Mobile Technology Company Limited ("EGOOS BVI") BVI 100 % $ 1EGOOS Mobile Technology Company Limited ("EGOOS HK") Hong Kong
100% 1,290 Move
P.R.C 100 % -Guangzhou Yuzhi Information Technology Co., Ltd. ("GZYZ") P.R.C 100 % 150,527Shenzhen Qianhai Exce-card Technology Co., Ltd. ("SQEC") P.R.C 100 % 150,527Guangzhou Rongsheng Information Technology Co. , Ltd. ("GZRS") P.R.C 100 % 1,505,267 Use of estimates The preparation of the financial statements in conformity withU.S. 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, impairment, inventory allowance, taxes and contingencies. Contingencies Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company's management evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. 4
The contingencies of loss considered remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Cash and cash equivalents
The Company classifies the following instruments as cash and cash equivalents: cash on hand, unallocated bank deposits and all highly liquid investments purchased with original maturities of three months or less.
Accounts receivable
Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. Other receivables
Other receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is made when recovery of the full amount is doubtful.
Tangible fixed assets
Plant and equipment are carried at cost less accumulated depreciation. Depreciation is carried out over their estimated useful life, using the straight-line depreciation method with a residual value of 10%. The estimated useful lives of the plant and equipment are as follows:
Computer equipment 3 years Office furniture 5 years Motor vehicle 5 years The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.
Accounting for impairment of long-lived assets
The long-lived assets held by the Company are reviewed in accordance withFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Subtopic 360-10-35, "Accounting for the Impairment or Disposal of Long-Lived Assets," for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Impairment is present if carrying amount of an asset is less than its undiscounted cash flows to be generated. If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company believes no impairment has occurred to its
assets during 2020 and 2019. Income taxes
The Company uses the accrual method of accounting to determine income taxes for the year. The Company has implemented FASB ASC 740 Accounting for Income Taxes. Income tax liabilities computed according tothe United States ,People's Republic of China (PRC), andHong Kong tax laws provide for the tax effects of transactions reported in the financial statements and consists of taxes currently due, plus deferred taxes, related primarily to differences arising from the recognition of expenses related to the depreciation of plant and equipment, amortization of intangible assets, and provisions for doubtful accounts between financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. 5 A valuation allowance is recognized for deferred tax assets if it is more likely than not, that the deferred tax assets will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.
Stock-based compensation
The Company has elected to use the Black-Scholes-Merton ("BSM") pricing model to
determine the fair value of stock options on the dates of grant. Also, the
Company recognizes stock-based compensation using the straight-line method over
the requisite service period.
The Company measures share awards using the market price on or around the date of the share award and includes the amount of compensation as a periodic compensation expense over the required service period.
For the past years
Foreign currency translation The accompanying financial statements are presented inUnited States dollars (USD). The functional currency of the Company is the USD and Renminbi (RMB). The financial statements are translated into USD from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. December 31, December 31, Exchange rates 2019 2018
Year-end/period-end RMB : US$ exchange rate 6.9762
6.8764
Average annual/period RMB : US$ exchange rate 6.8944
6.6146
The RMB is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into US
Dollar at the rates used in translation.
Revenue recognition
The Company recognizes services revenue when the following criteria have been
met: 1.) it has agreed and entered into a contract for service with its
customers pursuant to which the Company identifies the contract and determines
the transactions price with its customers, 2.) the contract has set forth a
fixed fee for the services to be rendered under which the Company has determined
the transaction's price and the allocation of such price to performance
obligations with the customers, 3.) the Company has fully rendered service to
its customers, and there are no additional obligations that exist under the
terms of the contract that the Company has not fulfilled such that the Company
recognizes revenue when the performance obligation is satisfied, and 4.) the
Company has either received payment, or reasonably expects payment from the
customer in accordance to the payment terms set forth in the contract.
Earnings per share
Basic earnings per share is computed on the basis of the weighted average number
of common stock outstanding during the period. Diluted earnings per share is
computed on the basis of the weighted average number of common stock and common
stock equivalents outstanding. Dilutive securities having an anti-dilutive
effect on diluted earnings per share are excluded from the calculation.
6
Dilution is computed by applying the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Comprehensive loss Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company presents components of comprehensive income with equal prominence to other financial statements. The Company's current component of other comprehensive income is the foreign currency translation adjustment. Subsequent events The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.
Fair value of financial instruments
ASC 825, Financial Instruments, requires the Company to disclose the estimated fair values ​​of financial instruments. The book values ​​entered in the balance sheet for current assets and liabilities classified as financial instruments constitute a reasonable estimate of fair value.
The Company applies the provisions of ASC 820-10, Fair Value Measurements and
Disclosures. ASC 820-10 defines fair value, and establishes a three-level
valuation hierarchy for disclosures of fair value measurement that enhances
disclosure requirements for fair value measures. For certain financial
instruments, including cash and cash equivalents, loan receivables and
short-term bank loans, the carrying amounts approximate fair value due to their
relatively short maturities. The three levels of valuation hierarchy are defined
as follows:
? Level 1 inputs to the valuation methodology are quoted prices for
identical assets or liabilities in active markets.
? Level 2 inputs of the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs
which are
observable for the asset or liability, either directly or
indirectly,
for substantially the full term of the financial instrument.
? Level 3 inputs to the valuation methodology are unobservable and
significant to the fair value measurement.
