SIPP International Industries, Inc S-1/A, filed Jun 22, 2023
SIPP International Industries, Inc. (XAKJ)
As filed with the Securities and Exchange Commission on June 22, 2023
Registration No. 333-271830
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No.1
FORM S-1/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SIPP International Industries, Inc.
(Exact name of Registrant as specified in its charter)
| Nevada | 2000 | 39-2079723 | ||
| (State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
| incorporation or organization) | Classification Code Number) | Identification No.) |
69 Waterfall Blvd, The Ponds, Sydney, NSW 2769, Australia
Tel: +86 13162253315
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Copies to:
McMurdo Law Group, LLC
1185 Avenue of the Americas, 3rd Floor
New York, NY 10036
(917) 318-2865
Approximate date of commencement of proposed sale to the public: As soon as practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 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 ☐
WE HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The information in this prospectus (this “Prospectus”) is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission (the “SEC”) is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where offers or sales are not permitted.
SUBJECT TO COMPLETION, DATED JUNE 22, 2023
SIPP International Industries, Inc.
140,000,000 Shares of Common Stock, $0.001 par value per share
This is a public offering of SIPP International Industries, Inc., a Nevada corporation (“SIPN,” or the “Company”). We are offering 140,000,000 Common Shares at $0.01 per share (the “Shares”) of SIPN, in a best effort, direct public offering, by our officers and directors for the Company and the Company’s management. There is no minimum proceeds threshold for the offering. The offering will terminate within 360 days from the date of this prospectus. The Company will retain all proceeds received from the shares sold on their account in this offering. The Company has not made any arrangements to place the proceeds in an escrow or trust account. Any proceeds received in this offering may be immediately used by the Company in its sole discretion. There are no minimum purchase requirements for each investor. All proceeds retained by the Company may not be sufficient to continue operations. Currently, the Company does not intend to register the Common Shares under Section 12(g) of the Exchange Act of 1934, as amended, at the completion of this offering.
Our Shares are not currently traded on any national securities exchange, but are quoted on the OTC Pink market, under the symbol “SIPN.”
On November 1, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), whereunder the Company acquired 100% ownership interest in CIHL from Min Jiang for the issuance of 100,000,000 shares of the Company’s common stock. CIHL through its China based subsidiaries, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (“SRAS”) is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
Investing in the Company’s Shares involves a high degree of risk. See “Risk Factors” for a detailed discussion of certain risks that you should consider in connection with an investment in our Shares.
SIPN is a holding company, which holds 100% of the equity of Chengzhao International Holdings Ltd. (“CIHL”), a BVI company, which holds 100% shares of Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd. (“SRAS”) and SIPN operates business through SRAS. Neither SIPN nor CHIL is a Chinese operating company. SIPN is a Nevada holding company which owns 100% of CIHL which operates business through SRAS in China. This involves unique risks to investors. SIPN exercise effective control over the operations of Beijing Kezhao pursuant to a series of contractual arrangements, under which SIPN is entitled to receive substantially all of its economic benefits. Please see “Risks Relating to Our Corporate Structure” starting on page 18.
SIPP International Industries, Inc is the holding company located in Nevada and controls 100% shares of Chengzhao International Holdings Ltd. (CIHL), a BVI company. This is referred to hereion as “SIPN” or “the Company.” SIPN is the entity in which shares of common stock are being offered.
Chengzhao International Holdings Ltd. (“CIHL”), a BVI company, is a holding company subsidiary of SIPN, which controls 100% shares of Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd. CIHL doesn’t conduct any business operations. It is referred to as “CIHL” herein.
Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd. (“SRAS”), is a Chinese company and a subsidiary of CIHL. SRAS is conducting business operations in China. It is referred to as “SRAS” herein.
There are legal and operational risks with having operations in China. Operational headquarters are in Chengdu, China. The legal and operational risks associated with being based in or having the majority of the Company’s operations in China could result in a material change in the value of the securities of SIPN being registered for sale or could significantly limit or completely hinder SIPN’s ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Please see the Risk Factor titled “The Company is faced with risks and uncertainties as a foreign enterprise under PRC laws” on page 18.
Recently, Beijing revamped its rules for overseas listings after ride-hailing Didi Global launched its initial public offering despite warnings from regulators. That triggered a data security investigation led by the Cyberspace Administration of China (“CAC”), which recently culminated with the firm announcing plans to delist in the US in favor of Hong Kong. This shows how recent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities and data security or anti-monopoly concerns, have or may impact the Company’s ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange.
Trading securities may be prohibited under the Holding Foreign Companies Accountable Act (“HFCAA”), as amended by the Consolidated Appropriations Act (“CAA”) of 2023. If the PCAOB determines that it cannot inspect or fully investigate SIPN’s auditor for two consecutive years, and that as a result an exchange may determine to delist your securities.
SRAS is formed and operating in the Peoples Republic of China (“Material PRC Company”) and has been duly established and is validly existing as a limited liability company under the laws of the Peoples Republic of China (“PRC Laws”), and has received all authorizations required by the Peoples Republic of China (the “Governmental Authorizations”) for its establishment to the extent such Governmental Authorizations are required under applicable PRC Laws, and its business license is in full force and effect. The Material PRC Company has the capacity and authority to own assets, to conduct business, and to sue and be sued in its own name under PRC Laws. The articles of association, business license and other constitutional documents (if any) of the Material PRC Company complies with the requirements of applicable PRC Laws and are in full force and effect. The Material PRC Company has not taken any corporate action, nor has any legal proceedings commenced against it, for its liquidation, winding up, dissolution, or bankruptcy, for the appointment of a liquidation committee, team of receivers or similar officers in respect of its assets or for any adverse suspension, withdrawal, revocation or cancellation of its business license.
All of the equity interests of the Material PRC Company are owned by Chengzhao International Holdings Ltd., a BVI company, and (ii) the Material PRC Company has obtained all Governmental Authorizations for the ownership interest owned by Chengzhao International Holdings Ltd. The equity interests of the Material PRC Company are owned by Chengzhao International Holdings Ltd free and clear of any pledge or other encumbrance under PRC Laws, and there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, any equity interest in the Material PRC Company under PRC Laws, except for such encumbrance that would not be reasonably expected to have a Material Adverse Effect. “Material Adverse Effect,” as used herein, means a material adverse effect on the assets, liabilities, properties or business of the Company.
All of the Company’s operations are conducted by SRAS, which is controlled by CIHL, and is a wholly-foreign-owned entity (“WFOE”) based in China which involves unique risks to investors. The WFOE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the operating companies. Investors may never hold equity interests in the Chinese operating company. The WFOE structure is not as stable as some have imagined. The senior management and the shareholders of the domestic company play a very important role in the WFOE structure. Once there are changes to such positions involving interests, potential risks of the WFOE structure will appear. Chinese regulatory authorities could disallow this structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless.
Investing in SIPN’s Common Stock involves a high degree of risk. See “Risk Factors” on page 13 for a detailed discussion of certain risks that you should consider in connection with an investment in our Common Stock.
The Company will settle amounts owed under the WFOE structure by transferring dividends, or distributions between the holding company and its subsidiaries and consolidated entities, or to investors, which have not yet occurred. SIPN intend to rely primarily on dividends paid by the WFOE for our cash needs for applicable agreements, and the funds necessary to pay dividends and other cash distributions, if any, to our shareholders, to service any debt we may incur and to pay our operating expenses. SIPN has made no such distributions to date and SIPN has no current cash management policies in place. SIPN will look to implement one in the near future.
There are no legal, arbitral or governmental proceedings, regulatory investigations or other governmental decisions, rulings, orders, or actions before any Governmental Agencies in progress or pending in the PRC to which the Company or any Material PRC Company is a party or to which any assets of any Material PRC Company is a subject which, if determined adversely against any of the Company and the Material PRC Company, would be reasonably expected to have a material adverse effect.
All dividends declared and payable upon the equity interests in the WFOE may be converted into foreign currency and freely transferred out of the PRC free of any deductions in the PRC, provided that (i) the declaration and payment of such dividends complies with applicable PRC Laws and the constitutional documents of the WFOE, and (ii) the remittance of such dividends out of the PRC complies with the procedures required by the relevant PRC Laws relating to foreign exchange administration.
The Company faces uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. Despite the above, based on the current structure, these risks remain immaterial, regardless of the recent statements and regulatory actions by China’s government.
Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China, which could materially and adversely affect business. General macroeconomic conditions may materially and adversely affect SRAS’ business, prospects, results of operations and financial position. The PRC government’s control over foreign currency conversion may adversely affect our business and results of operations and our ability to remit dividends. PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to SIPN’s operating subsidiary in China, which could materially and adversely affect SIPN’s liquidity and ability to fund and expand business.
Assuming no offer, issuance or sale of the Common Shares has been or will be made directly or indirectly within the PRC, a prior approval from the CSRC is not required for the Offering. However, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any Governmental Agency will not take a view that is contrary to or otherwise different from the opinions stated herein. Subject to any applicable administrative procedures required by PRC Laws, and provided that all required Governmental Authorizations have been duly obtained, the due application of the net proceeds to be received by the Company from the issue Common Shares as disclosed in the Prospectus under the caption “Use of Proceeds” does not and immediately after the Offering will not contravene any applicable PRC Laws, the articles of association or the business licenses of the Material PRC Company, except for such contravention or default which would not be reasonably expected to have a Material Adverse Effect.
There is no tax or duty payable by or on behalf of the Material PRC Company under applicable PRC Laws in connection with the creation, allotment and issuance Common Shares, provided that each person taking the aforementioned actions is not subject to PRC tax by reason of citizenship, permanent establishment, residence or otherwise subject to PRC tax imposed on or measured by net income or net profits.
Assuming no offer, issuance or sale of the Common Shares has been or will be made directly or indirectly within the PRC, it is not necessary that such documents be filed or recorded now with any Governmental Agency in the PRC.
There are no reporting obligations to any Governmental Agency under PRC Laws on those holders of Common Shares who are not deemed to be PRC residents as defined under applicable PRC Laws, to the extent that no reporting obligation is triggered by the purchase or holding of Common Shares under the PRC anti-monopoly laws, rules and regulations.
The Company currently intends to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to SIPN’s dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deem relevant, and subject to the restrictions contained in any future financing instruments.
On December 16, 2021, Public Company Accounting Oversight Board (PCAOB) issued a report on its determinations that PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The PCAOB made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfils its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA). The report further listed in its Appendix A and Appendix B, Registered Public Accounting Firms Subject to the Mainland China Determination and Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively. The audit report included in this registration statement for the year ended December 31, 2022, was issued by Shandong Haoxin Certified Accountants Co., Ltd. (“HAOXIN”), an audit firm headquartered in PRC, a jurisdiction that the PCAOB has determined that the PCAOB may be unable to conduct inspections or investigate auditors, despite a recent treaty allowing the PCAOB to review the audit papers of firms in the PRC. Our auditors HAOXIN is among those listed by the PCAOB Mainland China Determination, a determination announced by the PCAOB on December 16, 2021 that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in PRC, because of a position taken by one or more authorities in PRC. As a result, SIPN and investors in our common stock may be deprived of the benefits of such full PCAOB inspections, which could cause investors in our stock to lose confidence in our reported financial information and the quality of our financial statements. In addition, under the HFCAA, as amended by the CAA, SIPN’s securities may be prohibited from trading on the U.S. stock exchanges or in the over-the-counter trading market in the U.S. if SIPN’s auditor is not inspected by the PCAOB for two consecutive years, and this ultimately could result in SIPN’s common stock being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which amends the HFCAA and requires the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges or in the over-the-counter trading market in the U.S. if its auditor is not subject to PCAOB inspections for two consecutive years. In the future, if we do not engage an auditor that is subject to regular inspection by the PCAOB, our common stocks may be delisted. See “Risk Factors – Risks associated with doing business in China – The audit report included in this Amendment is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and as such, SIPN’s investors are deprived of the benefits of such inspection. The Company could be delisted if it is unable to timely meet the PCAOB inspection requirements established by the Holding Foreign Companies Accountable Act.”
U.S shareholders may face difficulties in effecting service of process against the Company and officers and directors, as Min Jiang is based in China at No. 1201, Floor 12, Unit 1, Building 1, No. 39, Zhiyuan Road, Wenjiang District, Chengdu, China, while Zonghan Wu is based in New Zealand, at 46 Reeves Road, Pakuranga 2010, New Zealand. Even with proper service of process, the enforcement of judgments obtained in U.S. courts or foreign courts based on the civil liability provisions of the U.S. federal securities laws would be extremely difficult. Furthermore, there would be added costs and issues with bringing an original action in foreign courts to enforce liabilities based on the U.S. federal securities laws against the Company.
The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, SIPN may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if SIPN’s subsidiary in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If SIPN or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our Shares.
Cash dividends, if any, on SIPN’s Shares will be paid in U.S. dollars. If SIPN is considered a PRC tax resident enterprise for tax purposes, any dividends paid to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.
Investing in SIPN’s Shares involves a high degree of risk. See “Risk Factors” for a detailed discussion of certain risks that you should consider in connection with an investment in our Shares. There are specific risks related to having operations in China that the Company has been organized to avoid.
The registered capital of the Material PRC Company has been duly paid in accordance with applicable PRC Laws and their respective articles of association, to the extent that such registered capital is required to be paid prior to the date hereof.
All of the Company’s business operations are conducted in China. Accordingly, business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. Although the PRC economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between the Renminbi and foreign currencies, and regulate the growth of the general or specific market. While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically and among various sectors of the economy. As the PRC economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions of major economies around the world. The various economic and policy measures enacted by the PRC government to forestall economic downturns or bolster China’s economic growth could materially affect our business. Any adverse change in the economic conditions in China, in policies of the PRC government or in laws and regulations in China could have a material adverse effect on the overall economic growth of China and market demand for our outsourcing services. Such developments could adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.
The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC government has been building a comprehensive system of laws and regulations governing economic matters in general. The overall effect has been to significantly enhance the protections afforded to various forms of foreign investments in China. We conduct our business primarily through our WFOE, the WFOE is established in China. These companies are generally subject to laws and regulations applicable to foreign investment in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to SIPN. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract.
Min Jiang, Chief Executive Officer, owns 63.3% of the voting interest of the Company. Following the offering, Min Jiang will still hold a majority of the interest of the Company. As a result, this shareholder will be able to exercise control over virtually all matters requiring shareholder approval, including the election of directors and approval of significant corporation transactions. Thus, the individual who makes up the present management will be able to maintain her position as Director and Chief Executive Officer and effectively operate the Company’s business, regardless of other investors’ preferences.
An investment in our securities is highly speculative, involves a high degree of risk and should be considered only by persons who can afford the loss of their entire investments. See “Risk Factors” beginning on page 13 of this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated , 2023
You should rely only on information contained in this prospectus. We have not authorized anyone to provide you with additional information or information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful or in any state or other jurisdiction where the offer is not permitted.
For investors outside the United States: We have not taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities covered hereby and the distribution of this prospectus outside of the United States.
The information in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.
No person is authorized in connection with this prospectus to give any information or to make any representations about us, the securities offered hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.
We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.
Until July 3, 2023, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
i
This summary highlights information that we present more fully elsewhere in this prospectus. This summary does not contain all of the information that you might wish to consider before buying Common Shares in this offering. You should read the entire prospectus carefully, including “Risk Factors” and the financial statements and accompanying notes.
Corporate History
SIPP International Industries, Inc. (the “Company”) is a Nevada Corporation formed on January 10, 1991. The Company’s year ends March 31 and it has never been in bankruptcy, receivership, or any similar proceedings. The Company was in the business of overseeing the development of several product lines, encompassing a Food & Beverage Division, a High-Tech Storage Transport Container Division, and a Hospitality Division. The Company ceased operations in 2014. The Company was a shell company from 2014 through November 1, 2022, and presumably from 2004 through 2011 when it was dormant.
From 2014 to 2017, the prior management of the Company issued approximately 430,000,000 shares. An Aggregate of 260,000,000 shares were issued to Chan Ku EE and Yung Kong Chin in 2017, presumably pursuant to Regulation S. An aggregate of 42,000,000 shares were issued to Gary Adwar, Paul Anema, Trudy Anema, and Thomas Boyd, presumably for services rendered and in accordance with Section 4(a)(2) of the Securities Act.
On July 11, 2019, Custodian Ventures LLC, applied for appointment as Custodian of SIPP International Industries, Inc. with the eighth judicial District Court of Nevada.
On August 28, 2019, the eighth judicial District Court of Nevada appointed Custodian Ventures LLC as custodian for SIPP International Industries, Inc., proper notice having been given to the officers and directors of SIPP International Industries, Inc. There was no opposition.
On August 29, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On November 26, 2020, Custodian Ventures LLC entered into a stock purchase agreement whereby it transferred 10,000,000 shares of Preferred Stock to Kris Tabetando and Hemingway Investments LLC in exchange for $152,000 in cash. Kris Tabetando acquired 2,500,000 Preferred A Shares from Custodian Ventures LLC. Hemingway Investments LLC controlled by Issac Qureshi acquired 7,500,000 Preferred A Shares from Custodian Ventures LLC. As a result of the sale, and the resignation of David Lazar as sole officer and director of the Company, there was a change of control of the Company. Kris Tabetando was appointed CEO and director of the Company. There is no family relationship or other relationship between the Seller and the Purchasers.
On Nov 16, 2021, the company issued 248,101,224 shares of common stock to Kris Tabentando to repay loans advanced to the company.
On August 30, 2022 Chenxu International Investment Holding Group Limited (“Chenxu”), a BVI company purchased 248,101,224 shares of common stock and 10,000,000 shares of Series A Preferred Sock for $225,000. Subsequent to the purchase of these shares which represented controlling interest of the Company, Chenxu converted the 10,000,000 Series A Preferred Shares into 500,000,000 million shares of common stock.
On November 1, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), whereunder the Company acquired 100% ownership interest in CIHL from Min Jiang for the issuance of 100,000,000 shares of the Company’s common stock. CIHL through its China based subsidiaries, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
1
As a result of the above transaction, the Company’s corporate structure which is set forth as follows:
On August 26, 2021, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (“SRAS”) was incorporated pursuant to the PRC law.
On September 27, 2022, we established a holding company, Chengzhao International Holdings Ltd. (CIHL), under the laws of the British Virgin Islands (BVI).
On September 27, 2022, CIHL acquired 100% ownership interest in SRAS. SRAS becomes a wholly foreign owned enterprise pursuant to the PRC law.
On November 11, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), whereunder the Company acquired 100% ownership interest in CIHL from Min Jiang for the issuance of 100,000,000 shares of the Company’s common stock. CIHL through its China based subsidiaries, SRAS is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
Min Jiang, Chief Executive Officer, owns 63.3% of the voting interest of the Company. Following the offering, Min Jiang will still hold a majority of the interest of the Company. As a result, this shareholder will be able to exercise control over virtually all matters requiring shareholder approval, including the election of directors and approval of significant corporation transactions. Thus, the individual who makes up the present management will be able to maintain his position as Director and Chief Executive Officer and effectively operate the Company’s business, regardless of other investors’ preferences.
The Company faces many risk factors by having its operations in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. Although the PRC economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between the Renminbi and foreign currencies, and regulate the growth of the general or specific market. While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically and among various sectors of the economy. As the PRC economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions of major economies around the world. The various economic and policy measures enacted by the PRC government to forestall economic downturns or bolster China’s economic growth could materially affect our business. Any adverse change in the economic conditions in China, in policies of the PRC government or in laws and regulations in China could have a material adverse effect on the overall economic growth of China and market demand for our outsourcing services. Such developments could adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.
2
The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC government has been building a comprehensive system of laws and regulations governing economic matters in general. The overall effect has been to significantly enhance the protections afforded to various forms of foreign investments in China. We conduct our business primarily through our WFOE, the VIE and its subsidiaries established in China. These companies are generally subject to laws and regulations applicable to foreign investment in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract.
We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. Despite the above, based on our current structure, these risks remain immaterial, regardless of the recent statements and regulatory actions by China’s government.
Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China, which could materially and adversely affect our business. General macroeconomic conditions may materially and adversely affect our business, prospects, results of operations and financial position. The PRC government’s control over foreign currency conversion may adversely affect our business and results of operations and our ability to remit dividends. PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiary in China, which could materially and adversely affect our operations and/or our liquidity and our ability to fund and expand business.
Any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
Business Overview
Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (“SRAS”) is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides full link solutions for family food, and focuses on the consumption, sales and experience of the c-end consumer market. Through close cooperation with the central kitchen (prefabricated vegetable factory), SRAS has made use of the advantages of the central kitchen in source procurement of traceable raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. Through the perfect combination with the central kitchen, cold chain logistics system and robot chain restaurants, SRAS has created a closed loop of prefabricated vegetable business ecology from the upstream central kitchen to the downstream chain restaurants and consumers.
3
Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among our WFOE and the shareholders of the WFOE do not represent arm’s-length prices and consequently adjust WFOE’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by the WFOE, which could in turn increase its tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties on WFOE for any unpaid taxes. Our consolidated net income may be materially and adversely affected if WFOE’s tax liabilities increase or if they are subject to late payment fees or other penalties.
WFOE is required to bear the losses of SRAS, thus our liquidity may be adversely affected, which could harm our financial condition and results of operations.
We face uncertainties as to whether market clearance is required, and, if required, whether we can timely obtain such clearance, or at all. If we are not able to obtain such clearance when required, our structure may be regarded as invalid or illegal. As a result, we would not be able to (i) exert control over SRAS, and (ii) receive the economic benefits of SRAS or consolidate the financial results of SRAS and its subsidiaries. Were this to occur, our results of operations and financial condition would be materially and adversely affected.
The payment of dividends out of China by entities organized in the PRC is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. WFOE is also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its compulsory reserves fund until the accumulative amount of such reserves reaches 50% of its registered capital.
The transfer to this reserve must be made before distribution of any dividend to shareholders. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.
Cash dividends, if any, on our Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%.
There is no assurance that the PRC government will not intervene or impose restrictions on your ability to do so. Please see the condensed consolidating schedule starting on page F-1 hereto.
Any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
The Company will settle amounts owed under the WFOE structure by transferring dividends, or distributions between the holding company and its subsidiaries and consolidated entities, or to investors, which have not yet occurred. We intend to rely primarily on dividends paid by the WFOE for our cash needs for applicable agreements, and the funds necessary to pay dividends and other cash distributions, if any, to our shareholders, to service any debt we may incur and to pay our operating expenses. We have made no such distributions to date and we have no current cash management policies in place. We will look to implement one in the near future.
All dividends declared and payable upon the equity interests in the WFOE may be converted into foreign currency and freely transferred out of the PRC free of any deductions in the PRC, provided that (i) the declaration and payment of such dividends complies with applicable PRC Laws and the constitutional documents of the WFOE, and (ii) the remittance of such dividends out of the PRC complies with the procedures required by the relevant PRC Laws relating to foreign exchange administration.
4
We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. Despite the above, based on our current structure, these risks remain immaterial, regardless of the recent statements and regulatory actions by China’s government.
Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China, which could materially and adversely affect our business. General macroeconomic conditions may materially and adversely affect our business, prospects, results of operations and financial position. The PRC government’s control over foreign currency conversion may adversely affect our business and results of operations and our ability to remit dividends. PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiary in China, which could materially and adversely affect our liquidity and our ability to fund and expand business.
Assuming no offer, issuance or sale of the Common Shares has been or will be made directly or indirectly within the PRC, a prior approval from the CSRC is not required for the Offering. However, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any Governmental Agency will not take a view that is contrary to or otherwise different from our opinions stated herein. Subject to any applicable administrative procedures required by PRC Laws, and provided that all required Governmental Authorizations have been duly obtained, the due application of the net proceeds to be received by the Company from the issue Common Shares as disclosed in the Prospectus under the caption “Use of Proceeds” does not and immediately after the Offering will not contravene any applicable PRC Laws, the articles of association or the business licenses of the Material PRC Company, except for such contravention or default which would not be reasonably expected to have a Material Adverse Effect.
There is no tax or duty payable by or on behalf of the Material PRC Company under applicable PRC Laws in connection with the creation, allotment and issuance Common Shares, provided that each person taking the aforementioned actions is not subject to PRC tax by reason of citizenship, permanent establishment, residence or otherwise subject to PRC tax imposed on or measured by net income or net profits.
Assuming no offer, issuance or sale of the Common Shares has been or will be made directly or indirectly within the PRC, it is not necessary that such documents be filed or recorded now with any Governmental Agency in the PRC.
There are no reporting obligations to any Governmental Agency under PRC Laws on those holders of Common Shares who are not deemed to be PRC residents as defined under applicable PRC Laws, to the extent that no reporting obligation is triggered by the purchase or holding of Common Shares under the PRC anti-monopoly laws, rules and regulations.
We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deem relevant, and subject to the restrictions contained in any future financing instruments.
Trading securities may be prohibited under the HFCAA, as amended by the CAA. If the PCAOB determines that it cannot inspect or fully investigate our auditor for two consecutive years, and that as a result an exchange may determine to delist your securities.
Recent events, such as Beijing revamping its rules for overseas listings after ride-hailing Didi Global launched its initial public offering, triggering a data security investigation led by the CAC, which caused Didi Global to delist in the US in favor of Hong Kong, shows how recent statements and regulatory actions by China’s government, such as those related to the use of variable interest entities and data security or anti-monopoly concerns, have or may impact the Company’s ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange. This oversight by the CAC could also impact the Company’s ability to offer securities to investors in the U.S. or elsewhere. While we believe we are compliant with the policies of the CAC regarding data security, our reliance on robot restaurants and traceable source procurement could cause the CAC to launch an investigation into out business and cause us to end our quotation on OTC Markets.
5
Competitive Strengths
We believe that the following strengths enable us to capture opportunities in the industry in China and differentiate us from our competitors:
Central kitchen’s prefabricated vegetable supply chain: The central kitchen has made use of the advantages of traceable source procurement of raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. One person has a thousand tastes, and one person has a thousand tastes. At the same time, it strictly abides by the regulations of the Market Supervision Administration and various departments, controls all levels of production, and achieves pollution-free, clean, transparent workshops, The product is green and healthy without any addition. SRAS through close cooperation with the central kitchen (prefabricated dishes factory), the use of the central kitchen of raw materials traceable source procurement advantages, the advantages of R & D of dishes, production standardization advantages, strict product quality control advantages, high efficiency production advantages, to achieve the standardization of Chinese dishes, one person a thousand tastes, a thousand people a taste.
“Traceable source procurement” refers to the practice of ensuring transparency and accountability in the process of procuring raw materials. It means that SRAS takes steps to trace and track the origin and quality of the ingredients it uses in its food production.
In order to achieve traceable source procurement, SRAS implements several measures:
1. Establish supplier relationships: SRAS establishes direct relationships with suppliers and engage in ongoing communication and collaboration. This allows SRAS to gain detailed information about the sourcing practices, cultivation methods, and quality control measures followed by the suppliers.
2. Verification and certification: SRAS requires suppliers to provide documentation and certifications that validate the origin and quality of the raw materials. This includes certificates of authenticity, quality assurance, organic certifications, or any other relevant documentation.
3. Supply chain transparency: SRAS works closely with suppliers to ensure transparency in the entire supply chain. This involves tracking the movement of ingredients from the source to the central kitchen, maintaining records of each step, and ensuring that all suppliers in the chain adhere to the same standards and practices.
4. Quality control measures: SRAS implements rigorous quality control measures at each stage of the procurement process. This includes regular inspections, sample testing, and adherence to strict quality standards to ensure that the raw materials meet the required criteria.
By implementing these measures, SRAS can achieve traceable source procurement, gaining confidence in the origin, quality, and safety of the ingredients it uses in its food production. This not only allows it to provide assurance to customers but also enables it to maintain high standards of product quality and safety throughout its operations.
SRAS through close cooperation with professional brand operation and management company, through the brand management company to establish the development and expansion of prefabricated dishes application scenario robot restaurant chain, restaurant chain using the perfect combination of technology and intelligent robot stir-fry machine and prefabricated dishes to complete a key stir-fry, no chef, effectively reducing the cost and efficiency of restaurant operations and enhance the profitability of the restaurant. At the same time in the restaurant supporting intelligent unmanned cabinet, to ensure the storage of pre-made dishes and more convenient and intuitive so that consumers can pay by brushing their faces, directly select the dishes they need, through the robot sweep code, complete a key stir-fry, 3-5 minutes can be out of the pot on the dishes. At the same time through the consumption of the restaurant, experience, to build our customer base, customers can also directly through the intelligent lifeless super cabinet, buy away the pre-made dishes they need to take home for cooking.
6
SRAS through the perfect combination with the central kitchen and cold chain logistics system and robot restaurant chain, to create a pre-made dishes from the upstream central kitchen to the downstream restaurant chain, to the consumer business ecological closed loop.
“Consumer business ecological closed loop” refers to an integrated and self-contained ecosystem that encompasses the entire process from the production of pre-made dishes to the consumption by customers, creating a seamless and interconnected system.
To achieve a consumer business ecological closed loop, SRAS implements several strategies:
1. Integration of the central kitchen, robot restaurant chain, and cold chain logistics: SRAS ensures smooth coordination and collaboration between these components. The central kitchen serves as the source of pre-made dishes, which are then distributed through the cold chain logistics system to the robot restaurant chain. This integration ensures a continuous supply of high-quality dishes from the central kitchen to the restaurants, enabling efficient operations and consistent customer experience.
2. Technology-enabled automation: SRAS leverages technology and automation in the robot restaurant chain to streamline operations and enhance efficiency. By using intelligent robot stir-fry machines, customers can experience quick and automated stir-fry preparation without the need for a chef. The integration of technology, such as robot sweep codes, enables a seamless and convenient experience for customers to select dishes and complete transactions.
3. Customer engagement and experience: SRAS focuses on providing a positive dining experience for customers. By emphasizing standardization, product quality control, and efficient production, SRAS aims to offer a wide variety of standardized Chinese dishes, catering to diverse tastes. Through the integration of technology, customers can also purchase pre-made dishes for cooking at home, expanding the customer base and enhancing convenience.
By implementing these strategies, SRAS aims to create a closed loop where pre-made dishes flow seamlessly from the central kitchen to the robot restaurant chain and ultimately to the customers. This closed loop ecosystem ensures efficient operations, consistent quality, and a satisfying experience for customers, reinforcing SRAS’s competitive strengths and enhancing profitability.
Growth Plan
In 2023, we plan to add more than 30 robot chain restaurants to our customer list in Chengdu, most of them will be put into operation, others are in preparation for site selection and decoration. While the robot chain restaurants will remain owned by the individual owners, SRAS will utilize its supply chain and central kitchen to manufacture and supply the prefabricated food to these restaurants.
In 2024, SRAS will focus on completing the layout of robot chain restaurants in East China market and South China market, 20 robot chain restaurants will be joined in Shanghai, Hangzhou, Guangzhou, Shenzhen and other central cities in 2024.
In 2025, SRAS will focus on completing the layout of the central and northern China markets, and 50 robot chain restaurants will be joined in Beijing, Wuhan, Tianjin, Zhengzhou, Changsha and other cities.
In 2023 - 2025, the overall new robot chain restaurants scale in the country could reach 100 restaurants. Around the key markets, we will adopt various cooperation methods with the local central kitchen of prepared dishes to establish the supply system of prepared dishes in the local market, improve the operation efficiency and reduce the product cost.
In order to fully implement the above growth plan comfortably, we would require approximately $1,270,000 from this offering. If we can’t raise such funds, the Company’s officers and directors will fund the additional amount.
7
Our Services
Central kitchen prefabricated dish supply chain
Central kitchen’s prefabricated vegetable supply chain: The central kitchen has made use of the advantages of traceable source procurement of raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. One person has a thousand tastes, and one person has a thousand tastes. At the same time, it strictly abides by the regulations of the Market Supervision Administration and various departments, controls all levels of production, and achieves pollution-free, clean, transparent workshops, The product is green and healthy without any addition.
Intelligent robot restaurant
Chain restaurants use the perfect combination of scientific and technological intelligent robot cooking machine and prefabricated dishes to complete one click cooking without the need for a chef, effectively reducing the cost and efficiency of restaurant operations, and improving the profitability of the restaurant. At the same time, the restaurant is equipped with an intelligent unmanned cabinet to ensure the storage of prefabricated dishes. At the same time, consumers can also directly select the dishes they need by brushing their faces to pay. The robot scans the code to finish one click cooking, and the dishes can be served in 3-5 minutes. At the same time, through the consumption and experience of the restaurant, we can establish our customer group. Customers can also directly buy their own pre prepared dishes to take home for cooking through the Smart Life Super Counter.
Marketing
The following marketing plan outlines the strategies that will be used to achieve the company’s marketing objectives and increase brand awareness.
Website Optimization:
The company’s website will be optimized to ensure that it is user-friendly, mobile-responsive, and easy to navigate. The website will also feature a blog section where the company can share useful content about its products, industry news, and food-related topics. Additionally, the website will have a “Contact Us” page that features a form for potential customers to submit inquiries or schedule a consultation with the company’s sales team.
Content Marketing:
The company will develop a content marketing strategy that includes blog posts, infographics, and case studies. The content will focus on educating potential customers about the benefits of prefabricated food, the company’s production processes, and its commitment to quality control. The content will be optimized for search engines and shared on social media platforms to reach a wider audience.
Social Media Marketing:
The company will establish a presence on popular social media platforms in China, such as WeChat, Weibo, and Douyin. The company will create social media content that is engaging, informative, and visually appealing. The social media strategy will include running paid ads to target potential customers who are interested in healthy and traceable food products.
