EOS : Management’s Discussion and Analysis of Financial Condition and Results of Operation. (form 10-Q)

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including this discussion and analysis by
management, contains or incorporates forward-looking statements. All statements
other than statements of historical fact made in report are forward looking. In
particular, the statements herein regarding industry prospects and future
results of operations or financial position are forward-looking statements.
These forward-looking statements can be identified by the use of words such as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. Forward-looking statements reflect
management’s current expectations and are inherently uncertain. Our actual
results may differ significantly from management’s expectations.

The following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best
present assessment of our management.



Description of Business



General Information


EOS Inc. (“we,” “us,” “our,” or the “Company”) was incorporated in the State of
Nevada
on April 3, 2015.

On or about November 18, 2016, the Company formed EOS INC.TAIWAN BRANCH, a
Taiwanese corporation (“EITB”) and the Company owns 100% of EITB. Yu-Cheng Yang,
a shareholder and director of the Company, is the sole director of EITB. Yu-Hsiang Chia is the branch manager of EITB.

Emperor Star International Trade Co., Ltd., (“Emperor Star“), was incorporated
on November 16, 2015 under the laws of Taiwan. Emperor Star is in the business
of marketing and distributing various consumer products, including detergents,
nutrition supplements, and skin care products.

On May 3, 2017, the Company entered into and closed a Share Purchase and Sale
Agreement (the “Purchase Agreement”) with Emperor Star to acquire all issued and
outstanding shares of Emperor Star in consideration of $30,562 in cash. As a
result of the transaction, Emperor Star became the Company’s wholly owned
subsidiary. Upon consummation of the transaction, the Company has assumed the
business of Emperor Star and ceased to be a shell company. Yu-Hsiang Chia currently serves as the officer and director of Emperor Star. On May 26, 2020,
EOS Inc. increased its investment in Emperor Star by $134,004 (NTD$4,000,000).
The Company also received the contributions to Emperor Star from non-controlling
interests in the amount of $33,398 (NTD$1,000,000). As a result, the Company
owns 83% equity interest of Emperor Star as of June 30, 2020, which is no longer
a wholly-owned subsidiary.

On September 20, 2018, the Company set up another wholly-owned subsidiary, EOS
International Inc. (“EOS(BVI)”), under the laws of British Virgin Islands.
EOS(BVI) is in the business of marketing and distribution of various products,
including nutrition supplements, skin care products, and water purifying
machines. On March 1, 2019, EOS(BVI) set up a wholly-owned subsidiary, Shanghai
Maosong Co., Ltd
(“Maosong”), under the laws of People’s Republic of China.
Maosong is in the business of marketing and distribution of various products,
including nutrition supplements, skin care products, and water purifying
machines in China. As of the date of this report, Maosong has a registered
capital of USD $100,000, but no capital has actually been paid into Maosong.

We have never been a party to any bankruptcy, receivership or similar
proceeding, nor have we undergone any material reclassification, merger,
consolidation, purchase or sale of a significant amount of assets not in the
ordinary course of business.

We do not own any real property. Our principal executive office is presently
located at 7F.-1, No. 162, Sec. 2, Zhongshan N. Rd., Zhongshan District, Taipei
City 10452, Taiwan (Republic of China). EITB and Emperor Star operate from this
Taipei location. Taiwan. Emperor Star and EITB entered into the office leases
which commenced on June 15, 2019 and will end on June 14, 2021. The office
occupies approximately 1,388 square feet and the average amount of office rent
(including the maintenance fees) is approximately $2,016 per month. Before this
location, our former principal executive office was at 372 Linsen N. Road, Suite
519, Zhongshan District, Taipei City, 104, Taiwan. Our then monthly rent for
that office space was $1,280 and that lease expired on June 30, 2019.

A-Best operates its business at the address of 159 Songde Road, Building 13,
Room 1, Xinyi District, Taipei, Taiwan. A-Best’s lease for that office space
commenced on January 20, 2018 and will end on January 19, 2020 with a term of
two years. The monthly rent for that office space is $1,451, excluding utilities
and maintenance fees.




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General Business Overview



EOS Inc. markets and distributes a variety of consumer products selected based
on its understanding of the demand for each of its products. EOS conducts its
business primarily in Asia, including the People’s Republic of China (“PRC”),
Taiwan, Singapore and Malaysia. The principal products that EOS markets and
sells through its subsidiaries include Nine Layer Transformation Hair Cream,
Deep Seawater Mineral Extract, and Lifegenes & Youthgenes. Nine Layer
Transformation Hair Cream is hair-coloring product that darkens the user’s hair
color to brown or black while nourishing the hair. Deep Seawater Mineral Extract
is a dietary supplement that is designed to enhance the overall health and
appearance of the consumer. Both Lifegenes and Youthgenes are dietary
supplements designed to improve the consumer’s health. In addition to the four
major products, EOS also sells and distributes other dietary supplements and
skin care products from time to time as it deems profitable. During the six
months ended June 30, 2020, the net sales of dietary supplements and skin care
products were $34,598, which represented approximately 4.2% of the total net
sales for that period.

On April 30, 2018, we, through our Emperor Star, started purchasing a type of
water purifying machines from Cosminergy Hitech Development Co., Ltd.
(“Cosminergy”) and reselling the water purifying machines in certain Asian areas
and countries. The sales generated from selling the water purifying machines for
the six months ended June 30, 2020 and 2019 were $648,702 and $41,799,
respectively, accounting for approximately 78.47% and 17.55% of the total
revenue of the said period, respectively. We did not renew the Cosminergy
Distribution Agreement when the said distribution agreement expired on April 30,
2019
. We are actively seeking for the new vendors for this product.