The Company analyzes all financial instruments with both liability and equity characteristics under ASC 480, “Distinguing Liabilities from Equity†and ASC 815.
7
The following tables present the Company’s financial assets and liabilities at fair value in accordance with ASC 820-10
As ofDecember 31, 2019 : Quoted in Active Markets for Significant Significant Identical Other Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Financial assets: Cash $ 16 $ - $ -$ 16 Total financial assets $ 16 $ - $ -$ 16 As ofDecember 31, 2018 : Quoted in Active Markets for Significant Significant Identical Other Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Financial assets: Cash$ 504 $ - $ -$ 504 Total financial assets$ 504 $ - $ -$ 504 Results of Operations
Years completed
For the year ended
Revenue
For the past years
Expenses
General and administrative and financial expenses were related to corporate overhead, financial and administrative contracted services, such as legal and accounting fees. General and administrative expenses and financial expenses for the year endedDecember 31, 2019 were$33,276 as compared to that of$1,671,264 for the comparable period endedDecember 31, 2018 , which represented a decrease of$1,637,988 or approximately 98%. Such decrease was primarily attributed to the suspension of our operations in 2019.
Liquidity and capital resources
Our primary liquidity and capital resource needs are to finance our operations,
to make capital expenditures and to service our debts. We continue to be
dependent on our ability to generate positive cash flows and obtain additional
financing to fund our operations.
Working Capital Summary
As of As of
December 31, December 31,
2019 2018
Current assets $ 16 $ 7,203
Current liabilities $ 32,406 $ 1,414,965
Working capital $ (32,390 ) $ (1,407,762 )
8
Cash Flows
Years ended
December 31,
2019 2018
Cash flow used in operating activities
Cash flow from investing activities $ – $ – Cash flow from financing activities $ –
Cash flow from operating activities
The cash used in operating activities for the year endedDecember 31, 2019 was$286 compared to$283,480 for the year endedDecember 31, 2018 . The major components of the cash used in operating activities for the period endedDecember 31, 2019 were net loss in the amount of$33,276 , offset by non-cash item$584 in depreciation, increase from accrued expenses in the amount of$32,006 and tax payable in the amount of$400 . The major components of the cash used in operating activities for the period endedDecember 31, 2018 were net loss in the amount of$5,607,041 , offset by non-cash item$1,113,217 in stock compensation and$2,952,177 in impairment loss on intangible assets and$59,541 in fixed assets, decrease from advance to suppliers in the amount of$36,174 and accounts payable in the amount of$162,602 offset by decrease from other payables$14,225 . Other items were insignificant.
Cash flow from investing activities
During the year ended
Cash flow from financing activities
The cash provided from financing activities for the year endedDecember 31, 2019 was$0 compared to$308,860 for the year endedDecember 31, 2018 . The cash provided from financing activities for the year endedDecember 31, 2018 derived from proceeds from related party transactions.
Off-balance sheet provisions
As ofDecember 31, 2019 , we did not have any off-balance sheet arrangements that had or were 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.
Recent accounting positions
InJune 2016 , the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments", which will be effective for fiscal years beginning afterDecember 15, 2019 , including interim periods within those fiscal years. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. The standard did not have a material impact on our consolidated financial statements. InJanuary 2017 , the FASB issued ASU 2017-04, "Intangibles -Goodwill and Other (Topic 350): simplifying the test for goodwill impairment", the guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.Goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not the difference between the fair value and carrying amount of goodwill which was the step 2 test before. The ASU should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning afterDecember 15, 2019 . Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates afterJanuary 1, 2017 . The standard did not have a material impact on our consolidated financial statements. InAugust 2018 , the FASB issued ASU 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement." This standard eliminates the current requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. The standard includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period and permits the disclosure of other relevant quantitative information for certain unobservable inputs. The new guidance is effective for interim and annual periods beginning afterDecember 15, 2019 . The standard did not have a material impact on our consolidated financial statements. 9 InAugust 2018 , the FASB issued ASU 2018-15, "Internal-Use Software - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement." This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement service contract with the guidance to capitalize implementation costs of internal use software. The ASU also requires that the costs for implementation activities during the application development phase be capitalized in a hosting arrangement service contract, and costs during the preliminary and post implementation phase are expensed. The new guidance is effective for interim and annual periods beginning afterDecember 15, 2019 . The standard did not have a material impact on our consolidated financial statements. InOctober 2018 , the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, ("ASU 2018-17"). ASU 2018-17 requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety for determining whether a decision-making fee is a variable interest. The standard is effective for all entities for financial statements issued for fiscal years beginning afterDecember 15, 2019 , and interim periods within those fiscal years. Early adoption is permitted. Entities are required to apply the amendments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The standard did not have a material impact on our consolidated financial statements InApril 2019 , the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ("ASU 2019-04"). ASU 2019-04 clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU 2016-13 are effective for fiscal years beginning afterDecember 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company's next annual reporting period; early adoption is permitted. The standard did not have a material impact on our consolidated financial statements. InDecember 2019 , the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2020 . ASU 2019-12 will be effective for the Company in the first quarter of 2021. The Company does not expect the adoption of the new accounting rules to have a material impact on the Company's financial condition, results of operations, cash flows or disclosures.
Other than the above, management does not believe that any of the accounting standards recently issued, but not yet in effect, if currently adopted, would have a material impact on the Company’s consolidated financial statements.
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