NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION
Joway Health Industries Group Inc. is herein
referred to as “Joway Health”, the “Company,” “we” and “us”.
Joway Health (formerly G2 Ventures, Inc.) was
originally incorporated under the laws of the State of Nevada on March 21, 2003.
On November 20, 2020, Joway Health entered into
a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and
a wholly owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Parent”)
and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Parent (“Merger Sub”).
Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Dynamic Elite (the “Merger”), with Dynamic
Elite continuing as the surviving corporation as a wholly owned subsidiary of Parent. The special committee of the Board of Directors
of the Company unanimously approved the Merger Agreement and the transactions contemplated thereby.
Pursuant to the terms of the Merger Agreement,
at the effective time of the Merger (the “Effective Time”) and as a result of the Merger, the ordinary shares of common stock
of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are held by the Company, were cancelled
and extinguished in consideration for $119,070 in cash (the “Merger Consideration”). The Company distributed the Merger
Consideration to its shareholders (other than to Parent) in an amount equal to such shareholder’s proportionate share of the Merger
Consideration based on such shareholders’ percentage of the outstanding common stock of the Company. In addition, the Company received
a fairness opinion from an investment banker opining that the Merger Consideration was fair, from a financial point of view to the shareholders
of the Company.
As of December 31, 2020, the Effective Time of
the Merger, the 10,000 ordinary shares of common stock of Dynamic Elite issued and outstanding immediately which were held
by the Company, were cancelled for $119,070 in cash as Merger Consideration, or $0.45 per share. In January 2021, the Company
had received $119,070 from Crystal Globe and distributed proportionately to the Company’s minority shareholders, other than
Crystal Globe, which represented 2,646,000 shares of our common stock. Since the remaining 17,408,000 shares of our
common stock was owned by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares was offset and Crystal
Globe did not receive any cash payment in connection with the Merger.
On December 31, 2020, upon the Company completed
the Merger Agreement with Crystal Globe, Joway Health became a “shell company” (as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Going forward, the Company intends to seek, investigate
and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for
the Company’s stockholders.
NOTE 2 – GOING CONCERN
The accompanying unaudited financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge
of liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying unaudited financial
statements, for the nine months ended September 30, 2022, and 2021, we incurred net losses of $50,644 and $107,441, respectively. As
of September 30, 2022, we had an accumulated deficit of $7.4 million. Management believes these factors raise substantial doubt
about our ability to continue as a going concern for the next twelve months.
The continuation of our Company as a going concern
through the next twelve months is dependent upon the continued financial support from our stockholders or external financing. Management
believes that our existing stockholders will provide the additional cash to meet our obligations as they become due.
These conditions raise substantial doubt about
our company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the
possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may
result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding
and implement its strategic plan provides the opportunity for our company to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The Company’s
functional currency is USD.
Use of Estimates
The preparation of the financial statements is
in conformity with generally accepted accounting principles in the United States of America, which require 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 periods. Management makes these
estimates using the best information available at the time the estimates are made. Actual results could differ from those estimates.
Other Comprehensive Income
Other comprehensive income is defined as the
change in equity during the period from transactions and other events, excluding the changes resulting from investments by owners and
distributions to owners, and is not included in the computation of income tax expense or benefit. Accumulated other comprehensive income
represents the accumulated balance of foreign currency translation adjustments.
Concentrations of Credit Risk
As a result of the consummation of the Merger,
as of December 31, 2020, the Company became a shell company, as that term is defined in Rule 12b-2 of the Exchange Act of 1934, as amended
(the “Exchange Act”). Going forward, our main business operations consist of seeking a business combination with a private
entity whose business would present an opportunity for its shareholders.
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value as follows:
| ● | Level 1—defined as observable
inputs such as quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2—defined as inputs
other than quoted prices in active markets that are either directly or indirectly observable; and |
| ● | Level 3—defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying amounts reported in the balance
sheets for cash, accounts receivable, other receivable, accounts payable, other payable, and amounts due from related parties generally
approximate their fair market values based on the short-term maturity of these instruments. ASC 825-10 “Financial Instruments”
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Revenue Recognition
The Company recognizes revenue when it satisfies
a performance obligation by transferring a promised good or service to a customer or the customer obtains control of that asset, in an
amount that reflects the consideration the Company expects to be entitled to in exchange for those promised goods or services.
After the consummation of the Merger as of December
31, 2020, the Company did not report any revenue for the year ended December 31, 2021, and for the nine-month period ended September
30, 2022.
Income Taxes
The Company accounts for income taxes in accordance
with FASB ASC 740 “Income Taxes” (formerly SFAS No. 109 Accounting for Income Taxes), which is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
recognized in the Company’s financial statements or tax returns. ASC 740 additionally requires the establishment of a valuation
allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets is dependent upon future
earnings, if any, of which the timing and amount are uncertain.
