ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Development
Guozi Zhongyu Capital Holdings Company
(The “Company” or “GZCC”) formerly known as Melt Inc., was organized on July 18, 2003, under the laws of
the State of Nevada. The Company operates as a holding company for operating subsidiaries.
Melt (California), Inc. is a wholly owned
subsidiary (hereinafter referred to as Melt (CA)) of Melt Inc. and was organized on August 6, 2003, under the laws of the State
of California. Melt (CA) was in the business of owning and operating corporate owned stores of which none were in existence during
the year ended December 31, 2009, managing the construction process for both corporate and franchisee owned stores, securing retail
space for either corporate or franchise stores to operate from, as well as the sale and distribution of product to franchise owned
stores until October 2007. Melt (CA) ceased managing the construction of stores during September 2007. All assets, liabilities
and operating results related to store construction and retail leases are therefore included in discontinued operations as of December
31, 2009 and 2008.
Melt Franchising LLC (hereinafter referred
to as Melt (FA)) a wholly owned subsidiary was organized on February 2, 2005 under the laws of the State of Nevada. Melt (FA) is
responsible for selling franchises to allow franchisees to own and operate stores trading under the name of Melt – gelato
italiano, Melt – café & gelato bar and Melt – gelato & crepe café as well as the sale and distribution
of product to franchisees, marketing and the collection of royalties. Melt (FA) sold forty-nine franchises of which nineteen were
operating, seventeen agreements were terminated by the Company as a result of the franchisee’s not securing retail space
or other reasons, and thirteen closed their operations. Melt discontinued operations in 2010.
On June 27, 2018, the eight judicial District
Court of Nevada appointed Custodian Ventures, LLC as custodian for Melt Inc., proper notice having been given to the officers and
directors of Melt, Inc. There was no opposition.
On June 28, 2018, the Company filed a certificate
of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On July 3, 2018, the Company obtained a
promissory note in amount of $68,305 from its custodian, Custodian Ventures, LLC, the managing member being David Lazar. The note
bears an interest of 3% and matures in 180 days from the date of issuance.
On July 3, 2018, the Company issued 78,000,000
shares of common stock, with par value $0.001 for par value in cash and a promissory note issued on that same day for $68,305,
to Custodian Ventures, LLC. In addition, David Lazar thereafter, published all of the missing filings with OTC Markets for the
Company, so that it became current with Pink Sheets information. There was no party that requested such services. Prior to July
3, 2018, neither Custodian Ventures, LLC, nor David Lazar, held any shares of capital stock in the Company
On July 11, 2018,
the Company terminated its registration with the Securities and Exchange Commission.
On August 13, 2018,
the Company filed a Form 10-12G, which went effective on October 12, 2018.
On February 27, 2019, Custodian Ventures
LLC (the “Seller”) entered into a Stock Purchase Agreement (the “Agreement”) with Zhicheng
RAO (the “Buyer” or “Purchaser”). Pursuant to the Agreement, the Seller sold to the Buyer,
and the Buyer agreed to purchase from the Seller, 2,185,710,000 shares of common stock, par value $0.00001 per share (the “Common
Stock”) of Melt, Inc. (the “Company”), constituting approximately 99% of the issued and outstanding
Common Stock, for an aggregate purchase price of $325,000. The closing of the transactions (the “Closing”) contemplated
by the Agreement occurred and consummated on March 7, 2019. The foregoing description of the Agreement does not purport to describe
all of the terms and provisions thereof and is qualified in its entirety by reference to the Agreement, which is filed as Exhibit
10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The Company filed a Certificate of Amendment
on April 15, 2019 with Nevada Secretary of State to (i) change the Company name from Melt Inc. to Guozi Zhongyu Capital Holdings
Company; and (ii) to effectuate a reverse stock split of the Company’s authorized, issued and outstanding shares of Common
Stock, at a ratio of 10-for-1.
