UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________.

 

Commission file number: 333-179130

 

J.E.M. Capital, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware	46-0525801
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

21/F., One Harbour Square, 181 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong

(Address of principal executive offices)

(852) 9625 0097

(Registrant’s telephone number, including area code)

 

(Former address, if changed since last report) (Former fiscal year, if changed since last report)

 

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 every Interactive Data File required to be submitted 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 such files). Yes ¨ No ⌧

 

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 ¨

 

Applicable only to issuers 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 Sections 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 issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 12, 2018, there were 12,032,400 shares of common stock, $0.0001 par value per share, issued and outstanding.

 

 

 

 

 

J.E.M. CAPITAL, INC.

Quarterly Report on Form 10-Q

 

TABLE OF CONTENTS

 

			Page
PART I.   FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements (Unaudited)	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 4.	Controls and Procedures	16
PART II.   OTHER INFORMATION
	Item 1.	Legal Proceedings	17
	Item 1A.	Risk Factors	17
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
	Item 3.	Defaults Upon Senior Securities	17
	Item 4.	Mine Safety Disclosures	17
	Item 5.	Other Information	17
	Item 6.	Exhibits	18
SIGNATURES			19

 

 

 

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION

 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this Quarterly Report on Form 10-Q. Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.

 

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

 

ITEM 1. Consolidated Financial Statements

 

The unaudited consolidated financial statements of the registrant for the three and nine months ended September 30, 2018 and consolidated financial statements for 2017 follows. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

	Page
Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and as of December 31, 2017	4
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017 (Unaudited)	5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 (Unaudited)	6
Notes to Unaudited Consolidated Financial Statements	7

 

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Consolidated Balance Sheets

As of September 30, 2018 and December 31, 2017

 

 

		September 30,				December 31,
		2018				2017
			(Unaudited)
ASSETS
Current assets:
Cash		$	451			$	166
Deposit paid			-				550
Total current assets			451				716
Equipment, Net			621				996
Total assets		$	1,072			$	1,712
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses		$	51,045			$	24,459
Due to shareholder			37,813				-
Total current liabilities		$	88,858			$	24,459
Total liabilities		$	88,858			$	24,459
Commitments and contingencies			-				-
Stockholders' deficit:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; no shares issued or outstanding			-				-
Common stock, $0.0001 par value; 195,000,000 shares authorized, 12,032,400 shares and 12,032,400 shares issued and outstanding as of September 30, 2018 and December 31, 2017			1,203				1,203
Additional paid-in capital			301,268				301,268
Accumulated deficit			(390,257	)			(325,218	)
Total stockholders' deficit			(87,786	)			(22,747	)
Total liabilities and stockholders' deficit		$	1,072			$	1,712

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Consolidated Statements of Operations (Unaudited)

 

 

 

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2018				2017				2018				2017
Operating expense:
General and administrative		$	21,188			$	21,163			$	65,039			$	148,471
Total operating expense			21,188				21,163				65,039				148,471
Loss before provision for income taxes			(21,188	)			(21,163)				(65,039	)			(148,471	)
Provision for income taxes			-				-				-				-
Net loss		$	(21,188	)		$	(21,163)			$	(65,039	)		$	(148,471	)
Net loss per common share - basic and diluted		$	(0.00	)		$	(0.00)			$	(0.00	)		$	(0.01	)
Weighted average number of common shares outstanding - basic and diluted			12,032,400				12,032,400				12,032,400				11,995,671

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

		Nine Months Ended September 30,
		2018				2017
Operating activities:
Net loss		$	(65,039	)		$	(148,471	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			375				1,009
Changes in operating assets and liabilities
Deposit paid			550				-
Accounts payable and accrued liabilities			26,586				3,476
Net cash used in operating activities		$	(37,528	)		$	(143,986	)
Investing activities:
Purchase of equipment		$	-			$	(450	)
Proceeds from disposal of fixed assets			-				2,633
Net cash provided by investing activities		$	-			$	2,183
Financing activities:
Proceeds from director		$	-			$	81,925
Proceeds from shareholder			37,813				59,984
Net cash provided by financing activities		$	37,813			$	141,909
Net increase in cash			285				106
Cash - Beginning of period			166				-
Cash - End of period		$	451			$	106

 

 

See accompanying notes to unaudited consolidated financial statements.

