UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2020

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

EXCHANGE ACT

 

Commission File Number: 333-100056

 

 

CHUN CAN CAPITAL GROUP

(Exact name of registrant as specified in its charter)

 

Nevada

 

52-2360156

(State or other jurisdiction of incorporation or organization)

 

(IR.S. Employer Identification No.)

 

 

 

7323 Oswego Road

 

 

Liverpool, N.Y.

 

13090

(Address of principal executive offices)

 

(Zip Code)

 

 

 

 

(315) 701-1032

 

Registrant’s telephone number Including area code

 

 

 

Securities registered pursuant to Section 12(b) of the Act: None

 

 

 

Securities registered pursuant to Section 12(g) of the Act.

 

 

 

 

Common Stock, $0.001 Par Value

 

 

(Title of class)

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ YES  ☑ NO

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ YES  ☑ NO

 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ YES ☐ NO

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐ YES ☑ NO

1

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer ☐

 

Accelerated filer ☐

 

Non-accelerated filer ☐

 

Smaller reporting company ☒

 

 

 

Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.

 

Note. If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold as of April 21, 2021, was $127,206.

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ YES  ☐ NO

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.220,033,011 shares of common stock are outstanding as of April 24, 2021.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).  None

2

TABLE OF CONTENTS

 

 

 

 

 

PART I

 

 

 

 

 

 

 

Item 1

Business

 

4

 

Item 1A

Risk Factors

 

4

 

Item 1B

Unresolved Staff Comments

 

5

 

Item 2

Properties

 

5

 

Item 3

Legal Proceedings

 

5

 

Item 4

Mine Safety Disclosures

 

5

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

 

 

Item 5

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

5

 

Item 6.

Selected Financial Data

 

6

 

Item 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

7

 

Item 7A

Quantitative and Qualitative Disclosures About Market Risk`

 

10

 

Item 8

Financial Statements and Supplementary Data

 

10

 

Item 9

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

19

 

Item 9A

Controls and Procedures

 

20

 

Item 9B

Other Information

 

22

 

 

 

 

 

 

PART III

 

 

 

 

 

 

 

 

 

Item 10

Directors, Executive Officers and Corporate Governance

 

22

 

Item 11

Executive Compensation

 

21

 

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

22

 

Item 13

Certain Relationships and Related Transactions, and Director Independence

 

23

 

Item 14

Principal Accounting Fees and Services

 

23

 

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

 

 

Item 15

Exhibits, Financial Statement Schedules

 

24

 

 

 

 

 

 

SIGNATURES

 

24

 

3

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

 

Information included in this Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Chun Can Capital Corp., formerly CinTel Corp. (the "Company"), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," or "project" or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

PART I

 

ITEM 1. BUSINESS.

 

CORPORATE HISTORY

 

Chun Can Capital Group (formerly CinTel Corp. and before that, Link2 Technologies) was incorporated in the State of Nevada on August 16, 1996. The initial business focus was to develop a 3D animation and digital effects studio that would provide high-end 3D animation and digital effects to the music video industry.

 

On September 30, 2003, Link2 Technologies entered into a definitive Share Exchange Agreement with CinTel Co., Ltd., a Korean corporation ("CinTel Korea") and the shareholders of CinTel Korea. Pursuant to the Share Exchange Agreement, we acquired 100% of the issued and outstanding capital stock of CinTel Korea in exchange for 16,683,300 shares of our common stock. CinTel Korea was founded in 1997 and has provided various Internet Traffic Management solutions to businesses and consumers. All of the business operations were comprised of developing, manufacturing and distributing Internet Traffic Management solutions to businesses and consumers in order to manage and control large traffic.

 

CinTel Korea introduced Korea's first dynamic server load balancer, and marketed Internet Traffic Management products since its inception, such as the PacketCruz (TM) family of products, iCache, i2one, and Proximator. The Internet Traffic Management solutions were marketed to customers around the world, helping them improve Internet traffic management, service levels (QOS: Quality of Service), and the user experience (QOC: Quality of Content).

 

From 2006 to 2011, we shifted our focus from Internet Traffic Management to becoming a semiconductor and LCD assembly holding company. The company's focus has included investments in several high growth subsidiaries and divesting some non-performing subsidiaries.

 

Until December 31, 2009, the Company's operations were conducted through its subsidiaries, Phoenix Digital Tech ("PDT"), Phoenix Semiconductor Telecommunication Suzhou ("PSTS"), and  Bluecomm and its indirect subsidiary BKLCD. Upon transfer of the shares of its operating subsidiaries, the company has no current operations. The Company maintains a 19% interest in PSTS and 2.1% interest in PDT.