In November 2019, we started the marketing, promotion, sales and distribution of
certain electrical noise suppressing device (the “Calibrator”) globally provided
by Ultra Velocity Technology Ltd. (“Ultra Velocity”), a corporation formed under
the laws of Taiwan, based on an exclusive patent licensing and distribution
agreement (the “Ultra Velocity Agreement”) between Ultra Velocity and us.
However, due to the outbreak of coronavirus (“COVID-19”) in mainland China,
Ultra Velocity and we terminated the Ultra Velocity Agreement in March 2020 and
intended to redefine the cooperation model between the respective
parties. During the six months ended June 30, 2020, the net sales of calibrator
was $129,985, which represented approximately 15.72% of the total net sales for
that period.

In addition, we provided inventory, membership and business management software
that designed by CKS Information Co., Ltd. to our customers in the fiscal year
of 2019. During the six months ended June 30, 2020 and 2019, the software
business line generated $13,448 and $4,515 respectively, accounting for
approximately 1.63% and 1.9% of the total net sales for that period.

Distribution Agreements and Supply Agreement

On May 1, 2015, we entered into a written Distribution Agreement with A.C.
(USA), Inc.
(“A.C.”) pursuant to which we have an exclusive right to market and
distribute in Taiwan certain skin care products manufactured by A.C. for a
period of 5 years (the “Distribution Agreement”). Pursuant to the provisions of
the Distribution Agreement, we will market and promote the A.C. Products as
defined therein in Taiwan. Accordingly, we are the exclusive distributor for
those A.C. Products in Taiwan.

On April 30, 2018, we, through our Emperor Star, entered into a distribution
agreement (the “Cosminergy Distribution Agreement”) with Cosminergy Hitech
Development Co., Ltd.
(Cosminergy”) pursuant to which we started purchasing a
type of water purifying machines from Cosminergy and reselling the water
purifying machines in certain Asian areas and countries. The Cosminergy
Distribution Agreement expired on April 30, 2019 and we did not renew it.




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We, through one of our wholly-owned subsidiaries, entered into a product supply
agreement (“Fortune King Product Supply Agreement”) with Fortune King (HK)
Trading Limited
(“Fortune King”), a company formed under the laws of Hong Kong,
to provide and sell any products that Fortune King orders from EOS and its
subsidiaries. Pursuant to the Fortune King Product Supply Agreement, we agreed
to provide products ordered by Fortune King within five business days from the
order date and the products we sell should have the expiration date/shelf life
at least one year from the supply date. The Fortune King Product Supply
Agreement became effective on October 1, 2018 and was extended to September 30,
2021
. We provide marketing information on the products we sell and training
services to Fortune King. During the year ended December 31, 2018 and nine
months ended September 30, 2019, the majority of EOS’ sales of Nine Layer
Transformation Hair Cream, Deep Seawater Mineral Extract, Lifegenes, Youthgenes,
and household water purifying machines were to Fortune King. As of June 30,
2019
, Fortune King was a related party of us because the founder and officer of
Fortune King was a shareholder of EOS. On or about June 30, 2019, the founder
and officer of Fortune King transferred her equity interest in the Company and
therefore Fortune King is no longer a related party to the Company.

Acquisition of Control Interest in A-Best

On August 7, 2019, the Company, A-Best Wire Harness & Components Co., Ltd
(“A-Best”), a company formed under the laws of Taiwan, and Ing-Ming Lai, a
Taiwanese individual and the majority shareholder of A-Best, entered into a
purchase agreement (the “Purchase Agreement”), pursuant to which, subject to the
terms and conditions therein, the Company shall purchase thirty-one percent
(31%) of the issued and outstanding equity interest in A-Best and as
consideration, issue ten million (10,000,000) shares (the “Stock Consideration”)
of its common stock (the “Common Stock”) to Ing-Ming Lai and pay Ing-Ming Lai fifty-five million (55,000,000) new Taiwanese dollars (“NTD”) (the “Cash
Consideration”). The Company currently owns twenty percent (20%) of equity
securities in A-Best, and will subsequently own a total of fifty-one percent
(51%) of issued and outstanding A-Best shares when Ing-Ming Lai completes
transferring his 31% of A-Best’s equity to the Company in accordance with the
Purchase Agreement. Pursuant to the Purchase Agreement, the Company shall use
its best efforts to obtain its shareholder approval to increase the number of
authorized common stock to allow legal issuance of the Stock Consideration to Ing-Ming Lai no later than December 31, 2019. In addition, pursuant to the
Purchase Agreement, the Company shall pay the Cash Consideration to Ing-Ming Lai if and only if the Company successfully completes an Initial Public Offering
(the “IPO”) of its common stock, with gross proceeds of no less than $5,000,000
USD
. The Purchase Agreement contains the customary confidentiality provision,
representations and warranties. The Purchase Agreement also provides for mutual
indemnification clauses. A-Best is a Taipei-based company that designs magnetic
resonance speakers.

In connection with the Purchase Agreement, on August 7, 2019, the Company,
A-Best, and Ing Ming Lai entered into an Exclusive Sales Agreement (the
“Exclusive Sales Agreement”), pursuant to which the Company is granted the right
as the exclusive distributor to sell all of A-Best’s products, including its
Micro-ceramic magnetic resonance speakers in the world, and the right to use
A-Best’s trademarks and copyrights in connection with the sale of such products.
The term of the Exclusive Sales Agreement shall be three (3) years from
execution and be automatically renewed for another term of three (3) years
unless one party gives the other parties a written notice of termination three
(3) months before the end of the term.