The Company's current business objective
is to seek a business combination with an operating company. We intend to use the Company's limited personnel and financial resources
in connection with such activities. The Company will utilize its capital stock, debt or a combination of capital stock and debt,
in effecting a business combination. It may be expected that entering into a business combination will involve the issuance of
restricted shares of capital stock. The issuance of additional shares of our capital stock:
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may significantly reduce the equity interest of our stockholders;
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will likely cause a change in control if a substantial number of our shares of capital stock are issued, and most likely will also result in the resignation or removal of our present officer and director; and
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may adversely affect the prevailing market price for our common stock.
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Similarly, if we issued
debt securities, it could result in:
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default and foreclosure on our assets if our operating revenues after a business combination were insufficient to pay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contained covenants that required the maintenance of certain financial ratios or reserves and any such covenants were breached without a waiver or renegotiations of such covenants;
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our immediate payment of all principal and accrued interest, if any, if the debt security was payable on demand; and
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our inability to obtain additional financing, if necessary, if the debt security contained covenants restricting our ability to obtain additional financing while such security was outstanding.
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GZCC has administrative
offices located at 18818 Teller Avenue. Suite 115, Irvine, CA 92612. It is provided by related party- Custodian Ventures LLC. with
no charge.
GZCC’s fiscal
year end is December 31.
Critical accounting
policies and estimates
Our condensed consolidated financial statements
are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets and liabilities, 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. We continually evaluate our
estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones.
We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.
All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as
disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other
factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change
and additional information becomes known, even for estimates and judgments that are not deemed critical.
Going Concern
The accompanying financial statements have
been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not completed
its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These
conditions raise substantial doubt as to our ability to continue as a going concern.
Results of Operations
For the three
and six months ended June 30, 2020 Compared to June 30, 2020
Revenue
For the three months ended June 30, 2020
and June 30, 2019, the Company generated $0 in revenues. For the six months ended June 30, 2020 and 2019, revenues were both $0
Expenses
For the three months ended June 30, 2020
and 2019, we incurred operating expenses of $10,350 and $41,731 respectively for a decrease of $31,381 or 75.20% from the same
period of prior year. The major expenses for the three-month period ended June 30, 2020 were audit and accounting fees of $9,500
and Transfer Agent service fees of $850; the major expenses for the three-month period ended June 30, 2019 were bad debt expenses
of $39,602, registration and transfer agent fees of $2,129. The decrease of $31,381 was mainly due to the decrease of bad debt
expense of $39,602 and the decrease of $1,279 in Transfer Agent fees, and an increase in audit and accounting fees of $9,500, respectively.
The management considers there is no collectability
of the promissory notes from related party- Custodian Ventures, LLC., On June 30, 2019, the Notes receivable of $70,995 from Custodian
Ventures, LLC. was written off. As of June 30, 2019, the company has a $0 balance of Notes receivable.
Per Stock Purchase Agreement, dated as
of February 12, 2019, term#3.3 Additional Consideration, at closing, the seller, Custodian Ventures, LLC. shall waive collection
on the promissory note issued by the company in its favor, which is in the total principal amount of Thirty One Thousand Three
Hundred Ninety Three Dollars ($31,393), accordingly, on June 30, 2019, Notes payable of $31,393 to Custodian Ventures, LLC. was
cancelled.
The net effect of the written off of Notes
receivable of $70,995 from Custodian Ventures, LLC. and Cancellation of Notes payable of $31,393 to Custodian Ventures, LLC. is
a bad debt expense of $39,602 for the reporting period.
For the six months ended June 30, 2020
and 2019, we incurred operating expenses of $14,100 and $58,185 respectively for a decrease of $44,085 or 75.77% from the same
period of prior year. The major expenses for the six-month period ended June 30, 2020 were audit and accounting fees and transfer
agent service fees; the major expenses for the six-month period ended June 30, 2019 were bad debt expense, audit and accounting
fees, legal fees and transfer agent service fees. The decrease of $44,085 was mainly due to a decrease of $39,602 in bad debt expense,
a decrease of $10,750 in legal fees, and a decrease of $1,733 in transfer agent fees, at the same time, there was an increase of
$8,000 in audit and accounting fees.