According to ASC 740, the evaluation of a tax
position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained
upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second
step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in
the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized
upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized
in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not
criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC 740
also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.
Basic and Diluted Earnings per Share
The Company reports earnings per share in accordance
with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average
number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive
options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s
outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the
average market price during the period. There were no dilutive instruments outstanding during the three month and nine-month periods
ended September 30, 2022 and 2021.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various
aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also
clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted the standard in 2021.
Adoption of the standard did not have a significant impact on the Company’s statement of earnings in 2021.
Other accounting standards that have been issued
or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a
material impact on the Company’s consolidated financial statements upon adoption.
Deconsolidation
On November 20, 2020, Joway Health entered into
a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and
a wholly owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Crystal
Globe”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Crystal Globe (“Merger
Sub”). The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth
therein, Merger Sub will be merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving
corporation as a wholly owned subsidiary of Crystal Globe.
Crystal Globe, as the majority shareholder holding
approximately 86.81% of the Company, is also the sole shareholder of Dynamic Elite after the Merger. Mr. Jinghe Zhang, as the former
President, former Chief Executive Officer, former Chairman and Director, and the majority beneficial owner of the Company, also serves
as sole shareholder and executive director of Crystal Globe. As a result, the Company and Dynamic Elite are under common control of Crystal
Globe and Mr. Jinghe Zhang.
Pursuant to the terms of the Merger Agreement,
at the effective time of the Merger (the “Effective Time”) and as a result of the Merger, the ordinary shares of common stock
of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are held by the Company, will be cancelled
and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration of $0.045 per share for
outstanding shares of Joway Health’s common stock (the “Merger Consideration”). As of November 20, 2020, Joway Health
reported 20,054,000 shares of common stock outstanding. As a result, Joway Health recognized a loss of $1,340,795 from
this transaction.
In January 2021, Joway Health had received $119,070 from
Crystal Globe and distributed proportionately to the Company’s minority shareholders, other than Crystal Globe, which represents 2,646,000 shares
of Joway Health’s common stock. Since the remaining 17,408,000 shares of Joway Health’s common stock is owned by
Crystal Globe, the $0.045 per share payment for the 17,408,000 shares is offset.
The following is a reconciliation of the deconsolidation:
| |
Amount | |
Selling price | |
$ | 902,430 | |
Disposed assets and liabilities: | |
| | |
Cash | |
| 79,446 | |
Current assets | |
| 1,133,812 | |
Fixed assets | |
| 3,194,533 | |
Intangible assets | |
| 465,007 | |
Liabilities | |
| (1,977,822 | ) |
Accumulated other comprehensive income | |
| (651,751 | ) |
| |
| 2,243,225 | |
Loss from disposal of discontinued component, net of income tax | |
$ | (1,340,795 | ) |
NOTE 4 –
OTHER PAYABLES
As of September 30, 2022, and December 31, 2021,
the Company reported $153,697 and $103,053 as its other payables, respectively. The other payables mainly consist of payables for
professional services, including audit, legal, and financial statement filing services.
NOTE 5 – RELATED PARTY TRANSACTIONS
Payables due to related parties consist
of the following:
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Jinghe Zhang | |
$ | - | | |
$ | 3,999 | |
Total | |
$ | - | | |
$ | 3,999 | |
The amounts owed to related parties are non-interest bearing and have
no specified repayment terms.
Transactions with Jinghe Zhang
The Company was a shell company and has no cash,
Mr. Jinghe Zhang, our former President, former Chief Executive Officer and director, agreed to advance operating capital to the Company.
For the three months ended March 31, 2022, Mr. Jinghe Zhang released the Company from $3,999.19 of indebtedness owed to him. For
the three months ended March 31, 2021, the Company received $3,397 from Mr. Jinghe Zhang. As of September 30, 2022 and December
31, 2021, the total unpaid principal balance due to Mr. Jinghe Zhang for advances was $0 and $3,999, respectively.
NOTE 6 – INCOME TAXES
Upon the Company executed the Merger Agreement
on December 31, 2020, no provision was made for federal income taxes since the Company has significant net operating losses.
The Company’s income tax returns since
inception are subject to audit by regulatory authorities. Changes in tax laws and rates could also affect recorded deferred tax assets
and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company’s results
of operations, cash flows or financial position. The calculation of our tax liabilities involves dealing with uncertainties in the application
of complex tax laws and regulations. FASB ASC Topic 740, Income Taxes provides that a tax benefit from an uncertain tax position may
be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related
appeals or litigation processes, based on the technical merits. ASC Topic 740 also provides guidance on measurement, derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and transition.
We recognize tax liabilities in accordance with
ASC Topic 740 and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously
available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different
from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense
in the period in which they are determined.
NOTE 7 – SUBSEQUENT EVENTS
None