Aphoenity International Holdings Inc 10-K/A, filed Aug 10, 2021
Aphoenity International Holdings Inc. (LDSN)
About this 10-K/A
Aphoenity International Holdings Inc filed this 10-K/A on August 10, 2021, covering the fiscal year ended December 31, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM 10-K
| ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | ||
| SECURITIES EXCHANGE ACT OF 1934 | |||
| For the fiscal year ended December 31, 2020 | |||
| OR | |||
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | ||
| SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 000-55999
LUDUSON G InC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 82-3184409 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
|
17/F, 80 Gloucester Road Wanchai, Hong Kong | ||
|
(Address of principal executive offices and zip code) | ||
Registrant’s telephone number, including area code: + 852 2818 7199
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value
Title of each class
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Smaller reporting company ☒ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| Common Stock | Outstanding at March 23, 2021 | |
| Common Stock, $.0001 par value per share | 28,110,000 shares |
The aggregate market value of the 3,080,000 shares of Common Stock of the registrant held by non-affiliates on June 30, 2020, the last business day of the registrant’s second quarter, computed by reference to the closing price reported by the Over-the-Counter Bulletin Board on that date is $400,400.
DOCUMENTS INCORPORATED BY REFERENCE:
None
EXPLANATORY NOTE
This Amendment No. 1 to the Company’s Form 10-K (the “Amendment”) amends the Annual Report of Luduson G Inc. on Form 10-K for the fiscal year ended December 31, 2020 (the “Form 10-K”), as filed with the Securities and Exchange Commission on March 25, 2021, and is being filed solely amend and restate the Report of the Independent Registered Public Accounting Firm included in “Item 8. Financial Statements and Supplementary Data” of the Form 10-K. Except as set forth above, no other changes to “Item 8. Financial Statements and Supplementary Data” were made.
This Amendment includes new certifications by our Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as exhibits 31.1 and 32. hereto.
Except as expressly set forth above, this Amendment does not, and does not purport to, amend, update or restate the information in any other item of the Form 10-K or reflect any events that have occurred after the filing of the original Form 10-K.
| 1 |
ITEM 8. Financial Statements and Supplementary Data.
The consolidated financial statements and the Report of Independent Registered Certified Public Accounting Firm thereon are filed pursuant to this Item 8 and are included in this report beginning on page F-1.
| 2 |
LUDUSON G INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
 |
TOTAL ASIA ASSOCIATES PLT (AF002128 & LLP0016837-LCA) A Firm registered with US PCAOB and Malaysian MIA
Block C-3-1, Megan Avenue 1, 189, Off Jalan Tun Razak, 50400, Kuala Lumpur. Tel: (603) 2733 9989 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
LUDUSON G INC.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Luduson G Inc. and its subsidiaries (the ‘Company’) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for the years ended December 31, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to those charged with governance that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. We determined that there are no critical matters.
/s/ TOTAL ASIA ASSOCIATES PLT
TOTAL ASIA ASSOCIATES PLT
March 25, 2021
We have served as the Company’s auditor since 2020.
Kuala Lumpur, Malaysia
| F-2 |
LUDUSON G INC.