 

The Company's principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

 

The analysis of new business opportunities has and will be undertaken by or under the supervision of the officers and directors of the Company. The Company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In its efforts to analyze potential acquisition targets, the Company will consider the following kinds of factors:

 

(a) Potential for growth, indicated by new technology, anticipated market expansion or new products; 

4

(b) Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole; 

 

(c)  Strength and diversity of management, either in place or scheduled for recruitment; 

 

(d)  Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources; 

 

(e)  The cost of participation by the Company as compared to the perceived tangible and intangible values and potentials; 

 

(f)  The extent to which the business opportunity can be advanced; 

 

(g) The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and 

 

(h)  Other relevant factors. 

 

In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the Company's limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.

 

Form of Acquisition

 

The manner in which the Company participates in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of the Company and the promoters of the opportunity, and the relative negotiating strength of the Company and such promoters.

 

It is likely that the Company will acquire its participation in a business opportunity through the issuance of common stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization.

 

The present stockholders of the Company will likely not have control of a majority of the voting shares of the Company following a reorganization transaction. As part of such a transaction, all or a majority of the Company's directors may resign and new directors may be appointed without any vote by stockholders.

 

In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval.

 

It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred.

5

OUR BUSINESS

 

The Company is currently a non-operating shell company.

 

EMPLOYEES

 

As of the date of this Annual Report, we have no employees.

 

ITEM 1A. RISK FACTORS. 

 

We are a smaller reporting company and therefore not required to provide this information in our Form 10-K.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS. 

 

As of the date of this Annual Report, there are no unresolved SEC Staff comments.

 

ITEM 2. DESCRIPTION OF PROPERTY 

 

We do not own or lease any property.

 

ITEM 3. LEGAL PROCEEDINGS. 

 

As of the date of this Annual Report, management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Annual Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

 

ITEM 4. MINE SAFETY DISCLOSURES. 

 

Not Applicable.

 

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASERS OF EQUITY SECURITIES. 

 

MARKET INFORMATION

 

Our common stock trades on the over the counter under the symbol "CNCN". The following table sets forth the high and low price information of the Company's common stock for the periods indicated.

 

 

FISCAL YEAR ENDED DECEMBER 31, 2020:

 

High

 

 

Low

 

December 31, 2020

 

$

12.00

 

 

$

12.00

 

September 30. 2020

 

$

12.00

 

 

$

12.00

 

June 30, 2020

 

$

12.00

 

 

$

12.00

 

March 31, 2020

 

$

12.00

 

 

$

12.00

 

 

 

 

 

 

 

 

 

 

FISCAL YEAR ENDED DECEMBER 31, 2019:

 

 

 

 

 

 

 

 

December 31, 2019

 

$

12.00

 

 

 

12.00

 

September 30, 2019

 

$

12.00

 

 

$

12.00

 

June 30, 2019

 

$

12.00

 

 

$

12.00

 

March 31, 2019

 

$

12.00

 

 

$

12.00

 

6

SHAREHOLDERS OF RECORD

 

As of April 21, 2021, there were approximately 220,033,011 shares of our common stock issued and outstanding.  There are approximately 295 shareholders of record at April 21, 2021.

 

The transfer agent of our common stock is Corporate Stock Transfer, whose address is 3200 Cherry Creek Drive South, Suite 430, Denver CO 80209.  The phone number of the transfer agent is (303) 282-4800.

 

DIVIDENDS

 

We have never declared or paid a cash dividend. At this time, we do not anticipate paying dividends in the future. We are under no legal or contractual obligation to declare or to pay dividends, and the timing and amount of any future cash dividends and distributions is at the discretion of our Board of Directors and will depend, among other things, on our future after-tax earnings, operations, capital requirements, borrowing capacity, financial condition and general business conditions. We plan to retain any earnings for use in the operation of our business and to fund future growth. You should not purchase our Shares on the expectation of future dividends.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

Equity Compensation Plan Information

Plan Category

 

Number of

securities to be issued

upon exercise

of outstanding

options,

warrants and rights

 

 

Weighted-

average exercise

price of

outstanding

options, warrants

and rights

 

 

Number of securities

remaining available for

future issuance

under equity compensation plans

(excluding securities

reflected in column (a))

 

Equity compensation plans approved by security holders

 

 

None

 

 

 

-

 

 

 

None

 

Equity compensation plans not approved by security holders

 

 

None

 

 

 

-

 

 

 

None

 

Total

 

 

None

 

 

 

-

 

 

 

None

 

 

INFORMATION RELATING TO OUTSTANDING SHARES

 

As of December 31, 2020, there were 220,033,011 shares of our common stock issued and outstanding.

 

All of our issued and outstanding common shares (of which none shares are owned by officers, directors and principal stock holders) were issued and have been held for a period in excess of six months and are eligible to be resold pursuant to Rule 144 promulgated under the Securities Act.