8
Email Marketing:
The company will build an email list of potential and existing customers who have shown interest in its products. The company will send out regular email newsletters that highlight new product releases, promotions, and exclusive discounts. The company will also use email marketing to nurture leads and keep customers engaged.
Events:
The company will participate in relevant food-related events in Sichuan province to showcase its products and establish relationships with potential customers. The company will also host its events, such as cooking workshops or food tastings, to educate potential customers about its products and services.
Referral Marketing:
The company will create a referral program that rewards existing customers who refer new business to the company. The program will include incentives such as discounts on future purchases, free products, or exclusive offers. The referral program will help the company tap into the power of word-of-mouth marketing and generate new leads.
Influencer Marketing:
The company will partner with influencers in the food and health industry to promote its products to a wider audience. The influencers will create content featuring the Company’s products and share it.
Competition
As a prefabricated food supply chain company, SRAS will face competition from other similar companies in the market. Some of the main competitors include:
Haidilao: A Chinese hot pot chain that has expanded into the prefabricated food market with its own central kitchen and delivery service.
Meicai: A Chinese fresh produce sourcing and distribution company that has recently entered the prefabricated food market, offering a variety of ready-to-cook meals.
Joyvio: A Chinese agricultural technology company that has invested in the prefabricated food market, focusing on developing innovative food products.
Panda Selected: A Chinese e-commerce platform that offers a variety of high-quality food products, including prefabricated meals, sourced directly from farmers.
Dingdong Maicai: A Chinese online grocery platform that has recently entered the prefabricated food market, offering a wide range of ready-to-cook meals.
These companies are well-established in the market and have their own strengths and advantages. However, SRAS has an advantage in its focus on standardization of Chinese food, as well as its closed loop system that provides a seamless supply chain from the central kitchen to chain restaurants and consumers. By continuing to emphasize these advantages and differentiating itself from competitors, SRAS can position itself as a leading player in the prefabricated food market.
9
| Common Shares offered | 140,000,000 Common Shares, $0.001 par value per share. | |
| Common Shares Outstanding before this Offering | 1,340,506,117 shares | |
| Common Shares to be Outstanding after this Offering | 1,480,506,117 shares | |
| Use of Proceeds; | While there is no minimum number of shares that will be sold in this offering, if we were to sell the entire number of shares registered, we estimate that our net proceeds from this offering will be approximately $1,200,000, based on an initial public offering price of $0.01 per share, after deducting estimated offering expenses. We plan to use the net proceeds of this offering primarily for general corporate purposes, which may include hiring additional sales, marketing and management personnel, and investing in sales and marketing activities, capital expenditures, and other general and administrative matters. | |
| See Use of Proceeds. | ||
| Minimum number of shares to be sold in this offering. | None. | |
| Market for the shares | There is a limited public market for the shares. The shares trade on the OTC Pink Markets under the symbol “SIPN.” | |
| Risk Factors | Investing in these securities involves a high degree of risk. You should be able to bear a complete loss of your investment and should carefully consider the information set forth in Risk Factors before deciding to invest in our common shares. While we face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies, based on our current structure, these risks remain immaterial, regardless of the recent statements and regulatory actions by China’s government. | |
| Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China, which could materially and adversely affect our business. General macroeconomic conditions may materially and adversely affect our business, prospects, results of operations and financial position. The PRC government’s control over foreign currency conversion may adversely affect our business and results of operations and our ability to remit dividends. PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiary in China, which could materially and adversely affect our liquidity and our ability to fund and expand business. |
10
| The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions. Under the Enterprise Income Tax Law, we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment. The M&A Rules, among other things, purport to require CSRC approval prior to the listing and trading on an overseas stock exchange of the securities of an offshore special purpose vehicle established or controlled directly or indirectly by the Material PRC Company or individuals and formed for the purpose of overseas listing through the acquisition of PRC domestic interests held by such Material PRC Company or individuals. | ||
| Based on our understanding of the explicit provisions under PRC Laws, and assuming no offer, issuance or sale of the Common Shares has been or will be made directly or indirectly within the PRC, a prior approval from the CSRC is not required for the Offering. However, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any Governmental Agency will not take a view that is contrary to or otherwise different from our opinions stated herein. Subject to any applicable administrative procedures required by PRC Laws, and provided that all required Governmental Authorizations have been duly obtained, the due application of the net proceeds to be received by the Company from the issue Common Shares as disclosed in the Prospectus under the caption “Use of Proceeds” does not and immediately after the Offering will not contravene any applicable PRC Laws, the articles of association or the business licenses of the Material PRC Company, except for such contravention or default which would not be reasonably expected to have a Material Adverse Effect. | ||
| The Company or our subsidiaries are required to obtain from Chinese authorities to operate our business and to offer the securities being registered to foreign investors. The Material PRC Company has obtained all material Governmental Authorizations necessary for its business operations as described in the Prospectus, and such Governmental Authorizations are in full force and effect and all required Governmental Authorizations have been duly obtained. | ||
| The due application of the net proceeds to be received by the Company from the issue of Common Shares as disclosed in the Prospectus under the caption ‘Use of Proceeds’ does not, and immediately after the Offering, will not impact any applicable PRC Laws. | ||
| Our WFOE takes invoices settles the Foreign Exchange with the banks, which pay in Renminbi. No transfer, dividend or distribution has been made to the holding company up to now. | ||
| Earning Distributions | ||
| We rely primarily on dividends paid by WFOE for our cash needs, including the funds necessary to pay dividends and other cash distributions, if any, to our shareholders, to service any debt we may incur and to pay our operating expenses. The Company settles amounts by transferring dividends, or distributions between the holding company and its subsidiaries, or to investors, which have not yet occurred between any of the above. The payment of dividends by entities organized in the PRC is subject to limitations as described herein. If we determine to pay dividends on any of our Common Shares in the future, as a holding company, we will be dependent on receipt of funds from WFOE. |
11
| Our revenue, net income and cash flow are variable. We may experience fluctuations in our results, including our revenue and net income, from period to period, due to a number of other factors, including changes in management fees as well as changes in the amount of distributions, dividends, or interest paid in respect of investments; changes in our operating expenses; or the degree to which we encounter competition and general economic and market conditions. Such variability in the timing and amount of our accruals and management fees may lead to volatility in the trading price of our shares, and, therefore, our results and cash flow for a particular period may not be indicative of our performance in a future period. | ||
| The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our Shares. | ||
| Pursuant to the Implementation Rules for the new Chinese enterprise income tax law, effective on January 1, 2008, dividends payable by a foreign investment entity to its foreign investors are subject to a withholding tax of up to 10%. Pursuant to Article 10 of the Arrangement Between the Mainland of China and the Hong Kong Special Administration Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income effective December 8, 2006, dividends payable by a foreign investment entity to its Hong Kong investor who owns 25% or more of the equity of the foreign investment entity is subject to a withholding tax of up to 5%. | ||
| The payment of dividends by entities organized in the PRC is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. WFOE is also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its compulsory reserves fund until the accumulative amount of such reserves reaches 50% of its registered capital. | ||
| The transfer to this reserve must be made before distribution of any dividend to shareholders. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital. | ||
| Cash dividends, if any, on our Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%. |
12
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information contained in this report before deciding to invest in our common stock.
Risks Related to our Business
Adverse economic and market conditions could negatively impact our business in many ways, including by reducing the value or performance of the investments made by our investment funds or reducing the ability of our investment funds to raise or deploy capital, or by impacting our liquidity position, any of which could materially reduce our revenue and cash flow and adversely affect our financial condition.
Our business may be materially affected by unfavorable economic or market conditions or events in the world, particularly in China, that are outside of our control, including but not limited to changes in interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates and controls and national, and international political circumstances (including wars, terrorist acts or security operations). These factors may affect the level and volatility of securities prices and the liquidity and the values of investments, and we may not be able to or may choose not to manage our business’s exposure to these market conditions and/or other events.
In addition, decreased business and investor confidence, as well as diminished liquidity and credit availability in the financial markets, may impact our ability to secure sufficient capital for our business within the required time frame. These and other factors could adversely affect the timing of new business development or our ability to raise new funds or secure future cash flow. During periods of difficult market conditions or slowdowns (which may be across one or more industries or geographies), our companies may experience adverse operating performance, decreased revenues, financial losses, difficulty in obtaining access to financing and increased funding costs. Negative financial results in our companies may result in lower investment returns, which could materially and adversely affect our operating results and cash flow. During such periods of weakness, our companies may also have difficulty expanding their businesses and operations or meeting their debt service obligations or other expenses as they become due, including expenses payable to us. Furthermore, such negative market conditions could potentially result in a company’s becoming bankrupt, thereby potentially resulting in a complete loss in such portfolio company or real assets and a significant negative impact on our operating results and cash flow, as well as our reputation.
Such event could cause our cash flow from operations to significantly decrease, which could materially and adversely affect our liquidity position and the amount of cash we have on hand to conduct our operations. Having less cash on hand could in turn require us to rely on other sources of cash (such as the capital markets which may not be available to us on acceptable terms) to finance our operations. Furthermore, continued weak market conditions and further adverse trends in the general economic environment may limit our ability to obtain credit facilities when needed or other financing on commercially reasonable terms. As a result, our uses of cash may exceed our sources of cash, thereby potentially affecting our financial situation.
We may be affected by adverse changes in taxation law, tax treaties and in the practice of tax authorities.
Changes in taxation legislation, tax treaties and in the practice of tax authorities can affect investment behavior which can have the effect of making specific kinds of investment products either more or less attractive to existing or potential clients.
We cannot predict the impact of future changes to tax legislation, tax treaties and the practice of tax authorities on our business or on the attractiveness of our investment products. Amendments to existing tax legislation (in particular if there is a withdrawal of any available tax relief or an increase in tax rates) and tax treaties or the introduction of new rules and new tax treaties or changes in the practice of tax authorities may affect the investment decisions of either existing or potential clients. Changes from time to time in the interpretation of existing tax laws, amendments to existing tax rates, the introduction of new tax legislation and tax treaties, a change in the interpretation of tax legislation, any change in the practice of enforcement of such legislation or any particular change in our tax treatment or our funds could have a material adverse effect on our business, growth prospects, net inflows of AUM, fee income, results of operations and/or financial condition.
13
Operational risks may disrupt our businesses, result in losses, or limit our growth.
If any of our financial, accounting, information and other data processing systems do not operate properly or are disabled, whether as a result of tampering, a breach of our network security systems, or otherwise, we could suffer financial losses, a disruption of our businesses, liability to our funds, regulatory intervention, or reputational damage. In addition, we operate in businesses that are highly dependent on information systems and technology. Our information systems and technology may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on us.
Furthermore, we depend on our headquarters in the PRC, where most of our administrative and operations personnel are located, for the continued operation of our business. A disaster or a disruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, could have a material adverse impact on our ability to continue to operate our business without interruption.
Sustaining our growth will also require us to commit additional management, operational, and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. Due to the competitiveness of the market for talented professionals, we may not be able to grow at the pace we desire.
If we are unable to implement and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected. In addition, because of our status as a smaller reporting company, you will not be able to depend on any attestation from our independent registered public accounting firm as to our internal control over financial reporting for the foreseeable future.
When we become a reporting company, the Sarbanes-Oxley Act requires, among other things, that we assess disclosure controls and procedures and internal control over financial reporting. In particular, as a public company, we will be required to perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. We will be required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of this offering. However, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an “smaller reporting company” as defined in the JOBS Act. Accordingly, you will not be able to depend on any attestation concerning our internal control over financial reporting from our independent registered public accounting firm for the foreseeable future.
Our senior management lacks experience in managing a public company and complying with laws applicable to operating as a U.S. public company domiciled in the Nevada, and failure to comply with such obligations could have a material adverse effect on our business.
Prior to the completion of this offering, SRAS has been operated as a private company located in China. In connection with this offering, we acquired our company, SIPN, and Chengzhao International Holdings Ltd (BVI Company), and SRAS, our subsidiary in China. In the process of taking these steps to prepare our company for this initial public offering, senior management of SRAS became the senior management of our company. None of senior management of our company has experience managing a public company or managing a Nevada company.
As a result of this offering, our company will become subject to laws, regulations and obligations that do not currently apply to it, such as the Exchange Act of 1934, and our senior management currently has no experience in complying with such laws, regulations and obligations. The senior management is only experienced in operating the business of SRAS in compliance with PRC laws. However, by virtue of this offering, our company will be required to file annual and current reports with the SEC in compliance with U.S. securities and other laws. These obligations can be burdensome and complicated, and failure to comply with such obligations could have a material adverse effect on our company.
14
The Public Company Accounting Oversight Board (PCAOB) issued a report on its determinations that the Board is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The Board made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfils its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA).
To protect investors and to carry out the PCAOB’s mandate, our inspectors and investigators need consistent access across all jurisdictions to the audit work performed for public companies in U.S. capital markets. Rule 6100 sets forth three factors that together reflect the access the PCAOB needs to completely execute its statutory mandate with respect to its inspections and investigations. The PCAOB’s determination report provides the PCAOB’s assessment of these factors based on positions taken by PRC authorities. As discussed in the report, PRC authorities assert that access by the Board to audit work papers and related information can be provided only under a cooperative agreement, but they persistently have taken positions that prevent the finalization of, or their full performance under, such agreements.
The PCAOB has issued its determination report to the U.S. Securities and Exchange Commission, which also has responsibilities under the HFCAA. The appendices to the report identify the PCAOB-registered firms subject to the determinations. Under Rule 6100, the Board will reassess its determinations at least annually.
We may not be able to obtain additional funding to meet our requirements.
Our ability to maintain and expand our development and production of feature restaurants to cover our general and administrative expenses depends upon our ability to obtain financing through equity financing, debt financing (including credit facilities) or the sale or syndication of some or all of our interests in certain projects or other assets. If our access to existing credit facilities is not available, and if other funding does not become available, there could be a material adverse effect on our business.
Our success depends on our personnel. Loss of key personnel may adversely affect our business.
Our success depends to a significant extent on the performance of our management personnel. In particular, we will depend on the services of such personnel as Min Jiang, President, CEO, and Treasurer, and Zonghan Wu, Secretary. The loss of the services of key persons could have a material adverse effect on the Company’s business, operating results and financial condition. We will also be dependent on the officers and directors of SIPN to raise capital.
We may not be able to compete with larger companies, the majority of whom have greater resources and experience than we do.
We are very small and unproven entity as compared to our competitors. As a restaurant brand operation and management company, we will compete with major restaurant related companies. Most of them are part of large diversified corporate groups with a variety of other operations, including the restaurants themselves, that can provide both the means of promoting their services and stable sources of earnings that may allow them better to offset fluctuations in the financial performance of their brand operation and management. In addition, the major brand operation and management companies have more resources with which to compete for ideas, clients and technology created by third parties as well as for restaurants and chefs. This may have a material adverse effect on our business, results of operations and financial condition.
Our operating results depend on product costs, public tastes and promotion success.
We expect to generate our future revenue from brand operation and management services. Our future revenues will depend upon the timing and the level of market acceptance of our services, as well as upon our fees. The revenues derived from our services depend primarily on the acceptance by the public, which cannot be predicted and does not necessarily bear a direct correlation to the services provided.
15
Our business could be adversely impacted if we are unable to protect our intellectual property rights.
Our ability to compete depends, in part, upon successful protection of our intellectual property. We do not have the financial resources to protect our rights to the same extent as major brand operation and management companies. We will attempt to protect proprietary and intellectual property rights to our production through available copyright and trademark laws and licensing and distribution arrangements with reputable international companies in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain countries. As a result, it may be possible for unauthorized third parties to copy and distribute our productions or certain portions or applications of our intended productions, which could have a material adverse effect on our business, results of operations and financial condition.
Litigation may also be necessary in the future to enforce our intellectual property rights, to protect our rights, or to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and the diversion of resources and could have a material adverse effect on our business, results of operations and financial condition. We cannot assure you that infringement or invalidity claims will not materially adversely affect our business, results of operations and financial condition. Regardless of the validity or the success of the assertion of these claims, we could incur significant costs and diversion of resources in enforcing our intellectual property rights or in defending against such claims, which could have a material adverse effect on our business, results of operations and financial condition.
If we fail to maintain effective internal controls over financial reporting, we may be subject to litigation and/or costly remediation and the price of our Common Stock may be adversely affected.
Failure to establish the required internal controls or procedures over financial reporting, or any failure of those controls or procedures once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Upon review of the required internal control over financial reporting and disclosure controls and procedures, our management and/or our auditors may identify material weaknesses and/or significant deficiencies that need to be addressed. Any actual or perceived weaknesses or conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of its internal control over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal control over financial reporting could adversely impact the price of our Common Stock and may lead to claims against us.
Global economic conditions, such as COVID-19, may adversely affect our industry, business and results of operations.
Our overall performance depends, in part, on worldwide economic conditions which historically is cyclical in character. Key international economies continue to be impacted by a recession, characterized by falling demand for a variety of goods and services, restricted credit, going concern threats to financial institutions, major multinational companies and medium and small businesses, poor liquidity, declining asset values, reduced corporate profitability, extreme volatility in credit, equity and foreign exchange markets and bankruptcies. By way of example, the automotive aftermarket, specifically fuel saving add-ons such as light-truck tonneau covers, is typically not as affected by economic slow-down or recession as other industries or market segments. In markets where our sales occur and go into recession, these conditions affect the rate of spending and could adversely affect our customers’ ability or willingness to purchase our products, and delay prospective customers’ purchasing decisions, all of which could adversely affect our operating results. In addition, in a weakened economy, companies that have competing products may reduce prices which could also reduce our average selling prices and harm our operating results.
Restaurants, like many other non-essential spending, has been hampered by COVID-19.
Due to the impact of COVID-19 around the world, the Company’s revenue was less than expected as governments around the world entered a lockdown to prevent the spread of COVID-19. Increased current unemployment and loss of income could cause our customers to spend their money elsewhere, on more essential products.
16
Any further disruptions from an uptick in new infections related to COVID-19 may materially harm out business prospects.
Further upticks in infection, and the related enforcement of governmental restrictions would materially hinder our ability to grow, as it would make it could interrupt our supply chain, as well as the financial condition of our intended customer base.
The restaurant industry may take longer to recover from the COVID-19 pandemic.
Increased current unemployment and loss of income, as well as any further disruptions from an uptick in new infections related to COVID-19 may materially harm out business prospects.
Concentration of Ownership by Min Jiang may allow such Shareholder to Control the Company’s Business
Min Jiang controls a majority of the voting interest of the Company. Following the offering, Min Jiang will still hold a majority of the interest of the Company. Future issuances of Series A Preferred Stock or common stock could further dilute the existing holders of common stock. Min Jiang will be able to exercise control over virtually all matters requiring shareholder approval, including the election of directors and approval of significant corporation transactions. Thus, Min Jiang will be able to maintain her positions and effectively operate the Company’s business, regardless of other investors’ preferences.
17
Risks Relating to Our Corporate Structure
U.S. Investors face added risks from the Company having the majority of its operations in China.
Subject to the requirements and public policy considerations as stipulated under applicable PRC Laws relating to the enforceability of foreign court judgments, submission to foreign jurisdiction for dispute resolution and choice of law, and also subject to the conditions described under the caption “Enforceability of Civil Liabilities” in the Registration Statement and Prospectus, (i) the irrevocable submission of the Company to the jurisdiction of any courts in the United States, the waiver by the Company of any objection to the venue of a proceeding in any such court, the waiver and agreement not to plead an inconvenient forum, the waiver of sovereign immunity
Under PRC Laws, neither the Material PRC Company, nor their respective properties, assets or revenues, are entitled to any right of immunity on the grounds of sovereignty or otherwise from any legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any court, from services of process, from attachment prior to or in aid of execution of any judgment, or from other legal processes or proceedings for the giving of any relief or for the enforcement of any judgment.
The Company’s principal executive offices and our officers and directors are located outside of the United States. This could make the enforcement and/or service of process of a shareholder claim or judgment difficult.
U.S shareholders may face difficulties in effecting service of process against the Company and our officers and director. Even with proper service of process, the enforcement of judgments obtained in U.S. courts or foreign courts based on the civil liability provisions of the U.S. federal securities laws would be extremely difficult. Furthermore, there would be added costs and issues with bringing an original action in foreign courts to enforce liabilities based on the U.S. federal securities laws against the Company or its officers and directors, and they still may be fruitless.
The Company is faced with risks and uncertainties as a foreign enterprise under PRC laws.
As a company incorporated under the laws of Nevada, we are classified as a foreign enterprise under PRC laws and regulations, and our wholly-owned PRC subsidiary, SRAS, is a foreign-invested enterprise, or a FIE.
Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
The Ministry of Commerce of the People’s Republic of China (“MOFCOM”) published a discussion draft of the proposed Foreign Investment law (“Draft Foreign Investment Law”) in January 2015 aiming to, upon enactment, replace the existing laws regulating foreign investment in China, namely, the Sino-Foreign Equity Joint Venture Enterprise Law, the Sino-Foreign Cooperative Joint Venture Enterprise Law, and the Wholly Foreign-Invested Enterprise Law, together with their implementation rules and ancillary regulations. The MOFCOM is currently soliciting comments on this draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The Draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance, and business operation.
Among other things, the Draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a FIE. Once an entity is determined to be an FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a “negative list,” which is classified into the “catalogue of prohibitions” and “catalogue of restrictions,” to be separately issued by the State Council later. Foreign investors are not allowed to invest in any sector set forth in the catalogue of prohibitions. If the FIE is engaged in the industry listed in the catalogue of restrictions, it needs market entry clearance by the MOFCOM. Otherwise, prior approval from governmental authorities as mandated by the existing foreign investment legal regime would no longer be required for establishment of the FIE.
18
Contractual arrangements WFOE has entered into may be subject to scrutiny by the PRC tax authorities and a finding that we owe additional taxes could substantially reduce our consolidated net income and the value of your investment.
Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements of the WFOE do not represent arm’s-length prices and consequently adjust WFOE’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by the WFOE, which could in turn increase its tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties on WFOE for any unpaid taxes. Our consolidated net income may be materially and adversely affected if WFOE’s tax liabilities increase or if they are subject to late payment fees or other penalties.
We rely on dividends paid by WFOE for our cash needs.
We rely primarily on dividends paid by WFOE for our cash needs, including the funds necessary to pay dividends and other cash distributions, if any, to our shareholders, to service any debt we may incur and to pay our operating expenses. The payment of dividends by entities organized in the PRC is subject to limitations as described herein. Under Nevada law, we may pay dividends from legally available realized and unrealized profits of the Company, and/or its share premium account and/or as otherwise permitted by the Companies Act, provided that we must be solvent before and after the dividend payment in the sense that we will be able to pay our debts as they become due in the ordinary course of business. If we determine to pay dividends on any of our common shares in the future, as a holding company, we will be dependent on receipt of funds from WFOE.
Pursuant to the Implementation Rules for the new Chinese enterprise income tax law, effective on January 1, 2008, dividends payable by a foreign investment entity to its foreign investors are subject to a withholding tax of up to 10%. Pursuant to Article 10 of the Arrangement Between the Mainland of China and the Hong Kong Special Administration Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income effective December 8, 2006, dividends payable by a foreign investment entity to its Hong Kong investor who owns 25% or more of the equity of the foreign investment entity is subject to a withholding tax of up to 5%.
The payment of dividends by entities organized in the PRC is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. WFOE is also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its compulsory reserves fund until the accumulative amount of such reserves reaches 50% of its registered capital.
The transfer to this reserve must be made before distribution of any dividend to shareholders. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.
We may be exposed to potential risks relating to our internal control over financial reporting.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX 404”), the SEC has adopted rules requiring public companies to include a report of management on the Company’s internal control over financial reporting in its annual reports. While we expect to expend significant resources in developing the necessary documentation and testing procedures required by SOX 404, there is a risk that we will not comply with all the requirements imposed thereby. At present, there is no precedent available with which to measure compliance adequately. In the event we continue to identify significant deficiencies or material weaknesses in our internal control over financial reporting that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements and our ability to obtain equity or debt financing could suffer.
19
Risks Related to Doing Business in China
Our profitability may be seriously affected by fluctuations in exchange rates between the Renminbi and the U.S. dollar.
All of our revenue is denominated in Renminbi while our financial reporting is in U.S. dollars. As a result, any significant fluctuation in exchange rates may cause us to incur currency exchange translation and harm our financial condition and results of operations.
Movements in Renminbi exchange rates are affected by, among other things, changes in political and economic conditions and China’s foreign exchange regime and policy. The Renminbi has been unpegged from the U.S. dollar since July 2005 and, although the People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates, the Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that the PRC authorities may lift restrictions on fluctuations in Renminbi exchange rates and lessen intervention in the foreign exchange market in the future.
To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all.
Governmental control of currency conversion may limit our ability to use our revenues effectively and the ability of our WFOE to obtain financing.
The PRC government imposes control on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive all our revenues in Renminbi, which currently is not a freely convertible currency. Restrictions on currency conversion imposed by the PRC government may limit our ability to use revenues generated in Renminbi to fund our expenditures denominated in foreign currencies or our business activities outside China. Under China’s existing foreign exchange regulations, Renminbi may be freely converted into foreign currency for payments relating to current account transactions, which include among other things dividend payments and payments for the import of goods and services, by complying with certain procedural requirements. Our WFOE is able to pay dividends in foreign currencies to us without prior approval from SAFE, by complying with certain procedural requirements Our WFOE may also retain foreign currency in its current account bank accounts for use in payment of international current account transactions. However, we cannot assure you that the PRC government will not take measures in the future to restrict access to foreign currencies for current account transactions.
Conversion of Renminbi into foreign currencies, and of foreign currencies into Renminbi, for payments relating to capital account transactions, which principally includes investments and loans, generally requires the approval of SAFE and other relevant PRC governmental authorities. Restrictions on the convertibility of the Renminbi for capital account transactions could affect the ability of WFOE to make investments overseas or to obtain foreign currency through debt or equity financing, including by means of loans or capital contributions from us. We cannot assure you that the registration process will not delay or prevent our conversion of Renminbi for use outside of China.
Adverse changes in political, economic and other policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of our business and our competitive position.
All of our business operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. Although the PRC economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to exercise significant control over China’s economic growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between the Renminbi and foreign currencies, and regulate the growth of the general or specific market. While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically and among various sectors of the economy. As the PRC economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions of major economies around the world. The various economic and policy measures enacted by the PRC government to forestall economic downturns or bolster China’s economic growth could materially affect our business. Any adverse change in the economic conditions in China, in policies of the PRC government or in laws and regulations in China could have a material adverse effect on the overall economic growth of China and market demand for our outsourcing services. Such developments could adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.
20
Uncertainties with respect to the PRC legal system could have a material adverse effect on us.
The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC government has been building a comprehensive system of laws and regulations governing economic matters in general. The overall effect has been to significantly enhance the protections afforded to various forms of foreign investments in China. We conduct our business primarily through our WFOE established in China. These companies are generally subject to laws and regulations applicable to foreign investment in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into with our business partners, clients and suppliers. In addition, such uncertainties, including any inability to enforce our contracts, together with any development or interpretation of PRC law that is adverse to us, could materially and adversely affect our business and operations. Furthermore, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other more developed countries. We cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections available to us and other foreign investors, including you. In addition, any litigation in China may be protracted and result in substantial costs and diversion of our resources and management attention.
Since our operations and assets are located in China, shareholders may find it difficult to enforce a U.S. judgement against the assets of our Company, our directors and executive officers.
Our operation and assets are located in China. In addition, our executive officers and directors are non-residents of the U.S., and substantially all the assets of such persons are located outside the U.S. As a result, it could be difficult for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of our officers or directors.
The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with this offering under a recently adopted PRC regulation; any requirement to obtain prior CSRC approval could delay this offering and failure to obtain such approval, if required, could have a material adverse effect on our business, results of operation and reputation and could also create uncertainties for this offering.
In 2006, the CSRC and five other PRC regulatory agencies jointly promulgated the Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rule, which regulates foreign investment in PRC domestic enterprises. The M&A Rule requires offshore special purpose vehicles formed for the purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of the special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the M&A Rule is currently unclear. If the CSRC or another PRC regulatory agency subsequently determines that prior CSRC approval was required, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations, limit our operating privileges, delay or restrict the repatriation of the proceeds from this offering into China or the payment or distribution of dividends by our PRC subsidiary, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects.
21
We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of the stock of our operating company.
Under the current PRC tax regulations, indirect transfers of equity interests and other properties of PRC tax resident enterprises by non-PRC holding companies may be subject to PRC tax. In accordance with the Announcement of the State Administration of Taxation on Several Issues concerning the Enterprise Income Tax on the Indirect Transfers of Properties by Non-Resident Enterprises (“Announcement 7”) issued by the SAT on February 3, 2015, if a non-PRC tax resident enterprise indirectly transfers equities and other properties of a PRC tax resident enterprise and such indirect transfer will produce a result identical or substantially similar to direct transfer of equity interests and other properties of the PRC tax resident enterprise, the non-PRC tax resident enterprise may be subject to PRC withholding tax at a rate up to 10%. The Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises at Source (“Announcement 37”), which was issued by SAT on October 17, 2017 and became effective on December 1, 2017, renovates the principles and procedures concerning the indirect equity transfer tax withholding for a non-PRC tax resident enterprise. Failure to comply with the tax payment obligations by a non-PRC tax resident will result in penalties, including full payment of tax owed, fines and default interest on those tax.
According to Announcement 7, where a non-resident enterprise indirectly transfers equity interests or other properties of PRC tax resident enterprises (“PRC Taxable Property”) to avoid its tax liabilities by implementing arrangements without reasonable commercial purpose, such indirect transfer shall be recharacterized and recognized as a direct transfer of PRC Taxable Property. As a result, gains derived from such indirect transfer and attributable to PRC Taxable Property may be subject to PRC withholding tax at a rate of up to 10%. In respect of an indirect offshore transfer of property of a PRC establishment or place of business of a foreign enterprise, the resulting gain is to be included with the annual enterprise filing of the PRC establishment or place of business being transferred and would consequently be subject to PRC enterprise income tax at a rate of 25%. Announcement 7 further sets forth certain “safe harbors” which would be deemed to have a reasonable commercial purpose. As a general principle, the SAT also issued the Administration of General Anti-Tax Avoidance (Trial Implementation) (“GATA”), which became effective on February 1, 2015 and empowers the PRC tax authorities to apply special tax adjustments for “tax avoidance arrangements.”
We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC Taxable Property are involved, such as offshore restructuring, sale of the shares in our offshore subsidiary and investments. Our Company may be subject to withholding obligations if our Company is considered as a transferee in such transactions, under Announcement 7 and Announcement 37. For transfer of shares in our Company by investors who are non-PRC resident enterprises, our PRC subsidiary may be required to expend valuable resources to comply with Announcement 7 and Announcement 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have an adverse effect on our financial condition and results of operations.
PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to acquire PRC companies or to inject capital into WFOE, limit WFOE’s ability to distribute profits to us, or otherwise materially and adversely affect us.
Under the Circular of the State Administration of Foreign Exchange on Issues concerning Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or Circular 37, issued by SAFE, prior registration with the local SAFE branch is required for PRC residents to contribute domestic assets or interests to offshore companies, known as SPVs. Moreover, Circular 37 applies retroactively. As a result, PRC residents who have contributed domestic assets or interest to a SPV, but failed to complete foreign exchange registration of overseas investments as required before July 4, 2014 shall send a letter to SAFE and its branches for explanation. SAFE and its branches shall, under the principle of legality and legitimacy, conduct supplementary registration, and impose administrative punishment on those in violation of the administrative provisions on the foreign exchange pursuant to the law.
We have requested our shareholders who are PRC residents to make the necessary applications, filings and amendments as required under Circular 37 and other related rules. We attempt to comply, and attempt to ensure that our shareholders who are subject to these rules comply with the relevant requirements. However, we cannot provide any assurances that all of our shareholders who are PRC residents will comply with our request to make or obtain any application registrations or comply with other requirements required by Circular 37 or other related rules. The failure or inability of our PRC resident shareholders to make any required registrations or comply with other requirements may subject such shareholders to fines and legal sanctions and may also limit our ability to contribute additional capital into or provide loans to (including using the proceeds from this offering) SRAS, limiting the ability of SRAS to pay dividends or otherwise distribute profits to us.
22
Failure to comply with the Individual Foreign Exchange Rules relating to the overseas direct investment or our PRC resident shareholders’ engaging in the issuance or trading of securities overseas may subject them to fines or other liabilities.
Other than Circular 37, our ability to conduct foreign exchange activities in China may be subject to interpretation and enforcement of the Implementation Rules of the Administrative Measures for Individual Foreign Exchange promulgated by SAFE in January 2007 (as amended and supplemented, the “Individual Foreign Exchange Rules”). Under the Individual Foreign Exchange Rules, any PRC individual seeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the appropriate registrations in accordance with SAFE provisions. PRC individuals who fail to make such registrations may be subject to warnings, fines or other liabilities.
We may not be fully informed of the identities of all our beneficial owners who are PRC residents. For example, because the investment in or trading of our shares will happen in an overseas public or secondary market where shares are often held with brokers in brokerage accounts, it is unlikely that we will know the identity of all of our beneficial owners who are PRC residents. Furthermore, we have no control over any of our future beneficial owners and we cannot assure you that such PRC residents will be able to complete the necessary approval and registration procedures required by the Individual Foreign Exchange Rules.