 

  

 

 

 

 

J.E.M. CAPITAL, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

 

1.  Basis of Presentation

 

The accompanying interim consolidated financial statements are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which includes normal recurring adjustments or a description of the nature and amount of any adjustments other than normal recurring adjustments, necessary for a fair presentation of the financial positions and results of operations for the periods presented. The financial data and other information disclosed in these notes to the interim consolidated financial statements are also unaudited. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other interim period or for any future year. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The disclosures made in the unaudited interim consolidated financial statements generally do not repeat those in the annual statements.

 

There have been no material changes to the significant accounting policies during the three and nine months ended September 30, 2018, as compared to the significant accounting policies described in Note 3 of the “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

 

2.  Summary of Significant Accounting Policies

 

Nature of Operations

 

J.E.M. Capital, Inc. (the Company) was incorporated under the laws of the State of Delaware on September 14, 2011 and has had limited operations since inception. The Company’s current business plan is to seek to identify a privately held operating company desiring to become a publicly held company by merging with the Company through a reverse merger or acquisition. The Company is a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934. As a shell company, the Company has no operations and assets.

 

On January 5, 2017, the Company entered into a Share Exchange Agreement (the “Agreement”) with Essential Elements Limited, a British Virgin Islands company (“ESEL”), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong (“JEM Capital”).

 

ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.

 

Risks and Uncertainties

 

The Company’s activities are subject to significant risks and uncertainties, including failure to identify a privately held operating company desiring to merge with the Company, failure to complete a reverse merger transaction, and inability to secure funding to continue as a going concern. (See Note 3 regarding going concern discussion.)

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

Use of Estimates

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. The preparation of the accompanying consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

 

Principles of Consolidation

 

The unaudited consolidated financial statements include the financial statements of the Company and its subsidiaries for which it is the primary beneficiary. Upon making this determination, the Company is deemed to be the primary beneficiary of the entity, which is then required to be consolidated for financial reporting purposes. All significant intercompany transactions and balances have been eliminated upon consolidation.

 

Equipment, net

 

Equipment is stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is provided on a straight-line basis, less estimated residual values over the assets’ estimated useful lives. The estimated useful lives are as follows:

 

Computer hardware and software

3 years

 

When equipment is retired or otherwise disposed of, the related cost, accumulated depreciation and provision for impairment loss, if any, are removed from the respective accounts, and any gain or loss is reflected in the consolidated statements of operations. Repairs and maintenance costs on equipment are expensed as incurred.

 

Impairment of Long-Lived Assets

 

Long-lived assets, such as equipment, are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds the sum of the undiscounted cash flows expected to be generated from the asset’s use and eventual disposition. An impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the asset calculated using an undiscounted cash flow analysis. There was no impairment of long-lived assets for the three and nine months ended September 30, 2018 and 2017.

 

Fair value of financial instruments

 

ASC Topic 825, “Financial Instruments”, requires disclosing fair value to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheets. The fair values of the financial instruments are not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement. For certain financial instruments, including deposits paid, accounts payable and accrued expenses, the fair values were determined based on the near-term maturities of such the assets and obligations.

 

Revenue

 

The Company has yet to generate revenue from operations for the three and nine months ended September 30, 2018 and 2017.

 

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

Net Loss per Common Share

 

Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the three and nine months ended September 30, 2018 and 2017.

 

Income Taxes

 

The Company accounts for income taxes under ASC Topic 740, Income Tax. Deferred tax assets and liabilities are provided for the future tax effects attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, and for the expected future tax benefits from items including tax loss carry forwards.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or reversed. The expense or benefit related to adjusting deferred tax assets and liabilities as a result of a change in tax rates is recognized in income or loss in the period that includes the enactment date.