 

The resale of our shares of common stock owned by officers, directors and affiliates is subject to the volume limitations of Rule 144. In general, Rule 144 permits our affiliate shareholders who have beneficially-owned restricted shares of common stock for at least six months to sell without registration, within a three-month period, a number of shares not exceeding one percent of the then outstanding shares of common stock. Furthermore, if such shares are held for at least six months by a person not affiliated with the company (in general, a person who is not one of our executive officers, directors or principal shareholders during the three month period prior to resale), such restricted shares can be sold without any volume limitation, provided all of the other requirements for resale under Rule 144 are applicable.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

During the year ended December 31, 2020, the Registrant had the following sale of unregistered securities:

 

None

7

ISSUER PURCHASE OF SECURITIES

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA. 

 

Not Applicable.

 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 

 

Forward Looking Statements

 

This section and other parts of this Form 10-K annual report includes "forward-looking statements", that involves risks and uncertainties. All statements other than statements of historical facts, included in this Form 10-K that address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strength, goals, expansion and growth of our business and operations, plans, references to future success, reference to intentions as to future matters, and other such matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate in the circumstances. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks, uncertainties, and other factors, many of which are beyond our control.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, we do not assume responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results.

 

Overview

 

   Chun Can Capital Group.  (the "Company", "we", or "us") was incorporated under the laws of the State of Nevada on August 16, 1996.  The purpose of the Company is to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition, or other business combination with a domestic or foreign private business.  The company has no principal operations. The Company has a December 31 year end. As of December 31, 2020, the issued and outstanding shares of common stock totaled 33,011,

 

   Certain statements contained below are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

 

   We are considered a start-up corporation. Our auditors have issued a going concern opinion in the financial statements for the year ended December 31, 2020.

 

RESULTS OF OPERATIONS

 

Working Capital

 

 

December 31,

 

December 31,

 

 

2020

 

2019

 

Current Assets

 

 

$                 -  

 

 

 

$                 -   

 

Current Liabilities

 

 

58,234

 

 

 

-

 

Working Capital (Deficit)

 

$

(58,234)

 

 

$

-

 

8

Cash Flows

 

 

December 31,

 

December 31,

 

 

2020

 

2019

 

Cash Flows from (used in) Operating Activities

 

 

$                 -

 

 

 

$                 -

 

Cash Flows from (used in) Financing Activities

 

 

-

 

 

 

-

 

Net Increase (decrease) in Cash During Period

 

$

-

 

 

$

-

 

 

 

YEAR ENDED DECEMBER 31, 2020 COMPARED TO YEAR ENDED DECEMBER 31, 2019

 

REVENUES

 

We have generated no revenues for the years ended December 31, 2020 and 2019.

 

OPERATION AND ADMINISTATIVE EXPENSES

 

Operating expenses for the year ended December 31, 2020 were $68,234 compared with $0 for the year ended December 31, 2019.  The increase in Operating expenses for 2020 consisted of an increase in general and administrative expenses for the year ended December 31, 2020 of $68,234 from $0 for the year ended December 31, 2019.

 

During the year ended December 31, 2020, the Company recorded a net loss of $68,234, compared with net loss of $0 for the year ended December 31, 2019.

 

LIQUIDITY AND CAPITAL RESOURCES  

 

As of December 31, 2020, the Company's cash balance was $0 compared to cash balance of $0 as at December 31, 2019. As of December 31, 2020, the Company's total assets were $0 compared to total assets of $0 as at December 31, 2019.

 

As of December 31, 2020, the Company had total liabilities of $58,234 compared with total liabilities of $0 as at December 31, 2019.  The increase in total liabilities for the year ended December 31, 2020 consisted of an increase in accounts payable for the year ended December 31, 2020 of $26,361 from $0 for the year ended December 31, 2019; and an increase in due to related party for the year ended December 31, 2020 of $31,873 from $0 for the year ended December 31, 2019.

 

As of December 31, 2020, the Company has a working capital of ($58,234) compared with working capital of $0 at December 31, 2019.

 

Cashflow from Operating Activities

 

During the year ended December 31, 2020 the Company used $0 of cash for operating activities compared to $0 of cash used by operating activities during the year ended December 31, 2019.

 

Cashflow from Financing Activities

 

During the years ended December 31, 2020 the Company's net cash provided by financing activity was $0 compared to $0 cash provided by financing for year ended December31, 2019.

 

Subsequent Developments

 

None

 

Going Concern

 

We have not attained profitable operations and are dependent upon the continued financial support from our shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from our future business. These factors raise substantial doubt regarding our ability to continue as a going concern.

9

OFF BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

CONTRACTUAL OBLIGATIONS

 

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide this information.

 

CRITICAL ACCOUNTING POLICIES

 

We have one main products, namely the concealed weapons detection system. In all cases revenue is considered earned when the product is shipped to the customer, installed (if necessary) and accepted by the customer as a completed sale. Each product has an unconditional 30-day warranty, during which time the product can be returned for a complete refund. Customers can purchase extended warranties, which provide for replacement or repair of the unit beyond the period provided by the unconditional warranty. Warranties can be purchased for various periods but generally they are for one-year period that begins after any other warranties expire. The revenue from warranties is recognized on a straight-line bases over the period covered by the warranty. Prior to the issuance of financial statements management reviews any returns subsequent to the end of the accounting period which are from sales recognized during the accounting period and makes appropriate adjustments as necessary. Product prices are fixed or determinable and products are only shipped when collectability is reasonably assured.