It is uncertain how the Individual Foreign Exchange Rules will be interpreted or enforced and whether such interpretation or enforcement will affect our ability to conduct foreign exchange transactions. Because of this uncertainty, we cannot be sure whether the failure by any of our PRC resident shareholders to make the required registration will subject our subsidiaries to fines or legal sanctions on their operations, delay or restriction on repatriation of proceeds of this offering into the China, restriction on remittance of dividends or other punitive action that would have a material adverse effect on our business, results of operations and financial condition.
PRC regulation of loans and direct investment by offshore holding companies to or in PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to WFOE, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
In using the proceeds from this public offering or any future offerings, we may make loans to the WFOE. Any loans to either are subject to PRC regulations and approvals. For example, loans by us to our WFOE in China cannot exceed statutory limits and must be registered with SAFE or its local counterpart. We may also decide to finance our WFOE through capital contributions. These capital contributions must be approved by the Ministry of Commerce in China or its local counterpart. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. If we fail to receive such registrations or approvals, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.
The SAFE’s Circular on Reforming the Administration Approach Regarding the Foreign Exchange Capital Settlement of Foreign-invested Enterprises (“Circular 19”) provides that the conversion from foreign currency registered capital of foreign-invested enterprises into the Renminbi capital may be at foreign-invested enterprises’ discretion, which means that the foreign currency registered capital of foreign-invested enterprises for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry of monetary contribution has been registered) can be settled at the banks based on the actual operational needs of the enterprises.
Further, according to Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred to a third party. Although Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within China, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit such capital to be used for equity investments in China in actual practice.
23
In July 2016, the SAFE promulgated the Circular on Reforming and Standardizing the Administrative Provisions on Capital Account Foreign Exchange (“Circular 16”), which applies to all domestic enterprises in China. Circular 16 reiterates some of the rules set forth in Circular 19 but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises.
Circular 19 and Circular 16 may significantly limit the ability of our WFOE to transfer and use Renminbi funds from its foreign currency denominated capital, which may adversely affect our business, financial condition and results of operations.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received from our initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
We must remit the offering proceeds to our WFOE in China before they may be used to benefit our business in China. This process may take a number of months and we will be unable to use the proceeds to grow our business in the meantime.
The proceeds of this offering must be sent back to China, and the process for sending such proceeds back to our WFOE in China may take several months after the closing of this offering. In order to remit the offering proceeds to China, we will take the following actions:
| ● | First, we will open a special foreign exchange account for capital account transactions. To open this account, we must submit to SAFE certain application forms, identity documents, transaction documents, form of foreign exchange registration of overseas investments by domestic residents, and foreign exchange registration certificate of the invested company. |
| ● | Second, we will remit the offering proceeds into this special foreign exchange account. |
| ● | Third, we will apply for settlement of the foreign exchange. In order to do so, we must submit to SAFE certain application forms, identity documents, payment order to a designated person, and a tax certificate. |
The timing of the process is difficult to estimate because the efficiencies of different SAFE branches can vary materially. Ordinarily, the process takes several months to complete. We may be unable to use these proceeds to grow our business until we receive such proceeds in China.
We may be classified as a “resident enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
The PRC enterprise income tax law and its implementing rules provide that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” under PRC tax laws. The implementing rules define the term “de facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. Circular 82, issued by the State Administration of Taxation, provides that a foreign enterprise controlled by a PRC company or a group of PRC companies will be classified as a “resident enterprise” with its “de facto management body” located within China if all of the following requirements are satisfied: (1) the senior management and core management departments in charge of its daily operations function are mainly in China; (2) its financial and human resources decisions are subject to determination or approval by persons or bodies in China; (3) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in China; and (4) at least half of the enterprise’s directors with voting right or senior management reside in China. To provide more guidance on the implementation of Circular 82, the State Administration of Taxation issued Bulletin 45, which clarifies certain matters relating to resident status determination, post-determination administration and competent tax authorities.
24
The State Administration of Taxation since issued a bulletin to provide more guidance on the implementation of Circular 82. This bulletin further provides that, among other things, an entity that is classified as a “resident enterprise” in accordance with the circular shall file the application for classifying its status of residential enterprise with the local tax authorities where its main domestic investors are registered. From the year in which the entity is determined to be a “resident enterprise,” any dividend, profit and other equity investment gain shall be taxed in accordance with the enterprise income tax law and its implementing rules.
Currently, there are no detailed rules or precedents governing the procedures and specific criteria for determining de facto management bodies which are applicable to our company or our overseas subsidiary. If our company or any of our overseas subsidiaries is considered a PRC tax resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, our company or our overseas subsidiary will be subject to the uniform 25% enterprise income tax rate as to our global income as well as PRC enterprise income tax reporting obligations. Second, although under the Enterprise Income Tax Law and its implementing rules dividends paid to us from our PRC subsidiary would qualify as tax-exempted income, we cannot assure you that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, dividends payable by us to our shareholders and gain on the sale of our shares may become subject to PRC withholding tax. It is possible that future guidance issued with respect to the new resident enterprise classification could result in a situation in which a withholding tax of 10% for our non-PRC enterprise shareholders or a potential withholding tax of 20% for individual investors is imposed on dividends we pay to them and with respect to gains derived by such investors from transferring our shares. In addition to the uncertainty in how the new resident enterprise classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect. If we are required under the Enterprise Income Tax law to withhold PRC income tax on our dividends payable to our foreign shareholders, or if we are required to pay PRC income tax on the transfer of our shares under the circumstances mentioned above, the value of your investment in our shares may be materially and adversely affected. It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas.
Our current employment practices may be restricted under the PRC Labor Contract Law and our labor costs may increase as a result.
The PRC Labor Contract Law and its implementing rules impose requirements concerning contracts entered into between an employer and its employees and establishes time limits for probationary periods and for how long an employee can be placed in a fixed-term labor contract. Because the Labor Contract Law and its implementing rules have not been in effect very long and because there is lack of clarity with respect to their implementation and potential penalties and fines, it is uncertain how it will impact our current employment policies and practices. We cannot assure you that our employment policies and practices do not, or will not, violate the Labor Contract Law or its implementing rules and that we will not be subject to related penalties, fines or legal fees. If we are subject to large penalties or fees related to the Labor Contract Law or its implementing rules, our business, financial condition and results of operations may be materially and adversely affected. In addition, according to the Labor Contract Law and its implementing rules, if we intend to enforce the non-compete provision with an employee in a labor contract or non-competition agreement, we have to compensate the employee on a monthly basis during the term of the restriction period after the termination or ending of the labor contract, which may cause extra expenses to us. Moreover, the Labor Contract Law and its implementation rules require certain terminations to be based upon seniority rather than merit, which significantly affects the cost of reducing workforce for employers. In the event we decide to significantly change or decrease our workforce in the PRC, the Labor Contract Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our circumstances or in a timely and cost effective manner, thus our results of operations could be adversely affected.
Furthermore, the economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, on-the-job injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected.
25
The United States Senate has passed the Accelerating Holding Foreign Companies Accountable Act, which, through the enactment of the CAA, decreased the number of “non-inspection years” from three years to two years, and thus, reduced the time before your securities may be prohibited from trading or delisted.
With the enactment of the Accelerating Holding Foreign Companies Accountable Act, as amended by the CAA, our common shares may be prohibited from trading or even delisted in two years from the completion of the offering. Furthermore, the Commission adopted rules to implement the HFCAA and, pursuant to the HFCAA, the PCAOB has issued its report notifying the Commission of its determination that it is unable to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong. Therefore, our common shares are at advanced risk of prohibition from trading or delisting in two years from the offering. If the PRC adopts positions at any time in the future that would prevent the PCAOB from continuing to inspect or investigate completely our auditor, we could then be delisted within two years.
We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. PRC Governmental Agencies may intervene or influence the Company’s operations at any time, which could result in a material change in the Company’s operations and/or the value of the Common shares. There is a risk that such action could significantly limit or completely hinder the Company’s ability to offer or continue to offer any securities to investors and cause the value of such securities to significantly decline or be worthless.
Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China, which could materially and adversely affect our business. General macroeconomic conditions may materially and adversely affect our business, prospects, results of operations and financial position. The PRC government’s control over foreign currency conversion may adversely affect our business and results of operations and our ability to remit dividends. PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our operating subsidiary in China, which could materially and adversely affect our liquidity and our ability to fund and expand business.
The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions. Under the Enterprise Income Tax Law, we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment. The M&A Rules, among other things, purport to require CSRC approval prior to the listing and trading on an overseas stock exchange of the securities of an offshore special purpose vehicle established or controlled directly or indirectly by Material PRC Companies or individuals and formed for the purpose of overseas listing through the acquisition of PRC domestic interests held by such Material PRC Companies or individuals.
Based on our understanding of the explicit provisions under PRC Laws, and assuming no offer, issuance or sale of the Common shares has been or will be made directly or indirectly within the PRC, a prior approval from the CSRC is not required for the Offering. However, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any Governmental Agency will not take a view that is contrary to or otherwise different from our opinions stated herein. Subject to any applicable administrative procedures required by PRC Laws, and provided that all required Governmental Authorizations have been duly obtained, the due application of the net proceeds to be received by the Company from the issue Common shares as disclosed in the Prospectus under the caption “Use of Proceeds” does not and immediately after the Offering will not contravene any applicable PRC Laws, the articles of association or the business licenses of the Material PRC Companies, except for such contravention or default which would not be reasonably expected to have a Material Adverse Effect.
26
The audit report included in this Amendment is prepared by an auditor who may not have been not inspected by the Public Company Accounting Oversight Board and as such, our investors are deprived of the benefits of such inspection. The Company could be delisted if it is unable to timely meet the PCAOB inspection requirements established by the Holding Foreign Companies Accountable Act, as amended by the CAA.
As a public company with securities quoted on the OTC Pink Sheets, we will be required to have our financial statements audited by an independent registered public accounting firm registered with the PCAOB. A requirement of being registered with the PCAOB is that if requested by the SEC or PCAOB, such accounting firm is required to make its audits and related audit work papers be subject to regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in PRC, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities due to various state secrecy laws and the revised Securities Law, the PCAOB currently has limited access to inspect the work of our auditor. The lack of access to the PCAOB inspection in PRC prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in PRC. As a result, the investors may be deprived of the benefits of such PCAOB inspections. Despite an agreement between the U.S. and the PRC in October of 2022, the limited ability of the PCAOB to conduct inspections of auditors in PRC makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of PRC that are subject to the PCAOB inspections.
On December 18, 2020, the Holding Foreign Companies Accountable Act, or HFCAA, was enacted, and was amended by the CAA. In essence, the act requires the SEC to prohibit securities of any foreign companies from being listed on U.S. securities exchanges or traded “over-the-counter” if a company retains a foreign accounting firm that cannot be inspected by the PCAOB for two consecutive years, beginning in 2021. Our independent registered public accounting firm is located in and organized under the laws of PRC, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, and therefore our auditors are not currently inspected by the PCAOB.
On March 24, 2021, the SEC adopted interim final amendments, which will become effective 30 days after publication in the Federal Register, relating to the implementation of certain disclosure and documentation requirements of the HFCAA. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. Before any registrant will be required to comply with the interim final amendments, the SEC must implement a process for identifying such registrants. As of the date of this Amendment, the SEC is seeking public comment on this identification process. Consistent with the HFCAA, the amendments will require any identified registrant to submit documentation to the SEC establishing that the registrant is not owned or controlled by a government entity in that jurisdiction, and will also require, among other things, disclosure in the registrant’s annual report regarding the audit arrangements of, and government influence on, such registrant.
On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which, decreased the number of non-inspection years from three years to two, thus reducing the time period before our securities may be delisted or prohibited from trading.
On November 5, 2021, the SEC approved PCAOB Rule 6100, Board Determination Under the Holding Foreign Companies Accountability Act, effective immediately. The rule establishes “a framework for the PCAOB’s determinations under the HFCAA that the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction.”
27
On December 2, 2021, SEC has announced the adoption of amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (Commission-Identified Issuers). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a “foreign issuer,” as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the adopting release provides notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain Commission- Identified Issuers, as required by the HFCAA. The SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022.
On December 16, 2021, PCAOB issued a report on its determinations that PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The PCAOB made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfils its responsibilities under the HFCAA. The report further listed in its Appendix A and Appendix B, Registered Public Accounting Firms Subject to the Mainland China Determination and Registered Public Accounting Firms Subject to the Hong Kong Determination, respectively. The audit report included in this registration statement for the year ended December 31, 2022, was issued by HAOXIN, an audit firm headquartered in PRC, a jurisdiction that the PCAOB has determined the PCAOB may be unable to conduct inspections or investigate auditors, despite a recent treaty allowing the PCAOB to review the audit papers of firms in the PRC. Our auditors HAOXIN is among those listed by the PCAOB Mainland China Determination, a determination announced by the PCAOB on December 16, 2021 that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in PRC, because of a position taken by one or more authorities in PRC. As a result, we and investors in our common stock may be deprived of the benefits of such full PCAOB inspections. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in PRC makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of PRC that are subject to the PCAOB inspections. In addition, under the HFCAA, as amended by the CAA, our securities may be prohibited from trading on the U.S. stock exchanges or in the over the counter trading market in the U.S. if our auditor is not inspected by the PCAOB for two consecutive years, and this ultimately could result in our common stock being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if enacted, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges or in the over the counter trading market in the U.S. if its auditor is not subject to PCAOB inspections for two consecutive years. In the future, if we do not engage an auditor that is subject to regular inspection by the PCAOB, our common stocks may be delisted.
The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended that the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA. For example, if a company was not subject to PCAOB inspection, the report recommended that the transition period before a company would be delisted would end on January 1, 2022.
28
The enactment of the HFCAA and the implications of any additional rulemaking efforts to increase U.S. regulatory access to audit information in China could cause investor uncertainty for affected SEC registrants, including us, and the market price of our stock could be materially adversely affected. Additionally, whether the PCAOB will be able to conduct inspections of our auditors in the next two years, or at all, is subject to substantial uncertainty and depends on a number of factors out of our control. If we are unable to meet the PCAOB inspection requirement in time, our stock will not be permitted for trading “over-the counter” either. Such a delisting would substantially impair your ability to sell or purchase our stock when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our stock. Also, such a delisting would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition and prospects.
The Chinese government, in general, has significant oversight and discretion over the conduct of our business and has made recent statements indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.
With the Chinese government having a material say over our operations, we are subject to its policy changes and exertions of control. Any such action could significantly limit or completely hinder our ability to offer or continue to offer our common stock to investors and cause the value of such securities to significantly decline or be worthless. Furthermore, the Chinese government has recently indicated that it may seek to exert even more control over Chinese operating companies, which would compound these risks. Any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
29
Risks Related to our Common Stock
The OTC and share value
Our Common Stock trades over the counter, which may deprive stockholders of the full value of their shares. Our stock is quoted via the Over-The-Counter (“OTC”) Pink Sheets under the ticker symbol “SIPN”. Therefore, our Common Stock is expected to have fewer market makers, lower trading volumes, and larger spreads between bid and asked prices than securities listed on an exchange such as the New York Stock Exchange or the NASDAQ Stock Market. These factors may result in higher price volatility and less market liquidity for our Common Stock.
Low market price
A low market price would severely limit the potential market for our Common Stock. Our Common Stock is expected to trade at a price substantially below $5.00 per share, subjecting trading in the stock to certain Commission rules requiring additional disclosures by broker-dealers. These rules generally apply to any non-NASDAQ equity security that has a market price share of less than $5.00 per share, subject to certain exceptions (a “penny stock”). Such rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and institutional or wealthy investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our Common Stock.
Lack of market and state blue sky laws
Investors may have difficulty in reselling their shares due to the lack of market or state Blue Sky laws. The holders of our shares of Common Stock and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our shares. Accordingly, even if we are successful in having the shares available for trading on the OTC, investors should consider any secondary market for our securities to be a limited one. We intend to seek coverage and publication of information regarding our Company in an accepted publication which permits a “manual exemption.” This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer’s balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. We may not be able to secure a listing containing all of this information. Furthermore, the manual exemption is a non-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities. Most of the accepted manuals are those published in Standard and Poor’s, Moody’s Investor Service, Fitch’s Investment Service, and Best’s Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin.
Accordingly, our shares of Common Stock should be considered totally illiquid, which inhibits investors’ ability to resell their shares.
30
Penny stock regulations
We will be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our Common Stock. The Commission has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. We anticipate that our Common Stock will become a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the Commission relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.
We do not anticipate that our Common Stock will qualify for exemption from the Penny Stock Rule. In any event, even if our Common Stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the Commission the authority to restrict any person from participating in a distribution of penny stock, if the Commission finds that such a restriction would be in the public interest.
Rule 144 Risks
Sales of our Common Stock under Rule 144 could reduce the price of our stock. There are 1,301,493,002 issued and outstanding shares of our Common Stock that Rule 144 of the Securities Act defines as restricted securities.
These shares will be subject to the resale restrictions of Rule 144, should we hereinafter cease being deemed a “shell company”. In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least twelve months, affiliates may not sell more than 1.0% of the total issued and outstanding shares in any 90-day period, and affiliates must resell the shares in an unsolicited brokerage transaction at the market price. The availability for sale of substantial amounts of Common Stock under Rule 144 could reduce prevailing market prices for our securities.
No audit or compensation committee
Because we do not have an audit or compensation committee, stockholders will have to rely on our entire Board of Directors, none of which are independent, to perform these functions. We do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee. These functions are performed by our Board of Directors as a whole. No members of our Board of Directors are independent directors. Thus, there is a potential conflict in that Board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions.
31
Security laws exposure
We are subject to compliance with securities laws, which exposes us to potential liabilities, including potential rescission rights. We may offer to sell our shares of our Common Stock to investors pursuant to certain exemptions from the registration requirements of the Securities Act, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We may not seek any legal opinion to the effect that any such offering would be exempt from registration under any federal or state law. Instead, we may elect to relay upon the operative facts as the basis for such exemption, including information provided by investor themselves.
If any such offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial pre-emption from the registration or qualification provisions of such state statutes under the National Securities Markets Improvement Act of 1996. If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which we have relied, we may become subject to significant fines and penalties imposed by the Commission and state securities agencies.
No cash dividends
Because we do not intend to pay any cash dividends on our Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them. We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on shares of our Common Stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares of our Common Stock when desired.
We cannot assure you that a market will develop for our Common Stock or what the market price of our Common Stock will be.
There is a limited trading market for our Common Stock. There is no assurance that an active market for our Common Stock will develop as a result of our operation of SRAS even if we are successful. If a market does not develop or is not sustained, it may be difficult for you to sell your shares of Common Stock at an attractive price or at all. We cannot predict the prices at which our Common Stock will trade. It is possible that, in future quarters, our operating results may be below the expectations of securities analysts or investors. As a result of these and other factors, the price of our Common Stock may decline or may never become liquid.
32
Risks Related to Industry
Success depends on external factors in the restaurant industry.
Operating in the restaurant production industry involves a substantial degree of risk. Each restaurant is unique and depends on unpredictable tastes. There can be no assurance that our restaurant clients will be favorably received.
A decline in the popularity of restaurants could adversely impact our business.
Because our operations are affected by general economic conditions and consumer tastes, our future success is unpredictable. The demand for restaurant dining tends to be highly sensitive to consumers’ disposable incomes, and thus a decline in general economic conditions could, in turn, have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
Public tastes are unpredictable and subject to change and may be affected by changes in the country’s political and social climate. A change in public tastes could have a material adverse effect on our business, operating results and financial condition and the price of our Common Stock.
A decline in general economic conditions could adversely affect our business.
Our operations are affected by general economic conditions, which generally may affect consumers’ disposable income. The demand for restaurant dining tends to be highly sensitive to the level of consumers’ disposable income. A decline in general economic conditions could reduce the level of discretionary income that our fans and potential fans have to spend on our live and televised entertainment and consumer products, which could adversely affect our revenues.
33
We will receive gross proceeds of up to $1,400,000 from the sale of shares we are registering to sell at $0.01 per share, in an offering conducted by our officers and directors on a best-efforts basis.
The net proceeds to us from the sale of the shares which we intend to offer to new investors, after the offering expenses detailed herein, would be a maximum of $1,350,000. We do not intend to engage any broker/dealers for the sale of the shares, and thus do not expect to pay any sales commissions.
These proceeds would be received from time to time as sales of these shares are made by us. As set forth in the following table, we will use those proceeds primarily for payment of general corporate purposes with the remainder used for administrative and legal expenses for operations. We intend to use the proceeds in the following order of priority:
| Assumed Offering #1(1)(5) | Percent | Assumed Offering #2(2)(5) | Percent | Assumed Offering #3(3)(5) | Percent | Maximum Offering(4)(5) | Percent | |||||||||||||||||||||||||
| Offering Expenses | $ | 50,000 | 14.3 | % | $ | 50,000 | 7.1 | % | $ | 50,000 | 4.8 | % | $ | 50,000 | 3.6 | % | ||||||||||||||||
| Administrative Expenses | $ | 30,000 | 8.6 | % | $ | 30,000 | 4.3 | % | $ | 30,000 | 2.9 | % | $ | 30,000 | 2.1 | % | ||||||||||||||||
| Advertising expenses for promoting the opening of new robot chain restaurants | $ | 35,000 | 10.0 | % | $ | 70,000 | 10.0 | % | $ | 105,000 | 10.0 | % | $ | 140,000 | 10.0 | % | ||||||||||||||||
| New Staffs required for growth plans | $ | 85,000 | 24.3 | % | $ | 295,000 | 42.1 | % | $ | 470,000 | 44.8 | % | $ | 610,000 | 43.6 | % | ||||||||||||||||
| New Equipment required for growth plans | $ | 70,000 | 20.0 | % | $ | 175,000 | 25.0 | % | $ | 315,000 | 30.0 | % | $ | 490,000 | 35.0 | % | ||||||||||||||||
| New IT System required for growth plans | $ | 30,000 | 8.6 | % | $ | 30,000 | 4.3 | % | $ | 30,000 | 2.9 | % | $ | 30,000 | 2.1 | % | ||||||||||||||||
| Legal and Professional Fees | $ | 50,000 | 14.3 | % | $ | 50,000 | 7.1 | % | $ | 50,000 | 4.8 | % | $ | 50,000 | 3.6 | % | ||||||||||||||||
| Total | $ | 350,000 | 100 | % | $ | 700,000 | 100 | % | $ | 1,050,000 | 100 | % | $ | 1,400,000 | 100 | % | ||||||||||||||||
| (1) | Assumes that we only raise 25% in this offering. This offering is conducted on a best-efforts basis with no minimum; therefore, we could raise significantly less than $1,400,000. |
| (2) | Assumes that we only raise 50% in this offering. This offering is conducted on a best-efforts basis with no minimum; therefore, we could raise significantly less than $1,400,000. |
| (3) | Assumes that we only raise 75% in this offering. This offering is conducted on a best-efforts basis with no minimum; therefore, we could raise significantly less than $1,400,000. |
| (4) | Assumes that we raise the full amount of our Maximum Offering hereunder, or $1,400,000. This offering is conducted on a best-efforts basis with no minimum; therefore, we could raise significantly less than $1,400,000. |
| (5) | The Offering is being sold by our officers and directors, who will not receive any compensation for their efforts. No sales fees or commissions will be paid to such officers or directors. Shares may be sold by registered broker or dealers who are members of the NASD and who enter into a Participating Dealer Agreement with the Company. Such brokers or dealers may receive commissions up to ten percent (10%) of the price of the Shares sold. |
The above estimated amounts are only for initial working purposes since we do not know how much we will need to spend on these items. Even if we are able to sell the maximum shares, we do not know how long these funds will last, and we have no other specific plans for raising additional funds. The portion of any net proceeds not immediately required will be invested in certificates of deposit or similar short-term interest-bearing instruments.
We are dependent on $400,000 of the proceeds of this offering to finance our operations for the next 12 months. The majority of the proceeds will go toward corporate overhead or our growth plan, if possible.
34
Determination of Offering Price
Our offering price of $0.01 per share was arbitrarily determined based upon a discount to the current market price. Accordingly, the offering price should not be considered an indication of the actual value of our securities.
There is no assurance that our common stock will trade at market prices in excess of the offering price hereunder as prices for the common stock in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for the common stock, investor perception of us and general economic and market conditions.
35
We are offering our common stock at a price per share that is significantly more than the price per share paid by our current stockholders for our common stock, as well as the current market price of our common stock. We are offering for sale up to 140,000,000 shares of common stock with $1,150,000 of the proceeds going to the Company. If you purchase Shares in this offering, you will experience immediate and substantial dilution.
Dilution represents the difference between the price per share paid by purchasers in this offering and the net tangible book value per share. Net tangible book value per share represents our net tangible assets (our total tangible assets less our total liabilities), divided by the number of shares of Common Stock outstanding at the time of the offering, 1,340,506,117 issued and outstanding shares of Common Stock. As of December 31, 2022, our net tangible book value per share was ($0.0002) per share.
The table below illustrates the pro forma per share dilution described above assuming 140,000,000 shares are sold.
After giving effect to the sale of the maximum of 140,000,000 Shares being offered in this offering, at $0.01 per Share, and the payment of expenses related to the offering, our pro forma net tangible book value would be $845,571 and increase by $0.0008 per share.
The table below illustrates the pro forma per share dilution described above assuming 90,000,000 shares are sold.
After giving effect to the sale of 75% of the Shares (90,000,000) shares being offered in this offering, at $0.01 per Share, and the payment of expenses related to the offering, our pro forma net tangible book value would be $545,571 and increase by $0.0006 per share.
The table below illustrates the pro forma per share dilution described above assuming 60,000,000 shares are sold.
After giving effect to the sale of 50% of the Shares (60,000,000 shares) being offered in this offering, at $0.01 per Share, and the payment of expenses related to the offering, our pro forma net tangible book value would be $245,571 and increase by $0.0004 per share.
The table below illustrates the pro forma per share dilution described above assuming 30,000,000 shares are sold.
After giving effect to the sale of 25% of the Shares (30,000,000 shares) being offered in this offering, at $0.01 per Share, and the payment of expenses related to the offering, our pro forma net tangible book value would be -$54,429 and increase by $0.0002 per share.
The table below illustrates the pro forma per share dilution described above assuming 12,000,000 shares are sold.
After giving effect to the sale of 10% of the Shares (12,000,000 shares) being offered in this offering, at $0.01 per Share, and the payment of expenses related to the offering, our pro forma net tangible book value would be -$234,429 an increase by $0.0001 per share.
36
The table below indicates the relative aggregate cash investment and stock ownership of new investors in this offering:
| Percentage of offering sold | 100% | 75% | 50% | 25% | 10% | |||||||||||||||
| Price per share | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||||
| Total shares purchased | 140,000,000 | 105,000,000 | 70,000,000 | 35,000,000 | 14,000,000 | |||||||||||||||
| Total proceeds of shares purchased | $ | 1,400,000 | $ | 1,050,000 | $ | 700,000 | $ | 350,000 | $ | 140,000 | ||||||||||
| less: offering costs | $ | (50,000 | ) | $ | (50,000 | ) | $ | (50,000 | ) | $ | (50,000 | ) | $ | (50,000 | ) | |||||
| Net proceeds from offering | $ | 1,350,000 | $ | 1,000,000 | $ | 650,000 | $ | 300,000 | $ | 90,000 | ||||||||||
| Net Tangible book value as of December 31, 2022 | $ | (305,383 | ) | $ | (305,383 | ) | $ | (305,383 | ) | $ | (305,383 | ) | $ | (305,383 | ) | |||||
| Net Tangible book value after the offering | $ | 1,044,617 | $ | 694,617 | $ | 344,617 | $ | (5,383 | ) | $ | (215,383 | ) | ||||||||
| Total shares issued at time of offering | 1,340,506,117 | 1,340,506,117 | 1,340,506,117 | 1,340,506,117 | 1,340,506,117 | |||||||||||||||
| Total shares issued after the offering | 1,480,506,117 | 1,445,506,117 | 1,410,506,117 | 1,375,506,117 | 1,354,506,117 | |||||||||||||||
| Net tangible book value per share as of December 31, 2022 | $ | (0.0002 | ) | $ | (0.0002 | ) | $ | (0.0002 | ) | $ | (0.0002 | ) | $ | (0.0002 | ) | |||||
| Net tangible book value per share after the offering | $ | 0.0007 | $ | 0.0005 | $ | 0.0002 | $ | (0.0000 | ) | $ | (0.0002 | ) | ||||||||
| Net tangible book value per share increase to present shareholders | $ | 0.0009 | $ | 0.0007 | $ | 0.0005 | $ | 0.0002 | $ | 0.0001 | ||||||||||
| Dilution to investors | $ | 0.0093 | $ | 0.0095 | $ | 0.0098 | $ | 0.0100 | $ | 0.0102 | ||||||||||
| Percentage of ownership to present shareholders after the offering | 90.5 | % | 92.7 | % | 95.0 | % | 97.5 | % | 99.0 | % | ||||||||||
| Purchasers of stock in the offering | ||||||||||||||||||||
| Price per Share | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||||||||
37
Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto.
Forward Looking Statements
The following information specifies certain forward-looking statements of the management of our Company. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as may, shall, could, expect, estimate, anticipate, predict, probable, possible, should, continue, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information statement have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements. Such forward-looking statements include statements regarding our anticipated financial and operating results, our liquidity, goals, and plans.
All forward-looking statements in this Form S-1 are based on information available to us as of the date of this report, and we assume no obligation to update any forward-looking statements.
Overview
SIPP International Industries, Inc. (the “Company”) is a Nevada Corporation formed on January 10, 1991. The Company’s year ends March 31 and it has never been in bankruptcy, receivership, or any similar proceedings. The Company was in the business of overseeing the development of several product lines, encompassing a Food & Beverage Division, a High-Tech Storage Transport Container Division, and a Hospitality Division. The company ceased operations in 2014.
On July 11, 2019, Custodian Ventures LLC, applied for appointment as Custodian of SIPP International Industries, Inc. with the eighth judicial District Court of Nevada.
On August 28, 2019, the eighth judicial District Court of Nevada appointed Custodian Ventures LLC as custodian for SIPP International Industries, Inc., proper notice having been given to the officers and directors of SIPP International Industries, Inc. There was no opposition.
On August 29, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On November 26, 2020, Custodian Ventures LLC entered into a stock purchase agreement whereby it transferred 10,000,000 shares of Preferred Stock to Kris Tabetando and Hemingway Investments LLC in exchange for $152,000 in cash. Kris Tabetando acquired 2,500,000 Preferred A Shares from Custodian Ventures LLC. Hemingway Investments LLC controlled by Issac Qureshi acquired 7,500,000 Preferred A Shares from Custodian Ventures LLC. As a result of the sale, and the resignation of David Lazar as sole officer and director of the Company, there was a change of control of the Company. Kris Tabetando was appointed CEO and director of the Company. There is no family relationship or other relationship between the Seller and the Purchasers.
38
On August 30, 2022 Chenxu International Investment Holding Group Limited (“Chenxu”), a BVI company purchased 248,101,224 shares of common stock and 10,000,000 shares of Series A Preferred Sock for $225,000. Subsequent to the purchase of these shares which represented controlling interest of the Company, Chenxu converted the 10,000,000 Series A Preferred Shares into 500,000,000 million shares of common stock.
On November 11, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), whereunder the Company acquired 100% ownership interest in CIHL from Min Jiang for the issuance of 100,000,000 shares of the Company’s common stock. CIHL through its China based subsidiaries, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
The Company’s accounting year-end is December 31.
Business Overview
Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (SRAS) is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides full link solutions for family food, and focuses on the consumption, sales and experience of the c-end consumer market. Through close cooperation with the central kitchen (prefabricated vegetable factory), SRAS has made use of the advantages of the central kitchen in source procurement of traceable raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. Through the perfect combination with the central kitchen, cold chain logistics system and robot chain restaurants, SRAS has created a closed loop of prefabricated vegetable business ecology from the upstream central kitchen to the downstream chain restaurants and consumers.
Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (SRAS) is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides full link solutions for family food, and focuses on the consumption, sales and experience of the c-end consumer market. Through close cooperation with the central kitchen (prefabricated vegetable factory), SRAS has made use of the advantages of the central kitchen in source procurement of traceable raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. Through the perfect combination with the central kitchen, cold chain logistics system and robot chain restaurants, SRAS has created a closed loop of prefabricated vegetable business ecology from the upstream central kitchen to the downstream chain restaurants and consumers.
On August 26, 2021, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (SRAS) was incorporated pursuant to the PRC law.
On September 27, 2022, we established a holding company, Chengzhao International Holdings Ltd. (CIHL), under the laws of the British Virgin Islands (BVI).
On September 27, 2022, CIHL acquired 100% ownership interest in SRAS. SRAS becomes a wholly foreign owned enterprise pursuant to the PRC law.
On November 1, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), whereunder the Company acquired 100% ownership interest in CIHL from Min Jiang for the issuance of 100,000,000 shares of the Company’s common stock. CIHL through its China based subsidiaries, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
39
Our services
Central kitchen prefabricated dish supply chain
Central kitchen’s prefabricated vegetable supply chain: The central kitchen has made use of the advantages of traceable source procurement of raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. One person has a thousand tastes, and one person has a thousand tastes. At the same time, it strictly abides by the regulations of the Market Supervision Administration and various departments, controls all levels of production, and achieves pollution-free, clean, transparent workshops, The product is green and healthy without any addition.