In connection with the Purchase Agreement, on August 7, 2019, the Company and Ing-Ming Lai entered into a management agreement (the “Management Agreement”),
pursuant to which the Company has agreed to maintain A-Best’s existing
operations and Ing-Ming Lai’s positions as A-Best’s President and Chief
Executive Officer of A-Best, until A-Best’s board of directors decides to
terminate the terms of his positions. Pursuant to the Management Agreement, the
Company shall also designate one individual to A-Best’s board of directors, and
A-Best’s board of directors shall continue to maintain two director seats, where
at least one of the two directors is designated by the Company until the Parties
either reach a shareholder agreement or A-Best receives additional capital
investment in equity or debt. The Management Agreement became effective upon
execution. For more information about this transaction, the Purchase Agreement,
the Exclusive Sales Agreement and Management Agreement, please refer to the
current report on Form 8-K which was filed with the Securities and Exchange
Commission
on August 13, 2019.

On December 30, 2019, the Company, A-Best, and Ing-Ming Lai, a Taiwanese
individual and the majority shareholder of A-Best, entered into a termination
agreement (the “Termination Agreement”) to, among other things, terminate the
Purchase Agreement, Exclusive Sales Agreement, and Management Agreement, all of
which were dated August 7, 2019. The Company, A-Best and Mr. Ing-Ming Lai decided to terminate the three agreements primarily because they need more time
to agree to a mutually beneficial way to cooperate with each other with respect
to the sales of the Micro-ceramic magnetic resonance speakers that A-Best has
developed. Pursuant to the Termination Agreement which became effective on
December 31, 2019, none of the three parties owes any compensation, payments,
damages, penalties or liabilities to one another or has any obligations to
perform under any of the Purchase Agreement, Exclusive Sales Agreement, and
Management Agreement, except that each party agrees to keep confidential the
business plans, research and development information obtained from performing
the three agreements. For more information about the Termination Agreement,
please refer to the current report on Form 8-K which was filed with the
Securities and Exchange Commission on December 31, 2019.

On March 2, 2020, the Company, A-Best, and Ing-Ming Lai, a Taiwanese individual
and the majority shareholder of A-Best (collectively, the “Parties”) entered
into a strategic alliance agreement (the “Strategic Alliance Agreement”),
pursuant to which the Parties redefined their cooperation with respect to the
sales and distribution of A-Best’s micro-ceramic speakers. In accordance with
the Strategic Alliance Agreement, A-Best, Mr. Ing-Ming Lai and the Company
terminated the Investment Cooperation Agreement dated January 12, 2019 entered
by and among the Parties and as a result the Company agreed to return 20% of the
equity interest in A-Best to Mr. Ing-Ming Lai, which was valued at approximately
$33,411 by the Parties.

Furthermore, subject to the terms and conditions of the Strategic Alliance
Agreement, A-Best has granted the Company the exclusive sale and distribution
right of A-Best’s micro-ceramic speakers in the world for one (1) year (the
“Term”), which may be renewed with mutual consent of the Parties two months
prior to the expiration of the Term, while A-Best retains its own right to sell
and distribute the micro-ceramic speakers on its own. In consideration for the
exclusive distribution right of A-Best’s speakers under the Strategic Alliance
Agreement, the Company agreed to have A-Best keep the Company’s 10,000,000
shares of common stock, par value $0.001 per share, issued under the Investment
Cooperation Agreement and the Company may keep the revenue and profits generated
from the sale of A-Best speakers until the total revenue from such speakers
reaches $15 millionU.S. dollars. This Strategic Alliance Agreement contains
A-Best’s and Mr. Ing-Ming Lai’s joint representation regarding their
intellectual property rights to A-Best ceramic speakers. For more information
about this transaction and the Strategic Alliance Agreement, please refer to the
current report on Form 8-K which was filed with the Securities and Exchange
Commission
on March 5, 2020.

On April 22, 2020, the Company returned 20% equity interest in A-Best to Mr. Ing-Ming Lai pursuant to the Strategic Alliance Agreement.




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On November 25, 2019, the Company and Ultra Velocity Technology Ltd. (“Ultra
Velocity”), a corporation formed under the laws of Taiwan, entered into an
exclusive patent licensing and distribution agreement (the “Exclusive Patent
Licensing
and Distribution Agreement”), pursuant to which, subject to the terms
and conditions therein, Ultra Velocity granted the Company an exclusive license
to the patent (Patent M566970 registered in Taiwan) to its electrical noise
suppressing device (the “Calibrator”) and the exclusive right to market,
promote, distribute and sell the Calibrator globally. In accordance with the
Agreement and in consideration for the exclusive patent license and distribution
right to the Calibrator, the Company agreed to issue Ultra Velocity three
million (3,000,000) restricted shares of its common stock after the execution of
this Agreement and upon the shareholder approval to increase the number of
authorized capital of the Company (the “Shareholder Approval”). The term of
this Agreement was ten years, commencing from the dare thereof. However, on
March 30, 2020, the Company and Ultra Velocity terminated the Exclusive Patent
Licensing
and Distribution Agreement via a mutually agreed written notice,
effective March 24, 2020.

Results of Operation – For the three months ended June 30, 2020 compared to the
three months ended June 30, 2019



Net sales


Net sales were $94,007 for three months ended June 30, 2020, representing an
increase of $55,947, or 147.00%, as compared to $38,060 for the three months
ended June 30, 2019. The increase was primarily due to the increase in sales of
water purifying machines of approximately $50,000.



Cost of sales


Cost of sales was $14,191 for the three months ended June 30, 2020, representing
an increase of $7,425 or 109.74%, as compared to $6,766 for the three months
ended June 30, 2019. Such increase was mainly due to the increase in the sales
of water purifying machines.