 

Stock Based Compensation

 

We account for share-based compensation at fair value. Stock based compensation cost for stock options granted to employees, board members and service providers is determined at the grant date using an option pricing model. The value of the award that is ultimately expected to vest is recognized as expensed on a straight-line basis over the requisite service period.

 

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 

 

As a "smaller reporting company", the Company is not required to provide this information.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 

 

 

CHUN CAN CAPITAL GROUP

FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2020

 

C O N T E N T S

 

Report of Independent Registered Public Accounting Firm

 

 

11

 

 

 

 

 

 

Balance Sheets

 

 

12

 

 

 

 

 

 

Statements of Operations

 

 

13

 

 

 

 

 

 

Statements of Stockholders' Deficit

 

 

14

 

 

 

 

 

 

Statements of Cash Flows

 

 

15

 

 

 

 

 

 

Notes to the Financial Statements

 

 

16

 

10

Boyle CPA, LLC

Certified Public Accountants & Consultants

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and

Board of Directors of Chun Can Capital Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Chun Can Capital Corp. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

 

As discussed in Note 1 to the financial statements, the Company has no operations, has ongoing net losses, and an accumulated deficit.  These factors raise substantial doubt about its ability to continue as a going concern for one year from the issuance of these financial statements. Management’s plans are also described in Note 1. The financial statements do not include adjustments that might result from the outcome of this uncertainty.

 

Basis of Opinion

 

These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the Company’s financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

/s/ Boyle CPA, LLC

 

We have served as the Company’s auditor since 2019

 

Bayville, NJ

April 21, 2021

 

361 Hopedale Drive SE P (732) 822-4427  

Bayville, NJ 08721 F (732) 510-0665 

11

Chun Can Capital Group

 

 

 

 

(formerly Cintel Corp. and Subsidiary)

 

 

 

 

Consolidated Balance Sheets

 

 

 

 

December 31, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalent

 

$                         -  

 

$                         -  

 

 

Total current assets

 

 -  

 

 -  

 

 

 

 

 

 

 

Total assets

 

$                         -  

 

$                        -  

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable

 

$             26,361

 

$                        -  

 

Accounts payable - related

 

31,873

 

 -  

 

 

Total current liabilities

 

58,234

 

 -  

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

Preferred stock: par value $0.001 per share, 30,000,000

 

 

 

 

 

 

Shares authorized, none issued and outstanding

 

 -  

 

 -  

 

Common stock: par value $0.001 per share, 300,000,000

 

 

 

 

 

 

Shares authorized, 220,033,011 and 33,011 shares issued

 

 

 

 

 

 

and outstanding

 

220,033

 

33

 

Additional paid-in capital

 

20,458,967

 

20,668,967

 

Accumulated deficit

 

(20,737,234)

 

(20,669,000)

 

 

Total stockholders' deficit

 

(58,234)

 

 -  

 

 

 

 

 

 

 

Total liabilities and stockholders' deficit

 

$                         -  

 

$                        -  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

F-2

12

Chun Can Capital Group

 

 

 

 

(formerly Cintel Corp. and Subsidiary)

 

 

 

 

Consolidated Statements of Operations

 

 

 

 

Years ended December 31, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Years Ended

 

 

 

December 31,

 

 

 

2020

 

2019

 

 

 

 

 

 

Net revenues

 

$                     -   

 

$                        -   

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

General and administrative expenses

 

68,234

 

    -   

 

Total operating expenses

 

68,234

 

   -   

Loss from operations

 

(68,234)

 

     -   

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 Other income (expense)

 

    -   

 

    -   

 

 Impairment loss on investment

 

      -   

 

    -   

 

 Share of loss from equity investment

 

     -   

 

     -   

 

 Foreign currency transactions, net

 

     -   

 

    -   

 

Gain on debt settlement

 

    -   

 

       -   

 

Other income (expenses), net

 

      -   

 

     -   

 

 

 

 

 

 

Income (loss) before income taxes

 

(68,234)

 

    -   

 

 

 

 

 

 

Income tax expense

 

   -   

 

   -   

 

 

 

 

 

 

Net income (loss)

 

(68,234)

 

      -   

 

 

 

 

 

 

Income (loss) per share – basic and diluted:

 

$            (0.00)

 

$                        -   

 

 

 

 

 

 

Weighted average number of

 

 

 

 

 

common shares outstanding - basic and diluted

189,978,366

 

33,011

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

 

 

 

 

 

 

 

F-3

13

Chun Can Capital Group

 

 

 

 

 

(formerly Cintel Corp. and Subsidiary)

 

 

 