 

The Company recognizes and measures uncertain tax positions and records tax benefits when it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties as a component of income tax expense if applicable. For the three and nine months ended September 30, 2018 and 2017, the Company had not recognized any interest or penalties on its consolidated financial statements.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

 

 

3.  Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenues to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2018, the cash resources of the Company were insufficient to continue to conduct its normal business operations. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

4.  General and Administrative Expenses

 

The following summarizes the type of expenses incurred during the three and nine months ended September 30, 2018 and 2017:

 

			Three Months Ended														Nine Months Ended
			September 30,														September 30,
			2018							2017							2018							2017
			(Consolidated and unaudited)														(Consolidated and unaudited)
General and administrative expense:
Professional fees				$	7,037						$	9,166						$	22,166						$	25,493
Filing fees					1,760							1,170							4,300							6,938
Franchise Tax expense					-							-							409							3,307
Salary and related expenses					11,885							8,884							35,654							95,133
Depreciation					125							219							375							1,008
Other office expenses					381							1,724							2,135							16,592
Total general and administrative expense				$	21,188						$	21,163						$	65,039						$	148,471

 

 

5.  Commitments and contingencies

 

Contingencies

 

The Company accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of September 30, 2018 and December 31, 2017, the Company’s management is of the opinion that there are no commitments and contingencies to account for.

 

 

6.  Stockholders’ Equity

 

Preferred Stock

 

The Company is authorized to issue 5,000,000 shares of preferred stock with a $0.0001 par value. As of September 30, 2018 and December 31, 2017, there were no shares of preferred stock issued or outstanding.

 

Common Stock

 

On January 5, 2017, the Company entered into a Share Exchange Agreement with Essential Elements Limited, a British Virgin Islands company (“ESEL”), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong (“JEM Capital”). ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.

 

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

The Company is authorized to issue 195,000,000 shares of common stock with a $0.0001 par value. As of September 30, 2018 and December 31, 2017, 12,032,400 shares and 12,032,400 shares of common stock were issued and outstanding, respectively.

 

As of September 30, 2018 and December 31, 2017, the Company did not have any dilutive securities, such as stock options, warrants or convertible securities, issued or outstanding.

 

 

7.   Related Party Transactions

 

During the nine months ended September 30, 2018 and 2017, the Company received loans of $nil and $81,925 from its director, respectively. As of September 30, 2018 and December 31, 2017, the Company recorded an amount of $nil and $nil payable to director. The amount is unsecured, bears no interest and is repayable on demand.

 

During the nine months ended September 30, 2018 and 2017, the Company received loans of $37,813 and $nil from its shareholder, respectively. As of September 30, 2018 and December 31, 2017, the Company recorded an amount of $37,813 and $nil payable to its shareholder. The amount is unsecured, bears no interest and is repayable on demand.

 

 

8.   Income taxes

 

Income is subject to taxation in various countries in which the Company and its subsidiaries operate or are incorporated. The loss before income taxes by geographical locations for the three and nine months ended September 30, 2018 and 2017 were summarized as follows:

 

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2018				2017				2018				2017
	(Consolidated and unaudited)								(Consolidated and unaudited)
United States		$	11,060			$	10,540			$	35,307			$	35,198
Foreign			10,128				10,623				29,732				113,273
		$	21,188			$	21,163			$	65,039			$	148,471

 

The Company had accumulated tax losses of approximately $176,000 and $141,000 as of September 30, 2018 and December 31, 2017, respectively, which will expire between 2031 and 2037.

 

The net operating loss carryforwards indicated above represent the principle component of the Company's deferred tax assets as of September 30, 2018 and December 31, 2017. Deferred tax assets of approximately $49,000 and $39,000 as of September 30, 2018 and December 31, 2017, respectively, will be offset by valuation allowance of the same amounts as realization of such assets is uncertain.

 

 

 

 

 

 

J.E.M. CAPITAL, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

		September 30, 2018				December 31, 2017
Deferred tax assets: Net operating loss carryforwards		$	49,163			$	39,323
Total deferred tax assets			49,163				39,323
Less: Valuation allowance			(49,163	)			(39,323	)
Net deferred tax assets		$	-			$	-

 

Movement in valuation allowance:

 

		September 30, 2018				December 31, 2017
At the beginning of the period/year		$	39,323			$	55,760
Current period/year addition/(deduction)			9,840				(16,437	)
At the end of the period/year		$	49,163			$	39,323

 

The provision for income taxes differs from the expected provision determined by applying the federal statutory rate to the income before income taxes. The reasons for the difference are state and local income taxes and various non-deductible expenses. As a result of the reduction of the corporate income tax rate from 35% to 21% due to the Tax Cuts and Jobs Act which was enacted on December 22, 2017, U.S. GAAP requires companies to remeasure their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the period of enactment. (the change in deferred tax balances would have a corresponding change to valuation allowance thereby resulting in no income tax expense for the year).