AS OF DECEMBER 31, 2020 and 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current asset: | ||||||||
| Cash and cash equivalents | $ | 40,447 | $ | 269,691 | ||||
| Accounts receivable | 4,499,746 | 760,733 | ||||||
| Deposits, prepayments and other receivables | 665,052 | 142,001 | ||||||
| Operating lease right-of-use assets | – | 35,816 | ||||||
| Total current assets | 5,205,245 | 1,208,241 | ||||||
| Non-current asset: | ||||||||
| Plant and equipment | 422,414 | 9,172 | ||||||
| TOTAL ASSETS | $ | 5,627,659 | $ | 1,217,413 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,251 | $ | – | ||||
| Accrued liabilities and other payables | 23,521 | 1,289 | ||||||
| Tax payable | 743,562 | 139,804 | ||||||
| Operating lease liabilities | – | 36,690 | ||||||
| Amount due to a director | 28,290 | – | ||||||
| Total current liabilities | 798,624 | 177,783 | ||||||
| TOTAL LIABILITIES | 798,624 | 177,783 | ||||||
| Commitments and contingencies | – | – | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding at December 31, 2020 and 2019, respectively | – | – | ||||||
| Common stock, $0.0001 par value, 100,000,000 shares authorized, 28,110,000 and 10,000,000 shares issued and outstanding at December 31, 2020 and 2019, respectively | 2,811 | 1,000 | ||||||
| Additional paid-in capital | 332,189 | 9,000 | ||||||
| Accumulated other comprehensive income | 10,573 | 5,435 | ||||||
| Retained earnings | 4,483,462 | 1,024,195 | ||||||
| Shareholders’ equity | 4,829,035 | 1,039,630 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 5,627,659 | $ | 1,217,413 | ||||
See accompanying notes to consolidated financial statements.
| F-3 |
LUDUSON G INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”))
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenue, net | $ | 5,935,720 | $ | 1,426,354 | ||||
| Cost of revenue | (1,027,662 | ) | (283,828 | ) | ||||
| Gross profit | 4,908,058 | 1,142,526 | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses | (531,681 | ) | (164,293 | ) | ||||
| Professional fee | (127,416 | ) | – | |||||
| Total operating expenses | (659,097 | ) | (164,293 | ) | ||||
| Other (expenses) income: | ||||||||
| Interest income | 40 | 2 | ||||||
| Interest expenses | (1,938 | ) | – | |||||
| Total other (expenses) income | (1,898 | ) | 2 | |||||
| INCOME BEFORE INCOME TAXES | 4,247,063 | 978,235 | ||||||
| Income tax expense | (602,877 | ) | (138,959 | ) | ||||
| NET INCOME | 3,644,186 | 839,276 | ||||||
| Other comprehensive income: | ||||||||
| Foreign currency translation gain | 5,138 | 6,152 | ||||||
| COMPREHENSIVE INCOME | $ | 3,649,324 | $ | 845,428 | ||||
| Net income per share: | ||||||||
| Basic and diluted | $ | 0.18 | $ | 0.08 | ||||
| Weighted average shares outstanding | ||||||||
| Basic and diluted | 20,332,350 | 10,000,000 | ||||||
See accompanying notes to consolidated financial statements.
| F-4 |
LUDUSON G INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”))
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flow from operating activities: | ||||||||
| Net income | $ | 3,644,186 | $ | 839,276 | ||||
| Adjustments to reconcile net income to net cash generated from operating activities | ||||||||
| Depreciation of plant and equipment | 48,889 | 5,946 | ||||||
| Share-based compensation for services | 325,000 | – | ||||||
| Non-cash lease expenses | 35,600 | 874 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,739,013 | ) | (746,361 | ) | ||||
| Deposits, prepayments and other receivables | (523,050 | ) | (138,809 | ) | ||||
| Accounts payable | 3,251 | – | ||||||
| Accrued expenses and other payables | 22,232 | (2,554 | ) | |||||
| Lease liabilities | 2,051 | – | ||||||
| Tax payable | 603,758 | 138,959 | ||||||
| Net cash generated from operating activities | 422,904 | 97,331 | ||||||
| Cash flow from investing activities: | ||||||||
| Purchases of plant and equipment | (462,109 | ) | – | |||||
| Net cash used in investing activities | (462,109 | ) | – | |||||
| Cash flow from financing activities: | ||||||||
| Advances from a director | 28,290 | 138,596 | ||||||
| Repayment of lease liabilities | (38,525 | ) | – | |||||
| Dividend paid to former shareholders | (184,919 | ) | – | |||||
| Net cash (used in) generated from financing activities | (195,154 | ) | 138,596 | |||||
| Effect on exchange rate change on cash and cash equivalents | 5,115 | 6,949 | ||||||
| Net change in cash and cash equivalents | (229,244 | ) | 242,876 | |||||
| BEGINNING OF YEAR | 269,691 | 26,815 | ||||||
| END OF YEAR | $ | 40,447 | $ | 269,691 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for tax | $ | – | $ | – | ||||
| Cash paid for interest | $ | – | $ | – | ||||
See accompanying notes to consolidated financial statements.