 

 

Consolidated Statements of Cash Flows

 

 

 

 

 

Years ended December 31, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended

 

 

 

 

 

December 31,

 

 

 

 

2020

 

 

2019

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$         (68,234)

 

 

$                        -   

Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

provided by (used in) operating activities:

 

 

 

 

 

 

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

Accounts payable

 

26,361

 

 

    -   

 

 

Accounts payable- related

 

41,873

 

 

  -   

 

 

Cash provided by (used in) operating activities

 

    -   

 

 

  -   

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Cash provided by investing activities

 

 -   

 

 

   -   

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from notes payable

 

   -   

 

 

   -   

 

Principal payments of notes payable

 

    -   

 

 

   -   

 

Cash used in financing activities

 

   -   

 

 

    -   

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalent

 

  -   

 

 

   -   

 

Cash and cash equivalent - beginning of year

 

   -   

 

 

    -   

 

 

 

 

 

 

 

 

 

Cash and cash equivalent - end of year

 

$                      -   

 

 

$                        -   

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flows Information:

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

Interest

 

$                      -   

 

 

$                        -   

 

Income taxes

 

$                      -   

 

 

$                        -   

 

 

 

 

 

 

 

 

Non-cash financing activities:

 

 

 

 

 

 

Conversion of payables to common stock

 

$           10,000

 

 

$                        -   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

 

 

 

 

 

 

F-4

14

Chun Can Capital Group

 

 

 

 

 

 

 

 

 

 

(formerly Cintel Corp. and Subsidiary)

 

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Deficit

 

 

 

 

 

 

 

 

Years Ended December 31, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Common stock

 

Paid-in

 

Accumulated

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Total

Balance, December 31, 2018

 

   33,011

 

$         33

 

$20,668,967

 

$(20,669,000)

 

$               -   

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

   -   

 

     -   

 

   -   

 

  -   

 

   -   

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

33,011

 

33

 

20,668,967

 

(20,669,000)

 

    -   

 

 

 

 

 

 

 

 

 

 

 

Shares issued to convert payables

 

220,000,000

 

220,000

 

(210,000)

 

   -   

 

10,000

Net loss

 

   -   

 

  -   

 

   -   

 

(68,234)

 

(68,234)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

220,033,011

 

$220,033

 

$20,458,967

 

$(20,737,234)

 

$ (58,234)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-5

15

Chun Can Capital Group

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

On October 30, 2006, the Company acquired 51% of the outstanding voting stocks of Phoenix Semiconductor Telecommunication Co., Ltd. ("PSTS") in China for $16.5 million. In March 2008, the Company contributed $4.9 million of additional capital to PSTS to proportionately match the additional investments made by the minority shareholders of PSTS.  PSTS was in the business of semiconductor packaging and manufacturing.

 

On May 18, 2007, the Company acquired 100% of the outstanding voting stocks of Bluecomm Korea, Co. Ltd. (“Bluecomm”) in Korea for $6.5 million. Bluecomm was engaged in the business of Customer Relationship Management (CRM) solution and consulting, call-center operation, and database marketing.

 

On August 27, 2007, the Company acquired 50.1% of the outstanding voting stocks of Phoenix Digital Tech Co. Ltd. (“PDT”) in Korea for $34.7 million. PDT was in the business of designing, manufacturing and installing automated assembly line for Flat Panel Displays, and manufacturing and testing of PCB related equipment based on customers’ specification.

 

Acquisitions of these subsidiaries were financed by issuing convertible debts to various parties.  In October 2009, the convertible debts issued to Woori PEF was called, and in December 2009, to satisfy the debts, the Company transferred to the creditor (1) 100% ownership in Bluecomm, (2) 48% ownership in PDT and (3) 32% ownership interest in PSTS.  As a result, the Company had only one wholly-owned subsidiary, Cintel Korea as of December 31, 2010.  In 2011, the Company abandoned its’ investment in Cintel Korea.

 

Going Concern

 

The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  The Company is a non-operating shell company which has experienced recurring operating losses and has.an accumulated deficit.  These conditions raise uncertainty about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

 

The Company’s ability to continue as a going concern is contingent upon its ability to secure additional financing and find a merger candidate.  It is the intent of management to continue to raise additional funds and to pursue acquisitions of operating companies in order to generate future profits for the Company. Although the Company plans to pursue additional equity financing and acquisitions, there can be no assurance that the Company will be able to secure financing or acquisition targets when needed or obtain such on terms satisfactory to the Company, if at all.

 

The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-6

16

Chun Can Capital Group

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

Note 2 – Summary of Significant Accounting Policies:

 

The following summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. 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 financial statements.

 

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable.  Actual results may differ materially from these estimates.  In addition, any changes in these estimates or their related assumptions could have a materially adverse effect on the Company's operating results.