Gross profit


Gross profit was $79,816 for the three months ended June 30, 2020, compared to
$31,294 for the same period in 2019. Gross profit as a percentage of net sales
was 84.90% for the three months ended June 30, 2020, compared to 82.22% in the
same period in 2019. The change in gross margin was because the higher gross
margin product accounted for a higher proportion of sales for the three months
ended June 30, 2020.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of office rent,
salary and related costs for personnel and facilities, and professional service
fees. Selling, general and administrative expenses were $231,069 for the three
months ended June 30, 2020, representing an increase of $43,690, or 23.32%, as
compared to $187,379 for the three months ended June 30, 2019. The increase in
selling, general and administrative expenses was primarily attributable to the
increase in the marketing expense of $62,500 as a result of Sales Collaboration
Agreement, partially offset by the decrease in travel expenses of
approximately $10,000.




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Income (loss) from operations

Loss from operations was $151,253 for the three months ended June 30, 2020
compared to loss from operations of $156,085 for the three months ended June 30,
2019
, representing a decrease in loss of $4,832, or 3.10%. Such decrease was
primarily due to the increase in sales of water purifying machines, partially
offset by the increase in selling, general and administrative expenses.



Other income (loss)


Other income (loss) was $(52,899) for the three months ended June 30, 2020,
reflecting a decrease of $55,524, or 2,115.20%, compared to other income of
$2,625 for the three months June 30, 2019. The decrease was mainly attributable
to the increase in loss on foreign currency exchange and loss on investment in
equity securities.



Net loss


As a result of the above factors, our net loss was $204,152 for the three months
ended June 30, 2020, as compared to net loss of $153,460 for the three months
ended June 30, 2019, representing an increase in loss of $50,692, or 33.03%.

Results of Operation – For the six months ended June 30, 2020 compared to the
six months ended June 30, 2019



Net sales


Net sales were $826,733 for six months ended June 30, 2020, representing an
increase of $588,561, or 247.12%, as compared to $238,172 for the six months
ended June 30, 2019. The increase was primarily due to the increase in sales of
water purifying machines and mobile carbon reduction machine of approximately
$600,000 and $130,000, respectively, partially offset by the decrease in
sales of skin care products of approximately $130,000.



Cost of sales


Cost of sales was $107,014 for the six months ended June 30, 2020, representing
an increase of $62,193 or 138.76%, as compared to $44,821 for the six months
ended June 30, 2019. Such increase was mainly due to the increase in the sales
of water purifying machines and automobile carbon reduction machines, partially
offset by the decrease in sales of skin care products.



Gross profit


Gross profit was $719,719 for the six months ended June 30, 2020, compared to
$193,351 for the same period in 2019. Gross profit as a percentage of net sales
was 87.06% for the six months ended June 30, 2020, compared to 81.18% in the
same period in 2019. The change in gross margin was because the higher gross
margin product accounted for a higher proportion of sales for the six months
ended June 30, 2020.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of office rent,
salary and related costs for personnel and facilities, and professional service
fees. Selling, general and administrative expenses were $533,148 for the six
months ended June 30, 2020, representing an increase of $159,218, or 42.58%, as
compared to $373,930 for the six months ended June 30, 2019. The increase in
selling, general and administrative expenses was primarily attributable to the
increase in the marketing expense of $125,000 as a result of Sales Collaboration
Agreement and accounting, legal and professional fees of approximately $30,000.




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Income (loss) from operations


Income from operations was $186,571 for the six months ended June 30, 2020
compared to loss from operations of $180,579 for the six months ended June 30,
2019
, representing an increase in income of $367,150, or 203.32%. Such increase
was primarily due to the increase in sales of automobile carbon reduction
machines and water purifying machines, partially offset by the decrease in sales
of skincare products and the increase in selling, general and administrative
expenses.




Other income (loss)



Other income (loss) was $(37,492) for the six months ended June 30, 2020,
reflecting a decrease of $47,639, or 469.49%, compared to other income of
$10,147 for the six months June 30, 2019. The decrease was mainly attributable
to the increase in loss on foreign currency exchange and loss on investment in
equity securities.




Net Income (loss)



As a result of the above factors, our net income was $149,079 for the six months
ended June 30, 2020, as compared to net loss of $170,432 for the six months
ended June 30, 2019, representing an increase in income of $319,511, or 187.47%.

Liquidity and Capital Resources

Cash and cash equivalents were $91,852 at June 30, 2020 and $295,594 at December
31, 2019
. Our total current assets were $2,286,258 at June 30, 2020, as compared
to $2,819,688 at December 31, 2019. Our total current liabilities were $245,647
at June 30, 2020, as compared to $221,694 at December 31, 2019.

We had a working capital of $2,040,611 on June 30, 2020, compared to the working
capital of $2,597,994 on December 31, 2019. The decrease in working capital was
primarily attributable to the decrease in cash and cash equivalents and accounts
receivable.

Net cash used in operating activities was $226,990 during the six months ended
June 30, 2020, as compared to $30,146 for the six months ended June 30, 2019.
The increase in net cash used in operating activities in the amount of $196,844
was primary attributable to the increase in security deposits and other assets,
partially offset by the increase in net income and stock-based compensation and
the decrease in advance to suppliers.

Net cash used in investing activities was $1,095 during the six months ended
June 30, 2020, as compared to $935 for the six months ended June 30, 2019. The
increase in net cash used in investing activities was due to the slight increase
in the acquisition of property, plant and equipment.