 

The Company' income tax returns are subject to examination for three years from the date filed or the due date, whichever is later.

 

The Company did not identify any material uncertain tax positions.

 

 

 

 

 

 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Disclaimer Regarding Forward Looking Statements

 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this Quarterly Report on Form 10-Q and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

Overview

 

We were incorporated on September 14, 2011 in Delaware as “Eco Planet Corp.” On October 21, 2013, we effected a 1-for-200 reverse stock split of our common stock, $0.0001 par value per share (the “Common Stock”), and changed our name to “Zosano, Inc.” On October 31, 2013, we entered into a Stock Purchase Agreement with Zosano Pharma Corporation (formerly known as ZP Holdings, Inc.) pursuant to which we issued and sold 10,016,973 shares of Common Stock (the “Shares”) to Zosano Pharma Corporation. As a result of our issuance and sale of the Shares to Zosano Pharma Corporation, a change in control of the Company occurred and Zosano Pharma Corporation became the owner of 99.9% of our outstanding Common Stock.

 

On November 14, 2016, Zosano Phama Corporation entered into Stock Purchase Agreements with eighteen (18) foreign investors (the “New Shareholders”), pursuant to which Zosano Pharma Corporation sold an aggregate of 10,016,973 shares of common stock of Zosano, Inc. (the “Company”), or approximately 99.9% of the issued and outstanding common stock of the Company, to the New Shareholders. As a result of the transaction, the New Shareholders acquired approximately 99.9% of the total votes entitled to be cast at any meeting of shareholders, giving them voting control of the Company. The New Shareholders obtained the funds for the purchase of the Company's common stock in the transaction from each of their available cash on hand.

 

On December 15, 2016, we filed Articles of Amendment to its Amended Articles of Incorporation (the "Articles of Amendment") with the Secretary of State of Delaware effecting a name change of the Company to J.E.M. Capital, Inc. (the "Corporate Action"). The Corporate Action and the Amended Articles became effective on March 15, 2017, following compliance with notification requirements of the Financial Industry Regulatory Authority. The new CUSIP number for the Company's common stock is 46619V107. On March 14, 2017, the Financial Industry Regulatory Authority (FINRA) approved the Corporate Action. The Company's stock is quoted on the OTCQB under the ticker symbol ZOSN, but beginning March 15, 2017, the Company's common stock will begin trading under the symbol JEMC.

 

 

 

 

 

 

 

 

On January 5, 2017, we entered into a Share Exchange Agreement with Essential Elements Limited, a British Virgin Islands company (“ESEL”), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong (“JEM Capital”). ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.

 

We are a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”). As a shell company, we have no operations and assets. Our current business plan is to identify a privately held operating company, which is profitable or, in management’s view, has growth potential, irrespective of the industry in which it is engaged, desiring to become a publicly held company with access to U.S. capital markets by merging with us through a reverse merger or acquisition. We can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited resources that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances that any business combination, if one occurs, will be on terms that are favorable to us or our current stockholders.

 

Results of Operations

 

Three Months Ended September 30, 2018 Compared To Three Months Ended September 30, 2017

 

Revenue

We have not generated any revenues since our inception.

 

Operating expenses

 

Our operating expenses primarily consisted of general and administrative expenses, such as salary and related expenses, audit and review fees, tax returns preparation fees, transfer agent services, Edgar filing costs, franchise and business taxes, other professional services and general office expenses. Operating expenses for the three months ended September 30, 2018 and 2017 were $21,188 and $21,163, respectively. The increase is insignificant.

 

Net loss

 

Net loss for the three months ended September 30, 2018 was $21,188, as compared to $21,163 for the three months ended September 30, 2017. The increase is insignificant.

 

Nine Months Ended September 30, 2018 Compared To Nine Months Ended September 30, 2017

 

Revenue

 

We have not generated any revenues since our inception.

 

Operating expenses

 

Our operating expenses primarily consisted of general and administrative expenses, such as audit and review fees, tax returns preparation fees, transfer agent services, Edgar filing costs, franchise and business taxes, and other professional services. Operating expenses for the nine months ended September 30, 2018 and 2017 were $65,039 and $148,471, respectively. The decrease in operating expenses was due to the decrease in salary and related expenses paid for officers for the nine months ended September 30, 2018 and the legal fee paid for the change of name of the Company for the nine months ended September 30, 2017.