Intelligent robot restaurant
Chain restaurants use the perfect combination of scientific and technological intelligent robot cooking machine and prefabricated dishes to complete one click cooking without the need for a chef, effectively reducing the cost and efficiency of restaurant operations, and improving the profitability of the restaurant. At the same time, the restaurant is equipped with an intelligent unmanned cabinet to ensure the storage of prefabricated dishes. At the same time, consumers can also directly select the dishes they need by brushing their faces to pay. The robot scans the code to finish one click cooking, and the dishes can be served in 3-5 minutes. At the same time, through the consumption and experience of the restaurant, we can establish our customer group. Customers can also directly buy their own pre prepared dishes to take home for cooking through the Smart Life Super Counter.
Results of Operations for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
Revenue
For the year ended December 31, 2022, we recorded $692,308 in revenue compared to $0 for the same period in 2021. The increase in revenue is based on the operations of the business combination under common control company.
Operating expenses
Operating expenses for the year ended December 31, 2022 was $385,034 compared to $92,268 for the year ended December 31, 2021. The increase in operating expenses in the year December 31, 2022 compared to the same period in 2021 is due to the expenses associated with the new subsidiary Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (SRAS)
Liquidity and Capital Resources
We had $1,925 in cash on hand as of December 31, 2022.
Net cash used in operating activities was ($82,467) for the year ended December 31, 2022, compared to $2,087 for the year ended December 31, 2021. The material increases in cash used in operating activities during the year ended December 31, 2022 was primarily due to the operating activities of the new subsidiary Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (SRAS)
Net cash provided by investing activities during the year ended December 31, 2022 was ($24,793) compared to $0 for the year ended December 31, 2021. The investing activity in 2022 related to the purchase of plant and equipment of the new subsidiary Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (SRAS)
Net cash provided by financing activities was $100,000 for the year ended December 31, 2022, compared to $0 for the year ended December 31, 2021. The material increase during the 2022 period was due to the capital contributions from an original shareholder of the new subsidiary Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd (SRAS)
40
We manage our liquidity and capital requirements by focusing on our cash flows before the consolidation of our funds and the effect of changes in short term assets and liabilities, which we anticipate will be settled for cash within one year. Our primary cash flow activities typically involve: (i) generating cash flow from operations; (ii) generating income from investment and financing activities, by investing in investments that generate yield (namely interest and dividends) as well as the sale of securities; and (iii) distributing cash flow to affiliates; and (v) paying borrowings, interest payments and repayments under borrowing arrangements. We believe that we will need to raise approximately $545,000 in order to continue operations for the next twelve months in order to continue as a going concern.
Results of Operations for the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
Revenue
Operating revenue for the three months ended March 31, 2023, which resulted primarily from the supply of prefabricated food revenue, was $304,520 as compared with the operating revenue of $0 for the three months ended March 31, 2022. The increase was primarily a result of the removal of restrictions imposed by Chinese government agencies on business operations in order to control the spread of COVID-19 in the first quarter of 2022.
Operating costs and expenses
General and administrative expenses for the three months ended March 31, 2023, which resulted primarily from costs associated with the supply of prefabricated food revenue, was $387,442, as compared to $0 for the three months ended March 31, 2022. The increase in operating expenses is due to the removal of restrictions imposed by Chinese government agencies on business operations in order to control the spread of COVID-19 in the first quarter of 2022 and more costs associated with more business operations for the three months ended March 31, 2023.
The other significant operating expense was professional fees of $91,436 for the three months ended March 31, 2023. These fees were primarily accounting and legal fees related to the Company’s U.S. reporting obligations. Professional fees for the three months ended March 31, 2022 totaled $14,216.
Liquidity and Capital Resources
We had $48,440 in cash on hand as of March 31, 2023.
Net cash used in operating activities was $46,515 for the three months ended March 31, 2023, compared to ($14,216) for the three months ended March 31, 2022. The material increases in net cash used in operating activities during the three months ended March 31, 2023 was primarily due to the removal of restrictions imposed by Chinese government agencies on business operations in order to control the spread of COVID-19 in the first quarter of 2022 and more business operations for the three months ended March 31, 2023.
Net cash provided by financing activities was $0 for the three months ended March 31, 2023, compared to $14,216 for the three months ended March 31, 2022. The material decrease during the three months ended March 31, 2023 was due to the 0 proceeds from related party loans.
41
Financial Impact of COVID-19
The COVID-19 pandemic has affected how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal, state and foreign governments have implemented measures to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, and closure of non-essential businesses. To protect the health and well-being of our employees, partners, and third-party service providers, we have implemented work-from-home requirements, made substantial modifications to employee travel policies, and cancelled or shifted marketing and other corporate events to virtual-only formats for the near future. While we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, such precautionary measures could negatively affect our customer success efforts, sales and marketing efforts, delay and lengthen our sales cycles, or create operational or other challenges, any of which could harm our business and results of operations.
In addition, the COVID-19 pandemic has disrupted the operations of our current enterprise customers, as well as many potential enterprise customers, and may continue to disrupt their operations, for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns, uncertainty in the financial markets, or other harm to their businesses and financial results, resulting in delayed purchasing decisions, extended payment terms, and postponed or cancelled projects, all of which could negatively impact our business and results of operations, including our revenue and cash flows.
Beginning in March 2020, the U.S. and global economies have reacted negatively in response to worldwide concerns due to the economic impacts of the COVID-19 pandemic. These factors also may adversely impact enterprise and government spending on technology as well as such customers’ ability to pay for our products and services on an ongoing basis. For example, some businesses in industries particularly impacted by the COVID-19 pandemic, such as travel, hospitality, retail, and oil and gas, have significantly cut or eliminated capital expenditures. A prolonged economic downturn could adversely affect technology spending, demand for our offerings, which could have a negative impact on our financial condition, results of operations and cash flows. Any resulting instability in the financial markets could also adversely affect the value of our common stock, our ability to refinance our indebtedness, and our access to capital.
The ultimate duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of the disease, the actions of governments, businesses, and individuals in response to the pandemic, the extent and effectiveness of containment actions, the impact on economic activity and the impact of these and other factors on our employees, partners, and third-party service providers. These uncertainties may increase variability in our future results of operations and adversely impact our ability to accurately forecast changes in our business performance and financial condition in future periods. If we are not able to respond to and manage the impact of such events effectively or if global economic conditions do not improve, or deteriorate further, our business, financial condition, results of operations, and cash flows could be adversely affected.
In December 2022, the Chinese government cancelled the lockdown policies in China. There’s no shutdown and outbreaks from December 2022 until now. Therefore, there has not had any material impact on our operations, supply chain, liquidity or capital resources due to COVID-19
SRAS establishes partnerships with local suppliers, farms, and agricultural producers to obtain fresh ingredients for its prefabricated dishes in China. Supply chain disruptions have not had any affect the SRAS’ outlook and business goals.
Employees
SIPN, through CIHL and SRAS, currently has an aggregate of 12 employees, two of whom are officers and directors of SIPN. SRAS anticipates hiring additional employees in the next twelve months. We anticipate hiring necessary personnel based on an as needed basis only on a per contract basis to be compensated directly from revenues.
42
Off-Balance Sheet Arrangements
During the years ended December 31, 2022 and December 31, 2021 SIPN did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the Commission’s Regulation S-K.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s former management abandoned all operations for many years, and only recently did the Company appoint new management to make filings with the SEC on behalf of the Company. As of December 31, 2022 we have concluded that our disclosure controls and procedures were not effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. The Company was dormant, and presumably a shell company, from 2007 to 2011 and was a shell company from 2014 until November 1, 2022. As a result, our management did not evaluate the effectiveness of our internal control over financial reporting as of December 31, 2022 and December 31, 2021 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). without such an evaluation, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2022 based on the COSO framework criteria, as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the PCAOB were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; (4) lack of management of the company from 2007 until 2021; and (5) lack of disclosure controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of December 31, 2022.
Management believes that the material weaknesses set forth above did not have an effect on our financial results because the activity during this period was nominal. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside Directors on our Board of Directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the periods ended December 31, 2022 and December 31, 2021, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
43
Critical Accounting Policies and Estimates
The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the Company’s financial condition and results of operations and which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies that are significant to understanding our results.
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are expressed in Canadian dollars.
Management’s Representation of Interim Financial Statements
The accompanying unaudited financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto on December 31, 2020.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of 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. The most significant estimates relate to revenue recognition, valuation of accounts receivable and inventories, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Revenue Recognition
The Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The guidance provided in Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”) requires entities to use a five-step model to recognize revenue by allocating the consideration from contracts to performance obligations on a relative standalone selling price basis. Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The standard also requires new disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds, the fair value of which approximates cost. The Company maintains its cash balances with a high-credit-quality financial institution. The Company has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit risk on its cash and cash equivalents. As of December 31, 2021, the balance of cash was $-0-.
44
Accounts Receivable
Accounts receivable are customer obligations due under normal trade terms which are recorded at net realizable value. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade receivables. A considerable amount of judgment is required in assessing the amount of the allowance. The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a specific allowance will be required.
Recovery of bad debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If the Company’s actual collection experience changes, revisions to its allowance may be required. After all, attempts to collect a receivable have failed, the receivable is written off against the allowance.
As of December 31, 2022, the balance of accounts receivable was $9,184.
Income Taxes
The Company accounts for income taxes under FASB ASC 740, Accounting for Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. ASC 740-10-05, Accounting for Uncertainty in Income Taxes prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.
Foreign Currency Translation
The reporting currency of the Company is the US dollar.
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with FASB ASC 260, Earnings per Share which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that impact the Company’s operations.
45
Business Overview
CHIL’s, the Company’s wholly-owned subsidiary, holds all of the equity of SRAS, which is is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides full link solutions for family food, and focuses on the consumption, sales and experience of the c-end consumer market. Through close cooperation with the central kitchen (prefabricated food factory), SRAS has made use of the advantages of the central kitchen in source procurement of traceable raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. Through the perfect combination with the central kitchen, cold chain logistics system and robot chain restaurants, SRAS has created a closed loop of prefabricated food business ecology from the upstream central kitchen to the downstream chain restaurants and consumers.
The specific activities and operations SRAS engages in are:
Linking upstream and downstream resources: SRAS connects various stakeholders in the food supply chain, such as suppliers, central kitchens, cold chain logistics, and robot chain restaurants.
Promoting the standardization of Chinese food: SRAS focuses on establishing standardized processes and quality control measures to ensure consistent and standardized Chinese food offerings.
Providing full-link solutions for family food: SRAS offers comprehensive solutions for the entire food value chain, ranging from procurement of raw materials to production, distribution, and consumption.
The markets and customers SRAS primarily serves are the robot chain restaurants owned by operators, targeting individuals and families who seek convenient and standardized Chinese food options.
The products and services that SRAS provides
1. Prefabricated Food Supply:
SRAS operates a central kitchen that specializes in the production of prefabricated food. The central kitchen utilizes traceable source procurement of raw materials to ensure transparency and quality control. Through food research and development, SRAS works on enhancing the taste and quality of the prefabricated food. Production standardization is maintained to ensure consistency in the dishes. Strict product quality control measures are implemented to meet high standards of hygiene and safety. Efficient production methods are employed to optimize output and minimize costs.
2. Full-Link Solutions for Robot Chain Restaurants:
SRAS collaborates closely with the operators of robot chain restaurants to establish and expand the robot chain restaurant concept. The integration of technology and intelligent robot stir-fry machines is a key component of the robot chain restaurants, allowing for efficient food preparation without the need for a chef. The use of prefabricated dishes in combination with the robot stir-fry machines enables quick and convenient stir-fry preparation. SRAS ensures the availability of pre-made dishes by utilizing intelligent unmanned cabinets within the restaurants. Customers can select the dishes they desire, complete transactions, and have their orders prepared within a short time. Additionally, SRAS offers support for customers to purchase pre-made dishes to take home for cooking, creating a convenient option for individuals and families.
46
The process of how to manufacture and distribute the products of SRAS is:
SRAS utilizes a central kitchen to manufacture its products and employs a traceable source procurement system for raw materials.
Manufacturing Process:
Central Kitchen: SRAS operates a central kitchen, which serves as the manufacturing hub for its products, specifically prefabricated food and dishes.
Food Research and Development: The central kitchen conducts food research and development activities to enhance the taste and quality of the prefabricated dishes.
Production Standardization: SRAS implements production standardization measures to ensure consistency in the preparation and manufacturing processes.
Strict Quality Control: SRAS enforces strict product quality control measures to ensure that its dishes meet high standards of hygiene and safety.
Efficient Production: The central kitchen employs efficient production methods to optimize output and minimize costs.
Distribution Process:
Cold Chain Logistics: SRAS utilizes a cold chain logistics system to ensure the proper storage and transportation of its products while maintaining their freshness and quality.
Robot Chain Restaurants: SRAS’s products, such as prefabricated dishes and food, are distributed to their partner robot chain restaurants owned by their operators. These restaurants leverage the combination of technology and intelligent robot stir-fry machines to prepare the dishes quickly and efficiently.
Intelligent Unmanned Cabinets: Within the robot chain restaurants, SRAS uses intelligent unmanned cabinets to store the pre-made dishes, allowing customers to conveniently select the dishes they desire.
The sources of materials are:
Traceable Source Procurement: SRAS emphasizes traceable source procurement of raw materials for its products. This means that they aim to ensure transparency and traceability in the sourcing of their ingredients.
Specific Material Sources: SRAS establishes partnerships with reliable suppliers, farms, and agricultural producers to obtain fresh and high-quality ingredients for its prefabricated dishes.
A robot chain restaurant refers to a restaurant concept that incorporates technology and automation, particularly the use of intelligent robot stir-fry machines and other automated systems, in food preparation and service. The general characteristics and details associated with robot chain restaurants served by SRAS are as follows:
Automated Food Preparation: Robot chain restaurants utilize intelligent robot stir-fry machines or other automated systems to handle food preparation tasks. These machines are designed to stir-fry, cook, or assemble dishes without the need for human chefs.
Efficiency and Speed: The automation and precision offered by robot stir-fry machines allow for efficient and speedy food preparation. This can help reduce waiting times for customers and increase the overall efficiency of restaurant operations.
Consistency: Robot chain restaurants focus on achieving consistency in the quality and taste of their dishes. By using automated systems, they can ensure that the food is prepared according to standardized recipes and processes, resulting in consistent flavors and presentation.
47
Enhanced Cost Efficiency: Automation in robot chain restaurants can contribute to reducing labor costs associated with employing human chefs and kitchen staff. This can enhance the overall cost efficiency of the restaurant operation.
Technology Integration: Robot chain restaurants often incorporate various technological elements, such as intelligent unmanned cabinets for dish storage, automated payment systems, and sometimes even robotic servers or customer service interfaces.
Customer Experience: Robot chain restaurants aim to provide a unique and futuristic dining experience for customers. The presence of intelligent robot stir-fry machines and other technological elements can be appealing and intriguing to customers, offering an engaging and novel dining atmosphere.
A local central kitchen refers to a centralized food production facility that serves a specific geographic area or locality. The details associated with local central kitchens of SRAS are as follows:
Food Production Hub: A local central kitchen serves as a dedicated facility for food production, often focused on specific cuisines or types of dishes. It is equipped with the necessary infrastructure, equipment, and staff to prepare large quantities of food.
Standardized Processes: Central kitchens typically follow standardized processes and recipes to ensure consistency in the taste, quality, and presentation of the food they produce. This helps maintain a uniform dining experience across multiple locations.
Efficient Production: Local central kitchens are designed to optimize production efficiency. They leverage economies of scale and streamlined processes to maximize output while minimizing costs and waste.
Traceable Source Procurement: Central kitchens prioritize traceable source procurement, which involves ensuring the transparency and traceability of raw materials used in food production. This can involve sourcing ingredients from reliable suppliers, farms, or other trusted sources.
Distribution Hub: The central kitchen acts as a distribution hub, supplying pre-made dishes or food components to various locations within the local area. This includes delivering the food to partner robot chain restaurants owned by their operators.
Quality Control: Central kitchens implement rigorous quality control measures to maintain food safety and hygiene standards. This includes regular inspections, adherence to local regulations, and proper handling and storage practices.
Flexibility and Adaptability: Local central kitchens have the flexibility to adjust their production based on demand fluctuations and changing customer preferences. They can scale up or down production volumes as needed.
A prefabricated food supply chain refers to the system or process that SRAS implements for the production, distribution, and supply of pre-prepared or processed food products. The details associated with a prefabricated food supply chain of SRAS are as follows:
Raw Material Procurement: SRAS focuses on traceable source procurement of raw materials, which means they emphasize transparency and accountability in sourcing their ingredients. This involves selecting reliable suppliers and ensuring the quality and origin of the raw materials used in their food production.
Food Research and Development: SRAS invests in food research and development to enhance the taste, quality, and variety of their prefabricated food offerings. This can involve experimenting with recipes, flavors, and textures to create appealing and standardized food options.
Production Standardization: SRAS implements standardized processes and recipes to ensure consistency in the production of their prefabricated food products. This ensures that the taste, appearance, and quality remain consistent across different batches and locations.
Strict Product Quality Control: SRAS enforces rigorous product quality control measures to ensure that their food products meet high standards of hygiene, safety, and nutritional value. This can involve regular inspections, adherence to food safety regulations, and maintaining clean and controlled production environments.
48
Efficient Production: SRAS aims for high efficiency in their production processes to optimize output and minimize costs. They may employ efficient production methods, automation, and streamlined workflows to ensure productivity and minimize waste.
Distribution and Supply: SRAS distributes their prefabricated food products to partner robot chain restaurants owned by their operators. SRAS has a well-organized distribution network to ensure timely and efficient delivery of its products to customers.
Competitive Strengths
We believe that the following strengths enable us to capture opportunities in the industry in China and differentiate us from our competitors:
Central kitchen’s prefabricated vegetable supply chain: The central kitchen has made use of the advantages of traceable source procurement of raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. One person has a thousand tastes, and one person has a thousand tastes. At the same time, it strictly abides by the regulations of the Market Supervision Administration and various departments, controls all levels of production, and achieves pollution-free, clean, transparent workshops, The product is green and healthy without any addition. SRAS through close cooperation with the central kitchen (prefabricated dishes factory), the use of the central kitchen of raw materials traceable source procurement advantages, the advantages of R & D of dishes, production standardization advantages, strict product quality control advantages, high efficiency production advantages, to achieve the standardization of Chinese dishes, one person a thousand tastes, a thousand people a taste.
SRAS through close cooperation with professional brand operation and management company, through the brand management company to establish the development and expansion of prefabricated dishes application scenario robot restaurant chain, restaurant chain using the perfect combination of technology and intelligent robot stir-fry machine and prefabricated dishes to complete a key stir-fry, no chef, effectively reducing the cost and efficiency of restaurant operations and enhance the profitability of the restaurant. At the same time in the restaurant supporting intelligent unmanned cabinet, to ensure the storage of pre-made dishes and more convenient and intuitive so that consumers can pay by brushing their faces, directly select the dishes they need, through the robot sweep code, complete a key stir-fry, 3-5 minutes can be out of the pot on the dishes. At the same time through the consumption of the restaurant, experience, to build our customer base, customers can also directly through the intelligent lifeless super cabinet, buy away the pre-made dishes they need to take home for cooking.
SRAS through the perfect combination with the central kitchen and cold chain logistics system and robot restaurant chain, to create a pre-made dishes from the upstream central kitchen to the downstream restaurant chain, to the consumer business ecological closed loop.
Growth Plan
In 2023, more than 30 robot chain restaurants will be joined in Chengdu, most of them will be put into operation, others are in preparation for site selection and decoration,
In 2024, SRAS will focus on completing the layout of robot chain restaurants in East China market and South China market, 20 robot chain restaurants will be joined in Shanghai, Hangzhou, Guangzhou, Shenzhen and other central cities in 2024.
In 2025, SRAS will focus on completing the layout of the central and northern China markets, and 50 robot chain restaurants will be joined in Beijing, Wuhan, Tianjin, Zhengzhou, Changsha and other cities.
In 2023 - 2025, the overall new robot chain restaurants scale in the country could reach 100 restaurants. Around the key markets, we will adopt various cooperation methods with the local central kitchen of prepared dishes to establish the supply system of prepared dishes in the local market, improve the operation efficiency and reduce the product cost.
In order to fully implement the above growth plan comfortably, we would require approximately $1,270,000 from this offering. If we can’t raise such funds, the Company’s officers and directors will fund the additional amount.
49
Our services
Central kitchen prefabricated dish supply chain
Central kitchen’s prefabricated vegetable supply chain: The central kitchen has made use of the advantages of traceable source procurement of raw materials, food research and development, production standardization, strict product quality control, and efficient production to achieve the standardization of Chinese food. One person has a thousand tastes, and one person has a thousand tastes. At the same time, it strictly abides by the regulations of the Market Supervision Administration and various departments, controls all levels of production, and achieves pollution-free, clean, transparent workshops, The product is green and healthy without any addition.
Intelligent robot restaurant
Chain restaurants use the perfect combination of scientific and technological intelligent robot cooking machine and prefabricated dishes to complete one click cooking without the need for a chef, effectively reducing the cost and efficiency of restaurant operations, and improving the profitability of the restaurant. At the same time, the restaurant is equipped with an intelligent unmanned cabinet to ensure the storage of prefabricated dishes. At the same time, consumers can also directly select the dishes they need by brushing their faces to pay. The robot scans the code to finish one click cooking, and the dishes can be served in 3-5 minutes. At the same time, through the consumption and experience of the restaurant, we can establish our customer group. Customers can also directly buy their own pre prepared dishes to take home for cooking through the Smart Life Super Counter.
Marketing
The following marketing plan outlines the strategies that will be used to achieve the company’s marketing objectives and increase brand awareness.
Website Optimization:
The company’s website will be optimized to ensure that it is user-friendly, mobile-responsive, and easy to navigate. The website will also feature a blog section where the company can share useful content about its products, industry news, and food-related topics. Additionally, the website will have a “Contact Us” page that features a form for potential customers to submit inquiries or schedule a consultation with the company’s sales team.
Content Marketing:
The company will develop a content marketing strategy that includes blog posts, infographics, and case studies. The content will focus on educating potential customers about the benefits of prefabricated food, the company’s production processes, and its commitment to quality control. The content will be optimized for search engines and shared on social media platforms to reach a wider audience.
Social Media Marketing:
The company will establish a presence on popular social media platforms in China, such as WeChat, Weibo, and Douyin. The company will create social media content that is engaging, informative, and visually appealing. The social media strategy will include running paid ads to target potential customers who are interested in healthy and traceable food products.
Email Marketing:
The company will build an email list of potential and existing customers who have shown interest in its products. The company will send out regular email newsletters that highlight new product releases, promotions, and exclusive discounts. The company will also use email marketing to nurture leads and keep customers engaged.
50
Events:
The company will participate in relevant food-related events in Sichuan province to showcase its products and establish relationships with potential customers. The company will also host its events, such as cooking workshops or food tastings, to educate potential customers about its products and services.
Referral Marketing:
The company will create a referral program that rewards existing customers who refer new business to the company. The program will include incentives such as discounts on future purchases, free products, or exclusive offers. The referral program will help the company tap into the power of word-of-mouth marketing and generate new leads.
Influencer Marketing:
The company will partner with influencers in the food and health industry to promote its products to a wider audience. The influencers will create content featuring the company’s products and share it
Competition
As a prefabricated food supply chain company, SRAS will face competition from other similar companies in the market. Some of the main competitors include:
Haidilao: A Chinese hot pot chain that has expanded into the prefabricated food market with its own central kitchen and delivery service.
Meicai: A Chinese fresh produce sourcing and distribution company that has recently entered the prefabricated food market, offering a variety of ready-to-cook meals.
Joyvio: A Chinese agricultural technology company that has invested in the prefabricated food market, focusing on developing innovative food products.
Panda Selected: A Chinese e-commerce platform that offers a variety of high-quality food products, including prefabricated meals, sourced directly from farmers.
Dingdong Maicai: A Chinese online grocery platform that has recently entered the prefabricated food market, offering a wide range of ready-to-cook meals.
These companies are well-established in the market and have their own strengths and advantages. However, SRAS has an advantage in its focus on standardization of Chinese food, as well as its closed loop system that provides a seamless supply chain from the central kitchen to chain restaurants and consumers. By continuing to emphasize these advantages and differentiating itself from competitors, SRAS can position itself as a leading player in the prefabricated food market.
Employees
We currently have an aggregate of 12 employees, two of whom are the officers and directors of SIPN. We anticipate hiring additional employees in the next twelve months. We anticipate hiring necessary personnel based on an as needed basis only on a per contract basis to be compensated directly from revenues.
Intellectual Property
None
51
Enforceability of Civil Liabilities
Substantially all of our assets are located outside the United States. In addition, all of our directors and officers are nationals and/or residents of jurisdictions other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or such persons, or to enforce against them or against us, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors.
We have appointed McMurdo Law Group LLC. as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any State of the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.
Government Regulation
Key regulations that may apply to the prefabricated food business of SRAS in China are as follows:
Food Safety Law of the People’s Republic of China: Food Safety Law of the People’s Republic of China sets the overarching framework for ensuring food safety throughout the entire food supply chain, including the production, processing, distribution, and consumption of food products. Compliance with food safety standards, labeling requirements, and hygiene practices is essential. The Food Safety Law of China was enacted to protect public health, ensure food quality, and regulate food-related activities to prevent foodborne illnesses and other food safety risks.
Food Production License: In China, the regulation related to the Food Production License is called the “Administrative Measures for the Licensing of Food Production”. It is a regulatory measure issued by the relevant authorities to ensure the safety and quality of food production processes. The Administrative Measures for the Licensing of Food Production outline the requirements and procedures for obtaining a Food Production License, which is a mandatory license for businesses engaged in food production activities in China. The specific requirements and procedures may vary based on the nature of the food production and the region in which the business operates. Businesses involved in the production of prefabricated food products in China are typically required to obtain a Food Production License. This license is granted by the relevant local food regulatory authority and signifies compliance with food safety regulations.
Product Labeling Requirements: In China, the regulation governing product labeling requirements for food products is called the “GB 7718-2011 National Food Safety Standard - General Rules for the Labeling of Pre-packaged Foods”. This standard provides guidelines and requirements for labeling pre-packaged food products in China. It covers various aspects, including the content, format, placement, and design of labels, as well as specific labeling requirements for ingredients, nutrition information, allergens, production dates, expiration dates, storage conditions, and other relevant information. Compliance with this standard is essential for businesses in the prefabricated food industry to ensure accurate and informative labeling of their products. Prefabricated food products in China must comply with labeling regulations. Labels should provide accurate and clear information about ingredients, nutritional values, production dates, expiration dates, storage conditions, and any allergens present in the product.
52
Directors and Executive Officers
On August 30, 2022, Min Jiang was appointed President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Chairman of the Board of Directors, and Zonghan Wu was appointed Secretary and a member of the Board of Directors.
| Name | Age | Position(s) | ||
| Min Jiang | 50 | President, CEO, CFO Treasurer, Chairman of the Board of Directors | ||
| Zonghan Wu | 44 | Secretary and Director |
Min Jiang. Ms Jiang was appointed to the Board and the position of Chief Executive Officer and Chief Financial Officer on August 30, 2022, to bring her experience in corporate management. Ms Jiang has served as Executive Director of Sichuan Zhiwei Wanjia Food Co., Ltd and Guangdong Guruicheng E-commerce Co., Ltd. since January 2020 and September 2020.. From 1994 through 2016, Ms Jiang was employed as Director of Sichuan Yibin Yunwang Hotel. Ms Jiang holds a Bachelor’s Degree in Business awarded by Sichuan University.
Zonghan Wu. Mr. Wu worked for Opus International Consultants as a Business Analyst in New Zealand from 2004 to 2007. He worked for Nestle as a Commercial Analyst from 2008 to 2011. Currently he is Managing Director of Shanghai JAZ Management Consulting Co. Ltd in Shanghai.
Mr. Wu has served as Chairman and Company Secretary for the companies with publicly available information under Rule 15c-211 and quoted in the U.S.: SSHT S&T Group Ltd. (OTC Pink: SSHT) since January 2022 and Alpine Auto Brokers Inc. (OTC Pink: ALTB) since February 2022, of which David Lazar was a prior CEO and Chairman.
Mr. Wu has also served as a Director and Company Secretary for the following companies with publicly available information under Rule 15c-211 and quoted in the U.S.: Alliance Recovery Corp. (OTC Pink: ARVY) since June 2022, ACC Aviation Holdings Ltd. OTC Pink: CAVG) since January 2022, Interact Holdings Group, Inc. (OTC Pink: IHGP) since August 2022, Linike Medical Group Ltd. (OTC Pink: LNMG) since July 2022, Providence Resources, Inc. (OTC Pink: PVRS) since December 2021, SIPP international Industries, Inc. (OTC Pink: SIPN) August 2022, of which David Lazar was a prior CEO and Chairman, ZKGC New Energy Ltd. (OTC Pink: ZKGCF) since March 2022, and Victor Mining Industry Group, Inc. (OTC Pink: VMTG) since August 2022. Mr. Wu was awarded a Bachelor of Commerce degree from the University of Auckland in New Zealand in 2004
Term of Office
Our directors hold their position until the next annual meeting of shareholders and until his successor is elected and qualified by our shareholders, or until earlier death, retirement, resignation or removal.
Family Relationships
There are no family relationships between the Company and any of our current and proposed directors or executive officers.
53
Our mailing address is 69 Waterfall Blvd, The Ponds, Sydney, NSW 2769, Australia. It is provided free of charge by one of our officers and directors as a courtesy. The Company’s wholly-owned subsidiary’s, SRAS, address is No. 1201, Floor 12, Unit 1, Building 1, No. 39, Zhiyuan Road, Wenjiang District, Chengdu, China for its staff which it rents on a month to month basis at a rate of 7,520 RMB per month. The expiration date of the lease is December 10, 2024. Min Jiang works out of the China office, while Zonghan Wu works out of 46 Reeves Road, Pakuranga 2010, New Zealand.
The company has the same mailing address as Victor Mining Industry Group, Inc. (OTC Pink: VMTG) as it is provided free of charge by one of our officers and directors as a courtesy.
54
Legal Proceedings Involving Directors And Executive Officers
During the past ten years no current or incoming director, executive officer, promoter or control person of the Company has been involved in the following:
(1) A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
| i. | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| ii. | Engaging in any type of business practice; or |
| iii. | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
(7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
| i. | Any Federal or State securities or commodities law or regulation; Or |
| ii. | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease and desist order, or removal or prohibition order; Or |
| iii. | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; Or |
(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
55
Executive Compensation
The table below sets forth the positions and compensations for the officers and directors of the Company, and for the officers and directors of SRAS, for the years ended December 31, 2022 and 2021.
There are no employment agreements between the Company and its officers and directors. And since the change of control on September 8, 2022, the directors and officers have received no compensation. This policy, however, will be revised as the Company secure additional fundings.
| Position | Name of Officers or Directors | Year | Salary before tax | Bonus | All other compensation | Total | ||||||
| Chairman of the Board of Directors, CEO | Min Jiang | 2022 2021 |
n/a n/a |
n/a n/a |
n/a n/a |
n/a n/a | ||||||
| Director, Secretary | Zonghan Wu | 2022 2021 |
n/a n/a |
n/a n/a |
n/a n/a |
n/a n/a |
We do not have an audit or compensation committee comprised of independent directors as our Company qualifies for an exemption from these requirements. Indeed, we do not have any audit or compensation committee. These functions are performed by our Board of Directors as a whole.
All directors serve 1 yr. terms.
Related Party Transactions
None
56
Security Ownership of Certain Beneficial Owners And Management
The following table sets forth certain information with respect to the beneficial ownership of our voting securities by (i) any person or group owning more than 5% of any class of voting securities, (ii) each director, (iii) our chief executive officer and (iv) all executive officers and directors of SIPN as a group as of December 31, 2022.
| Name | Number of Shares
of |
Percentage | ||||||
| Min Jiang No. 1201, Floor 12, Unit 1, Building 1, No. 39, Zhiyuan Road, Wenjiang District, Chengdu, China |
848,101,224 | 63.3 | % | |||||
| Zonghan
Wu 46 Reeves Road, Pakuranga 2010, New Zealand |
0 | % | ||||||
| All executives officers, directors, and beneficial ownership thereof as a group 2 people) | 63.3 | % | ||||||
There are no other officer or director 5 % shareholders.
Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the stockholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Except as set forth above, applicable percentages are based upon 1,340,506,117 shares of common stock outstanding.
The holders of our common stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders.
The following table sets forth certain information with respect to the beneficial ownership of our voting preferred by (i) any person or group owning more than 5% of any class of voting securities, (ii) each director, (iii) our chief executive officer and (iv) all executive officers and directors of SIPN as a group as of December 31, 2022.
| Name | Number of Shares
of |
Percentage | ||||||
| Min Jiang No. 1201, Floor 12, Unit 1, Building 1, No. 39, Zhiyuan Road, Wenjiang District, Chengdu, China |
0 | 0 | % | |||||
| Zonghan
Wu 46 Reeves Road, Pakuranga 2010, New Zealand |
0 | 0 | % | |||||
| All executives officers, directors, and beneficial ownership thereof as a group 2 people) | 0 | 0 | % | |||||
The holders of our Series A preferred stock would be entitled to 50 votes for each share held of record on all matters to be voted on by stockholders. The Series A Preferred Stock also convert into common stock at a rate of 50 for one. The aggregate voting power of our outstanding Series A Preferred Stock is more than 0% of the issued and outstanding voting equity.