 

Basis of Presentation and Consolidation

 

The accompanying consolidated financial statements include the accounts of Chun Can Capital Group (formerly Cintel Corp.) and its wholly owned subsidiary, Cintel Korea, (collectively, the Company).  Intercompany transactions and balances have been eliminated in consolidation. When the Company does not have a controlling interest in an entity, but exerts significant influence over the entity, the Company applies the equity method of accounting.

 

Where the functional currency of the Company's foreign subsidiaries is the local currency, all assets and liabilities are translated into U.S. dollars, in accordance with FASB ASC 830, Foreign Currency Translation, using the exchange rate on the consolidated balance sheet date, and revenues and expenses are translated at average rates prevailing during the period.  Accounts and transactions denominated in foreign currencies have been re-measured into functional currencies before translated into U.S. dollars.  Foreign currency transaction gains and losses are included as a component of other income and expense.  Gains and losses from foreign currency translation are included as a separate component of comprehensive income.  At December 31, 2019 and 2018, the Company no longer had foreign subsidiaries denominated in local currencies.

 

On March 16, 2017, the Company effected a 1 for 4,000 reverse stock split.  All share and per share information have been retroactively adjusted for this reverse stock split.

 

Cash and Cash Equivalents

 

Cash includes currency, checks issued by others, other currency equivalents, current deposits and passbook deposits held by financial institutions. Cash equivalents consist primarily of cash deposits in money market funds that are available for withdrawal without restriction.  The investments that mature within three months from the investment date are also included as cash equivalents.

 

 

 

 

 

 

 

 

 

 

F-7

17

Chun Can Capital Group

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

Fair Value Measurements

 

The Company follows the provisions of FASB ASC Topic 820, Fair Value Measurements, included in ASC Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. ASC Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair Value of Financial Instruments

 

In accordance with ASC 820, the Company to determines the fair value of financial assets and liabilities using a specified fair-value hierarchy. The objective of the fair value measurement of our financial instruments is to reflect the hypothetical amounts at which we could sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  ASC 820 describes three levels of inputs that may be used to measure fair value, as follows:

 

·

Level 1 inputs are quoted prices in active markets for identical asset or liability that the reporting entity has the ability to access at the measurement date.

 

·  

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

 

·  

Level 3 inputs are unobservable inputs for the asset or liability that supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

 

The fair values of securities available-for-sale are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to credit risk consist of cash equivalents and loan receivables. Cash equivalents are maintained with high quality institutions, the composition and maturities of which are regularly monitored by management. The Company diversifies its investments to reduce the exposure to loss from any single issuer, sector or bank.

 

For loan receivables, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value.  Concentration of credit risk arises when a group of customers having similar characteristics such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions.

 

 

 

 

 

 

 

 

 

 

 

 

F-8

18

Chun Can Capital Group

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

Income Taxes

 

The Company accounts for income taxes in accordance with FASB ASC 740, Accounting for Income Taxes, which requires that 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 operating loss and tax credit carry forwards.  ASC 740 also requires that deferred tax assets be reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company is required to evaluate the realizability of the deferred tax assets by assessing the valuation allowance and, if necessary, adjusting the amount of such allowance.  The factors used to assess the likelihood of realization includes the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.  The Company continued to record a full valuation allowance against the deferred tax assets because it was more likely than not that the Company would not be able to realize these deferred tax assets based upon forecast of future taxable income and other relevant factors.  The Company maintains a full valuation allowance against the deferred tax assets.

 

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

 

Note 3 - Income Taxes

 

The corporate tax rates was 21%. The Company provided a valuation allowance equal to the deferred tax amounts resulting from the tax losses in the United States, as it is not likely that they will be realized.  

 

The U.S. tax losses can be carried forward for 15 to 20 years to offset future taxable income and expire in years 2020 to 2029.  

 

The provision for income taxes for the years ended December 31, 2020 and 2019 are summarized as follows:

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

Income tax – current

 

$

(14,329)

 

 

$

-

 

Income tax – deferred

 

 

14,329

 

 

 

-

 

 

 

$

-

 

 

$

-

 

 

The Company has deferred tax assets (liabilities) at December 31, 2020 and 2019 were approximately as follows:

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$

4,355,000

 

 

$

4,340,000

 

Valuation allowance

 

 

(4,355,000

)

 

 

(4,340,000

)

 

 

$

-

 

 

$

-

 

 

 

 

F-9

19

Chun Can Capital Group

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

Note 4 – Capital Stock

 

On February 19, 2020, the Company issued 220,000,000 shares of common stock to a company controlled by the legal custodian of the Company to convert $10,000 in payables.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-10

20

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. 

 

BOYLE CPA, LLC

 

This decision to engage Boyle CPA, LLC was approved by our full Board of Directors. Because we have no standing audit committee, our full Board of Directors participated in and approved the decision to change independent accountants. Presently, the Board of Directors acts as the audit committee.

 

ITEM 9A. CONTROLS AND PROCEDURES. 