Net cash provided by financing activities was $33,300 during the six months
ended June 30, 2020, as compared to $0 for the six months ended June 30, 2019.
The increase in net cash provided by financing activities was due to the
proceeds from investments by noncontrolling interests in subsidiary.




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As a result of the above factors, net decrease in cash and cash equivalents were
$203,742 for the six months ended June 30, 2020, as compared to $28,508 for the
six months ended June 30, 2019.



Inflation


Our opinion is that inflation has not had a material effect on our operations
and is not expected to have any material effect on our operations.



Critical Accounting Policies



Principles of Consolidation


The accompanying unaudited consolidated financial statements, including the
accounts of EOS Inc. and its wholly owned subsidiaries in Taiwan, British Virgin
Islands
, and People’s Republic of China, have been prepared in conformity with
accounting principles generally accepted in the United States of America. Since
the Company and Emperor Star are entities under common control prior to the
acquisition of Emperor Star, the transaction is accounted for as a restructuring
transaction. All the assets and liabilities of Emperor Star were transferred to
the Company at their respective carrying amounts on the date of transaction. The
Company has recast prior period financial statements to reflect the conveyance
of Emperor Star’s common shares as if the restructuring transaction had occurred
as of the earliest date of the financial statements. All material intercompany
accounts, transactions, and profits have been eliminated in consolidation. The
nature of and effects on earnings per share (EPS) of nonrecurring intra-entity
transactions involving long-term assets and liabilities is not required to be
eliminated and EPS amounts have been recast to include the earnings (or losses)
of the transferred net assets.

The functional currency of the subsidiaries in Taiwan is the New Taiwan dollars
and the subsidiary in People’s Republic of China is the Chinese Yuan, or
Renminbi; however, the accompanying unaudited consolidated financial statements
have been translated and presented in United States Dollars ($). In the
accompanying unaudited consolidated financial statements and notes, “$”, “US$”
and “U.S. dollars” mean United States dollars, “NT$” and “NT dollars” mean New
Taiwan dollars, and “RMB” means Chinese Yuan, or Renminbi.



Use of Estimates


The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America, requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.



Classification


Certain classifications have been made to the prior year financial statements to
conform to the current year presentation. The reclassification had no impact on
previously reported net income nor retained earnings.



Cash and Cash Equivalents


Cash and cash equivalents include cash and all highly liquid instruments with
original maturities of three months or less.




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Accounts Receivable


Accounts receivable are stated at carrying value less estimates made for
doubtful receivables. An allowance for impairment of trade receivables is
established if the collection of a receivable becomes doubtful. Such receivable
becomes doubtful when there is objective evidence that the Company will not be
able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that
the debtor will enter into bankruptcy or financial reorganization, and default
or delinquency in payments are considered indicators that the receivable is
impaired. The amount of the allowance is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted
at the original effective interest rate. An impairment loss is recognized in the
statement of income, as are subsequent recoveries of previous impairments.



Inventory


Inventory is stated at the lower of cost and net realizable value. Net
realizable value (NRV) is defined as estimated selling prices less costs of
completion, disposal, and transportation. Inventory consists mainly of finished
goods held for resale. Cost is determined on a weighted average cost method. The
Company periodically reviews the age and turnover of its inventory to determine
whether any inventory has become obsolete or has declined in value, and incurs a
charge to operations for known and anticipated inventory obsolescence.



Property and Equipment


Property and equipment is carried at cost net of accumulated depreciation.
Repairs and maintenance are expensed as incurred. Expenditures that improve the
functionality of the related asset or extend the useful life are capitalized.
When property and equipment is retired or otherwise disposed of, the related
gain or loss is included in operating income. Leasehold improvements are
depreciated on the straight-line method over the shorter of the remaining lease
term or estimated useful life of the asset. Depreciation is calculated on the
straight-line method, including property and equipment under capital leases,
generally is five years. Depreciation expense is $1,138 and $902 for the six
months ended June 30, 2020 and 2019, respectively.

Impairment of Long-Lived Assets

The Company has adopted Accounting Standards Codification subtopic 360-10,
Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that
long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company evaluates its long-lived assets for impairment annually or more often if
events and circumstances warrant. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve breakeven operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undiscounted cash flows. Should impairment in value be indicated, the
carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. ASC 360-10 also requires assets to be disposed of be reported at the
lower of the carrying amount or the fair value less costs to sell. Management
has determined that no impairments of long-lived assets currently exist as of
June 30, 2020 and December 31, 2019.




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Long-term Equity Investment

The Company acquires equity investment to promote business and strategic
objectives. The Company accounts for non-marketable equity and other equity
investments for which the Company does not have control over the investees as:



?   Equity method investments when the Company has the ability to exercise
    significant influence, but not control, over the investee. Its proportionate
    share of the income or loss is recognized monthly and is recorded in gain
    (loss) on equity investments.

?   Non-marketable cost method investments when the equity method does not apply.



Significant judgment is required to identify whether an impairment exists in the
valuation of the Company’s non-marketable equity investments, and therefore the
Company considers this a critical accounting estimate. Its yearly analysis
considers both qualitative and quantitative factors that may have a significant
impact on the investee’s fair value. Qualitative analysis of its investments
involves understanding the financial performance and near-term prospects of the
investee, changes in general market conditions in the investee’s industry or
geographic area, and the management and governance structure of the investee.
Quantitative assessments of the fair value of its investments are developed
using the market and income approaches. The market approach includes the use of
comparable financial metrics of private and public companies and recent
financing rounds. The income approach includes the use of a discounted cash flow
model, which requires significant estimates regarding the investees’ revenue,
costs, and discount rates. The Company’s assessment of these factors in
determining whether an impairment exists could change in the future due to new
developments or changes in applied assumptions.