| F-5 |
LUDUSON G INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| Common stock | Additional paid-in | Accumulated other comprehensive (loss) | Retained | Total shareholders’ | ||||||||||||||||||||
No. of shares | Amount | capital | income | earnings | equity | |||||||||||||||||||
| Balance as at January 1, 2019 (restated) | 10,000,000 | $ | 1,000 | $ | 9,000 | $ | (717 | ) | $ | 184,919 | $ | 194,202 | ||||||||||||
| Foreign currency translation adjustment | – | – | – | 6,152 | – | 6,152 | ||||||||||||||||||
| Net income for the year | – | – | – | – | 839,276 | 839,276 | ||||||||||||||||||
| Balance as at December 31, 2019 | 10,000,000 | $ | 1,000 | $ | 9,000 | $ | 5,435 | $ | 1,024,195 | $ | 1,039,630 | |||||||||||||
| Balance as at January 1, 2020 | 10,000,000 | $ | 1,000 | $ | 9,000 | $ | 5,435 | $ | 1,024,195 | $ | 1,039,630 | |||||||||||||
| Dividends paid to former shareholders | – | – | – | – | (184,919 | ) | (184,919 | ) | ||||||||||||||||
| – | – | |||||||||||||||||||||||
| Shares issued for acquisition of legal acquirer | 15,610,000 | 1,561 | (1,561 | ) | – | – | – | |||||||||||||||||
| Shares issued for service rendered | 2,500,000 | 250 | 324,750 | – | – | 325,000 | ||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | 5,138 | – | 5,138 | ||||||||||||||||||
| Net income for the year | – | – | – | – | 3,644,186 | 3,644,186 | ||||||||||||||||||
| Balance as at December 31, 2020 | 28,110,000 | $ | 2,811 | $ | 332,189 | $ | 10,573 | $ | 4,483,462 | $ | 4,829,035 | |||||||||||||
See accompanying notes to consolidated financial statements.
| F-6 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 1. | DESCRIPTION OF BUSINESS AND ORGANIZATION |
Luduson G Inc. (formerly Baja Custom Designs, Inc., or "the Company" or "LDSN") was organized under the laws of the State of Delaware on March 6, 2014 under the name Jovanovic-Steele, Inc. The Company’s name was changed to Baja Custom Designs, Inc. on September 30, 2017. The Company was established as part of the Chapter 11 Plan of Reorganization of Pacific Shores Development, Inc. ("PSD"). The Company’s name was further changed to Luduson G Inc. on July 15, 2020.
On April 15, 2020, Linda Master, the former Chief Executive Officer, President and majority owner of the Company, sold 14,960,000 shares of her common stock of the Company, or 95.8% of the issued and outstanding stock of the Company, to Lan Chan, the current Chief Executive Officer, Chief Financial Officer and Secretary of the Company.
On May 8, 2020, the Company executed a Share Exchange Agreement with Luduson Holding Company Limited, a limited liability company organized under the laws of British Virgin Islands (“LHCL”), and the shareholders of LHCL. Pursuant to the Share Exchange Agreement, the Company purchased Ten Thousand (10,000) shares of LHCL (the “LHCL Shares”), representing all of the issued and outstanding shares of common stock of LHCL. As consideration, the Company agreed to issue to the shareholders of LHCL Ten Million (10,000,000) shares of its common stock, at a value of US$0.10 per share, for an aggregate value of US$1,000,000. The Company consummated the acquisition of LHCL on May 22, 2020.