57
Certain Relationships and Related Transactions
Except as described herein, none of the following parties (each a “Related Party”) has had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
| ● | any of our directors or officers; |
| ● | any person proposed as a nominee for election as a director; |
| ● | any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or |
| ● | any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the above persons. |
During the year ended December 31, 2022, Mr. Zonghan Wu advanced a total of $8,868 to the Company for payment of administrative expenses and legal fees, which amount remains due and payable.
Additionally, on November 1, 2022, the Company entered into a share exchange agreement with CIHL, which is under common control of the Company. Pursuant to such agreement the Company acquired 100% ownership interest in CIHL from Min Jiang for the issuance of 100,000,000 shares of the Company’s common stock. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
58
We have authorized 2,000,000,000 shares of common stock with par value $0.001 per share. As at May 2, 2023, the Company has issued and outstanding 1,340,506,117 shares of common stock. We have authorized 10,000,000 shares of Series A Preferred Stock. As of December 31, 2022, the Company has issued and outstanding 0 shares of Preferred Stock. We do not have different authorized classes of stock other than aforementioned.
Common Stock
The holders of our common stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors then up for election. The holders of our common stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefor. In the event of liquidation, dissolution or winding up of our company, the holders of common stock are entitled to share ratably in all assets remaining which are available for distribution to them after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the common stock. Holders of shares of our common stock, as such, have no conversion, pre-emptive or other subscription rights, and there are no redemption provisions applicable to the common stock.
Preferred Stock
The holders of our Series A preferred stock are entitled to 50 votes for each share held of record on all matters to be voted on by stockholders. The Series A preferred stock also convert into common stock at a rate of 50 for one. The holders of our preferred stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefore. In the event of liquidation, dissolution or winding up of our company, the holders of preferred stock are entitled to share ratably in all assets remaining which are available for distribution to them after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the Series A preferred stock. We do not have different authorized classes of stock other than aforementioned.
Controlling Shareholder(s)’ Ability
The controlling shareholder(s)’ shall and will have ability to control matters requiring shareholder approval, including election of directors, amendment of organizational documents, and approval of major corporate transactions, such as a change in control, merger, consolidation, or sale of assets.
Indemnification of Directors and Officers
Section 78.138 of the NRS provides that a director or officer will not be individually liable unless it is proven that (i) the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud or a knowing violation of the law.
Section 78.7502 of NRS permits a company to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending or completed action, suit or proceeding if the officer or director (i) is not liable pursuant to NRS 78.138 or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful.
59
Section 78.751 of NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit or proceeding as they are incurred and in advance of final disposition thereof, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of NRS further permits the company to grant its directors and officers additional rights of indemnification under its articles of incorporation or bylaws or otherwise.
Section 78.752 of NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses. Our Bylaws provide that we may indemnify and advance litigation expenses to our directors, officers, employees and agents to the extent permitted by law, our Articles of Incorporation or our Bylaws, and shall indemnify and advance litigation expenses to our directors, officers, employees and agents to the extent required by law, our Articles of Incorporation or Bylaws. Our obligations of indemnification, if any, shall be conditioned on receiving prompt notice of the claim and the opportunity to settle and defend the claim. We may, to the extent permitted by law, purchase and maintain insurance on behalf of an individual who is or was our director, officer, employee or agent.
Indemnification against Public Policy
Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling the company pursuant to provisions of our Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defence of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The effect of indemnification may be to limit the rights of the Company and the shareholders (through shareholders’ derivative suits on behalf of the Company) to recover monetary damages and expenses against a director for breach of fiduciary duty.
60
Shares Eligible for Future Sale
Future sales of substantial amounts of shares of our Common Shares in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our Common Shares to fall or impair our ability to raise equity capital in the future. Following this offering, the Common Shares that were not offered and sold in our initial public offering are “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below.
These restricted securities may be available for sale in the public market under Rule 144 one year following the filing of this registration statement on Form S-1.
Rule 144
Sales of our Common Stock under Rule 144 could reduce the price of our stock. There are 1,301,493,002 issued and outstanding shares of our Common Stock that Rule 144 of the Securities Act defines as restricted securities.
These shares will be subject to the resale restrictions of Rule 144. In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least year, affiliates may not sell more than 1.0% of the total issued and outstanding shares in any 90-day period, and affiliates must resell the shares in an unsolicited brokerage transaction at the market price. The availability for sale of substantial amounts of Common Stock under Rule 144 could reduce prevailing market prices for our securities.
WE
URGE POTENTIAL PURCHASERS OF OUR SHARES TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S.
TAX CONSEQUENCES OF PURCHASING,
OWNING AND DISPOSING OF OUR SHARES.
61
The Company is also offering up to a total of 140,000,000 shares of common stock in a best-efforts, direct public offering, without any involvement of underwriters. The offering price is $0.01 per share. The offering will terminate 365 days from the date of this prospectus or when all of the Shares are sold, whichever comes first. We also have the right to terminate this offering at any time prior to the expiration of the offering period. We will use our best efforts to sell as many shares as possible up to the maximum offering amount of 140,000,000 shares. This is no minimum offering amount. We may accept or reject any subscription amount from any investor in our sole discretion or we may accept only part of a subscription amount. Expenses related to the offering are estimated to be $50,000.
We will sell the shares in this offering exclusively through our officers and directors, Min Jiang and Zonghan Wu. The Company has confirmed, via written confirmation, that neither Min Jiang nor Zonghan Wu has participated in selling or offering securities for any other issuer in the last twelve months. Zonghan Wu shall not participate in selling or offering the Company’s securities in the United States. They will receive no commission from the sale of any shares by the Company. They will not register as a broker/dealer under the 1934 Act in reliance upon Rule 3a4-1 under the 1934 Act. They may rely upon Rule 3a4-1 because (i) they are not subject to any statutory disqualifications, as defined in Section 3(a)(39) of the 1934 Act, (ii) they will not be compensated in connection with the sale of the Company’s securities by the payment of commissions or other remuneration based either directly or indirectly on transactions in the securities, (iii) they are not associated persons of a broker or dealer, (iv) they will primarily perform, at the end of the offering, substantial duties for or on behalf of the Company, otherwise than in connection with transactions in securities, (v) they were not a broker or dealer, or an associated person thereof, within the preceding 12 months, (vi) they do not participate in selling an offering of securities for any issuer more than once every 12 months, except in reliance on (iv) and (v) above. The Company will register as the issuer-agent in those states requiring such registration.
We anticipate that our common stock will continue to be subject to the penny stock rules under the Securities Exchange Act of 1934, as amended. These rules regulate broker/dealer practices for transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00. The penny stock rules require broker/dealers to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker/dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our shares. These additional penny stock disclosure requirements are burdensome and may reduce all of the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, holders of our common stock may find it more difficult to sell their shares.
Our officers and directors may purchase shares in this offering; however any such purchases will be held for investment purposes only and they will be subject to Regulation M and will act accordingly, including through filing the notice and information relating to distributions subject to Regulation M under Rule 5190, Rule 6275(f) and the trade reporting rules. They shall file all notices related to these rules with FINRA’s Market Regulation Department electronically through the FINRA Firm Gateway.
In certain states the Shares may not be sold unless the Shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
62
Procedures for Subscribing
If you decide to subscribe for any Shares in this offering, please make:
Direct Deposit:
Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd
Address: No. 1201, Floor 12, Unit 1, Building 1, No. 39, Zhiyuan Road, Wenjiang District, Chengdu, China
Bank: China Construction Bank
Bank Address: 1st Floor, Jinsha Building, No. 118, Section 2, Hongxing Road, Jinjiang District, Chengdu, Sichuan Province, China
Account Number#: 51050143630800007382
SWIFT Code: PCBCCNBJ
All checks for subscriptions must be made payable to “Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd.”.
Right to Reject Subscriptions
We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions. Subscriptions for shares will be accepted or rejected within five business days after we receive them. Furthermore, once a subscription agreement is accepted, it will be executed without reconfirmation to or from the subscriber. Once SIPN accepts a subscription, the subscriber cannot withdraw it unless otherwise dictated by state law.
63
The validity of the issuance of the shares of common stock will be passed upon for the company by McMurdo Law Group, LLC. Counsel has additionally consented to his opinion being included as an exhibit to this filing. Additionally, counsel has consented to being named in the prospectus.
The legal counsel that passed their opinion on the legality of these securities is:
McMurdo Law Group, LLC
Matthew McMurdo, Esq.
1185 Avenue of the Americas, 3rd Floor New York, NY 10036
The audited consolidated financial statements of SIPP International Inc., as of December 31, 2022 and 2021 are appended to this report beginning on page F-1. The audited consolidated financial statements of SIPP International Inc., as of December 31, 2022 and 2021 were audited by Shandong Haoxin Certified Accountants Co., Ltd. The consolidated financial statements have been so included in reliance upon the report of Shandong Haoxin Certified Accountants Co., Ltd upon their authority as experts in accounting and auditing.
Where You Can Find Additional Information
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the Common Shares offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the Common Shares offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We currently do not file periodic reports with the SEC. We will file periodic reports (including an annual report on Form 10-K, which we will be required to file within 90 days from the end of each fiscal year, and Form 10-Q, which we will be required to file within 45 days of the end of each fiscal quarter), and other information with the SEC pursuant to the Exchange Act once this registration statement on Form S-1 becomes effective. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is http://www.sec.gov.
64
Index to Consolidated Financial Statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of SIPP International Industries, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SIPP International Industries, Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated 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, 2022 and 2021 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Explanatory Paragraph—Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2(a) to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2(a). The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
/s/ Shandong Haoxin Certified Public Accountants Co., Ltd.
We have served as the Company’s auditor since 2022.
Weifang, People’s Republic of China
May 10, 2023
F-2
SIPP INTERNATIONAL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
| As of December 31, |
|||||||||||
| Note | 2021 | 2022 | |||||||||
| US$ | US$ | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | 3 | 1,786 | 1,925 | ||||||||
| Prepaid expenses and other current assets | 4 | - | 59,305 | ||||||||
| Inventory | 5 | - | 51,820 | ||||||||
| Total current assets | 1,786 | 113,050 | |||||||||
| Property and equipment, net | 6 | - | 19,886 | ||||||||
| Other non-current assets | - | - | |||||||||
| TOTAL ASSETS | 1,786 | 132,936 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | 8 | - | 65,490 | ||||||||
| Amounts due to a related party | 10 | 17,691 | 8,868 | ||||||||
| Advances from customers | - | 49,955 | |||||||||
| Accrued expenses and other current liabilities | 9 | 26,590 | 314,006 | ||||||||
| Total current liabilities | 44,281 | 438,319 | |||||||||
| TOTAL LIABILITIES | 44,281 | 438,319 | |||||||||
| Commitments and contingencies | - | - | |||||||||
| Shareholders’ deficit: | |||||||||||
| Common stock, par value $0.001, 2,000,000,000 shares authorized; 1,340,506,117 and 740,506,117 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively | 12 | 740,506 | 1,340,506 | ||||||||
| Preferred Stock | 10,000 | - | |||||||||
| Additional paid-in capital | 19,206,092 | 18,672,834 | |||||||||
| Accumulated deficit | (19,998,792 | ) | (20,324,808 | ) | |||||||
| Accumulated other comprehensive income (loss) | (301 | ) | 6,085 | ||||||||
| Total shareholders’ deficit | (42,495 | ) | (305,383 | ) | |||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | 1,786 | 132,936 | |||||||||
F-3
SIPP INTERNATIONAL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the years ended December 31, |
|||||||||||
| Note | 2021 | 2022 | |||||||||
| US$ | US$ | ||||||||||
| Net revenues | 11 | - | 692,308 | ||||||||
| Cost of revenues | - | 637,649 | |||||||||
| Gross profit | - | 54,659 | |||||||||
| Operating expenses: | |||||||||||
| General and administrative expenses | 92,268 | 385,034 | |||||||||
| Total operating expenses | 92,268 | 385,034 | |||||||||
| (Loss) income from operations | (92,268 | ) | (330,375 | ) | |||||||
| Interest income (expense), net | - | (118 | ) | ||||||||
| Bank charge | 118 | 251 | |||||||||
| Foreign exchange (losses) gains, net | - | - | |||||||||
| Other expenses(net） | - | (3,478 | ) | ||||||||
| (Loss) income before income taxes | (92,386 | ) | (327,030 | ) | |||||||
| Income tax expenses | - | - | |||||||||
| Share of loss in equity method investment | - | - | |||||||||
| Net (loss) income | (92,386 | ) | (327,030 | ) | |||||||
| Net (loss) income attributable to ordinary shareholders | (92,386 | ) | (327,030 | ) | |||||||
| Net loss per ordinary share: | |||||||||||
| Basic and diluted | 13 | (0.00 | ) | (0.00 | ) | ||||||
| Weighted average shares used in calculating net loss per ordinary share: | |||||||||||
| Basic and diluted | 13 | 524,106,716 | 907,172,784 | ||||||||
F-4
SIPP INTERNATIONAL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
| For the years ended December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Net (Loss) income | (92,386 | ) | (327,030 | ) | ||||
| Other comprehensive (loss) income | ||||||||
| Foreign currency translation adjustments, net of tax of nil | (301 | ) | 7,400 | |||||
| Comprehensive (loss) income attributable to SIPP International Industries, Inc. | (92,687 | ) | (319,630 | ) | ||||
| Total comprehensive (loss) income attributable to ordinary shares of SIPP International Industries, Inc. | (92,687 | ) | (319,630 | ) | ||||
F-5
SIPP INTERNATIONAL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
| Number
of | Preferred | Ordinary shares | Additional | Accumulated | Accumulated
other | Total | ||||||||||||||||||||||||||
| Shares | US$ | Shares | US$ | US$ | US$ | US$ | US$ | |||||||||||||||||||||||||
| Balance at December 31, 2020 | 10,000,000 | 10,000 | 492,404,893 | 492,404 | 19,404,002 | (19,906,406 | ) | - | - | |||||||||||||||||||||||
| Net Loss | - | - | - | - | - | (92,386 | ) | - | (92,386 | ) | ||||||||||||||||||||||
| Issuance of ordinary shares | - | - | 248,101,224 | 248,102 | (197,910 | ) | - | - | 50,192 | |||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | (301 | ) | (301 | ) | ||||||||||||||||||||||
| Balance at December 31, 2021 | 10,000,000 | 10,000 | 740,506,117 | 740,506 | 19,206,092 | (19,998,792 | ) | (301 | ) | (42,495 | ) | |||||||||||||||||||||
| Net Loss | - | - | - | - | - | (327,030 | ) | - | (327,030 | ) | ||||||||||||||||||||||
| Issuance of ordinary shares upon follow-on public offering, net of issuance cost | (10,000,000 | ) | (10,000 | ) | 600,000,000 | 600,000 | (456,979 | ) | - | - | 133,021 | |||||||||||||||||||||
| Shares issued to acquire CIHL | (76,279 | ) | (76,279 | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | 1,014 | 6,386 | 7400 | ||||||||||||||||||||||||
| Balance at December 31, 2022 | - | - | 1,340,506,117 | 1,340,506 | 18,672,834 | (20,324,808 | ) | 6,085 | (305,383 | ) | ||||||||||||||||||||||
F-6
SIPP INTERNATIONAL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss (income) | (92,386 | ) | (327,030 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | - | 4,907 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | - | - | ||||||
| Due from related companies | - | 49,955 | ||||||
| Prepaid expenses and other current assets | - | (36,350 | ) | |||||
| Inventories | - | (51,820 | ) | |||||
| Other receivable | - | (22,955 | ) | |||||
| Accounts payable | - | 65,490 | ||||||
| Accrued expenses and other payables | 26,590 | 297,484 | ||||||
| Amounts due to a related party | 67,883 | 24,198 | ||||||
| Taxes payable | - | 13,653 | ||||||
| Net cash used in operating activities | 2,087 | 17,532 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment and intangible assets | - | (24,793 | ) | |||||
| Proceeds from maturity/sale of long-term investments | - | - | ||||||
| Net cash used in investing activities | - | (24,793 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of ordinary shares upon follow-on public offering | - | - | ||||||
| Net cash (used in) provided by financing activities | - | - | ||||||
| Net decrease in cash, cash equivalents | 1,786 | 139 | ||||||
| Cash, cash equivalents at beginning of year | - | 1,786 | ||||||
| Effect of exchange rate changes on cash, cash equivalents | (301 | ) | 7,400 | |||||
| Cash, cash equivalents at end of year | 1,786 | 1,925 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Income taxes paid | - | - | ||||||
| Interest paid | - | - | ||||||
F-7
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Description of business |
Organization and Principal Activities
SIPP International Industries, Inc. (the “Company”) is a Nevada Corporation formed on January 10, 1991. The Company’s year ends March 31 and it has never been in bankruptcy, receivership, or any similar proceedings. The Company was in the business of overseeing the development of several product lines, encompassing a Food & Beverage Division, a High-Tech Storage Transport Container Division, and a Hospitality Division. The company ceased operations in 2014.
History of the Group and reorganization
On July 11, 2019, Custodian Ventures LLC, applied for appointment as Custodian of SIPP International Industries, Inc. with the eighth judicial District Court of Nevada.
On August 28, 2019, the eighth judicial District Court of Nevada appointed Custodian Ventures LLC as custodian for SIPP International Industries, Inc., proper notice having been given to the officers and directors of SIPP International Industries, Inc. There was no opposition.
On August 29, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On November 26, 2020, Custodian Ventures LLC entered into a stock purchase agreement whereby it transferred 10,000,000 shares of Preferred Stock to Kris Tabetando and Hemingway Investments LLC in exchange for $152,000 in cash. Kris Tabetando acquired 2,500,000 Preferred A Shares from Custodian Ventures LLC. Hemingway Investments LLC controlled by Issac Qureshi acquired 7,500,000 Preferred A Shares from Custodian Ventures LLC. As a result of the sale, and the resignation of David Lazar as sole officer and director of the Company, there was a change of control of the Company. Kris Tabetando was appointed CEO and director of the Company. There is no family relationship or other relationship between the Seller and the Purchasers.
On November 16, 2021, the Company issued 248,101,224 Common Shares to Kris Tabetando to repay loans advanced to the Company and for services rendered to the Company since November 26, 2020.
On August 30, 2022 Chenxu International Investment Holding Group Limited (“Chenxu”), a BVI company purchased 248,101,224 shares of common stock and 10,000,000 shares of Series A Preferred Stock from Kris Tabetando and Hemingway Investments LLC for $225,000. Subsequent to the purchase of these shares which represented controlling interest of the Company, Chenxu converted the 10,000,000 Series A Preferred Shares into 500,000,000 shares of common stock.
On November 1, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), and Jiang, Min, its sole shareholder, Chief Executive Officer of the Company, whereunder the Company acquired 100% ownership interest in CIHL for the issuance of 100,000,000 shares of the Company’s common stock. CIHL owns a China based subsidiaries, which is Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd, a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction has been treated as a business combination under common control.
The implementation of the holding company reorganization on November 1, 2022 was accounted for as a business combination under common control. The assets and liabilities acquired were recognized based on their historical cost. The consolidated financial statements of the Company present comparative information for prior years on a combined basis, as if the exchange of equity interests had occurred at the beginning of the period.
F-8
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2. | Summary of significant accounting policies |
| (a) | Basis of Presentation |
The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements include the financial information of the Company and its wholly owned subsidiaries, All the intercompany balances and transactions have been eliminated upon consolidation. While the Company has commenced generating revenues from its principal business purpose during the most recently completed quarter ended December 31, 2022, we remain in the development stage in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 915 (SFAS No. 7). The Company has elected a fiscal year end of December 31.
Going Concern
The Company experienced net loss from continuing operations of US$92,386, US$327,030 for the years ended December 31, 2021 and 2022, respectively. As of December 31, 2021 and 2022, the Company had cash and cash equivalents of US$1,786, US$1,925, and experienced negative working capital of US $42,495, US$325,269 for the years ended December 31, 2021 and 2022. The Company suffered an accumulated deficit of US$ 20,324,808 as of December 31, 2022.
These adverse conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s principal sources of liquidity have been cash provided by operating activities, as well as financial support from related parties. The Company’s operating results for future periods are subject to numerous uncertainties and it is uncertain whether the Company will be able to maintain profitability and continue sustainable growth in the foreseeable future. If management is not able to increase revenue and/or manage operating expenses in line with revenue forecasts, the Company may not be able to maintain profitability. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company will focus on improving operational efficiency and cost reduction, developing core cash-generating business, and enhancing marketing function. Actions include developing more customers, as well as creating synergy using the Company’s resources. Therefore, management believed that the substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued has been alleviated.
Based on cash flows projection from operating and financing activities and existing balance of cash and cash equivalents, management concludes that the Company has sufficient funds for sustainable operations and it will be able to meet its payment obligations from operations and debt- related commitments for the next twelve months from the issuance of the consolidated financial statements. Based on the above considerations, the accompanying financial statements have been prepared in accordance with U.S. GAAP, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of assets and amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
F-9
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (b) | Use of Estimates |
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s financial statements include but are not limited to allowance for doubtful accounts. Actual results may differ materially from those estimates.
| (c) | Foreign Currency Translation |
The functional currency of the Company is the United States Dollar (“US$”). The functional currency of its owned subsidiaries in the PRC is Renminbi (“RMB”).
Foreign currency transactions have been translated into the functional currency at the exchange rates prevailing on the date of transactions. Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at exchange rates prevailing on the balance sheet date. Exchange gains and losses are recorded in the statements of operations.
The Group has chosen the US$ as its reporting currency. Assets and liabilities have been translated using exchange rates prevailing on the balance sheet date. Equity accounts are translated at historical exchange rates. Income statement items have been translated using the average exchange rate for the year. Translation adjustments have been reported as cumulative translation adjustments and are shown as a component of other comprehensive (loss) income in the consolidated statements of comprehensive loss and consolidated statements of changes in shareholders’ equity (deficit).
| (d) | Cash, Cash Equivalents and Restricted cash |
Cash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.
| (e) | Accounts Receivable, net |
Accounts receivable, net represents those receivables derived from the ordinary course of business and are recorded net of allowance for doubtful accounts. The Group maintains an allowance for doubtful accounts that reflect its best estimate of probable losses inherent in the accounts receivables. In determining collectability of the accounts receivables, the Group considers many factors, such as: creditworthiness of customers, aging of the receivables, payment history of customers, financial condition of the customers and market trends, and specific facts and circumstances.
The allowance for doubtful accounts is reduced by subsequent collections of the specific allowances or by any write-off of customer accounts that are deemed uncollectible.
F-10
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (f) | Property and Equipment, net |
Property and equipment is recorded at cost less accumulated depreciation and impairment. Depreciation expense of long-lived assets is recorded as either cost of revenue or operating expenses, as appropriate. Depreciation is computed using the straight-line method over the following estimated useful lives by major asset category:
| Transportation equipment | 4 years |
| (g) | Goodwill and Other Long-Lived Assets |
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.
In accordance with guidance within FASB ASC 350 “Intangibles - Goodwill and Other,” goodwill and identifiable intangible assets with indefinite lives are not subject to amortization but must be evaluated for impairment.
We evaluate long-lived assets, including finite-lived intangible assets, for impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value or estimates of future discounted cash flows.
For goodwill and indefinite-lived intangible assets, in-process research and development, we review for impairment annually and upon the occurrence of certain events as required by ASC Topic 350, “Intangibles — Goodwill and Other.” Goodwill and indefinite-lived intangible assets are tested at least annually for impairment and more frequently if events or changes in circumstances indicate that the asset might be impaired. We review goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If we are able to determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, we would conclude that goodwill is not impaired. If the carrying amount of a reporting unit is zero or negative, the second step of the impairment test is performed to measure the amount of impairment loss, if any, when it is more likely than not that a goodwill impairment exists.
F-11
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (h) | Revenue Recognition |
The Group recognizes revenue in accordance with ASC 606. The core principle of ASC606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes: (1) identifying contracts with customers, (2) identifying performance obligations within those contracts, (3) determining the transaction price, (4) allocating the transaction price to the performance obligation in the contract, which may include an estimate of variable consideration, and (5) recognizing revenue when or as each performance obligation is satisfied. Our sales arrangements generally ask customers to pay in advance before any services can be arranged. The company recognizes revenue when each performance obligation is satisfied. Documents and terms and the completion of any customer acceptance requirements, when applicable, are used to verify services rendered. The Company has no returns or sales discounts and allowances because services rendered and accepted by customers are normally not returnable.
| (i) | Income Taxes |
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured at rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is recorded when it is not more likely than not that all or a portion of the net deferred tax assets will be realized.
| (j) | Comprehensive Loss |
Comprehensive Loss includes all changes in equity except those resulting from investments by owners and distributions to owners. For the years presented, the Group’s total comprehensive loss includes net loss and foreign currency translation adjustments.
| (k) | Net Income (Loss) Per Share |
The Group computes net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At December 31, 2022, there were no potentially dilutive shares.
F-12
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| (l) | Fair Value of Financial Instruments |
FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
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 of input that is significant to the fair value measurement of the instrument.
| (m) | Major Supplies and Customers |
The following customers accounted for 10% or more of revenue:
| For the years ended December 31, | ||||||||||||||||
| 2021 | 2022 | |||||||||||||||
| US$ | % | US$ | % | |||||||||||||
| Shenzhen Ruicheng Network Technology Co., LTD | - | - | 692,308 | 100.00 | % | |||||||||||
The following vendors accounted for 10% or more of accounts payable:
| As of December 31, | ||||||||||||||||
| 2021 | 2022 | |||||||||||||||
| US$ | % | US$ | % | |||||||||||||
| Sichuan Zhiwei Wanjia Food Co., LTD | - | - | 36,689 | 56.02 | % | |||||||||||
| (n) | Foreign Currency Risk |
The RMB is not a freely convertible currency. The State Administration for Foreign Exchange in the PRC, under the authority of the Peoples Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central government policies, international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The Group’s cash and cash equivalents denominated in RMB amounted to RMB 11,384 (amounted to US$1,786) and RMB 13,279 (amounted to US$1,925) as of December 31, 2021 and 2022, respectively.
| (o) | Recent Accounting Pronouncements |
The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
F-13
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 3. | Cash and cash equivalents |
The following is a summary of cash and cash equivalents:
| As of December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Cash and cash equivalents | 1,786 | 1,925 | ||||||
| Total | 1,786 | 1,925 | ||||||
| 4. | Prepaid expenses and other current assets |
The following is a summary of prepaid expenses and other current assets:
| As of December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Other receivables | - | 22,955 | ||||||
| Advance to suppliers | - | 36,350 | ||||||
| Prepaid expenses and other current assets | - | 59,305 | ||||||
| 5. | Inventories |
The following is a summary of inventories:
| As of December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Inventories | - | 51,820 | ||||||
| Inventory valuation allowance | - | - | ||||||
| Inventories, net | - | 51,820 | ||||||
| 6. | Property and Equipment, net |
The following is a summary of property and equipment:
| As of December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Transportation equipment | - | 24,793 | ||||||
| Less: accumulated depreciation | - | 4,907 | ||||||
| Total Property and Equipment, net | - | 19,886 | ||||||
F-14
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 7. | Acquisitions |
On November 1, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), and Jiang, Min, its sole shareholder, Chief Executive Officer of the Company, whereunder the Company acquired 100% ownership interest in CIHL for the issuance of 100,000,000 shares of the Company’s common stock. CIHL owns a China based subsidiaries, which is Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd, a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction has been treated as a business combination under common control.
The assets acquired were recorded based on their historical cost, and the excess paid over the parent’s basis of the net assets acquired was recorded to equity.
The following table summarizes the historical cost of the assets acquired and liabilities:
| Amount | ||||
| (US$) | ||||
| Cash and cash equivalent | 2,614 | |||
| Prepaid expenses and other current assets | 195,306 | |||
| Property and equipment, net | 19,703 | |||
| Accounts payable | 27,551 | |||
| Advances from customers | 444,913 | |||
| Accrued expenses and other current liabilities | 134,717 | |||
| Total net assets | (389,558 | ) | ||
| Attributed to the Company | (389,558 | ) | ||
| Consideration: | ||||
| Accumulated 100,000,000 common stock | 100,000 | |||
| Allocate to equity due to common control | 489,558 | |||
| 8. | Accounts payable |
The following is a summary of accounts payable:
| As of December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Accounts payable | - | 65,490 | ||||||
| Total | - | 65,490 | ||||||
F-15
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 9. | Other current liabilities |
The following is a summary of other current liabilities:
| As of December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Taxes payable | - | 13,652 | ||||||
| Salary and welfare payables | 24,684 | 33,429 | ||||||
| Accrued expenses and other current liabilities | 1,906 | 266,925 | ||||||
| Total Other current liabilities | 26,590 | 314,006 | ||||||
| 10. | Related Parties |
The company’s policy is to enter into transactions with related parties on terms that are on the whole no less favorable to it than those that would be available from unaffiliated parties at arm’s length. Based on its experience in the business sectors in which it operates and the terms of the transactions with unaffiliated third parties, the company believes that all of the transactions described below met this policy standard at the time they occurred.
Balances with Related Parties
| As of December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Due to related companies Mr. Zonghan Wu | 17,691 | 8,868 | ||||||
| Total | 17,691 | 8,868 | ||||||
During the year ended December 31, 2022, Mr. Zonghan Wu advanced a total of $ 8,868 to the Company for payment of administrative expenses and legal fees, which amount remains due and payable.
| 11. | Revenue |
The following is a summary of revenue:
| For the years ended December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Merchandise sales | - | 196,747 | ||||||
| Distribution service | - | 177,237 | ||||||
| Hosted services | - | 318,324 | ||||||
| Total | - | 692,308 | ||||||
F-16
SIPP INTERNATIONAL INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 12. | Ordinary Shares |
As of December 31, 2022, the Company is authorized to issue 2,000,000,000 shares of common stock with a par value of $0.001. All shares have equal voting rights, are non-assessable, and have one vote per share. The total number of shares of Company common stock issued and outstanding as of December 31,2022 and December 31, 2021, was 1,340,506,117 and 740,506,117 shares, respectively.
| 13. | Net Loss per Ordinary Share |
Net loss per ordinary share was computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the years ended December 31, 2021 and 2022:
| For the years ended December 31, |
||||||||
| 2021 | 2022 | |||||||
| US$ | US$ | |||||||
| Numerator: | ||||||||
| Net loss—basic and diluted | (92,386 | ) | (327,030 | ) | ||||
| Deemed dividend in relation to the convertible note | - | - | ||||||
| Net loss attributable to ordinary shareholders | (92,386 | ) | (327,030 | ) | ||||
| Shares (Denominator): | ||||||||
| Weighted average number of ordinary shares outstanding | 524,106,716 | 907,172,784 | ||||||
| Basic and diluted | - | - | ||||||
| Net loss per share—basic and diluted | (0.00 | ) | (0.00 | ) | ||||
| 14. | Commitments and Contingencies |
The Group did not have other significant capital commitments or significant guarantees as of December 31, 2021 and 2022, respectively.
| 15. | Subsequent events |
Management has evaluated subsequent events through May 10, 2023, the date on which the financial statements were available to be issued. All subsequent events requiring recognition as of December 31, 2022 have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
F-17
SIPP International Industries, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
| Mar 31, | Mar 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 48,440 | $ | - | ||||
| Accounts Receivable | 39,230 | |||||||
| Prepaid expense | 19,362 | - | ||||||
| Inventory | 85,358 | |||||||
| Fixed Assets, net | 20,359 | |||||||
| Total assets | $ | 212,751 | $ | - | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | 678,246 | |||||||
| Related party notes payable | 14,885 | 31,906 | ||||||
| Total current liabilities | 693,131 | 31,906 | ||||||
| Total liabilities | 693,131 | 31,906 | ||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock - Par value $0.001, 10,000,000 shares authorized, 10,000,000 and -0-shares outstanding, respectively, as of March 31, 2023 and March 31, 2022 | 10,000 | |||||||
| Common stock, Par Value $0.001, 2,000,000,000 shares authorized, 1,340,506,117 and 740,506,117 shares issued and outstanding as of March 31, 2023, and March 31, 2022 | 1,340,506 | 740,506 | ||||||
| Additional paid in capital | 18,749,114 | 19,206,092 | ||||||
| Accumulated deficit | (20,577,933 | ) | (19,988,504 | ) | ||||
| Other comprehensive income | 7,934 | |||||||
| Total stockholders’ deficit | (480,380 | ) | (31,906 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 212,751 | $ | 0 | ||||
The accompanying notes are an integral part of these financial statements
F-18
SIPP International Industries, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
| Three months ended | Three months ended | |||||||
| Mar 31, | Mar 31, | |||||||
| 2023 | 2022 | |||||||
| Revenue | $ | 304,520 | $ | - | ||||
| Operating expenses | ||||||||
| General and administrative expenses | 387,442 | |||||||
| Sales and marketing | ||||||||
| Depreciation | 1,592 | |||||||
| Professional fees | 91,436 | 14,216 | ||||||
| Total operating expenses | 480,470 | 14,216 | ||||||
| Income (loss) from Operations | (175,951 | ) | (14,216 | ) | ||||
| Other income (expense) | ||||||||
| Interest income | - | - | ||||||
| Total other income | - | - | ||||||
| Net income (loss) | $ | (175,951 | ) | $ | (14,216 | ) | ||
| Earnings per share | ||||||||
| Net loss per common share – basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average number of ordinary shares | ||||||||
| Basic and diluted | 1,340,506,117 | 740,506,117 | ||||||
The accompanying notes are an integral part of these financial statements
F-19
SIPP International Industries, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(unaudited)
| Series A | Additional | Accumulated
Other |
||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | paid in | Accumulated | Comprehensive | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | Deficit | Income | Total | |||||||||||||||||||||||||
| Balance, December | 10,000,000 | $ | 10,000 | 740,506,117 | $ | 740,506 | $ | 19,206,092 | $ | (19,998,792 | ) | $ | (301 | ) | $ | (42,494 | ) | |||||||||||||||
| Conversion of Series A Preferred stock to common stock | (10,000,000 | ) | (10,000 | ) | 600,000,000 | 600,000 | (456,978.39 | ) | 133,022 | |||||||||||||||||||||||
| Net income (loss) | (402,331 | ) | (402,331 | ) | ||||||||||||||||||||||||||||
| Foreign currency translation | (860 | ) | 8,235 | 7,374 | ||||||||||||||||||||||||||||
| Balance, December | - | $ | - | 1,340,506,117 | $ | 1,340,506 | $ | 18,749,114 | $ | (20,401,983 | ) | $ | 7,934 | $ | (304,430 | ) | ||||||||||||||||
| Net income (loss) | (161,066 | ) | (161,066 | ) | ||||||||||||||||||||||||||||
| Balance, March 31, | - | $ | - | 1,340,506,117 | $ | 1,340,506 | $ | 18,749,114 | $ | (20,563,048 | ) | $ | 7,934 | $ | (465,495 | ) | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
F-20
SIPP International Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
| For Three Months Ended | ||||||||
| Mar 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income (loss) | $ | (175,951 | ) | $ | (14,216 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Expenses paid by related party | 14,885 | |||||||
| Accounts payable and accrued liabilities | 235,847 | |||||||
| Depreciation | 1,592 | |||||||
| Impairment of goodwill | ||||||||
| Accounts receivable | 2,297 | |||||||
| Inventory | (32,155 | ) | - | |||||
| Net cash used in operating activities | 46,515 | (14,216 | ) | |||||
| Cash Flows From Investing Activities: | ||||||||
| Deconsolidation - cash held for sale | ||||||||
| Purchase fixed assets | ||||||||
| Net cash provided by investing activities | - | - | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from related party loans | - | 14,216 | ||||||
| Net cash provided by financing activities | - | 14,216 | ||||||
| Net change in cash | 46,515 | - | ||||||
| Cash, beginning of period | 1,925 | - | ||||||
| Cash, end of period | $ | 48,440 | $ | - | ||||
The accompanying notes are an integral part of these financial statements
F-21
SIPP INTERNATIONAL INDUSTRIES INC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and basis of accounting.