Other-Than-Temporary Impairment

The Company’s long-term equity investments are subject to a periodic impairment
review. Impairments affect earnings as follows:



?   Marketable equity securities include the consideration of general market
    conditions, the duration and extent to which the fair value is below cost,
    and our ability and intent to hold the investment for a sufficient period of
    time to allow for recovery of value in the foreseeable future. The Company
    also considers specific adverse conditions related to the financial health
    of, and the business outlook for, the investee, which may include industry
    and sector performance, changes in technology, operational and financing cash
    flow factors, and changes in the investee's credit rating. The Company
    records other-than-temporary impairments on marketable equity securities and
    marketable equity method investments in gain (loss) on equity investments.

?   Non-marketable equity investments based on the Company's assessment of the
    severity and duration of the impairment, and qualitative and quantitative
    analysis of the operating performance of the investee; adverse changes in
    market conditions and the regulatory or economic environment; changes in
    operating structure or management of the investee; additional funding
    requirements; and the investee's ability to remain in business. A series of
    operating losses of an investee or other factors may indicate that a decrease
    in value of the investment has occurred that is other than temporary and that
    shall be recognized even though the decrease in value is in excess of what
    would otherwise be recognized by application of the equity method. A loss in
    value of an investment that is other than a temporary decline shall be
    recognized. Evidence of a loss in value might include, but would not
    necessarily be limited to, absence of an ability to recover the carrying
    amount of the investment or inability of the investee to sustain an earnings
    capacity that would justify the carrying amount of the investment. The
    Company records other-than-temporary impairments for non-marketable cost
    method investments and equity method investments in gain (loss) on equity
    investments.





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Revenue Recognition



During the fiscal year 2018, the Company has adopted FASB Accounting Standards
Codification (“ASC”), Topic 606 (“ASC 606”), Revenue from Contracts with
Customers, using the modified retrospective method to all contracts that were
not completed as of January 1, 2018. The Company recognized the cumulative
effect of applying the new revenue standard as an adjustment to the opening
balance of accumulated deficit at the beginning of 2018. The results for the
Company’s reporting periods beginning on and after January 1, 2018 are presented
under ASC 606, while prior period amounts are not adjusted and continue to be
reported under the accounting standards in effect for the prior period. Based on
the Company’s review of existing sales contracts as of January 1, 2018, the
Company concluded that the adoption of the new guidance did not have a
significant change on the Company’s revenue during all periods presented.

Pursuant to ASC 606, the Company recognizes revenue when its customer obtains
control of promised goods or services, in an amount that reflects the
consideration that the Company expects to receive in exchange for those goods or
services. To determine revenue recognition for arrangements that the Company
determines is within the scope of ASC 606, the Company performs the following
five steps: (i) identify the contract(s) with a customer; (ii) identify the
performance obligations in the contract; (iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the
contract; and (v) recognize revenue when (or as) the Company satisfies a
performance obligation. The Company only applies the five-step model to
contracts when it is probable that the Company will collect the consideration
the Company is entitled to in exchange for the goods or services the Company
transfers to the customers. At inception of the contract, once the contract is
determined to be within the scope of ASC 606, the Company assesses the goods or
services promised within each contract, determines those that are performance
obligations, and assesses whether each promised good or service is distinct. The
Company then recognizes as revenue the amount of the transaction price that is
allocated to the respective performance obligation when (or as) the performance
obligation is satisfied.

Merchandise sales: The Company recognizes sales revenues from merchandise sales
when customers obtain control of the Company’s products, which typically occurs
upon delivery to customer. Merchandise sales revenues are recorded at the sales
price, or “transaction price”.

Software sales: The Company does not develop the software products on its own.
When the Company receives a purchase order from the customer, the Company would
engage with the third-party software company to customize and develop the
software products. The Company recognizes software revenues upon completion of
the installation and testing, and transfer the control of the software products
to the customer. Software revenues are recorded at the fixed sales price, or
“transaction price”, pursuant to the sales contracts. The Company may also
charge the customer maintenance service fees on a straight-line basis over the
service period pursuant to the sales contract. The Company concluded that the
performance obligation for the maintenance service is distinct. Therefore, such
maintenance service revenue can be separated from other elements in the
arrangement.

Trade discount and allowances: The Company generally does not provide invoice
discounts on product sales to its customers for prompt payment.

Product returns: The Company generally does not provide customers with the right
to return a product for a full or partial refund, a credit, or an exchange for
another product.

To date, product allowance and returns have been minimal and, based on its
experience, the Company believes that returns of its products will continue to
be minimal.




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The following tables provide details of revenue by major products and by
geography.




Revenue by Major Products



For the six months ended June 30, 2020:
Water purifier machine                    $ 648,702
Automobile carbon reduction machine         129,985
Nutrition supplement                         34,598
Software                                     13,448
Total                                     $ 826,733




Revenue by Geography



For the six months ended June 30, 2020:
Asia Pacific$ 826,733
Total                                     $ 826,733

Leases — The Company adopted FASB Accounting Standards Codification, Topic 842,
Leases (“ASC 842”) using the modified retrospective approach, electing the
practical expedient that allows the Company not to restate its comparative
periods prior to the adoption of the standard on January 1, 2019. As such, the
disclosures required under ASC 842 are not presented for periods before the date
of adoption. For the comparative periods prior to adoption, the Company
presented the disclosures which were required under ASC 840.