Because the Company is a shell company, LHCL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, LHCL 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 become the historical financial statements of LHCL, and the Company’s assets, liabilities and results of operations will be consolidated with LHCL beginning on the acquisition date. LHCL was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting acquirer (LHCL). 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.
Description of subsidiaries
| Name |
Place of incorporation and kind of legal entity |
Principal activities |
Particulars of registered/ paid up share capital |
Effective interest held | ||||
| Luduson Holding Company Limited | British Virgin Island | Investment holding | 10,000 ordinary shares at par value of $1 | 100% | ||||
| Luduson Entertainment Limited | Hong Kong | Sales and marketing | 10,000 ordinary shares for HK$10,000 | 100% | ||||
| G Music Asia Limited | British Virgin Islands | Event planning | 2 ordinary shares at par value of US$1 | 100% |
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes.
| l | Basis of presentation |
These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
| F-7 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| l | Use of estimates and assumptions |
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates.
| l | Basis of consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
| l | Cash and cash equivalents |
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
| l | Accounts receivable |
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2020 and 2019, there was no allowance for doubtful accounts.
| l | Plant and equipment |
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Expected useful lives | |||
| Leasehold improvement | 3 years | ||
| Computer equipment | 3-5 years | ||
| Furniture and equipment | 5 years |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
| l | Revenue recognition |
The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”) as of January 1, 2019 using the modified retrospective method. This method allows the Company to apply ASC 606 to new contracts entered into after January 1, 2019, and to its existing contracts for which revenue earned through December 31, 2018 has been recognized under the guidance in effect prior to the effective date of ASC 606. The revenue recognition processes the Company applied prior to adoption of ASC 606 align with the recognition and measurement guidance of the new standard, therefore adoption of ASC 606 did not require a cumulative adjustment to opening equity.
| F-8 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
| • | identify the contract with a customer; | |
| • | identify the performance obligations in the contract; | |
| • | determine the transaction price; | |
| • | allocate the transaction price to performance obligations in the contract; and | |
| • | recognize revenue as the performance obligation is satisfied. |
| l | Cost of revenue |
Cost of revenue consists primarily of the fees paid to contracted programmers and labor costs, which are directly attributable to the rendering of services and the production of contents.
| l | Income taxes |
The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
| l | Uncertain tax positions |
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the years ended December 31, 2020 and 2019.
| l | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
| F-9 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholders’ equity.
Translation of amounts from HKD into US$ has been made at the following exchange rates for the years ended December 31, 2020 and 2019:
| December 31,2020 | December 31,2019 | |||||||
| Year-end HKD:US$ exchange rate | 0.12899 | 0.12842 | ||||||
| Annual average HKD:US$ exchange rate | 0.12894 | 0.12764 | ||||||
| l | Comprehensive income |
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| l | Retirement plan costs |
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service is provided.
| l | Share-based compensation |
The Company follows ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards, including restricted stock units, based on estimated grant date fair values. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company records compensation expense, net of estimated forfeitures, over the requisite service period.
| l | Leases |
The Company adopted Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2019 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
| F-10 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.
The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.
| l | Related parties |
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| l | Commitments and contingencies |
The Company follows the ASC 450-20, Commitments to report accounting for 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 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 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 therein.
| F-11 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
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 consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
| l | Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayment and other receivables, amount due from a director and operating lease right-of-use assets, approximate their fair values because of the short maturity of these instruments.
| l | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
| F-12 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Recently Adopted Accounting Standards
In June 2016, the FASB issued guidance that affects loans, trade receivables and any other financial assets that have the contractual right to receive cash. Under the new guidance, an entity is required to recognize expected credit losses rather than incurred losses for financial assets. The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company adopted the new guidance effective January 1, 2020, with no material impact to the Company’s consolidated financial position, results of operations or cash flows.