Business Description
SIPP International Industries, lnc. (the “Company”) is a Nevada Corporation formed on January 10, 1991. The Company has never been in bankruptcy, receivership, or any similar proceedings. The Company was in the business of overseeing the development of several product lines, encompassing a Food & Beverage Division, a High-Tech Storage Transport Container Division, and a Hospitality Division. The company ceased operations in 2014.
On July 11, 2019, Custodian Ventures LLC, applied for appointment as Custodian of SIPP International Industries, Inc. with the eighth judicial District Court of Nevada.
On August 28, 2019, the eighth judicial District Court of Nevada appointed Custodian Ventures LLC as custodian for SIPP International Industries, Inc., proper notice having been given to the officers and directors of SIPP International Industries, Inc. There was no opposition.
On August 29, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On November 26, 2020, Custodian Ventures LLC entered into a stock purchase agreement whereby it transferred 10,000,000 shares of Preferred Stock to Kris Tabetando and Hemingway Investments LLC in exchange for $152,000 in cash. Kris Tabetando acquired 2,500,000 Preferred A Shares from Custodian Ventures LLC. Hemingway Investments LLC controlled by Issac Qureshi acquired 7,500,000 Preferred A Shares from Custodian Ventures LLC. As a result of the sale, and the resignation of David Lazar as sole officer and director of the Company, there was a change of control of the Company. Kris Tabetando was appointed CEO and director of the Company. There is no family relationship or other relationship between the Seller and the Purchasers.
On August 30, 2022 Chenxu International Investment Holding Group Limited (“Chenxu”), a BVI company purchased 248,101,224 shares of common stock and 10,000,000 shares of Series A Preferred Sock for $225,000. Subsequent to the purchase of these shares which represented controlling interest of the Company, Chenxu converted the 10,000,000 Series A Preferred Shares into 500,000,000 shares of common stock.
On October 31, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), whereunder the Company acquired 100% ownership interest in CIHL for the issuance of 100,000,000 shares of the Company’s common stock. CIHL through its China based subsidiaries, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
Basis of Presentation and Organization
This summary of significant accounting policies of SIPP International Industries Inc. (“the Company”) is presented to assist in understanding the Company’s financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. While the Company has commenced generating revenues from its principal business purpose during the most recently completed quarter ended March 31, 2023, we remain in the development stage in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 915 (SFAS No. 7). The Company has elected a fiscal year end of December 31.
The accompanying financial statements are prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern. To continue as a going concern, the Company is actively pursuing additional funding and strategic partners to enable it to implement its business plan. In addition, the Company is also working to devote more efforts to improve its operation and generate more profits. Management believes that these actions will allow the Company to continue its operations through the next fiscal year.
F-22
Note 2 – Summary of significant accounting policies
Principals of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its 100% controlled subsidiaries: Chengzhao International Holdings Ltd, a British Virgin Islands corporation, and Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd a Chinese corporation. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant items subject to estimates and assumptions include timing of recognition of commission revenue on insurance policy renewals and expenses related thereto, along with costs associated with policy acquisition and our allowance for doubtful accounts. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Share-based compensation
We account for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation. Under the fair value recognition provision of this guidance, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period and reduced for actual forfeitures in the period they occur. Stock-based compensation is included as consulting expenses in our consolidated statements of operations.
Acquisition
The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business generally being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative related costs in the consolidated statements of operations. The Company performs valuations of assets acquired and liabilities assumed and allocates the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates.
Accounts Receivable
The Company’s accounts receivables arise from provision of services to customers and reimbursements for our of pocket costs invoiced to customers. In general the Company invoices for services rendered at the time the service is provided or the cost incurred. In the event the Company does have accounts receivable, the Company will evaluate each reporting period to provide a reserve against accounts receivable for estimated losses that may result from a customer’s inability to pay based on customer-specific analysis and general matters such as current assessments of past due balances, economic conditions and forecasts, and historical credit loss activity. Amounts determined to be uncollectible will be charged or written-off.
F-23
Revenue Recognition
The Company has adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from service related agreements and contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. Customers are billed for services in installments as they are performed either based on agreed contract terms or on a monthly basis for those clients to whom we provide recurring monthly services.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over their estimated useful lives of five to seven years for furniture and equipment and three to five years for computer hardware and software. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Upon retirement or sale, the cost and related accumulated depreciation or amortization are removed from the Condensed Consolidated Balance Sheets and the resulting gain or loss is reflected in the Condensed Consolidated Statements of Operations. Repairs and maintenance are expensed as incurred
Goodwill and Other Long-Lived Assets
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.
In accordance with guidance within FASB ASC 350 “Intangibles - Goodwill and Other,” goodwill and identifiable intangible assets with indefinite lives are not subject to amortization but must be evaluated for impairment.
We evaluate long-lived assets, including finite-lived intangible assets, for impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value or estimates of future discounted cash flows.
For goodwill and indefinite-lived intangible assets, in-process research and development, we review for impairment annually and upon the occurrence of certain events as required by ASC Topic 350, “Intangibles — Goodwill and Other.” Goodwill and indefinite-lived intangible assets are tested at least annually for impairment and more frequently if events or changes in circumstances indicate that the asset might be impaired. We review goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If we are able to determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, we would conclude that goodwill is not impaired. If the carrying amount of a reporting unit is zero or negative, the second step of the impairment test is performed to measure the amount of impairment loss, if any, when it is more likely than not that a goodwill impairment exists.
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At March 31, 2023 there were no potentially dilutive shares.
F-24
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
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 of input that is significant to the fair value measurement of the instrument.
Foreign Currency
Translation and Remeasurement Items included in the condensed consolidated financial statements of the Company and its subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The Company’s reporting currency is the U.S. dollar. The functional currency of subsidiaries based in China is the RMB. Companies based in the British Virgin Islands operate in US Dollars. All transactions initiated in RMB are translated into U.S. dollars in accordance with Accounting Standards Codification (“ASC”) 830-30, “Translation of Financial Statements,” as follows: monetary assets and liabilities are translated into U.S. dollars at exchange rates as of the balance sheet date and non-monetary assets, liabilities and equity are translated at historical rates. Sales and expenses are translated using a weighted average exchange rate for the period. All resulting exchange differences are recognized as other comprehensive income, a separate component of equity.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured at rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is recorded when it is not more likely than not that all or a portion of the net deferred tax assets will be realized.
Recently issued accounting pronouncements
The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
F-25
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern. As reflected in the accompanying consolidated financial statements, the Company had a negative retained earnings or accumulated deficit as of March 31, 2023. This raised doubt about its ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
To continue as a going concern, the Company is actively pursuing additional funding and strategic partners to enable it to implement its business plan. In addition, the Company is also working to devote more efforts to improve its operation and generate more profits. Management believes that these actions will allow the Company to continue its operations through the next fiscal year.
COVID 19
The recent COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may severely impact the Company’s ability to raise additional capital and to pursue certain planned business activities. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise additional funds or continue to implement its planned business objectives to obtain profitable operations.
Note 4 – Acquisitions
On October 31, 2022, the Company entered into an agreement with Chengzhao International Holdings Ltd, a British Virgin Islands corporation (“CIHL”), whereunder the Company acquired 100% ownership interest in CIHL for the issuance of 100,000,000 shares of the Company’s common stock. CIHL through its China based subsidiaries, Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd is a professional prefabricated food supply chain company that links upstream and downstream resources, promotes the standardization of Chinese food, provides a full-link solution for family food, and focuses on consumption, sales and experience in the retail consumer market. The transaction closed effective November 1, 2022 and has been treated as a business combination under common control.
Tangible and intangible assets acquired were recorded based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair value of the net assets acquired was recorded to goodwill. The Company fully impaired the goodwill during the year ended March 31, 2023.
Note 5 – Property and Equipment, Net
Depreciation expense amounted to $1,592 and $0, for the years ended March 31, 2023 and 2022, respectively.
F-26
Note 6 – Related Party Transactions
As at March 31, 2023, Mr. Zonghan Wu advanced a total of $ 14,885 to the Company for payment of administrative expenses and legal fees, which amount remains due and payable.
Note 7 – Equity
The Company has a total of 2,000,000,000 shares of common stock, $0.001 par value authorized and 10,000,000 shares of Preferred Stock, $0.001 par value currently authorized.
Common Stock
On August 30, 2022 Chenxu International Investment Holding Group Limited (“Chenxu”), a BVI company purchased 248,101,224 shares of common stock and 10,000,000 shares of Series A Preferred Sock for $225,000. Subsequent to the purchase of these shares which represented controlling interest of the Company, Chenxu converted the 10,000,000 Series A Preferred Shares into 500,000,000 shares of common stock.
On October 31, 2022, the Company issued 100,000,000 shares of common stock with respect to the acquisition of Chengzhao International Holdings Ltd, (BVI) discussed in Note 3 above.
As of March 31, 2023, the Company is authorized to issue 2,000,000,000 shares of common stock with a par value of $0.001. All shares have equal voting rights, are non-assessable, and have one vote per share. The total number of shares of Company common stock issued and outstanding as of March 31,2023 and March 31, 2022, was 1,340,506,117 and 740,506,117 shares, respectively.
Preferred Stock
Series A Preferred
The Company has 10,000,000 Convertible Preferred Series A shares authorized. One share of Series A Preferred is convertible into 50 shares of common stock at the option of the holder. The Series A preferred holders are entitled to 50 votes per one share held and are not entitled to dividends.
On August 30, 2022 Chenxu International Investment Holding Group Limited (“Chenxu”), a BVI company purchased 248,101,224 shares of common stock and 10,000,000 shares of Series A Preferred Sock for $225,000. Subsequent to the purchase of these shares which represented controlling interest of the Company, Chenxu converted the 10,000,000 Series A Preferred Shares into 500,000,000 shares of common stock.
The total number of Series A Preferred shares of Company common stock issued and outstanding as of March 31,2023 and March 31, 2022, was 0 and 10,000,000 shares, respectively.
Note 8 – Subsequent Event
There were no events or transactions that would require recognition or disclosure in financial statements for the quarter ended March 31, 2023.
F-27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On November 1, 2022, the Company issued CIHL100,000,000 shares of the Company’s common stock, whereunder the Company acquired 100% ownership interest in CIHL from Min Jiang, The Company relied on Section 4(a)(2) of the Securities Act.
ITEM 16. EXHIBITS
| * | To be filed by amendment. |
II-1
ITEM 17. UNDERTAKINGS
UNDERTAKINGS
The Registrant undertakes:
1. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to the director, officer and controlling person of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The Registrant is registering securities under Rule 415 of the Securities Act and hereby undertakes:
1. To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:
| (i) | Include any prospectus required by Section 10(a)(3) of the Securities Act; |
| (ii) | Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. |
| (iii) | Include any additional or changed material information on the plan of distribution. |
2. That, for the purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
4. The undersigned Registrant hereby undertakes that:
A. For determining liability of the undersigned issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned issuer undertakes that in a primary offering of securities of the undersigned issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
| i. | Any preliminary prospectus or prospectus of the undersigned issuer relating to the offering required to be filed pursuant to Rule 424; |
II-2
| ii. | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned issuer or used or referred to by the undersigned issuer; |
| iii. | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned issuer or its securities provided by or on behalf of the undersigned issuer; and |
| iv. | Any other communication that is an offer in the offering made by the undersigned issuer to the purchaser. |
B. That for the purpose of determining liability under the Securities Act to any purchaser:
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
“Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to the director, officer and controlling person of the issuer pursuant to the foregoing provisions, or otherwise, the issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.”
In the event that a claim for indemnification against such liabilities (other than the payment by the issuer of expenses incurred or paid by a director, officer or controlling person of the issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized in Chengdu, China on June 22, 2023.
| SIPP INTERNATIONAL INDUSTRIES, INC. | ||
| By: | /s/ Min Jiang | |
| Min Jiang, CEO, CFO, and Director | ||
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
Dated: June 22, 2023
| By: | /s/ Min Jiang | |
| Min Jiang, CEO, CFO, and Director (principal executive officer and principal accounting officer) | ||
| Dated: June 22, 2023 | By: | /s/ Zonghan Wu |
| Zonghan Wu, Secretary and Director |
II-4
Exhibit 3.1
FILING FEE $ 225.00 KS RECEIPT # C 2371 TRANS-NATIONAL TRANSFER CO SUITE 400 10 PEST 100 SOUTH SALT LAKE CITY, UTAH 84101 et Tlir OFFICE Cr trOlIETARY O OTATI OF MC EITAIE OF NEVADA ARTICLES OP INCORPORATION of INEWSTRIES INTERNATIONAL, INCORPORATED We, the undersigned natural persons at the age of 21 years or nore, acting as incorporators of a corporatios under the Nevada Business Corporation Act pereinateer referred to as the “Aot!’), adopt the following Articles of Incorporation for such corporation. ARTICLE I Thu name of the corporation (hereinafter called the “Corporation”) in INDUSTRIES INTERNATIONAL, INCORPORATED. ARTICLE II Period of Duration. The period of duration of the Corporation is perpetual. ARTICLE III Elanum_uuliztus. The purposes and powers for which the Corporation is organized are as follows: to purchase, own, hold, sell, dispose of and otherwise des1 in recreational development properties and systems of every kind and vAriety. To manufacture, build, prepare for market, buy, eel’s., import, export, trade and otherwise dei1 in recreation n development properties and materials of every kind And variety.• To conduct in all its branches the business of designing, building, operating, manufacturing, buying, selling,
importing, exporting, displaying, distributing, renting, repairing and otherwise dealing in and with, at wholesale and at retail, and as principal, agent, factor, broker or commission merchant, or in any other lawful capacity, recreational development properties and materials of every kind and variety. (C) To purchase, own, hold, sell, dispose of and otherwise deal In oil and gas properties, mining propervpies and natural resource property of every kind and variety. To explore for, market, buy, sell, import and export natural reenurces of every kind and variety. To manufacture, prepare for market, buy, sell, import, export, trade and otherwise deal in natural resource manufactured products of every kind and variety. To conduct in all its branches the businees of designing, manufacturing, buying, selling, importing, exporting, displaying, distributing, renting, repairing and otherwise dealing in and with, at whclesale and at retail, and as principal, agent, factor, broker, commission merchant, or in any other lawful capacity, natural resource manu!aetured products of every kind and variety. To invest in improved and unimproved real property, personal property and rights of every kind and variety. To purchase or otherwise acquire the whole or any part of tht securities, good will,-royalties, patents, patent applications, copyrights, franchises, leases, rights, property and assets of all kinds and to undertake or assume the whole or any part of the bonds. mortgagee, franchises, leases,, contracts, 2
indebtedness, guarantees, liabilities and obligations of any person, corporation, association, partnership, syndicate, entity of governmental, municipa’., or public authority, and to pay for the oan.e in cash, shares, capital stock, bonds, debenture stook notes and other securities of the corporation or otherwise or by undertaking and assuming the wholv or any “art of the liabilities or obligations of the transferor and to hold or in any manner dispose of the whole or any part of the property aAd assets so acquired and to exercise all powers necessary or convenient in and about the conduct. management and carrying -,),1 of any ouch business. (s) To borrow or raise ronieu for tiny of the purposes of the corporation and from time to tiAe without limit as to amount, to draw, make, accept, endorse, guarantee, execute and Inoue promissory notes, 6rafts, hills of exchange, warrants, bonds, debentures and other negotiable and nonnegotiable instruments and evidence of indettedness and to secure the payment thereof and of the interest thureon by mortgage on or pledge, conveyance or aQsignment in truet of the whole or any part of the assets of th,’ corporation, real, personal or mixed, including contract rights whether at the time owned or thereafter acquired. To lenu and advance monies or give credit for corporate purposes with or without req-Aring interest or any Iw seclrity for the repayment thereof. (i) To purchase, take, receive or otherwise acqu 3
hold, own, pledge, transfer or otherwise dispose of shares of its own capital stock but purchase of its own shares of stock, whether direct or indirect, shall be made only to the extent of unreserved and unrestriJted surplus available therefor and to the extent of unreserved and unrestricted capital surplus available therefor, if permitted by the act and any other applicable law and these Articles of Incorporation. (.;) To become a party to any Ir4ful arrangement for sharing of profits or to any union of interest reiciprocal concessions, partnership, syndicate, joint venture or cooperation with any person, corporation, association, partnership, syndicate, entity or governmental, municipal or public authority, domestic or foreign, in the carryirg on of any business or transacti’n deemed necessary, convenient or incidental to carrying out any of the purposes of she corporation. (k) To do all dnd everything necessary, proper, advisable or convenient for the accomplishment of any of the purposes or the attainment of any of the objects or the-furtherance of any of the pownra herein set forth and co do every other act and thing incidental thereto or connected therewith, provided the same be not forbidden b the Act, by any other applicable law or by these Articles of Incorporation. -(1) To carry out the purposes hereinabove set forth in any state, district,’ territory or possession in the United States or in any foreign country to the extent such purposes are not forbidden by the laws of such state, district, territory, 4
voesession or foreign country, and in the event that they do forbid any one of more such purposes to licit the purposes which the corporation proposes to carry on in such state, district, territory, posseision or foreign country to such purpose or purposes as are not forbidden by the lawn thereof and any certificate for application to do business therein. To engage in atilt lawful activity, subject to expressed limitations, if any. In general, to carry on any business and have and exercise all the potrere conferred by the Act on corporations organized under it and upon corporations by any other applicable law and to do any and all of the acts and things therein set forth to the same extent as natural perenns might or could do in any part of the world as principal, factor, agent, contractor, representative, trustee or otherwise, either alone or in syndicates, jointly and otherwise, in conjunction with any person, corporation, association, partnership, syndicate, entitor governmental, mnicipal or public authoriky, domestic or foreign, mid to establish and maintain offices:sod agencies all’ to exencine all or any of its corporate powers and rights throughout the world. The foregoing clauses shbll be construed as powers as well as objects and purposes and the matters expressed in etch clause ahall, unless herein otherwise expressly provided, be in no way limited by reference to or inference from the terms of any other clause but snail be regarded as independent obAects, purposes and powers and the enumeration of specifi - objects, 5
purpcnes and powers shall not be construed to limit or restrict in any manner the meaning of the general terms or the general powers of the Corporation, nor shall the expression of one thing be deemed to exclude another not expressed although it be of life nature. ARTICLE IV Authorized Shares. The aggregate number of shares which the Corporation shall have authority to issue is twenty million (20,000,000) shares of a par value of One Cent ($0.C1) ca’. The total authorized capital, of this Corporation is Two Bundred Thousand Dollars ($200,000.00). The common stock may issued 17, the Corporatiin or subscriptions taken therefor from time to time for such consideration as may be fixed from time to time by the Board of Directors. the common stock of the Corporation shall not be issued in series or broken into additional classes. There shall be but one class of stock, or equal rights and preferences. Dividend rights in the company stock shall he treated hereinafter al said stook is pet forth to be treated in }he Nevada Easiness ...Arporation Act, as amended to date. The common stook of the Corporation ahaIl be nonaesesaable and the shareholdera shall not to liable for the debts cf the Corporption except as to the extent of any unpaid subscriptions for shares which may be outstanding at any tine the 6
Corporation is dissolved, merged or said Subscription rights are called. ARTICLE V ro Pre-shptill_apio, The shareholders of the Corporation shall have no pre-eiTtive rights to acquire additional shares Gf the Corporation. ART/CLO VI Commencement of Surliness. The Corporation shall not Cortence bueiness until at least One Thoueand Dollars ($1,000.00) has been received by it as consideration for the issuance of sharer’. ARTICLE VII Votim ?hares. Each outstanding ohare of the canon stock of the oprpozation st-,all be entitled to one vote on each matter submitted to a vote at a meeting of the stockholders, each Shareholder being entitled to vote his or its shares in person or by proxy executed in writing by such shareholder or by his duly authorized attorney In fact. The shareholders of this corpo- ration shall have no right whatsoever to cumulate his or its vote with regard to such voting. All voting shall be noncumulative. ARTICLE VIII prolisions for Regulation of Internal Affairs of the gEMIAIIPn meet112-4.11_11S-11221112ULLPgs.. All meetings of the sharehold4rs of the corporation shalI-ba held at such place either within or without the State of Nevada as may be provided 7
by the bylaws of the corporation. In the absence of any such provision, all such meetings ‘hall be held at the registered office of the corporation. Quorum of Shareholders. Unless otherwise provided in the Act- or other applicable law, a majority of the shares of the Common stock of the corporation entitled to vote represented in person or by proxy shall constitute a quorum at a meeting of the shareholders of till corporation. Meetings -of Directors. Meetings of the Board of Directors Of the corporation whether regular or special may be held either within or without the State of Nevada and upon such notice be prescribed in bylaws of the corporation. gEsslul_21_2111E2sa, The number of directors of the corporation which shall constitute a quorum for the transaction of busineas at any meeting of the Board of Directors shall be fixed in the bylaws of the corporation. pallaarion of CommittmLlythe Board of Directors. The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate a committee or committees consisting of not less than two directors which committee or committees to the extent provided in such resolution or resolutions shall have and may exercise all the authority so provided by the designation of such committees and the Jelegation therto of such authority shall not operate to relieve the Board of Directors or any member thereof of any responsibility imposed upon it or him by law. 8
WILIL21....thpamrjniea. The initial bylaws of the corporation shall be adopted by its Board of Directors hereafter unleee otherwise provided in the act. Bylaws of the corporation may be adopted, amended or repealed either by the shsreholdnrs or by the Board of Directors except that (a) no bylaw adopted or anended by the shsreholdete shall be altered or repealed by the Board of Directors, and (b) no bylaw shall be adopted by the Directors which shall require more than a majority of the voting for a quorum at a meeting of the shareholders of the corporation or morn than a majority of tree votes cast t, constitute action by the shareholders except where higher percentages are required by law. The bylaws may contain any provisions for the regulation and management of the affairs of the corporation not incrineiptent with the Act, other applicable laws, and these Articles of Incorporation. V19anqy_ia_thejlopr_mdfpimotora. Any vacancy occurring in the Board of Directors may be filled by of vote of majority of the remaining directors though less than a quorum o. the Board of Directors. A director elected to fill a vauanoy shall be elected for the unexpired term of his predecensor in office. Any directorship to be filled by reaoon of an increase in the number of directors shall also be filled by the Board of Direotoro, such appointment to be until the next annual meeting as a special meeting of the shareholders called for the purpose of electing a director to the office so created. 9
Shareholder!’ of record. The name and Address of each dhareholder of record of the capital stock of the corporation ae they appear In the, stook records of the corporatfion shall he conclunive evidence as to who are the shareholder’s who are entitled to receive notice of any meetings of --N* shareholders, to vote at such etetinga, to examine & immplete linh of the allareholdere who rosy be entitled to vote at any ouch meeting And to own, enjoy and exercise any other righto and privilegea which are based upon the ownership of th•oe Gimes of common stack of the corporation. Books and Records. The corporation shall keep complete and correct books and record’s of account and shall keep minutes of the proceedings of its abareholdere and the Board of Dicectore and shall keep at ate regini,nred office or principal place of bubineeo or at the office of its transfer agent or registrar a record of Ito shareholders giving the nariee addreesen of all shareholders and the number of share° of the corporation held by each. No shareholder shall, have the right to inspect eny each books and records except ae conferred by the Act or other appliceile law unless authorized to do no by a resolution or renolutione of the shareholder’ or the 1nard of Directors. Working Cant The Doard of Di of the corporat,_A _w obeli have the power from time to time to fix and determine and to vary the amount which in to he reserved by the corporation as working capital and before the payment (Di any dividends or the making of -any diatribution of profits it may from time to time in making of -any diatribution of profits it may from time to time in 10
its absolute discretion determine to be proper whether an a reserve fund to meet contingencies or for the equalizing of dividends of the repairing or maintaining of any property of the corporation or for an addition to ntated capital, capital nurplun or earned ourplun or for any corporate purpose which the Peard of Directors shall deem to be in the bent interest of the corporation nubjeot only to such ?.imitations an the bylaws of the corporation may from tine to tine impose. Simpensation of Directors, The Board of Directors of the corporation may, provided the bylaws of the corporation no provido,makc provision for reasonable compensation of Ito membern for their cervical] an directors and eatablinh the basis upon which ouch compensation to its merbern for their nervicen an directors and eetablinh the basic upon which such compennation nha).l be paid, Any director’, of the corporation ma!, also nerve the corporation in any other capacity and receive proper compensation therefor. 192NJULLatim_21„2111Es., The directors of this corporation need not be otonkholdere, Number of Directors, The exact number of directors may from time to time be npecified by the bylaws at not lens than three nor more than fifteen, When the bylaws do not opeoify the exact number of directorn, the number of direotors shall be three, eliance_aryi.othern. A director 01611 be fully protected in relying in good faith upon the books of account of the corporation or ‘statement’s prepared by any of Ito officials an to
the value and amount of millets, liabilities or net profits of the corporation or any other facto pertinent to the existence and amount of ourpluo or other fundo from which dividends might properly be declared and paid. Reliance aiyon Others-Prudent Conduct. Dc person chill he -t liable to the corporation for any loop or darage auffered by it on account of any action taken or omitted to be talon by him as a director or officer of the corporation in good faith if ouch person (a) exercised or used the name degree of care and okill ae a prudent man would have exercised or uned under the circum- stances in the conduct, of his own affairo, or (b) took or omitted to take ouch action in reliance upon advice of counsel, for the corporation which he had reasonable grounde to believe or upon a financial stater ent of the corporation prepared by an officer or employee of the corporation in charge of its accounts or certified by a public accountant or firm of public accountants. Contracts with Interested Directorn Diaolosure and Voting. A director of the corporation ball not in the ahnenae of fraud be disqualified by hia office from dealing or contractistg with the corporation either as a vendor, purehaaer or otherwise nor in the absence of fraud shall insofar an permitted by the Act or any othar applicable atatute, any transaction or contract of the corporation he void or voidable or affected by reason of the fact that any director or any firm of which a director i a member of any corporation of which any director is an officer, director or stockholder is in any way intereated in ouch tranoaction or
contract, provided taat at the meeting of the Board of Pireotoro or of a committee thereof having authority In the premise; to authorize or confirm such contract or transaction, the interact of such director, fire~ or corporation is diaaloaed or made Known and there shall be present a quorum of the Board of Directors or of the directors constituting such committee and such contract or tranonction shall be approved by a rajority of ouch quorum, which majority shall egnnist of directors not eo interested or connected. Nor shall any director he liable to acc.int to the corporation for any profit realized by him from or through any ouch transection or contract of the corporation, ratified or approved so herein provided, by reason of the fact that he or any rim of idhich he in a member or any corporation of which he in a stockholder, director or officer was intereeted in ouch transaction or contract. Directors no interested may be counted when present at reetimps of the Board of Directoro or of ouoh committee for the purpose of determining the existence of a quorum. Each and every peroon who in or may become a director of the corporation in hereby relieved from any Mobility that might otherwise exist from theme contracting with the oorporation for the benefit of himself or any firm, ansociation or corporation or of the Board of nimatort or of nny committee which shall he ratified by a majority in the interest of a quorum of the stockholders having voting power, shall to an valid and as binding an though ratified by each and every stockholder of the corporation, but thin oholl not he conutitutid as requiring the 13
submission of any contract to the stockholders for amtroval, Indern 4 (font ion of oirectors, The corporation shall indemnify any and all pernons who may serve or who have nerved at any time es director° or officers, or who at the request of the Board of Directors of the corporatiOn may serve Or at any time have nerved as director° or officere of another corporatinn in which the corporation at rush time owned or ray own Oaten of stock or of whIch it was or may be a creditor, and their rempective heirs, administrators, successors and assigns, against any and all expenses, including amounts paid upon judgments, counsel fees, and amounta paid in settlement before_ or after suit is canmenced, actueilly and necesoarily incurred by such pefnon in connection with the defense or settlement of any claim, action, suit or proceeding fri which they, or any of them are made parties or a party or which Trity be aenerted against them or any of than by reasnn of being or having been directors or officers or a director or off uer of the corporation, or of aucih other corporation, except in relation to matters as to which any auch direotor or officer former director or officer or pernon shall be adjudged in any action, suit or proceeding to be liable for his own negligence or misconduct in the performance of his iuty. Such indemnification shall be in addition to any other rightn to which those indemnified ray he entitled under any law, bylaw, agreement, vote of otockholdern or otherwinea Ratification of Actr, of Directors. The directors may nuhmit any contract or tranoactio for approval at any annual meeting of 14
the stockholders or at any Special meeting of the stockholders called for that purpose/ and any contract or tranoaction so approved by a majority vote of a quorum of the stockholders at such neeting shall be binding upon the corporation and all og its stockholdeze, whether or not the contract or transacticn wou:05 otherwise be subject ..o attack because of the interest of any of the direotors of the corporation or for any other reason. Etaiiirsj_rients fos21a029erleat. The corporation may Issue and cell Its authorized shares from time to time, in the absence of fraud, for such considerations as may from time to time he fixed by the Board of Directors. Issuance of Shares. The corporation may issue and sell its authorized shares_ from time to time, in the absence of fraud, for such consideration as may from time to time be fixed by the Board of Directors, but in no event for less than par value. Anendm9nts of these Articles of Incur oration. The corporation reserves the right to amend, alter or repeal or to add any provisions to these Articles of Incorporation in any manner now or hereafter prescribed by the Act and any amendment thereto or by the provisions of any other applicable law and 511 rights conferred upon the shareholders of the corporation by these Articles of Incorporation and amendments hereto are granted subject only to this reservation. 15
ARTICLE IX Ellass2nUffigt. The address of the initial registered office of the corporation isi 3801 Royal Crest Street #5 Clark County Las Vegas, Nevada 89119 Eakst5=129221. The name of the initial registered agent of the Corporation at such address is: Frank Hihalka. ARTICLE Initial Board of Directors, The initial Board of nirectors of the Corporation shall consist of three members and their respective names and addresses axes Ivan R. Harty Dan Shuput Ralph L. Jensen Address 4189 South 4080 West #128 West Valley City, UT 84120 259 East 4050 South #4 Murray, UT 84107 3769 South Loretta Drive Salt Lake City, UT 84106 which directors shall hold office until the first meeting of shareholders of the Corporation and until their; successors shall have been elected and gual)fiad. allmstspt Board of Directors. At the first meeting of the shareholders of the Corporation and at each annual meeting thereafter, the shareholders shall elect directors to hold office until the next succeeding annual meeting of the shareholders. Each director so elected shall hold office for the term for which he is elected and until his successor shall have been elected and 16
qualified. Directors need not be residents of the State of Wevada or shareholders of the Corporation. ARTICLE XI The name of each incorporator and their addresses aret Name Ivan R. Harry Dan Shuput Ralph L. Jensen Address 4189 South 4080 West 4128 West Valley City, UT 84120 259 East 4050 South 14 Murray, UP 84107 3969 South Loretta Drive Salt Lake City, DT 04106 DATED this MT day of 1990. Ivan R. Barry Dan 3 uput RECEIVED JAN 1 0 inni SECKTARY OF STATE 17
STATE OP UTAH ) ao. County of Salt Lake ) On this day of 1990, personally appeared before me IVAN R. HARRY, one 43 s gners of the above and foregoing Articles of Incorporatio ho duly acknowledged to me that the executed the Fare. Notary Pu. c Residing at: My commission exp res: KITARY P1,191-10 WAN D. Deri9Alti -145 W.V.C., u I Ms* CosamissIOH FicyiRC.1 MARCH 100M aTATE CIF I$TAH SWF OF UTAH County of Salt Lake ) ss. On this day of 1990, personally appeared before me DAN SHUPUT, one ol t e gners of the above and foregoing Articles of Incorporation, who duly acknowledged to me that the executed the same. Notary Pu Residing at: My commission exp rest STATE or UTAH County of Salt Lake ant On this Oc. day of ?);?ee--’ appeared before me RALPH L. JTRETT7777777Ve 1990, personally signers of the ion, who duly acknowledged to me that the executed thq,same. Frahly 12CSLcatz... i4•4412.11 1:41 stasciOwl Note- Residing,- at: My commission exp zest.L.i?4,1:3 41.1/1..hi JAN 10 MI StCRETAsw OF MIT
WICATE OF ACCEPTANCE OF APPOINTMENT JAN it 1991 ! BY RESIDENT AGENT pun LIU 11011Trinir “‘CC INDUSTRIES IN THE. MATTER F ..... INTEPNATIONAL INCORPORATED O thine or corposioo.; ...... __FRANK MII1ALKA , with address at Suite. .... ............. oi RCIldeat Agent Street .. 3001 ROYAL CREST STREET LAS VEGAS CLARK Town of d••••••I.• •Pk.••• County of. , State of Nevada, hereby accept the appointment as Resident Agent of die above-entitled corpxation in accordance with NRS 78.(190. FURTHERMORE, that ;he principal office in this stale is located at Suite. Stree 3801 ROYAL CREST STREET Street............ .......3801 Town or LAS VEGAS County of CLAPK State of Nevada. --’;EIVED 1 6 mu #6
ROSS MILLER Secretary of State 204 North Carson Street, Ste 1 Carson City, Nevada 89701-4299 (775) 684 5708 Website: secretaryofstate.biz Certificate to Accompany Restated Articles (PURSUANT TO NRS) USE BLACK RIK ONLY DO HOT HIGICISKT ABOVE SPACE IS FOR OFFICE USE ONLY This NMI l to Accompany Restated Articles cLf incorporation (Pursuant to NRS 78.403, 82.371, 86.221, 88.355 or 8844150) (This form is also to be used to accompany Restated Articles for Limited-Liability Companies, Certificates of Limited Partnership, Limited-Liability Limited Partnerships and Business Trusts) Name of Nevada entity as last recorded in this office: INDUSTRIES INTERNATIONAL, INC., FILE # C203-1991 The articles are being ❑ Restated or ki Amended and Restated (check only one). Please entitle your attached articles “Restated” or “Amended and Restated,” accordingly. 3.. Indicate what changes have been made by checking the appropriate box.* No amendments: articles are restated only and are signed by an officer of the corporation who has been, authorized to execute the certificate by resolution of the board of directors adopted on ! The certificate correctly sets forth the text of the articles or certificate as amended to the date of the certificate. 1E1 The entity name has been amended. IE The resident agent has been changed. (attach Certificate of Acceptance from new resident agent) The purpose of the entity has been amended. The authorized shares have been amended. The directors, managers or general partners have been amended, IRS tax language has been added. Articles have been added. Articles have been deleted. Other. The articles or certificate have been amended as follows (provide article numbers, if available}: * This form is to accompany Restated Articles which contain newly altered or amended articles. The Restated Articles must contain all of the requirements as set forth in the statutes for amending or altering the articles or certificates IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected. This form must be accompanied by appropriate fees Nevada Secretary C4 State AM Restated 2007 Revised on 01/01/07
ROSS MILLER Secretary of State 204 North Corson Street, st• Coma city. td•vada 857E11-4299 (7751 .114 0708 4. PFMNIMEMMIMINIII■I■nommmi =um WOO*: escretorioestata.blx Certificate of Amendment (PURSUANT TO NRS 78 385 AND 78,390) uso BLACK INK ONLY . DO WO HIGHLIGHT MOVE SPACE S ease WIC’ wig coax ralt_101/ lisadifilissibranwaggn EtrAraishmergatarmalml (Pursuant to NR 5 78.305 and 711.390 After Issuance of Stock) Name ofcorporation• • .•._ • INDusTRIES INTERNATIONAL, INC., FILE ti (.203-1991 The articles have been amended as follows (provide article numbers, If available): The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by theprpvisions of the* articles of incorporation have voted in favor of theipendment is: .92,000,000 out of 126,585.ftoos73%) Effective date of filing (optional): Officer Signature (Required): *If any proposed amendment mold alter or change an •oit 6r any relatnre or right given to any class or aeries of outstanding shares, then the amendment must be approved by fie vote. In addition to the afltrmative vote otherwise requirsd. of the holders of shares reprseentlng a majority of the voting power of each class or series affected by the amendment regardless of Iimitabon& or Peetrictions on the voting power thereof. IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected. iromt must be eccornPenied by approptiatip fees Nelda tormay at ammo Ail Mal kid 2007 !WNW air MIN
RESTATED AND AMENDED ARTICLES OF INCORPORATION INDUSTRIES INTERNATIONAL, INC. ARTICLE I (Corporate Name) The name of this corporation shall be: SIPP INTERNATIONAL INDUSTRIES, INC. ARTICLE II (Duration) This corporation shall have perpetual existence. ARTICLE III (per The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the laws of the State of Nevada other than the banking business, the trust company business, the insurance business or the practice of a profession permitted to be incorporated under the laws of the State of Nevada. ARTICLE IV (Shares) The aggregate number of shares which the corporation shall have authority to issue, including the classes thereof and special provisions, are as follows: 260,000,000 shares; 250,000,000 shares of voting, common stock, with a par value of $0.001 and 10,000,000 shares of preferred stock, with a par value of $0.001. The shares of preferred stock may be issued in a series of designations. The shareholders shall not have the right to accumulate votes in the election of directors with respect to shares of common stock in the corporation. Each share of common stock shall be entitled to one vote. The holders of the shares of preferred stock are entitled to receive the net assets of the corporation upon dissolution. The Board of Directors are entitled to restructure the issued and outstanding shares of stock with respect to a forward or reverse split, without a formal shareholders meeting, general or special meeting, providing that fifty percent (50%) of
the shareholders agree to the share reorganization within the limits of the share capitalization of 250,000,000 shares of voting, common stock. Such shareholder vote may be obtained by telefax or other means of communication to obtain the shareholder’s vote. When, as and if the shareholders of the Corporation vote to restructure the Corporation’s issued and outstanding shares of common stock by either a forward (up to the authorized share capital) or reverse split of the issued and outstanding shares of common stock, the authorized capital remains the same and does not forward or reverse split along the issued and outstanding shares of common stock. ARTICLE V (Directors) The initial number of directors and original incorporators of this corporation shall be one (1), whose name and address is as follows: David Goldberg, President, Board Chairman C/o Nevada Business Services 1805 North Carson, #188 Carson City, Nevada 8970 ARTICLE VI (By-laws) The authority to make By-laws for the corporation is hereby expressly vested in the Board of Directors of this corporation, subject to the power of the majority of the shareholders to change or repeal such By-laws. Any such change in the By-laws must be in agreement by the majority (fifty percent or more) of the shareholders. The Board of Directors shall not make or alter any By-laws fixing their qualifications, classifications, terms of office or extraordinary powers without first securing the approval of the majority (fifty percent or more) of the shareholders. Such majority approval may be obtained by the Board of Directors without the necessity of a Special or Extraordinary General Meeting of the corporation’s shareholders. Such majority shareholder approval may be obtained by written proxy statement or a polling of the shareholders by telephone or telefax. ARTICLE VII (Amendment to Articles of Incorporation) The Board of Directors reserves the right to amend, alter, change, or repeal any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred on the corporation herein are granted subject to this reservation.