The Company applied the following practical expedients in the transition to the
new standard and allowed under ASC 842:



Practical Expedient                          Description
                     The Company elected not to reassess, at the application
Reassessment of      date, whether any expired or existing contracts contained
expired or existing  leases, the lease classification for any expired or existing
contracts            leases, and the accounting for initial direct costs for any
                     existing leases.
                     The Company elected to use hindsight in determining the
Use of hindsight     lease term (that is, when considering options to extend or
                     terminate the lease and to purchase the underlying asset)
                     and in assessing impairment of right-to-use assets.
                     The Company elected not to evaluate existing or expired land
Reassessment of      easements that were not previously accounted for as leases
existing or expired  under ASC 840, as allowed under the transition practical
land easements       expedient. Going forward, new or modified land easements
                     will be evaluated under ASU No. 2016-02.
Separation of lease  Lease agreements that contain both lease and non-lease
and non-lease        components are generally accounted for separately.
components
Short-term lease     The Company also elected the short-term lease recognition
recognition          exemption and will not recognize ROU assets or lease
exemption            liabilities for leases with a term less than 12 months.





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The new leasing standard requires recognition of leases on the consolidated
balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets
represent the Company’s right to use underlying assets for the lease terms and
lease liabilities represent the Company’s obligation to make lease payments
arising from the leases. Operating lease ROU assets and operating lease
liabilities are recognized based on the present value and future minimum lease
payments over the lease term at commencement date. The Company’s future minimum
based payments used to determine the Company’s lease liabilities mainly include
minimum based rent payments. As most of Company’s leases do not provide an
implicit rate, the Company uses its estimated incremental borrowing rate based
on the information available at commencement date in determining the present
value of lease payments.

The adoption of ASC 842 had no substantial impact on the Company’s consolidated
balance sheets. The most significant impact was the recognition of the operating
lease right-of-use assets and the liability for operating leases. Accordingly,
adoption of this standard resulted in the recognition of operating lease
right-of-use assets of $8,235 and operating lease liabilities of $8,235 on the
consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 did
not result in a cumulative-effect adjustment to the opening balance of retained
earnings.

In addition, the adoption of the standard did not have a material impact on the
Company’s results of operations or cash flows. Operating lease cost is
recognized as a single lease cost on a straight-line basis over the lease term
and is recorded in Selling, general and administrative expenses. Variable lease
payments for common area maintenance, property taxes and other operating
expenses are recognized as expense in the period when the changes in facts and
circumstances on which the variable lease payments are based occur.



Advertising Costs


Advertising costs are expensed at the time such advertising commences.
Advertising expenses were $17,645 and $22,321 for the six months ended June 30,
2020
and 2019, respectively.

Post-retirement and Post-employment Benefits

The Company’s subsidiaries in Taiwan adopted the government mandated defined
contribution plan pursuant to the Taiwan Labor Pension Act (the “Act”). Such
labor regulations require that the rate of contribution made by an employer to
the Labor Pension Fund per month shall not be less than 6% of the worker’s
monthly salaries. Pursuant to the Act, the Company makes monthly contribution
equal to 6% of employees’ salaries to the employees’ pension fund. The Company
has no legal obligation for the benefits beyond the contributions made. The
total amounts for such employee benefits, which were expensed as incurred, were
$2,584 and $4,000 for the six months ended June 30, 2020 and 2019, respectively.
Other than the above, the Company does not provide any other post-retirement or
post-employment benefits.



Fair Value Measurements


FASB ASC 820, “Fair Value Measurements” defines fair value for certain financial
and nonfinancial assets and liabilities that are recorded at fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. It requires that an entity measure its financial
instruments to base fair value on exit price, maximize the use of observable
units and minimize the use of unobservable inputs to determine the exit price.
It establishes a hierarchy which prioritizes the inputs to valuation techniques
used to measure fair value. This hierarchy increases the consistency and
comparability of fair value measurements and related disclosures by maximizing
the use of observable inputs and minimizing the use of unobservable inputs by
requiring that observable inputs be used when available. Observable inputs are
inputs that reflect the assumptions market participants would use in pricing the
assets or liabilities based on market data obtained from sources independent of
the Company. Unobservable inputs are inputs that reflect the Company’s own
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances. The hierarchy prioritizes the inputs into three broad levels
based on the reliability of the inputs as follows:




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    ?   Level 1 - Inputs are quoted prices in active markets for identical assets
        or liabilities that the Company has the ability to access at the
        measurement date. Valuation of these instruments does not require a high
        degree of judgment as the valuations are based on quoted prices in active
        markets that are readily and regularly available.
    ?   Level 2 - Inputs other than quoted prices in active markets that are
        either directly or indirectly observable as of the measurement date, such
        as quoted prices for similar assets or liabilities; quoted prices in
        markets that are not active; or other inputs that are observable or can be
        corroborated by observable market data for substantially the full term of
        the assets or liabilities.
    ?   Level 3 - Valuations based on inputs that are unobservable and not
        corroborated by market data. The fair value for such assets and
        liabilities is generally determined using pricing models, discounted cash
        flow methodologies, or similar techniques that incorporate the assumptions
        a market participant would use in pricing the asset or liability.



The carrying values of certain assets and liabilities of the Company, such as
cash and cash equivalents, accounts receivable, inventory, advance to suppliers,
prepaid expenses, accounts payable, accrued expenses, and due to shareholders,
approximate fair value because of to their relatively short maturities.



Net Income Per Share


Basic income per share is computed by dividing net income by weighted average
number of shares of common stock outstanding during each period. Diluted income
per share is computed by dividing net income by the weighted average number of
shares of common stock, common stock equivalents, and potentially dilutive
securities outstanding during each period. For the six months ended June 30,
2020
and 2019, the Company does not have any outstanding common stock
equivalents; therefore, a separate computation of diluted income per share is
not presented.