 

Evaluation of Disclosure Controls and Procedures

 

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of December 31, 2020. Based on such evaluation, we have concluded that, as of such date, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Principal Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.

 

Management's Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining internal control over financial reporting for our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over our financial reporting includes those policies and procedures that:

 

(1)

pertain to the maintenance of records that in reasonable detail accurately and fairy reflect our transactions.

 

(2)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and

 

(3)

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or circumvention through collusion of improper overriding of controls. Therefore, even those internal control systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

 

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making its assessment of internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO 2013") in Internal-Control-Integrated Framework and implemented a process to monitor and assess both the design and operating effectiveness of our internal controls. Based on this assessment, management believes that as of December 31, 2020, our internal control over financial reporting was not effective.

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2020, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

 

(1)

We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management's view that such a committee, including a financial expert member, is an utmost important entity level control over the Company's financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management's activities

21

(2)

We did not maintain enough skilled accounting resources supporting the financial close and reporting processes to ensure (i) changes and entry to spreadsheets utilized in the financial reporting process were properly reviewed, (ii) significant estimates and judgments were adequately supported, reviewed, approved and evaluated against actual experiences, (iii) effective and timely analysis and reconciliation of significant accounts, and (iv) a proper review of period close entries and procedures

 

We have instituted remediation plan which involves reeducating our management, the accounting staff, and the administrative staff as to the elements of a completed sale. We increased the oversight of the process by increasing the frequency of involvement of outside accounting consultants. Internal systems are being put into place to track and document significant dates, such as delivery, installation and customer acceptance. In addition, the bookkeeping system has been modified so that all sales of extended warranties are automatically recorded as deferred revenue and that the amount of revenue that is ultimately recognized as warranty revenue is as the result of an analysis of the significant aspects of the warranty such as coverage and period.

 

Changes in Internal Control Over Financial Reporting

 

Our management has evaluated, with the participation of our Chief Executive Officer/Chief Financial Officer, changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fourth quarter of 2020. In connection with such evaluation, there have been no changes to our internal control over financial reporting that occurred since the beginning of our fourth quarter of 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. While there have been no changes, we have assessed our internal controls as being deficient and will be taking steps beginning in 2021 to remedy such deficiencies.

 

ITEM 9B. OTHER INFORMATION. 

 

There are no further disclosures.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. 

 

Directors and Executive Officers

 

The following table includes the names and positions held of our executive officers and directors who served during the years ended December 31, 2019 and/or December 31, 2020 and their current ages:

 

 

 

 

 

 

 

 

NAME

 

AGE

 

POSITION

 

DIRECTOR SINCE

 

 

 

 

 

 

 

 

 

Clara Gomez

 

26

 

Chief Executive & Chief Financial Officer and Director

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clara J. Gomez

 

Clara J. Gomez, Chief Executive Officer, Chief Financial Oficer and Director has a degree in Business Administration and Accounting from the Univeridad Abierta Para Auditos (UAPA) Santo Domingo.

 

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

 

None of our directors, executive officers or control persons has been involved in any of the legal proceedings required to be disclosed in Item 401 of Regulation S-K, during the past five years.

22

CORPORATE GOVERNANCE MATTERS

 

Audit Committee

 

The board of directors does not have an audit committee, and the functions of the audit committee are currently performed by our Corporate Secretary, with assistance by expert independent accounting personnel and oversight by the entire board of directors. We are not currently subject to any law, rule or regulation requiring that we establish or maintain an audit committee.

 

Board of Directors Independence. Our board of directors currently consists of one member. We are not currently subject to any law, rule or regulation requiring that all or any portion of our board of directors include "independent" directors.

 

Audit Committee Financial Expert. Our board of directors has determined that we do not have an audit committee financial expert serving on our audit committee within the meaning of Item 407(d)(5) of Regulation S-K. In general, an "audit committee financial expert" is an individual member of the audit committee who (a) understands generally accepted accounting principles and financial statements, (b) is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves, (c) has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to the Company's financial statements, (d) understands internal controls over financial reporting and (e) understands audit committee functions.

 

We have not yet replaced our former audit committee financial expert, but we are engaged in finding a suitable replacement.

 

Code of Ethics

 

We have not adopted a code of ethics for our executive officers, directors and employees. However, our management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations.

 

Nominating Committee

 

We have not yet established a nominating committee. Our board of directors, sitting as a board, performs the role of a nominating committee. We are not currently subject to any law, rule or regulation requiring that we establish a nominating committee.

 

Compensation Committee

 

We have not established a compensation committee. Our board of directors, sitting as a board, performs the role of a compensation committee. We are not currently subject to any law, rule or regulation requiring that we establish a compensation committee.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Commission. Officers, directors and greater than ten percent beneficial owners are required by Commission regulations to furnish us with copies of all forms they file pursuant to Section 16(a). Based solely on our review of the copies of such forms received and written representations from reporting persons required to file reports under Section 16(a), all of the Section 16(a) filing requirements applicable to such persons, with respect to fiscal year 2020, appear not to have been complied with to the best of our knowledge.