ARTICLE VIII (Registered Agent & Registered Office) The name and street address of the Registered Agent is Nevada Business Services, 1805 North Carson, #188, Carson City, Nevada 98006. ARTICLE IX SHAREHOLDER VOTING REQUIREMENTS FOR CERTAIN TRANSACTIONS To be adopted by the shareholders, the following actions must be approved by each voting group of shareholders entitled to vote thereon by a majority of all the votes entitled to be cast by that voting group. Such majority may be obtained via telefax or other valid means of communication: Amendment of the Articles of Incorporation; A plan of merger or share exchange; The sale, lease, exchange or other disposition of all or substantially all of the corporation’s assets, other than in the use and regular course of business; or Dissolution of the corporation. ARTICLE X (Commencement of Business) This corporation shall commence business upon receiving its corporate license. IN WITNESS WHERE, the Board Chairman has hereunto set his hand in duplicate originals 20th Da#f April 2007. Gol g, President, Board Chairman
Filed in the Office of K• Secretary of State State Of Nevada Filed OnBusiness Number C203-1991 Filing Number 20200434135 1/2/2020 10:00:00 AM Number of Pages 20 BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov Profit Corporation: Certificate of Amendment (PURSUANT TO NRS 78.380 & 78.385/78.390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PURSUANT TO NRS 78.403) Officer’s Statement (PURSUANT TO NRS 80.030) TYPE OR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT Entity information: Name of entity as on file with the Nevada Secretary of State: SIPP INTERNATIONAL INDUSTRIES, INC. Entity or Nevada Business Identification Number (NVID): C203-1991 Restated or Amended and Restated Articles: (Select one) (If amending and X Certificate to Accompany Restated Articles or Amended and Restated Articles Restated Articles - No amendments; articles are restated only and are signed by an officer of the corporation who has been authorized to execute the certificate by resolution of the board of directors adopted on: The certificate correctly sets forth the text of the articles or certificate as amended to the date of the certificate. X Amended and Restated Articles * Restated or Amended and Restated Articles must be included with this filing type. restating only, complete section 1,2 3, 5 and 6) Type of Amendment Filing Being Completed: (Select only one box) (If amending, complete section 1, 3, 5 and 6.) Certificate of Amendment to Articles of Incorporation (Pursuant to NRS 78.380 - Before Issuance of Stock) The undersigned declare that they constitute at least two-thirds of the following: (Check only one box) incorporators board of directors The undersigned affirmatively declare that to the date of this certificate, no stock of the corporation has been issued x Certificate of Amendment to Articles of Incorporation (Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock) The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is: court order Officer’s Statement (foreign qualified entities only) - Name in home state, if using a modified name in Nevada: L ., Jurisdiction of formation: Changes to takes the following effect: The entity name has been amended. ---j Dissolution The purpose of the entity has been amended. ;Merger The authorized shares have been amended. T....Conversion Other: (specify changes) * Officer’s Statement must be submitted with either a certified copy of or a certificate evidencing the filing of any document, amendatory or otherwise, relating to the original articles in the place of the corporations creation. This form must be accompanied by appropriate fees. Page 1 of 2 Revised: 1/1/2019 This form must be accompanied by appropriate fees. Page 1 of 2 Revised: 1/1/2019
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov Profit Corporation: Certificate of Amendment (PURSUANT TO NRS 78.380 & 78.385178.390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PURSUANT TO NRS 78.403) Officer’s Statement (PURSUANT TO NRS 80.030) Effective Date and Time: (Optional) Date: Time: (must not be later than 90 days after the certificate is filed) Information Being Changed: (Domestic corporations only) Changes to takes the following effect: The entity name has been amended. The registered agent has been changed. (attach Certificate of Acceptance from new registered agent) The purpose of the entity has been amended. x The authorized shares have been amended. The directors, managers or general partners have been amended. IRS tax language has been added. X Articles have been added. X Articles have been deleted. Other. The articles have been amended as follows: (provide article numbers, if available) (attach additional page(s) if necessary) Signature: (Required) : X artei4se Lazar ! President . Signature of Officer or Authorized Signer Title X Signature of Officer or Authorized Signer Title *If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof. Please include any required or optional information in space below: (attach additional page(s) if necessary) This form must be accompanied by appropriate fees. Page 2 of 2 Revised: 1/1/2019
AMENDED AND RESTATED ARTICLES OF INCORPORATION AFTER ISSUANCE OF STOCK OF SIPP INTERNATIONAL INDUSTRIES, INC. ARTICLE I NAME The name of the corporation shall be SIPP INTERNATIONAL INDUSTRIES, INC. (hereinafter, the “Corporation”). ARTICLE II REGISTERED OFFICE The initial office of the Corporation shall be 50 W. Liberty St., Suite 880, Reno, Nevada 89501. The initial registered agent of the Corporation shall be Nevada Agency and Transfer Company. The Corporation may, from time to time, in the manner provided by law, change the resident agent and the registered office within the State of Nevada. The Corporation may also maintain an office or offices for the conduct of its business, either within or without the State of Nevada. ARTICLE III CAPITAL STOCK Section 1. Atithori=ed Shares. The aggregate number of shares which the Corporation shall have authority to issue is five hundred ten million (510,000,000) shares, consisting of two classes to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares of Common Stock that the Corporation shall have authority to issue is five hundred million (500,000,000) shares with all such shares of Common Stock having a par value of $0.001 per share. The total number of shares of Preferred Stock that the Corporation shall have authority to issue is ten million (10,000,000) shares with all such shares of Preferred Stock having a par value of $0.001 per share. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof. The voting powers, designations, preferences, limitations, restrictions, and relative, participating, optional and other rights, and the qualifications, limitations, or restrictions thereof, of the Preferred Stock shall hereinafter be prescribed by resolution of the board of directors pursuant to Section 3 of this Article III. Section 2. Common Stock. Dividend Rate. Subject to the rights of holders of any Preferred Stock having preference as to dividends and except as otherwise provided by these Articles of Incorporation, as amended from time to time (hereinafter, the “Articles”) or the Nevada Revised Statues (hereinafter, the “NRS”), the holders of Common Stock shall be entitled to receive dividends when, as and if declared by the board of directors out of assets legally available therefor. Voting Rights. Except as otherwise provided by the NRS, the holders of the issued and outstanding shares of Common Stock shall be entitled to one vote for each share of Common Stock. No holder of shares of Common Stock shall have the right to cumulate votes.
Liquidation Rights. In the event of liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary, subject to the prior rights of holders of Preferred Stock to share ratably in the Corporation’s assets, the Common Stock and any shares of Preferred Stock which are not entitled to any preference in liquidation shall share equally and ratably in the Corporation’s assets available for distribution after giving effect to any liquidation preference of any shares of Preferred Stock. A merger, conversion, exchange or consolidation of the Corporation with or into any other person or sale or transfer of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation. No Conversion, Redemption, or Preemptive Rights. The holders of Common Stock shall not have any conversion, redemption, or preemptive rights. Consideration for Shares. The Common Stock authorized by this Article shall be issued for such consideration as shall be fixed, from time to time, by the board of directors. Section 3. Preferred Stock. (a) Designation. The board of directors is hereby vested with the authority from time to time to provide by resolution for the issuance of shares of Preferred Stock in one or more series not exceeding the aggregate number of shares of Preferred Stock authorized by these Articles, and to prescribe with respect to each such series the voting powers, if any, designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions relating thereto, including, without limiting the generality of the foregoing: the voting rights relating to the shares of Preferred Stock of any series (which voting rights, if any, may be full or limited, may vary over time, and may be applicable generally or only upon any stated fact or event); the rate of dividends (which may be cumulative or noncumulative), the condition or time for payment of dividends and the preference or relation of such dividends to dividends payable on any other class or series of capital stock; the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution, or winding up of the affairs of the Corporation; the rights, if any, of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other class or series of capital stock or for any other securities, property, or assets of the Corporation or any subsidiary (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange shall be applicable, and the time or times during which a particular price or rate shall be applicable); whether the shares of any series of Preferred Stock shall be subject to redemption by the Corporation and if subject to redemption, the times, prices, rates, adjustments and other terms and conditions of such redemption. The powers, designations, preferences, limitations, restrictions and relative rights may be made dependent upon any fact or event which may be ascertained outside the Articles or the resolution if the manner in which the fact or event may operate on such series is stated in the Articles or resolution. As used in this section “fact or event” includes, without limitation, the existence of a fact or occurrence of an event, including, without limitation, a determination or action by a person, government, governmental agency or political subdivision of a government. The board of directors is further authorized to increase or decrease (but not below the number of such shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. Unless the board of directors provides to the contrary in the resolution which fixes the characteristics of a series of Preferred Stock, neither the consent by series, or otherwise, of the holders of any outstanding Preferred Stock nor the consent of the holders of any outstanding Common Stock shall be required for the issuance of any new series of Preferred Stock regardless of whether the rights and preferences of the new series of Preferred Stock are senior or superior, in any way, to the outstanding series of Preferred Stock or the Common Stock. 2
(b) Certificate. Before the Corporation shall issue any shares of Preferred Stock of any series, a certificate of designation setting forth a copy of the resolution or resolutions of the board of directors, and establishing the voting powers, designations, preferences, the relative, participating, optional, or other rights, if any, and the qualifications, limitations, and restrictions, if any, relating to the shares of Preferred Stock of such series, and the number of shares of Preferred Stock of such series authorized by the board of directors to be issued shall be made and signed by an officer of the corporation and filed in the manner prescribed by the NRS. Section 4. Non-Assessment of Stock. The capital stock of the Corporation, after the amount of the subscription price has been fully paid, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed, and the Articles shall not be amended in this particular. No stockholder of the Corporation is individually liable for the debts or liabilities of the Corporation. ARTICLE IV DIRECTORS AND OFFICERS Section 1. Number of Directors. The members of the governing board of the Corporation are styled as directors. The board of directors of the Corporation shall be elected in such manner as shall be provided in the bylaws of the Corporation. The board of directors shall consist of at least one (1) individual and not more than thirteen (13) individuals. The number of directors may be changed from time to time in such manner as shall be provided in the bylaws of the Corporation. Section 2. Initial Directors. The name and post office box or street address of the director(s) constituting the initial board of directors is: Name Address David Lazar 3445 Lawrence Ave , Oceanside, NY 1 1572 Section 3. Limitation of Liability. The liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS. If the NRS is amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors or officers, the liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS, as so amended from time to time. Section 4. Payment of Expenses. In addition to any other rights of indemnification permitted by the laws of the State of Nevada or as may be provided for by the Corporation in its bylaws or by agreement, the expenses of officers and directors incurred in defending any threatened, pending. or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, involving alleged acts or omissions of such officer or director in his or her capacity as an officer or director of the Corporation or member, manager, or managing member of a predecessor limited liability company or affiliate of such limited liability company or while serving in any capacity at the request of the Corporation as a director, officer, employee, agent, member, manager, managing member, partner, or fiduciary of, or in any other capacity for, another corporation or any partnership, joint venture, trust, or other enterprise, shall be paid by the Corporation or through insurance purchased and maintained by the Corporation or through other financial arrangements made by the Corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Corporation. To the extent that an officer or director is successful on the merits in defense of any such action, suit or proceeding, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense. Notwithstanding anything to the contrary 3
contained herein or in the bylaws, no director or officer may be indemnified for expenses incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, that such director or officer incurred in his or her capacity as a stockholder. Section 5. Repeal and Conflicts. Any repeal or modification of Sections 3 or 4 above approved by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the liability of a director or officer of the Corporation existing as of the time of such repeal or modification. In the event of any conflict between Sections 3 or 4 above and any other Article of the Articles, the terms and provisions of Sections 3 or 4 above shall control. ARTICLE V COMBINATIONS WITH INTERESTED STOCKHOLDERS At such time, if any, as the Corporation becomes a “resident domestic corporation”, as that term is defined in NRS 78.427, the Corporation shall not be subject to, or governed by, any of the provisions in NRS 78.411 to 78,444, inclusive, as may be amended from time to time, or any successor statute. ARTICLE VI BYLAWS The board of directors is expressly granted the exclusive power to make, amend, alter. or repeal the bylaws of the Corporation pursuant to NRS 78.120. IN WITNESS WHEREOF, the Corporation has caused these articles of incorporation to be executed in its name by its President on December 27, 2019. DAVID LAZAR, President The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have voted in favor of the amendment is: 50.2837% This Amended and Restated Articles of Incorporation After Issuance Of Stock is filed pursuant to the order dated December 18, 2019, of the Eighth Judicial District Court of Nevada, in and for Clark County, case number A-19-798294-B, a certified copy of which is attached hereto as Exhibit A. 4
EXHIBIT A Eighth Judicial District Court of Nevada, in and for Clark County, case number A-19-798294-B Order, dated December 18, 2019 5
Electronically Filed 12/18/2019 12:51 PM Steven D. Grierson CLERK OF THE COU NOTC PETER L CHASEY, ESQ. Nevada Bar No. 007650 CHASEY LAW OFFICES 3295 N. Fort Apache Road, Suite 110 Las Vegas, Nevada 89129 Tel: (702) 233-0393 Fax: (702) 233-2107 email: peter@chaseylaw.com Attorney for Petitioner CUSTODIAN VENTURES, LLC EIGHTH JUDICIAL DISTRICT COURT CLARK COUNTY, NEVADA In the Matter of ) CASE NO.: A-19-798294-B ) DEPT NO.: XVI SIPP INTERNATIONAL INDUSTRIES, INC., a ) Nevada Corporation, ) ) (Petition of Custodian Ventures, LLC) ) ) NOTICE OF ENTRY OF ORDER PLEASE TAKE NOTICE that on the 18th day of December, 2019 the attached Order fo Declaratory Relief was entered in the above-captioned case. Dated this / r day of December, 2019. CHASEY LAW OFFICES Peter L. chaSey; Esq. Nevada’Bar No. 007650 3295 N. Fort Apache Rd., Ste. 110 Las Vegas, NV 89129 Tel: (702) 233-0393 Fax: (702) 233-2107 Email: peter@chaseylaw.com Attorney for Petitioner CUSTODIAN VENTURES, LLC
I hereby certify that on the I. CERTIFICATE OF SERVICE day of December, 2019, I served a true and complete copy o the foregoing NOTICE OF ENTRY OF ORDER by placing a copy of the same in the United States Mail postage fully prepaid addressed to the following: Officers and Directors SIPP International Industries, Inc. 848 N. Rainbow Blvd. Las Vegas, NV 89107 Action Stock Transfer 2469 E. Fort Union Blvd., Suite 214 Salt Lake City, UT 84121 Officers and Directors SIPP International Industries, Inc. 4616 W. Sahara Avenue, Suite 151 Las Vegas, NV 89102 (APA/(01/ iff1A.00 MPLOYEE OF CH SEY LAW OFFIC DEC 19 2019 CERTIFIED COPY DOCUMENT ATTACHED IS A TRUE AND CORRECT COPY OF THE ORIGINAL ON FILE CLERK OF THE COURT
Electronically Flied 12/18/201912:22 PM Steven D. Grierson CLERK OF THE COU ORDR PETER L. CHASEY, ESQ. Nevada Bar No 007650 CHASEY LAW OFFICES 3295 N. Fort Apache Road, Suite 110 Las Vegas, Nevada 89129 Tel: (702) 233-0393 Fax: (702) 233-2107 email: peter@chaseylaw.com Attorney for Petitioner CUSTODIAN VENTURES, LLC EIGHTH JUDICIAL DISTRICT COURT CLARK COUNTY, NEVADA In the Matter of ) CASE NO.: A-19-798294-B ) DEPT NO.: XVI SIPP INTERNATIONAL INDUSTRIES, INC., a Nevada Corporation, ) ORDER FOR DECLARATORY RELIEF (Petition of Custodian Ventures, LLC), This Court, having considered the Motion for Declaratory Relief by Custodian Ventures, LLC, Custodian for SIPP International Industries, Inc., proper notice having been given to all interested parties, including the former officers and directors of SIPP International Industries, Inc., pursuant to NRS 78.750(2), good cause appearing: IT IS FOUND that: The circumstances before this Court warrant a declaration of rights and status pursuant to Chapter 30 of the Nevada Revised Statutes, On or about February 2, 2017, the former officers and directors of Sipp International Industries, Inc., a Nevada corporation, apparently filed documents with the Colorado Secretary of State in an effort to change jurisdiction of Sipp International Industries, Inc. to Colorado, but no Case Number. A-19-798294-B
conversion was ever valid or effective due to the failure to file Articles of Conversion with the Nevada Secretary of State. conversion was ever valid or effective due to the failure to file Articles of Conversion with the Nevada Secretary of State. On or about February 2, 2017, the former officers and directors of SIPP International Industries, Inc. purported to increase the number of authorized shares of common stock to 500 million share, and thereafter the transfer agent for SIPP International Industries, Inc. issued a substantial portion of those 500 million shares. THEREFORE, IT IS ORDERED, ADJUDGED, AND DECREED that: From its formation in 1991, through the date of this Order, SIPP International Industries, Inc. has been and is a Nevada corporation organized and existing under Nevada law; and Custodian Ventures, LLC, court appointed custodian of SIPP International Industries, Inc. is specifically authorized to file a Certificate of Amendment and Amended and Restated Articles of Incorporation with the Nevada Secretary substantially similar to those attached hereto as Exhibit 1 and Exhibit 2 attached to this Order IT IS SO ORDERE, ve- D. Dated this day of — , 20 DISTRIC COURT JUDGE Respectfully Submitted by: CHASEY LAW OFFICES Peter L. Chasey, Esq. Nevadaiar No. 007650 3295 N. Fort Apache Rd., Ste. 110 Las Vegas, NV 89129 Attorney for Custodian CUSTODIAN VENTURES, LLC
EXHIBIT I.
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov Profit Corporation: Certificate of Amendment (PURSUANT TO NRS 78.380 & 78.385178.390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PURSUANT TO NRS 78.403) Officer’s Statement (PURSUANT TO NRS 80.030) TYPE OR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT Entity information: Name of entity as on file with the Nevada Secretary of State: 1SIPP INTERNATIONAL INDUSTRIES, INC. 1 Entity or Nevada Business Identification Number (NVID): ;C203-1991 j Restated or Amended and Restated Articles: (Select one) (If amending and K Certificate to Accompany Restated Articles or Amended and Restated Articles D Restated Articles - No amendments; articles are restated only and are signed by an officer of the corporation who has been authorized to execute the certificate by resolution of the board of directors adopted on: The certificate correctly sets forth the text of the articles or certificate as amended to the date of the certificate. >---5] Amended and Restated Articles * Restated or Amended and Restated Articles must be included with this filing type. restating only, complete section 1,2 3, 5 and 6) Type of Amendment Filing Being Completed: (Select only one box) (If amending, complete section 1, 3, 5 and 6.) Ei Certificate of Amendment to Articles of Incorporation (Pursuant to NRS 78.380 - Before Issuance of Stock) The undersigned declare that they constitute at least two-thirds of the following: (Check only one box) T..1 incorporators 171 board of directors The undersigned affirmatively declare that to the date of this certificate, no stock of the corporation has been issued 5-{i Certificate of Amendment to Articles of Incorporation (Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock) The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is: court order r___: Officer’s Statement (foreign qualified entities only) - Name in home state, if using a modified name in Nevada: 1 Jurisdiction of formation: i i . .._ Changes to takes the following effect: 0 The entity name has been amended. ►Dissolution ri The purpose of the entity has been amended. 0-Merger El The authorized shares have been amended. i 1Conversion 00ther: (specify changes) - - * Officer’s Statement must be submitted with either a certified copy of or a certificate evidencing the filing of any document, amendatory or otherwise, relating to the original articles in the place of the corporations creation. This form must be accompanied by appropriate fees. Page 1 of 2 Revised: 1/1/2019
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov Profit Corporation: Certificate of Amendment (PURSUANT TO NRS 78.380 & 78.385/78.390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PURSUANT TO NRS 78.403) Officer’s Statement (PURSUANT TO NRS 80.030) Effective Date and Time: (Optional) -- - - -----i Date: Time: (must not be later than 90 days after the certificate is filed) Information Being Changed: (Domestic corporations only) Changes to takes the following effect: ri The entity name has been amended. L i The registered agent has been changed. (attach Certificate of Acceptance from new registered agent) Li The purpose of the entity has been amended. RI The authorized shares have been amended. El The directors, managers or general partners have been amended. ❑ IRS tax language has been added. [Ecl Articles have been added. X Articles have been deleted. 17?_(1 Other. The articles have been amended as follows: (provide article numbers, if available) ;Article 1 The name of the corporation shall be SIPP (continued, see attached) (attach additional page(s) if necessary) Signature: (Required) , X 1 President 7 i Signature of Officer or Authorized Signer Title X i Signature of Officer or Authorized Signer Title *If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof. Please include any required or optional information in space below: (attach additional page(s) if necessary) This form must be accompanied by appropriate fees. Page 2 of 2 Revised: 1/1/2019
EXHIBIT 2
AMENDED AND RESTATED ARTICLES OF INCORPORATION AFTER ISSUANCE OF STOCK OF SIPP INTERNATIONAL INDUSTRIES, INC. ARTICLE I NAME The name of the corporation shall be SIPP INTERNATIONAL INDUSTRIES, INC. (hereinafter, the “Corporation”). ARTICLE II REGISTERED OFFICE The initial office of the Corporation shall be 50 W. Liberty St., Suite 880, Reno, Nevada 89501. The initial registered agent of the Corporation shall be Nevada Agency and Transfer Company. The Corporation may, from time to time, in the manner provided by law, change the resident agent and the registered office within the State of Nevada. The Corporation may also maintain an office or offices for the conduct of its business, either within or without the State of Nevada. ARTICLE III CAPITAL STOCK Section 1. Authorized Shares. The aggregate number of shares which the Corporation shall have authority to issue is five hundred ten million (510,000,000) shares, consisting of two classes to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares of Common Stock that the Corporation shall have authority to issue is five hundred million (500,000,000) shares with all such shares of Common Stock having a par value of $0.001 per share. The total number of shares of Preferred Stock that the Corporation shall have authority to issue is ten million (10,000,000) shares with all such shares of Preferred Stock having a par value of $0.001 per share. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof. The voting powers, designations, preferences, limitations, restrictions, and relative, participating, optional and other rights, and the qualifications, limitations, or restrictions thereof, of the Preferred Stock shall hereinafter be prescribed by resolution of the board of directors pursuant to Section 3 of this Article III. Section 2. Common Stock Dividend Rate. Subject to the rights of holders of any Preferred Stock having preference as to dividends and except as otherwise provided by these Articles of Incorporation, as amended from time to time (hereinafter, the “Articles”) or the Nevada Revised Statues (hereinafter, the “NRS”), the holders of Common Stock shall be entitled to receive dividends when, as and if declared by the board of directors out of assets legally available therefor. Voting Rights. Except as otherwise provided by the NRS, the holders of the issued and outstanding shares of Common Stock shall be entitled to one vote for each share of Common Stock. No holder of shares of Common Stock shall have the right to cumulate votes.