Income Taxes


The Company accounts for income taxes in accordance with ASC 740, Income Taxes,
which requires that the Company recognize deferred tax liabilities and assets
based on the differences between the financial statement carrying amounts and
the tax basis of assets and liabilities, using enacted tax rates in effect in
the years the differences are expected to reverse. Deferred income tax benefit
(expense) results from the change in net deferred tax assets or deferred tax
liabilities. A valuation allowance is recorded when, in the opinion of
management, it is more likely than not that some or all of any deferred tax
assets will not be realized.

Concentration of Credit Risk

Cash and cash equivalents: The Company’s financial instruments that are exposed
to concentrations of credit risk consist primarily of cash and cash equivalents.
The Company places its cash and temporary cash investments in high quality
credit institutions in Taiwan, but these investments may be in excess of the
insurance limits of Taiwan Central Deposit Insurance Corporation (the “TCDIC”).
The Company does not enter into financial instruments for hedging, trading or
speculative purposes. Concentration of credit risk with respect to trade and
notes receivables is limited due to the wide variety of customers and markets in
which the Company transacts business, as well as their dispersion across many
geographical areas. As of June 30, 2020, the Company had approximately $3,638 in
excess of TCDIC insured limits. The Company has not experienced any losses in
such accounts.




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Customers: The Company performs ongoing credit evaluations of its customers’
financial condition and generally requires no collateral.

For the six months ended June 30, 2020, one customer accounted for more than 10%
of the Company’s total revenues, representing approximately 85% of its total
revenues, and 98% of accounts receivable in aggregate at June 30, 2020.



            Net sales
             for the           Accounts
            six months        receivable
              ended          balance as of
             June 30,          June 30,
Customer       2020              2020
A          $    704,397$     1,801,027




For the six months ended June 30, 2019, one customer accounted for more than 10%
of the Company's total revenues, represented approximately 76% of its total
revenues and 76% of accounts receivable in aggregate at June 30, 2019,
respectively.



            Net sales
             for the           Accounts
            six months        receivable
              ended          balance as of
             June 30,          June 30,
Customer       2019              2019
A          $    180,367 *   $     1,143,557


_________

*Related party transactions (see Note 5).

Suppliers: The Company purchases its inventories from various suppliers.




For the six months ended June 30, 2020, three suppliers accounted for more than
10% of the Company's total net purchase, representing approximately 39%, 31%,
and 22% of total net purchase, and 0% of accounts payable in aggregate at June
30, 2020, respectively:



            Net purchase
              for the            Accounts
             six months           payable
               ended           balance as of
              June 30,           June 30,
Supplier        2020               2020
A          $       60,547     $             -
B          $       49,300     $             -
C          $       34,000     $             -




For the six months ended June 30, 2019, two suppliers accounted for more than
10% of the Company's total net purchase, representing approximately 87% and 10%
of total net purchase, and 0% and 100% of accounts payable in aggregate at June
30, 2019, respectively:



            Net purchase
              for the             Accounts
             six months           payable
               ended           balance as of
              June 30,            June 30,
Supplier        2019                2019
A          $       34,561     $              -
D          $        3,821     $            715



Foreign-currency Transactions

Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) and
Renminbi (“RMB”) at the rates of exchange in effect when the transactions occur.
Gains or losses resulting from the application of different foreign exchange
rates when cash in foreign currency is converted into New Taiwan dollars and
Renminbi, or when foreign-currency receivables or payables are settled, are
credited or charged to income in the year of conversion or settlement. On the
balance sheet dates, the balances of foreign-currency assets and liabilities are
restated at the prevailing exchange rates and the resulting differences are
charged to current income except for those foreign currencies denominated
investments in shares of stock where such differences are accounted for as
translation adjustments under stockholders’ equity.




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Translation Adjustment


The accounts of the Company’s subsidiaries were maintained, and their financial
statements were expressed in New Taiwan Dollar (“NTD”) and Renminbi (“RMB”).
Such financial statements were translated into U.S. Dollars (“$” or “USD”) in
accordance ASC 830, “Foreign Currency Matters”, with the NTD and RMB as the
functional currency. According to the Statement, all assets and liabilities are
translated at the current exchange rate, common stock and additional paid-in
capital are translated at the historical rates, and income statement items are
translated at an average exchange rate for the period. The resulting translation
adjustments are reported under accumulated other comprehensive income (loss) as
a component of stockholders’ equity.



Comprehensive Income (loss)


Comprehensive income (loss) includes accumulated foreign currency translation
gains and losses. The Company has reported the components of comprehensive
income (loss) on its consolidated statements of operations and other
comprehensive income (loss).

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):
Disclosure Framework – Changes to the Disclosure Requirements for Fair Value
Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair
Value Measurement, by removing certain disclosure requirements related to the
fair value hierarchy, modifying existing disclosure requirements related to
measurement uncertainty and adding new disclosure requirements, such as
disclosing the changes in unrealized gains and losses for the period included in
other comprehensive income for recurring Level 3 fair value measurements held at
the end of the reporting period and disclosing the range and weighted average of
significant unobservable inputs used to develop Level 3 fair value measurements.
This ASU is effective for public companies for annual reporting periods and
interim periods within those annual periods beginning after December 15, 2019.
The Company is currently evaluating the effect, if any, that the ASU will have
on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting
for Income Taxes, as part of its initiative to reduce complexity in accounting
standards. The amendments in the ASU are effective for fiscal years beginning
after December 15, 2020, including interim periods therein. Early adoption of
the standard is permitted, including adoption in interim or annual periods for
which financial statements have not yet been issued. The Company is currently
evaluating the effect, if any, that the ASU will have on its consolidated
financial statements.

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