In August 2018, the FASB issued guidance which modifies certain disclosure requirements over fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019, including all interim periods within that fiscal year. The Company adopted the new guidance effective January 1, 2020. The Company does not currently classify any of its derivative contracts or restoration plan assets as Level 3 assets or liabilities, nor did the Company have any transfers amongst fair value levels during the year ended December 31, 2020. As a result, the guidance did not have an impact on Company’s the fair value measurement disclosures upon adoption.
In January 2017, the FASB issued guidance which eliminates the second step from the traditional two-step goodwill impairment test. Under current guidance, an entity performed the first step of the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount; if an impairment loss was indicated, the entity computed the implied fair value of goodwill to determine whether an impairment loss existed, and if so, the amount to recognize. Under the new guidance, an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value (the Step 1 test), with no further testing required. Any impairment loss recognized is limited to the amount of goodwill allocated to the reporting unit. The new guidance is effective for public companies that are Securities and Exchange Commission (“SEC”) registrants for fiscal years beginning after December 15, 2019. The Company adopted the new guidance on January 1, 2020, and applied the guidance prospectively to its goodwill impairment tests.
Accounting Standards Not Yet Adopted as of December 31, 2020
In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The new guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In March 2020, the FASB issued guidance to address certain accounting consequences from the anticipated transition from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based on matches the index of the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
| F-13 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 3. | BUSINESS SEGMENT |
The Company considers its business activities to constitute two reportable segments. The segment analysis of the Company’s revenues is as follows:
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Digital marketing | $ | 5,916,380 | $ | 502,324 | ||||
| Entertainment | 19,340 | 924,030 | ||||||
| $ | 5,935,720 | $ | 1,426,354 | |||||
| 4. | ACCOUNTS RECEIVABLE |
The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, the Company has not provided the allowance for the years ended December 31, 2020 and 2019.
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Accounts receivable, cost | $ | 4,499,746 | $ | 760,733 | ||||
| Less: allowance for doubtful accounts | – | – | ||||||
| Accounts receivable, net | $ | 4,499,746 | $ | 760,733 | ||||
The Company expects these balances to be recovered in the next 12 months.
| 5. | PLANT AND EQUIPMENT |
Plant and equipment consisted of the following:
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Leasehold improvement | $ | 64,495 | $ | – | ||||
| Computer equipment | 418,371 | 20,757 | ||||||
| Furniture and equipment | 6,908 | 6,908 | ||||||
| Foreign translation difference | 154 | 29 | ||||||
| 489,928 | 27,694 | |||||||
| Less: accumulated depreciation | (67,322 | ) | (18,433 | ) | ||||
| Less: foreign translation difference | (192 | ) | (89 | ) | ||||
| $ | 422,414 | $ | 9,172 | |||||
Depreciation expense for the years ended December 31, 2020 and 2019 were $48,889 and $5,946, respectively.
| F-14 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 6. | DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES |
Deposits, prepayments and other receivables consisted of the following,
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Prepayment for business project | $ | 139,414 | $ | 138,791 | ||||
| Prepayment for vending machine | 522,413 | – | ||||||
| Rental deposit | 3,225 | 3,210 | ||||||
| $ | 665,052 | $ | 142,001 | |||||
Prepayment for business project represents the security deposit to the project under the collaboration agreement, which is unsecured and non-refundable. The deposit will be charged to the project cost upon the commencement of its project in the next six months.
Prepayment for vending machine represents the deposit of purchasing vending machines. The deposit will be charged to the project cost upon the use of the machine in the next twelve months.
| 7. | LEASE |
As of December 31, 2020, the Company entered into one workshop space operating lease with a lease term of 2 years, commencing from January 1, 2019.