Other Income (expense)
Other income consists of interest income.
Other income for the three months ended June 30, 2020 and 2019 were $0 and $837; $837 was the interest on the promissory note from
related party - Custodian Ventures, LLC.
Other income for the six months ended June
30, 2020 and 2019 were $0 and $1,674; $1,674 was the interest on the promissory note from related party - Custodian Ventures, LLC.
Net Loss
For the three months ended June 30, 2020
and 2019, we incurred a net loss of $10,350 and $40,894 respectively. The decrease is mainly due to the write off of notes receivable
and cancellation of Notes payable that caused a bad debt expense of $39,602.
For the six months ended June 30, 2020
and 2019, we incurred a net loss of $14,100 and $56,511 respectively. The decrease is mainly due to the write off of notes receivable,
legal fees and transfer agent fee, at the same time, there was
an increase of $8,000 in audit and accounting fees.
Liquidity and Capital
Resources
As of June 30, 2020, the Company has no
business operations and no cash resources other than that provided by Management. We are dependent upon interim funding provided
by Management or an affiliated party to pay professional fees and expenses. Our Management and an affiliated party have agreed
to provide funding as may be required to pay for accounting fees and other administrative expenses of the Company until the Company
enters into a business combination. The Company would be unable to continue as a going concern without interim financing provided
by Management. As of June 30, 2020, we had $0 in cash. As of December 31, 2019, we had $0 in cash.
If we require additional financing, we
cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all. The Company depends
upon services provided by Management and an affiliated party to fulfill its filing obligations under the Exchange Act. At present,
the Company has no financial resources to pay for such services.
The Company does not currently engage in
any business activities that provide cash flow. The costs of investigating and analyzing business combinations, maintaining the
filing of Exchange Act reports, the investigation, analyzing, and consummation of an acquisition for an unlimited period of time
will be paid from additional money contributed by Zhichen Rao, our Co-Chairman of the Board, or an affiliated party.
During the next 12
months we anticipate incurring costs related to:
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filing of Exchange Act reports.
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franchise fees, registered agent fees, legal fees and accounting fees, and
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investigating, analyzing and consummating an acquisition or business combination.
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We estimate that these costs will be in
the range of five to six thousand dollars per year, and that we will be able to meet these costs as necessary, to be advanced/loaned
to us by Management and/or an affiliated party.
On June 30, 2020 and December 31, 2019,
we have had $9,000 in current assets and $6,000 in current assets, respectively. As of June 30, 2020, we had $9,000 in liabilities
and stockholders’ deficit. As of December 31, 2019, we had $6,000 in liabilities and stockholders’ deficit.
We had $0 cash flow from operations during
the six months ended June 30, 2020, compared to $0 used in operating activities for the six months ended June 30, 2019. We financed
our cash flow from operations during the six months ended June 30, 2020 and 2019 through advances made by related parties.
The Company currently plans to satisfy
its cash requirements for the next 12 months through borrowings from its CEO or companies affiliated with its CEO and believes
it can satisfy its cash requirements so long as it is able to obtain financing from these affiliated parties. The Company expects
that money borrowed will be used during the next 12 months to satisfy the Company's operating costs, professional fees and for
general corporate purposes. There is no written funding agreement between the Company and its CEO.
The Company has only limited capital. Additional
financing is necessary for the Company to continue as a going concern. Our independent auditors have provided an unqualified audit
opinion for the years ended December 31, 2019 and 2018 with an explanatory paragraph on going concern.
Off-Balance Sheet
Arrangements
As of June 30, 2020 and 2019, we did not
have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act
of 1934.
Contractual Obligations
and Commitments
As of June 30, 2020
and 2019, we did not have any contractual obligations.
Critical Accounting
Policies
Our significant accounting policies are
described in the notes to our financial statements for the six months ended June 30, 2020 and 2019, and are included elsewhere
in this registration statement.