 

ITEM 11. EXECUTIVE COMPENSATION. 

 

None.

 

Name

 

Salary

 

Position

 

 

 

 

 

 

 

 

 

Clara J. Gomez

 

$

0

 

 

 

As Chief Executive & Chief Financial Officer and Director

 

 

 

 

 

 

 

 

 

 

23

 

SUMMARY COMPENSATION TABLE ‡

 

Name and Principal Position

Fiscal

Year

 

Salary

($)

 

Bonus

($)

 

Stock

Awards

($)

 

Option

Awards

($)

 

Nonequity

Incentive

Plan

Compen-

sation ($)

 

Non-

Qualified

Deferred

Compen-

sation

Earnings

($)

 

All

Other

Compen-

sation

($)

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clara J. Gomez

2019

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

(Chief Executive & Chief Financial Officer and Director

2020

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

 

None

 

Directors Compensation

 

No director received compensation for services rendered in any capacity to us during the fiscal years ended December 31, 2019 and December 31, 2020.

 

Indemnification of Directors and Officers

 

Our Articles of Incorporation, as amended and restated, and our Bylaws provide for mandatory indemnification of our officers and directors, except where such person has been adjudicated liable by reason of his negligence or willful misconduct toward the Company or such other corporation in the performance of his duties as such officer or director. Our Bylaws also authorize the purchase of director and officer liability insurance to insure them against any liability asserted against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee, fiduciary, or agent, whether or not the corporation would have the power to indemnify such person under the applicable law.

 

Compensation Committee Interlocks and Insider Participation

 

We have not established a compensation committee. We are not currently subject to any law, rule or regulation requiring that we establish a compensation committee.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following tables set forth information as of December 31, 2020 regarding the beneficial ownership of our common stock each stockholder who is known by the Company to own beneficially in excess of 5% of our outstanding common stock; each director known to hold common or preferred stock; the Company's chief executive officer; and the executive officers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares of stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of stock.

24

 

 

 

 

 

NUMBER OF
SHARES

 

PERCENT OF
SHARES

NAME AND ADDRESS OF

 

TITLE

 

BENEFICIALLY

 

BENEFICIALLY

BENEFICIAL OWNER

 

OF CLASS

 

OWNED

 

OWNED

 

 

 

 

 

 

 

 

 

 

 

 

 

Clara J. Gomez

 

 

Common

 

 

 

0

 

 

 

0

 

Costa Rica Street, Yesiana Rosa I

 

 

 

 

 

 

 

 

 

 

 

 

Santo Domingo Este 11406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Directors and officers as a group (1 member)

 

 

Common

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The above table reflects share ownership as of the most recent date. Each share of common stock has one vote per share on all matters submitted to a vote of our shareholders.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. 

 

We do not have a specific policy or procedure for the review, approval, or ratification of any transaction involving related persons. We historically have sought and obtained funding from officers, directors, and family members as these categories of persons are familiar with our management and often provide better terms and conditions than we can obtain from unassociated sources. Also, we are so small that having specific policies or procedures of this type would be unworkable.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

The following table shows the fees paid or accrued for the audit and other services provided by our independent registered public accounting firm.

 

 

 

 

2020

 

 

 

2019

 

Audit fees

 

$

5,000

 

 

$

5,000

 

Audit related fees

 

 

0

 

 

 

0

 

Tax fees

 

 

0

 

 

 

0

 

All other fees

 

 

0

 

 

 

0

 

 

Audit Fees

 

Audit fees represent the professional services rendered for the audit of our annual financial statements and the review of our financial statements included in quarterly reports, along with services normally provided by the accountant in connection with statutory and regulatory filings or engagements.

 

Audit Related Fees

 

Audit-related fees represent professional services rendered for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements that are not reported under audit fees.

 

Tax Fees

 

Tax fees represent professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

All other fees represent fees billed for products and services provided by the principal accountant, other than the services reported for the other categories.

25

PRE-APPROVAL POLICIES

 

Our audit committee does not rely on pre-approval policies and procedures. Typically, Management has sought out audit firm candidates and presented them to the audit committee. Before the auditor renders audit and non-audit services our board of directors approves the engagement.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

The following exhibits are filed as part of this Form 10-K:

 

31.1

Rule 13a-15(e)/15d-15(e) Certification by the Chief Executive Officer *

 

 

31.2

Rule 13a-15(e)/15d-15(e) Certification by the Chief Financial Officer *

 

 

32.1

Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

 

32.2

Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

 

*Filed herewith

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 21, 2021.

 

 

Cannonau Corp.

 

 

 

 

 

 

By:

/ s/ Clara J. Gomez

 

 

 

Clara J. Gomez

 

 

 

Chief Executive Officer

 

 

 

(Principal executive officer)

 

26

 

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