Right of use assets and lease liability – right of use are as follows:
| As of December 31 | ||||||||
| 2020 | 2019 | |||||||
| Right-of-use assets | $ | – | $ | 35,816 | ||||
The lease liability – right of use is as follows:
| As of December 31 | ||||||||
| 2020 | 2019 | |||||||
| Current portion | $ | – | $ | 36,690 | ||||
| Non-current portion | – | – | ||||||
| Total | $ | – | $ | 36,690 | ||||
The lease was renewed on December 28, 2020 and extended for one additional year to December 31, 2021.
| F-15 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 8. | AMOUNT DUE TO A RELATED PARTY |
As of December 31, 2020, the amount due to a related party represented temporary advances made by the Company’s director, Mr Wong Ka Leung, which was unsecured, interest-free with no fixed repayment term. Imputed interest on this amount is considered insignificant.
| 9. | SHAREHOLDER’S EQUITY |
Authorized shares
As of December 31, 2020 and 2019, the authorized share capital of the Company consisted of 100,000,000 shares of common stock with $0.0001 par value, and 20,000,000 shares of preferred stock also with $0.0001 par value. No other classes of stock are authorized.
The Company's first issuance of common stock, totaling 580,000 shares, took place on March 6, 2014 pursuant to the Chapter 11 Plan of Reorganization confirmed by the U.S. Bankruptcy Court in the matter of Pacific Shores Development, Inc. ("PSD"). The Court ordered the distribution of shares in the Company to all general unsecured creditors of PSD, with these creditors to receive their Pro Rata share (according to amount of debt held) of a pool of 80,000 shares in the Company. The Court also ordered the distribution of shares in the Company to all administrative creditors of PSD, with these creditors to receive one share of common stock in the Company for each $0.10 of PSD's administrative debt which they held. A total of 500,000 shares were issued to PSD’s administrative creditors.
The Court also ordered the distribution of 2,500,000 warrants in the Company to all administrative creditors of PSD, with these creditors to receive five warrants in the Company for each $0.10 of PSD's administrative debt which they held. These creditors received 2,500,000 warrants consisting of 500,000 "A Warrants" each convertible into one share of common stock at an exercise price of $4.00; 500,000 "B Warrants" each convertible into one share of common stock at an exercise price of $5.00; 500,000 "C Warrants" each convertible into one share of common stock at an exercise price of $6.00; 500,000 "D Warrants" each convertible into one share of common stock at an exercise price of $7.00; and 500,000 "E Warrants" each convertible into one share of common stock at an exercise price of $8.00. The exercise price of the warrants was reduced to $0.10 per share on April 7, 2020, and on April 15, 2020, the warrant expiration date was extended to August 30, 2025. As of the date of this report, no warrants have been exercised.
On May 22, 2020, the Company consummated the acquisition of LHCL and agreed to issue to the shareholders of LHCL Ten Million (10,000,000) shares of its common stock, at a value of $0.10 per share, for an aggregate value of $1,000,000.
Issued and outstanding shares
On January 2, 2020, the Company declared and paid a dividend of $184,919 to its former shareholders.
On May 8, 2020, the Company executed a Share Exchange Agreement (“the “Share Exchange Agreement”) with Luduson Holding Company Limited, a limited company organized under the laws of the British Virgin Islands (“LHCL”), and the shareholders of LHCL. Pursuant to the Share Exchange Agreement, the Company agreed to purchase Ten Thousand (10,000) ordinary shares representing 100% of the issued and outstanding ordinary shares of the LHCL (the “LHCL Shares”). As consideration, the Company agreed to issue to the shareholders of LHCL Ten Million (10,000,000) shares of its common stock, at a value of US$0.10 per share, for an aggregate value of US$1,000,000. The Company consummated the acquisition of LHCL on May 22, 2020.
| F-16 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
On September 9, 2020, the Company issued 2,500,000 shares of its common stock to five individuals of consultants and service providers for the IT programming and marketing services rendered to the Company, at the fair value of $0.13 per shares, totally $325,000.