Liquidation Rights. In the event of liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary, subject to the prior rights of holders of Preferred Stock to share ratably in the Corporation’s assets, the Common Stock and any shares of Preferred Stock which are not entitled to any preference in liquidation shall share equally and ratably in the Corporation’s assets available for distribution after giving effect to any liquidation preference of any shares of Preferred Stock. A merger, conversion, exchange or consolidation of the Corporation with or into any other person or sale or transfer of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation. No Conversion, Redemption, or Preemptive Rights. The holders of Common Stock shall not have any conversion, redemption, or preemptive rights. Consideration for Shares. The Common Stock authorized by this Article shall be issued for such consideration as shall be fixed, from time to time, by the board of directors. Section 3. Preferred Stock. (a) Designation. The board of directors is hereby vested with the authority from time to time to provide by resolution for the issuance of shares of Preferred Stock in one or more series not exceeding the aggregate number of shares of Preferred Stock authorized by these Articles, and to prescribe with respect to each such series the voting powers, if any, designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions relating thereto, including, without limiting the generality of the foregoing: the voting rights relating to the shares of Preferred Stock of any series (which voting rights, if any, may be full or limited, may vary over time, and may be applicable generally or only upon any stated fact or event); the rate of dividends (which may be cumulative or noncumulative), the condition or time for payment of dividends and the preference or relation of such dividends to dividends payable on any other class or series of capital stock; the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution, or winding up of the affairs of the Corporation; the rights, if any, of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other class or series of capital stock or for any other securities, property, or assets of the Corporation or any subsidiary (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange shall be applicable, and the time or times during which a particular price or rate shall be applicable); whether the shares of any series of Preferred Stock shall be subject to redemption by the Corporation and if subject to redemption, the times, prices, rates, adjustments and other terms and conditions of such redemption. The powers, designations, preferences, limitations, restrictions and relative rights may be made dependent upon any fact or event which may be ascertained outside the Articles or the resolution if the manner in which the fact or event may operate on such series is stated in the Articles or resolution. As used in this section “fact or event” includes, without limitation, the existence of a fact or occurrence of an event, including, without limitation, a determination or action by a person, government, governmental agency or political subdivision of a government. The board of directors is further authorized to increase or decrease (but not below the number of such shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. Unless the board of directors provides to the contrary in the resolution which fixes the characteristics of a series of Preferred Stock, neither the consent by series, or otherwise, of the holders of any outstanding Preferred Stock nor the consent of the holders of any outstanding Common Stock shall be required for the issuance of any new series of Preferred Stock regardless of whether the rights and preferences of the new series of Preferred Stock are senior or superior, in any way, to the outstanding series of Preferred Stock or the Common Stock. 2
(b) Certificate. Before the Corporation shall issue any shares of Preferred Stock of any series, a certificate of designation setting forth a copy of the resolution or resolutions of the boaid of directors, and establishing the voting powers, designations, preferences, the relative, participating, optional, or other rights, if any, and the qualifications, limitations, and restrictions, if any,.relating to the shares of Preferred Stock of such series, and the number of shares of Preferred Stock of such series authorized by the board of directors to be issued shall be made and signed by an officer of the corporation and filed in the manner prescribed by the NRS. Section 4. Non-Assessment of Stock. The capital stock of the Corporation, after the amount of the subscription price has been fully paid, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed, and the Articles shall not be amended in this particular. No stockholder of the Corporation is individually Liable for the debts or liabilities of the Corporation. ARTICLE IV DIRECTORS AND OFFICERS. Section 1. Number of Directors. The members of the governing board of the Corporation are styled as directors. The board of directors of the Corporation shall be elected in such manner as shall be provided in the bylaws of the Corporation. The board of directors shall consist of at least one (I) individual and not more than thirteen (13) individuals. The number of directors may be changed from time to time in such manner as shall be provided in the bylaws of the Corporation. Section 2. Initial Directors. The name and post office box or street address of the director(s) constituting the initial board of directors is: Name Address David Lazar 3445 Lawrence Ave., Oceanside, NY 11572 Section 3. Limitation of Liability. The liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS. If the NRS is amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors or officers, the liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS, as so amended from time to time. Section 4. Payment of Expenses. In addition to any other rights of indemnification permitted by the laws of the State of Nevada or as may be provided for by the Corporation in its bylaws or by agreement, the expenses of officers and directors incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, involving alleged acts or omissions of such officer or director in his or her capacity as an officer or director of the Corporation or member, manager, or managing member of a predecessor limited liability company or affiliate of such limited liability company or while serving in any capacity at the request of the Corporation as a director, officer, employee, agent, member, manager, managing member, partner, or fiduciary of, or in any other capacity for, another corporation or any partnership, joint venture, trust, or other enterprise, shall be paid by the Corporation or through insurance purchased and maintained by the Corporation or through other financial arrangements made by the Corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Corporation. To the extent that an officer or director is successful on the merits in defense of any such action, suit or proceeding, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense. Notwithstanding anything to the contrary 3
contained herein or in the bylaws, no director or officer may be indemnified for expenses incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, that such director or officer incurred in his or her capacity as a stockholder. Section 5. Repeal and Conflicts. Any repeal or modification of Sections 3 or 4 above approved by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the liability of a director or officer of the Corporation existing as of the time of such repeal or modification. In the event of any conflict between Sections 3 or 4 above and any other Article of the Articles, the terms and provisions of Sections 3 or 4 above shall control. ARTICLE V COMBINATIONS WITH INTERESTED STOCKHOLDERS At such time, if any, as the Corporation becomes a “resident domestic corporation”, as that term is defined in NRS 78.427, the Corporation shall not be subject to, or governed by, any of the provisions in NRS 78.411 to 78.444, inclusive, as may be amended from time to time, or any successor statute. ARTICLE VI BYLAWS The board of directors is expressly granted the exclusive power to make, amend, alter, or repeal the bylaws of the Corporation pursuant to NRS 78.120. IN WITNESS WHEREOF, the Corporation has caused these articles of incorporation to be executed in its name by its President on October , 2019. DAVID LAZAR, President The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have voted in favor of the amendment is: % This Amended and Restated Articles of Incorporation After Issuance Of Stock is filed pursuant to the order dated , 2019, of the Eighth Judicial District Court of Nevada, in and for Clark County, case number A-19-798294-B, a certified copy of which is attached hereto as Exhibit A. 4
EXHIBIT A Eighth Judicial District Court of Nevada, in and for Clark County, case number A-19-798294-B Order, dated , 2019 5
Filed in the Office of Business Number C203-1991 K• Filing Number 20211890690 Secretary of State Filed On State Of Nevada 11/12/2021 9:32:00 AM Number of Pages BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov Profit Corporation: Certificate of Amendment (PURSUANT TO NRS 78.380 & 78.385178.390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PURSUANT TO NRS 78.403) Officer’s Statement (PURSUANT TO NRS 80.030) TYPE OR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT Entity information: Name of entity as on file with the Nevada Secretary of State: SIPP International Industries, Inc. Entity or Nevada Business Identification Number (NVID): INV1991 ‘1011469 Restated or Amended and Restated Articles: (Select one) (If amending and [?C_I Certificate to Accompany Restated Articles or Amended and Restated Articles 1.._] Restated Articles - No amendments; articles are restated only and are signed by an officer of the corporation who has been authorized to execute the certificate by resolution of the board of directors adopted on: 1 1 The certificate correctly sets forth the text of the articles or certificate as amended to the date of the certificate. X1 Amended and Restated Articles * Restated or Amended and Restated Articles must be included with this filing type. restating only, complete section 1,2 3, 5 and 6) Type of Amendment Filing Being Completed: (Select only one box) (If amending, complete section 1, 3, 5 and 6.) Li Certificate of Amendment to Articles of Incorporation (Pursuant to NRS 78.380 - Before Issuance of Stock) The undersigned declare that they constitute at least two-thirds of the following: (Check only one box) Lj incorporators Li board of directors The undersigned affirmatively declare that to the date of this certificate, no stock of the corporation has been issued ;xi Certificate of Amendment to Articles of Incorporation (Pursuant to NRS 78.385 and - 78.390 - After Issuance of Stock) The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is: 51 % 1 H Officer’s Statement (foreign qualified entities only) - Name in home state, if using a modified name in Nevada: ____....... _ _ Jurisdiction of formation: 1 I Changes to takes the following effect: [ j The entity name has been amended. rlDissolution Li The purpose of the entity has been amended. HMerger ❑ The authorized shares have been amended. HConversion ■ Other: (specify changes) * Officer’s Statement must be submitted with either a certified copy of or a certificate evidencing the filing of any document, amendatory or otherwise, relating to the original articles in the place of the corporations creation. This form must be accompanied by appropriate fees. Page i of 2 Revised: 1/1/2019
BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 884-6708 Website: www.nvsos.gov Profit Corporation: Certificate of Amendment (PURSUANT TO NRS 78.380 & 78.385/78.390) Certificate to Accompany Restated Articles or Amended and Restated Articles (PURSUANT TO NRS 78.403) Officer’s Statement (PURSUANT TO NRS 80.030) Effective Date and Time: (Optional) Date: Time: (must not be later than 90 days after the certificate is filed) Information Being Changed: (Domestic corporations only) Changes to takes the following effect: H The entity name has been amended. Li The registered agent has been changed. (attach Certificate of Acceptance from new registered agent) L j The purpose of the entity has been amended. [xl The authorized shares have been amended, 1 I The directors, managers or general partners have been amended. [ 1 IRS tax language has been added. Articles have been added. n Articles have been deleted. Other. The articles have been amended as follows: (provide article numbers, if available) ; Art. 3 has been amended to increase the authorized shares to 2,010,000,000 I (attach additional page(s) if necessary) 6. Signature: (Required) X KRIS TABETANDO PRESIDENT/CEO ] Signature of Officer or Authorized Signer Title X 1 ___ _ Signature of Officer or Authorized Signer Title *If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof. Please include any required or optional information in space below: (attach additional page(s) if necessary) This form must be accompanied by appropriate fees. Page 2 of 2 Revised: 1/1/2019
FORM OF CERTIFICATE OF AMENDED AND RESTATED ARTICLES OF INCORPORATION OF SIPP INTERNATIONAL INDUSTRIES, INC. Pursuant to the provisions of Nevada Revised Statutes 78.390 and 78.403, the undersigned officer of SIPP International Industries, Inc., a Nevada corporation, does hereby certify as follows: The board of directors of the corporation has duly adopted resolutions on November 11, 2021 proposing to amend and restate the Articles of Incorporation of the corporation as set forth below, declaring such amendment and restatement to be advisable and in the best interests of the corporation. The amendment and restatement of the Articles of Incorporation as set forth below has been approved on November I I, 2021 by at least a majority (51%) of the voting power of the stockholders of the corporation, which is sufficient for approval thereof. That Section 1 of Article 3 of the Amended and Restated Articles of Incorporation is amended to increase the total number of authorized shares of the Corporation from 510,000,000, with 500,000,000 being Common Stock, par value $0.001 and 10,000,000 being Preferred Stock, par value $0.001 to 2,010,000,000, with 2,000,000,000 being Common Stock, par value $0.001 and 10,000,000 being Preferred Stock, par value $0.001 per share as follows: ARTICLE III CAPITAL STOCK Section 1. Authorized Shares. The aggregate number of shares which the Corporation shall have authority to issue is hndre44-eff-million-(q-610.0.7000) two billion ten million (2,010,000,000) shares, consisting of Iwo classes to be designated, respectively, ‘‘Common Stock” and “Preferred Stock”. The total number of shares of Common Stock that the Corporation shall have authority to issue is five hund-recl—n414-ien—(4409.0v0i4) two billion (2,000,000,000) shares with all such shares of Common Stock having a par value of 50.001 per share. The total number of shares of Preferred Stock that the Corporation shall have authority to issue is ten million (10,000,000) shares with all such shares of Preferred Stock having a par value of $0.001 per share. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof. The voting powers, designations, preferences, limitations, restrictions, and relative, participating, optional and other rights, and the qualifications, limitations, or restrictions thereof, of the Preferred Stock shall hereinafter be prescribed by resolution of the board of directors pursuant to Section 3 of this Article Ill. This certificate sets forth the text of the Amended and Restated Articles of Incorporation of the corporation as amended and restated in their entirety to this date as follows on the following pages attached hereto. IN WITNESS WHEREOF, I have executed this Certificate of Amended and Restated Articles of Incorporation of SIPP International Industries, Inc. as of November I I, 2021. KRIS TABETANDO, President/CEO
AMENDED AND RESTATED ARTICLES OF INCORPORATION AFTER ISSUANCE OF STOCK OF SIPP INTERNATIONAL INDUSTRIES, INC. ARTICLE I NAME The name of the corporation shall be SIPP INTERNATIONAL INDUSTRIES, INC. (hereinafter, the “Corporation”). ARTICLE II REGISTERED OFFICE The initial office of the Corporation shall be 50 W. Liberty St., Suite 880, Reno, Nevada 89501. The initial registered agent of the Corporation shall be Nevada Agency and Transfer Company. The Corporation may, from time to time, in the manner provided by law, change the resident agent and the registered office within the State of Nevada. The Corporation may also maintain an office or offices for the conduct of its business, either within or without the State of Nevada. ARTICLE III CAPITAL STOCK Section I, Authori:ed Shares. The aggregate number of shares which the Corporation shall have authority to issue is two billion ten million (2,010,000,000) shares, consisting of two classes to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares of Common Stock that the Corporation shall have authority to issue is two billion (2,000,000,000) shares with all such shares of Common Stock having a par value of 50.001 per share. The total number of shares of Preferred Stock that the Corporation shall have authority to issue is ten million (10,000,000) shares with all such shares of Preferred Stock having a par value of $0.001 per share. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof. The voting powers, designations, preferences, limitations, restrictions, and relative, participating, optional and other rights, and the qualifications, limitations, or restrictions thereof, of the Preferred Stock shall hereinafter be prescribed by resolution of the board of directors pursuant to Section 3 of this Article Section 2. Common Stock. Dividend Rate. Subject to the rights of holders of any Preferred Stock having preference as to dividends and except as otherwise provided by these Articles of Incorporation, as amended from time to time (hereinafter, the “Articles”) or the Nevada Revised Statues (hereinafter, the “NRS”), the holders of Common Stock shall be entitled to receive dividends when, as and if declared by the board of directors out of assets legally available therefor. Voting Rights. Except as otherwise provided by the NRS, the holders of the issued and outstanding shares of Common Stock shall be entitled to one vote for each share of Common Stock. No holder of shares of Common Stock shall have the right to cumulate votes.
Liquidation Rights. In the event of liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary, subject to the prior rights of holders of Preferred Stock to share ratably in the Corporation’s assets, the CO111111011 Stock and any shares of Preferred Stock which are not entitled to any preference in liquidation shall share equally and ratably in the Corporation’s assets available for distribution atter giving effect to any liquidation preference of any shares of Preferred Stock. A merger, conversion, exchange or consolidation of the Corporation with or into any other person or sale or transfer of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation. No Conversion, Redemption, or Preemptive Rights. The holders of Common Stock shall not have any conversion, redemption, or preemptive rights. (c) Consideration for Shares. The Common Stock authorized by this Article shall be issued for such consideration as shall be fixed, from time to time, by the board of directors. Section 3. Preferred Stock. (a) Designation_ The board of directors is hereby vested with the authority from time to time to provide by resolution for the issuance of shares of Preferred Stock in one or more series not exceeding the aggregate number of shares of Preferred Stock authorized by these Articles, and to prescribe with respect to each such series the voting powers, if any, designations, preferences, and relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions relating thereto, including, without limiting the generality of the foregoing: the voting rights relating to the shares of Preferred Stock of any series (which voting rights, if any, may be Rill or limited, may vary over time, and may be applicable generally or only upon any stated fact or event); the rate of dividends (which may be cumulative or noncumulative), the condition or time for payment of dividends and the preference or relation of such dividends to dividends payable on any other class or series of capital stock; the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution, or winding up of the affairs of the Corporation; the rights, if any, of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other class or series of capital stock or for any other securities, property, or assets of the Corporation or any subsidiary (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange shall be applicable, and the time or times during which a particular price or rate shall be applicable); whether the shares of any series of Preferred Stock shall be subject to redemption by the Corporation and if subject to redemption, the times, prices, rates, adjustments and other terms and conditions of such redemption. The powers, designations, preferences, limitations, restrictions and relative rights may be made dependent upon any fact or event which may be ascertained outside the Articles or the resolution if the manner in which the fact or event may operate on such series is stated in the Articles or resolution. As used in this section “fact or event” includes, without limitation, the existence of a fact or occurrence of an event, including, without limitation, a determination or action by a person, government, governmental agency or political subdivision of a government. The board of directors is further authorized to increase or decrease (but not below the number of such shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. Unless the board of directors provides to the contrary in the resolution which fixes the characteristics of a series of Preferred Stock, neither the consent by series, or otherwise, of the holders of any outstanding Preferred Stock nor the consent of the holders of any outstanding Common Stock shall be required for the issuance of any new series of Preferred Stock regardless of whether the rights and preferences of the new series of Preferred Stock arc senior or superior, in any way, to the outstanding series of Preferred Stock or the Common Stock. 2
(b) Certificate. Before the Corporation shall issue any shares of Preferred Stock of any series, a certificate of designation setting forth a copy of the resolution or resolutions of the board of directors, and establishing the voting powers, designations, preferences, the relative, participating, optional, or other rights, if any, and the qualifications, limitations, and restrictions, if any, relating to the shares of Preferred Stock of such series, and the number of shares of Preferred Stock of such series authorized by the board of directors to be issued shall be made and signed by an officer of the corporation and filed in the rummer prescribed by the NRS. Section 4. Non-Assessment of Stock. The capital stock of the Corporation, Mier the amount of the subscription price has been fully paid, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed, and the Articles shall not be amended in this particular. No stockholder of the Corporation is individually liable for the debts or liabilities of the Corporation. ARTICLE IV DIRECTORS AND OFFICERS Section 1. Number of Directors. The members of the governing board of the Corporation are styled as directors. The board of directors of the Corporation shall be elected in such manner as shall be provided in the bylaws of the Corporation. The board of directors shall consist of at least one (1) individual and not more than thirteen (13) individuals, The number of directors may be changed from time to time in such manner as shall be provided in the bylaws of the Corporation. Section 2. initial Directors. The name and post office box or street address of the director(s) constituting the initial board of directors is: Name Address Kris Tabctando 50 W. Liberty St., Suite 880, Reno, Nevada 89501 Issac Qureshi 50 W. Liberty St., Suite 880, Reno, Nevada 89501 Section 3. Limitation of Liability. The liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS. If the NRS is amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors or officers, the liability of directors and officers of the Corporation shall he eliminated or limited to the fullest extent permitted by the NRS, as so amended from time to time. Section 4. Payment of Expenses. In addition to any other rights of indemnification permitted by the laws of the State of Nevada or as may be provided for by the Corporation in its bylaws or by agreement, the expenses of officers and directors incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, involving alleged acts or omissions of such officer or director in his or her capacity as an officer or director of the Corporation or member, manager, or managing member of a predecessor limited liability company or affiliate of such limited liability company or while serving in any capacity at the request of the Corporation as a director, officer, employee, agent, member, manager, managing member, partner, or fiduciary of, or in any other capacity for, another corporation or any partnership, joint venture, tnist, or other enterprise, shall be paid by the Corporation or through insurance purchased and maintained by the Corporation or through other financial arrangements made by the Corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court ofcompetent jurisdiction that he or she is not entitled to be indemnified by the Corporation. To the extent that an officer or director is successful on the merits in defense of any such action, suit or proceeding, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense. Notwithstanding anything to the contrary
contained herein or in the bylaws, no director or officer may be indemnified for expenses incurred in defending any threatened, pending, or completed action, suit or proceeding (including without limitation, nn action, suit or proceeding by or in the right of the Corporation), whether civil, criminal , administrative or investigative, that such director or omcer incurred in his or her capacity as a stockholder. Section 5. Repeal m1d Conjllcls. Any repent or modification of Sections 3 or 4 nbove approved by the stockholders of the Corporation shall be prospective only, and shall not adversely affect an)’ limitation on the liability of a director or omcer of the Corporation existing as of the time of such repeal or modification. In the event of any conflict between Sections 3 or 4 above and any other Article of the Articles, the terms and provisions of Sections 3 or 4 above shall control. AUTICLE V COI\IBINATIONS WITH INTERESTED STOCKHOLDERS At such time, if any, as the Corporation becomes n “resident domestic corporation”, as that term is defined in NRS 78.427, the Corporation shall not be subject to, or governed by, any of the provisions in NRS 78.411 to 78.444, inclusive, as may be amended from time to time, or any successor statute. ARTICLE VI BYLAWS The board of directors is expressly granted the exclusive power to make, amend, alter, or repeal the bylaws of the Corporation pursuant to NRS 78.120. IN WITNESS WHEREOF, the Corporation has caused these articles of incorporation to be executed in its name by its President on November II, 2021 . KRIS TABETANDO, PrcsidenVCEO The vote by which the stockholders holding shares in the corporation entitling them to exercise a least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or ns may be required by the provisions of the articles of incorporation lmve voted in favor of the amendment is: ll%
Exhibit 3.4
Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd.
Articles of Association
Chapter I General Rules
Company purpose: By setting up a company organization form, shareholders will jointly contribute to raising capital, establish a new operating mechanism, and make contributions to revitalizing the economy. The Articles of Association of the Company are formulated in accordance with the relevant provisions of the Company Law of The People’s Republic of China and the Regulations on the Administration of Registration of Market Subjects in The People’s Republic of China.
Company name: Sichuan Ruichengyuan Agricultural and Sideline Products Distribution Co., Ltd.
Company domicile: No.1201, Floor 12, Unit 1, Building 1, No.39 Zhiyuan Road, Wenjiang District, Chengdu
Article 4 The company is established with the capital contribution of a foreign main company, and the shareholders are liable to the company to the extent of the capital contribution; The company is liable for its debts with all its assets. The company enjoys all legal person property rights formed by shareholders’ investment, enjoys civil rights and bears civil liabilities according to law, and has the qualification of enterprise legal person.
Article 5 Scope of business: Licensed items: Urban distribution and transportation services (excluding dangerous goods); Road transportation of raw milk; Road freight transport (excluding dangerous goods); Food sales. (For projects subject to approval according to law, business activities can only be carried out after the approval of relevant departments. The specific business projects shall be subject to the approval documents or licenses of relevant departments.) General items: Road freight transport station management; Takeaway delivery service; Labor service (excluding labor dispatch); Retail of fresh vegetables; Fresh fruit retail; Retail of edible agricultural products; Sales of daily necessities; Fresh meat retail;
Retail of aquatic products: Personal hygiene products sales; Internet sales (except the sale of goods that need permission); General cargo storage services (excluding dangerous chemicals and other items that need permission and approval); Grain and oil storage services; Vending machine sales; Mechanical equipment leasing; Health food (prepackaged) sales; Food sales (prepackaged foods only). (Except for the projects subject to approval according to law, independently carry out business activities according to law with the business license)
 |
Article 6 The date of issuance of the company’s business license is the date of establishment of the company.
Business period: Perpetual existence
Chapter II Registered Capital
Article 7 The total investment of the company is RMB 1 million; The registered capital is 1 million Yuan.
Article 8 Name, amount, mode, time and list of shareholders.
| Name of shareholder (name) | Country |
Amount of contribution |
Forms of investment |
Capital contribution time |
|
Shengchao International Holdings Limited |
British Virgin Islands |
100 | Currency | 2041.12.31 |
Article 9 After the company is registered, it shall issue a capital contribution certificate to the shareholders. The capital contribution certificate shall specify the name of the company, the date of establishment of the company, the registered capital of the company, the names of shareholders, the amount and date of capital contribution delivered, the number of the capital contribution certificate and the date of issuance. The capital contribution certificate shall be sealed by the company. The capital contribution certificate is in duplicate, one for each shareholder and one for the company. If the capital contribution certificate is lost, it shall be immediately reported to the company for cancellation, and shall be reissued after being audited by the legal representative of the company.
Article 10 The company shall set up a register of shareholders, which shall record the names, domiciles, capital contributions and number of capital contribution certificates of shareholders.
Chapter III Rights and Obligations of Shareholders and Conditions for Transfer of Capital Contribution
Article 11 Shareholders, as investors, enjoy the owners’ rights to benefit from assets, make major decisions and choose managers, and assume corresponding obligations.
| 2 | |
Article 12 Rights of shareholders:
I. Decide on various major issues of the company;
II. Consult the meeting minutes and the company’s financial and accounting reports;
III. Divide the company’s profits on schedule;
IV. After the termination of the company, the remaining property of the company shall be divided according to law.
Article 13 Obligations of shareholders:
I. Pay their respective subscribed capital contributions in full and on time;
II. Undertake the company’s debts to the extent of the subscribed capital contribution;
III. After the company has gone through the industrial and commercial registration, it shall not withdraw its capital contribution (unless it is approved through legal procedures);
IV. Abide by the articles of association.
Article 14 Transfer of capital contribution:
Shareholders may decide to transfer all or part of their equity to people other than shareholders. After the shareholders transfer their capital contribution according to law, the company shall record the name and domicile of the transferee and the amount of capital contribution transferred in the register of shareholders.
Chapter IV The Organization of the Company, its Methods and Functions.
Article 15 In order to ensure the smooth and normal development of the company’s production and operation activities, the company’s executive directors, managers and supervisors are responsible for the prediction, decision-making and organization, leadership, coordination and supervision of the company’s production and operation activities.
| 3 | |
Article 16 The company has a general manager, a business department, a finance department and other specific handling institutions, which are responsible for handling the daily specific affairs of the company in carrying out production and business activities.
Article 17 The executive directors, supervisors and managers shall abide by the Articles of Association, the Company Law of The People’s Republic of China and other relevant national laws and regulations.
Article 18 The company shall listen to the opinions of the company’s trade unions and employees in advance and invite the representatives of the trade unions or employees to attend the relevant meetings as nonvoting delegates when studying and deciding on issues related to employees’ wages, welfare, production safety, labor protection and labor insurance.
Article 19 The company shall listen to the opinions and suggestions of the company’s trade unions and employees when studying and deciding major issues of production and operation and formulating important rules and regulations.
Article 20 A person under any of the following circumstances may not serve as an executive director, supervisor or manager of the company:
(I) Having no or limited capacity for civil conduct;
(II) Being guilty of corruption, bribery, embezzlement of property, misappropriation of property or disrupting social and economic order; Be sentenced to a criminal penalty, the execution period is less than five years, or be deprived of political rights because of a crime. The execution period has not exceeded five years;
(III) Being a director, factory director or manager of a company (enterprise) that went bankrupt and liquidated due to poor management, and being personally responsible for the bankruptcy of the company (enterprise), less than three years have passed since the completion of the bankruptcy liquidation of the company (enterprise);
(IV) Being the legal representative of a company (enterprise) whose business license has been revoked due to violation of the law, and having personal responsibility, less than three years have passed since the date when the business license of the company (enterprise) was revoked;
(V) Individuals who have a large amount of debts due and unpaid.
If the company violates the provisions of the preceding paragraph by appointing an executive director, supervisor or hiring a manager, the appointment or appointment shall be invalid.
Article 21 National civil servants may not concurrently serve as executive directors, supervisors and managers of the company.
| 4 | |
Article 22 The executive directors, supervisors and managers shall abide by the articles of association, faithfully perform their duties and safeguard the interests of the company, and shall not use their position and authority in the company for personal gain. The executive directors, supervisors and managers shall not take advantage of their powers to accept bribes or other illegal income, and shall not encroach on the company’s property.
Article 23 The executive director and manager shall not misappropriate company funds or lend company funds to any unit or individual unrelated to the company’s business.
The executive director and manager shall not open an account for the company’s funds in their own name or in the name of other individuals, nor shall they invest the company’s funds in foreign units in their own name.
The executive director and manager shall not use the company’s assets to guarantee the debts of shareholders or other individuals of the company.
Article 24 The executive director and manager shall not operate the same or similar projects as those of the company they work for or for others, or engage in activities that harm the interests of the company. Engaged in the above business or activities, the income shall be owned by the company.
Chapter V Authority of Shareholders
Article 25 Shareholders shall exercise the following rights:
1. To decide the company’s business policy and investment plan;
2. To appoint and replace the executive director and decide on the remuneration of the executive director;
3. Appoint and replace supervisors and decide on the remuneration of supervisors;
4. To examine and approve the reports of the executive directors or supervisors;
5. To examine and approve the Company’s annual financial budget and final accounts, as well as profit distribution and loss compensation plans;
6. To decide on the increase or decrease of the registered capital of the company;
| 5 | |
7. To make decisions on the division, merger, dissolution, liquidation or change of corporate form of the company;
8. Amend the articles of association of the company;
9. To appoint or dismiss the manager of the company and decide on their remuneration;
10. To make decisions on the issuance of corporate bonds;
11. Other functions and powers as stipulated in the Articles of Association.
Chapter VI Executive Directors, Managers and Supervisors
Article 26 The Company has no board of directors, only one executive director. The executive director is decided by the shareholders.
Article 27 The executive director is the legal representative of the Company.
Article 28 The executive director is responsible to the shareholders and exercises the following powers:
I. Report work to shareholders;
II. To implement the decisions of shareholders and formulate detailed rules for implementation;
III. To formulate the company’s business plan and investment plan;
IV. To draft the annual financial budget and final accounts, profit distribution and loss compensation plan of the company;
V. To formulate plans for the Company to increase or decrease its registered capital, split up, change its corporate form, dissolve and set up branches;
VI. To decide on the establishment of the company’s internal management organization and the selection and remuneration of the company’s managers;
VII. According to the nomination of the manager, appoint or dismiss the company’s deputy manager and financial officer, and decide on their remuneration;
VIII. Formulate the basic management system of the company.
| 6 | |
Article 29 The term of office of the executive director is three years and can be re-elected. Before the expiration of the term of office of the executive director, the shareholders’ meeting shall not dismiss him without reason.
Article 30 The manager of the company shall be appointed or dismissed by the shareholders. The manager is responsible to the shareholders and exercises the following powers:
I. To take charge of the company’s production, operation and management, and organize the implementation of the company’s annual business plan and investment plan decided by shareholders;
II. To draw up a plan for the establishment of the company’s internal management organization;
III. To formulate the basic management system of the company;
IV. Formulate specific rules of the company;
V. To nominate candidates for appointment or dismissal of the company’s deputy manager and financial officer to shareholders;
VI. To appoint or dismiss the person in charge of the management department except those who should be appointed or dismissed by the executive director.
VII. Other powers granted by shareholders.
Article 31 The company has no board of supervisors, but only one supervisor, which is decided by shareholders. The term of office of the supervisor is three years, and the supervisor can be re-elected at the expiration of the term according to the shareholders’ decision; The executive director, manager and financial officer of the Company shall not concurrently serve as supervisors.
Authority of the supervisor:
(I) Check the company’s finances;
(II) To supervise the executive directors and senior managers’ performance of the duties of the Company, and put forward suggestions for the removal of the executive directors and senior managers who violate laws, administrative regulations, the Articles of Association or the decisions of shareholders;
(III) When the actions of the executive directors and managers harm the interests of the company, they are required to correct them;
| 7 | |
(IV) Put forward proposals to shareholders;
(V) To institute legal proceedings against the executive directors and senior managers in accordance with Article 152 of the Company Law;
(VI) Other functions and powers as stipulated in the Articles of Association.
Chapter VII Finance and Accounting
Article 32 The Company shall establish its financial and accounting systems in accordance with laws, administrative regulations and the provisions of the national financial administrative department.
Article 33 At the end of each accounting system, the company shall prepare financial and accounting statements, submit audit reports according to the provisions of the state and relevant departments, submit them to the departments of finance, taxation, industry and commerce administration, and submit them to shareholders for review.
Financial and accounting reports include the following accounting statements and attached schedules: Balance sheet: (II) Income statement; (III) Statement of changes in financial position; (IV) Financial situation; (V) Instructions; (VI) Profit distribution statement.
Article 34 When the company distributes the annual after-tax profits, 10% of the profits will be included in the statutory reserve fund. When the accumulated amount of the statutory reserve fund of the company exceeds 50% of the registered capital of the company, it may not be withdrawn.
The company’s common reserve fund is used to make up the company’s losses in the previous year, expand the company’s production and operation, or increase the company’s capital. However, the capital reserve fund shall not be used to make up the company’s losses.
Article 35 Distribute the company’s after-tax profits after making up losses and withdrawing provident fund.
Article 36 When the statutory common reserve fund is converted into capital, the retained common reserve fund shall not be less than 25% of the registered capital of the company before the conversion.
In addition to the statutory accounting books, the company shall not set up other accounting books.
The company’s accounting books, statements and various vouchers shall be bound and filed in accordance with the relevant provisions of the Ministry of Finance, and kept as important archives.
| 8 | |
Chapter VIII Company Merger and Division and Change of Registered Capital
Article 37 The merger, division and reduction of registered capital of the company shall be decided by the shareholders of the company; Sign an agreement according to the requirements of the Company Law, liquidate assets, prepare a list of assets, liabilities and property, notify creditors and make an announcement, and go through relevant formalities according to law.
Article 38 When a company merges, divides or reduces its registered capital, it shall prepare a balance sheet and a list of assets. The company shall notify the creditors within 10 days from the date of making the decision of merger or division, and make an announcement in the newspaper within 30 days. Creditors have the right to require the company to pay off debts or provide corresponding guarantees within 30 days from the date of receiving the notice, or within 45 days from the date of announcement if they have not received the notice. Creditor’s rights and debts before the merger or division of the company shall be borne by the company after the merger or division.
Article 39 Where a company changes its registered items due to merger or division, it shall register the change with the company registration authority according to law; If the company is dissolved, it shall go through the cancellation of registration according to law; Where a new company is established, the company shall be registered in accordance with the law.
Where a company increases or decreases its registered capital, it shall register the change with the company registration authority according to law.
Chapter IX Bankruptcy, Dissolution, Termination and Liquidation
Article 40 When the company is dissolved due to the provisions of Item (1), (2), (4) and (5) listed in Article 180 of the Company Law, a liquidation group shall be established within 15 days from the date when the reasons for dissolution occur, and liquidation shall begin. If the liquidation group is not established within the time limit, the creditors may apply to the people’s court to appoint relevant personnel to form a liquidation group for liquidation.
The liquidation group of the company shall notify the creditors within 10 days from the date of its establishment and make an announcement in the newspaper within 60 days. Creditors shall declare their claims to the liquidation group within 30 days from the date of receiving the notice, or within 45 days from the date of announcement if they have not received the notice.
The company’s property can only be distributed to shareholders after paying the liquidation expenses, employees’ wages, social insurance expenses and statutory compensation, paying the taxes owed and paying off the company’s debts.
After the liquidation of the company, the company shall apply to the company registration authority for cancellation of company registration according to law.
| 9 | |
Chapter X Labour Union
Article 41 The company established trade unions in accordance with relevant national laws and the Trade Union Law of The People’s Republic of China. Trade unions work independently, and companies should support the work of trade unions. The company’s labor and employment system is strictly implemented in accordance with the Labor Law.
Chapter XI Supplementary Provisions
Article 42 The interpretation of the articles of association belongs to the shareholders of the company.
Article 43 The Articles of Association shall come into effect after being signed and sealed by shareholders.
Article 44 A company may amend its articles of association, which must be approved by shareholders, signed by the legal representative of the company and reported to the company registration authority for the record.
Article 45 Any dispute arising from or related to the Articles of Association shall be settled by the following Option (1):
(I) Submit to Chengdu Arbitration Commission for arbitration;
(II) Bring a lawsuit to the people’s court according to law.
Article 46 In case of any conflict between the Articles of Association and national laws, administrative regulations and the State Council decisions, the national laws, administrative regulations and the State Council decisions shall prevail.
| 10 | |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
SIPP International Industries, Inc.
We consent to the inclusion in this Form S-1 to the Registration Statement of SIPP International Industries, Inc. of our report dated April 28, 2023 relating to the financial statements of SIPP International Industries, Inc. which report appears in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/ Shandong Haoxin CPA Co., Ltd.
Shandong Haoxin CPA Co., Ltd.
Certified Public Accountants
Weifang, People’s Republic of China
June 22, 2023