As of December 31, 2020, 28,110,000 common shares issued and outstanding and 2,500,000 warrants to acquire common shares issued and outstanding.
| 10. | INCOME TAX |
Income (loss) before income taxes within or outside the United States are shown below:
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Domestic | $ | (343,616 | ) | $ | – | |||
| Foreign | 4,590,679 | 978,235 | ||||||
| Total | $ | 4,247,063 | $ | 978,235 | ||||
The provision for income taxes as shown in the accompanying consolidated statements of income consists of the following:
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Current: | ||||||||
| Domestic | $ | – | $ | – | ||||
| Foreign | 602,877 | 138,959 | ||||||
| Deferred: | ||||||||
| Domestic | – | – | ||||||
| Foreign | – | – | ||||||
| Provision for income taxes | $ | 602,877 | $ | 138,959 | ||||
The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in various countries: United States of America and Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
LDSN is registered in the State of Delaware and is subject to US federal corporate income tax. The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were not material to its results of operations for the periods presented. Deferred tax asset is not provided for as the tax losses may not be able to carry forward after a change in substantial ownership of the Company in May 2020.
As of December 31, 2020, the operations in the United States of America incurred $343,616 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2040, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets of $72,159 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
| F-17 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
ASC 740, Accounting for Income Taxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. The Company’s history of cumulative losses, along with expected future U.S. losses required that a full valuation allowance be recorded against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.
BVI
Under the current BVI law, the Company is not subject to tax on income.
Hong Kong
The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the years ended December 31, 2020 and 2019 is as follows:
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Income before income taxes | $ | 4,590,679 | $ | 978,235 | ||||
| Statutory income tax rate | 16.5% | 16.5% | ||||||
| Income tax expense at statutory rate | 757,462 | 161,408 | ||||||
| Tax effect of non-deductible items | 8,067 | 1,055 | ||||||
| Tax effect of non-taxable items | (138,797 | ) | (35 | ) | ||||
| Tax concession | (23,855 | ) | (23,469 | ) | ||||
| Income tax expense | $ | 602,877 | $ | 138,959 | ||||
| 11. | NET INCOME PER SHARE |
Basic net income per share is computed using the weighted average number of common shares outstanding during the year. The dilutive effect of potential common shares outstanding is included in diluted net income per share. The following table sets forth the computation of basic and diluted net income per share for the years ended December 31, 2020 and 2019:
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Net income attributable to common shareholders | $ | 3,644,186 | $ | 839,276 | ||||
| Weighted average common shares outstanding – Basic and diluted | 20,332,350 | 10,000,000 | ||||||
| Net income per share – Basic and diluted | $ | 0.18 | $ | 0.08 | ||||
| F-18 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 12. | PENSION COSTS |
The Company is required to make contribution under a defined contribution pension scheme for all of its eligible employees in Hong Kong. The Company is required to contribute a specified percentage of the participants' relevant income based on their ages and wages level. The total contributions made were $1,160 and $0 for the years ended December 31, 2020 and 2019, respectively.
| 13. | RELATED PARTY TRANSACTIONS |
Apart from the transactions and balances detailed elsewhere in these accompanying consolidated financial statements, the Company has no other significant or material related party transactions during the years presented.
| 14. | CONCENTRATIONS OF RISK |
The Company is exposed to the following concentrations of risk:
| (a) | Major customers |
For the years ended December 31, 2020 and 2019, the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at year-end dates, are presented as follows:
| Year ended December 31, 2020 | December 31, 2020 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | 3,284,657 | 55% | $ | 2,041,928 | |||||||
| Customer B | 1,448,086 | 24% | 1,352,108 | |||||||||
| Customer C | 1,183,637 | 20% | 1,088,683 | |||||||||
| Total | $ | 5,916,380 | 99% | $ | 4,482,719 | |||||||
| Year ended December 31, 2019 | December 31, 2019 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer C | $ | 316,545 | 22% | $ | 132,268 | |||||||
| Customer D | 256,555 | 18% | 139,331 | |||||||||
| Customer A | 245,067 | 17% | 169,508 | |||||||||
| Customer B | 210,604 | 15% | 94,000 | |||||||||
| Customer E | 185,077 | 13% | 105,301 | |||||||||
| Total | $ | 1,213,848 | 85% | $ | 640,408 | |||||||
All customers are located in the PRC and Hong Kong.
| F-19 |
LUDUSON G INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| (b) | Economic and political risk |
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
| (c) | Exchange rate risk |
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| 15. | COMMITMENTS AND CONTINGENCIES |
As of December 31, 2020, the Company has no material commitments or contingencies.
| 16. | SUBSEQUENT EVENTS |
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2020, up through the date the Company issued the audited consolidated financial statements. The Company determined that there are no further events to disclose.
| F-20 |
ITEM 15. Exhibits and Financial Statement Schedules.
The following documents are filed as part of this report:
| (1) | Financial Statements |
Financial Statements are included in Part II, Item 8 of this report.
| (2) | Financial Statement Schedules |
No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the financial statements or notes thereto.
| (3) | Exhibits |
| Exhibit Number | Description |
| 31.1* | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
| 31.2* | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
| 32.1* | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350* |
| 32.2* | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350* |
| 101.INS ** | XBRL Instance Document |
| 101.SCH ** | XBRL Taxonomy Extension Schema Document |
| 101.CAL ** | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF ** | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB ** | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE ** | XBRL Taxonomy Extension Presentation Linkbase Document |
_______________________
| * | Filed Herewith. |
| ** | Previously Filed. |
| 3 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized.
| LUDUSON G INC. | |||
| (Registrant) | |||
| By: | /s/Ka Leung Wong | ||
| Ka Leung Wong | |||
| Chief Executive Officer | |||
| Dated: | August 10, 2021 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Ka Leung Wong | Chief Executive Officer | |||
| Ka Leung Wong | and Director | August 10, 2021 | ||
| (Principal Executive Officer) | ||||
|
/s/ Lan Chan* Lan Chan |
Chief Financial Officer and Director (Principal Financial Officer |
August 10, 2021 |
Representing all of the members of the Board of Directors.
| * By | /s/ Ka Leung Wong | |
| Ka Leung Wong | ||
| Attorney-in-Fact | ||
| 4 |
EXHIBIT 31.1
LUDUSON
G INC.
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
RULE 13A-14(A) OR RULE 15D-14(A),
AS ADOPTED PURSUANT TO
RULE 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ka Leung Wong, certify that:
1. I have reviewed this Form 10-KA of Luduson G Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Ka Leung Wong | ||
Ka Leung Wong (Principal Executive Officer) |
Dated: August 10, 2021
EXHIBIT 31.2
LUDUSON G INC.
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
RULE 13A-14(A) OR RULE 15D-14(A),
AS ADOPTED PURSUANT TO
RULE 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lan Chan, certify that:
1. I have reviewed this Form 10-KA of Luduson G Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Lan Chan | ||
Lan Chan (Principal Financial Officer) |
Date: August 10, 2021
EXHIBIT 32.1
LUDUSON G Inc.
CERTIFICATION OF THE PRINCIPAL EXECUTIVE
OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Amendment No. 1 to the Annual Report of Luduson G Inc. (the “Company”) on Form 10-KA for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ka Leung Wong, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Ka Leung Wong | |
Ka Leung Wong (Principal Executive Officer) |
Date: August 10, 2021
EXHIBIT 32.2
LUDUSON G Inc.
CERTIFICATION OF THE PRINCIPAL FINANCIAL
OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Amendment No. 1 to the Annual Report of Luduson G Inc. (the “Company”) on Form 10-KA for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lan Chan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Lan Chan | |
Lan Chan (Principal Financial Officer) |
Date: August 10, 2021