 

 

 

 

 

 

 

Net loss

 

Net loss for the nine months ended September 30, 2018 was $65,039, as compared to $148,471 for the nine months ended September 30, 2017.  The decrease in net loss was due to the decrease in salary and related expenses paid for officers for the nine months ended September 30, 2018 and the legal fee paid for the change of name of the Company for the nine months ended September 30, 2017.

 

Liquidity and Capital Resources

 

As of September 30, 2018, we had cash of $451, as compared to $166 as of December 31, 2017, an increase of $285 with the increase of proceeds from shareholder’s loan. During the three months ended September 30, 2018 and 2017, because of our operating losses, we did not generate positive operating cash flows.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of September 30, 2018 compared to December 31, 2017 are as follows:

 

	September 30, 2018 (Unaudited)			December 31, 2017			Change
Cash	$	451		$	166		$	285
Deposit paid		-			550			(550)
Total Current Assets		451			716			(265)
Equipment, net		621			996			(375)
Total Assets		1,072			1,712			(640)
Total Current Liabilities		88,858			24,459			64,399
Total Liabilities		88,858			24,459			64,399

 

Assets and Liabilities

 

As of September 30, 2018, we had assets mainly related to office equipment. We had liabilities totalling $88,858 and $24,459 as of September 30, 2018 and December 31, 2017, respectively, which consisted of accrued expenses related to salary, office expenses, audit fees, transfer agent services, legal fees and advance from shareholder.

 

Stockholders’ Deficit

 

Stockholders’ deficit consisted primarily of shares issued to founders in the amount of $1,203, capital raised to fund our operations of $55,589, and additional capital provided to settle obligations for $245,679, offset by the accumulated deficit of $390,257 as of September 30, 2018.

 

Cash Flows from Operating Activities. For the nine months ended September 30, 2018, our net cash used in operations was $37,528 compared to $143,986 net cash used in operations for the same period in 2017. This was mainly attributable to decrease in expenses payment during the nine months ended September 30, 2018.

 

Cash Flows from Investing Activities. For the nine months ended September 30, 2018, our net cash used in investing activities was $nil compared to $2,183 net cash generated from investing activities for the same period in 2017. This was attributable to the net effect of proceeds from disposal and purchase of equipment during the nine months ended September 30, 2017.

 

Cash Flows from Financing Activities. Net cash flows provided by financing activities in the nine months ended September 30, 2018 was $37,813, compared to $141,909 net cash provided by financing activities in the same period in 2017. The decrease was mainly due to no proceeds from director’s loan and a decrease in shareholder’s loan for financing our operations during the nine months ended September 30, 2018.

 

 

 

 

 

 

 

Off Balance Sheet Arrangements

 

We have no off balance sheet arrangements.

 

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

 

ITEM 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls Procedures

 

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

 

As of September 30, 2018, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. We also do not have an audit committee. Based on the evaluation described above, and as a result, in part, of not having an audit committee and having one individual serve as our chief executive officer and principal financial officer, we have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were ineffective.

 

(b) Changes in Internal Controls over Financial Reporting

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

(c) Officer’s Certifications

 

Appearing as an exhibit to this Quarterly Report on Form 10-Q are “Certifications” of our principal executive and financial officer. The Certifications are required pursuant to Sections 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the Quarterly Report on Form 10-Q contains information concerning the Controls Evaluation referred to in the Section 302 Certifications. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

ITEM 1.  Legal Proceedings

 

There have been no events which are required to be reported under this Item.

 

 

ITEM 1A.  Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

 

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

There have been no events which are required to be reported under this Item.

 

 

ITEM 3. Defaults Upon Senior Securities

 

There have been no events which are required to be reported under this Item.

 

 

ITEM 4. Mine Safety Disclosures

 

There have been no events which are required to be reported under this Item.

 

 

ITEM 5. Other Information

 

There have been no events which are required to be reported under this Item.

 

 

 

 

 

 

 

 

ITEM 6. Exhibits 

 

Item No.	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of President (principal executive officer) (filed herewith).
31.2	Rule 13a-14(a)/15d-14(a) Certification of Treasurer (principal financial officer) (filed herewith).
32.1	Section 1350 Certification of President (principal executive officer) (filed herewith).
32.2	Section 1350 Certification of Treasurer (principal financial officer) (filed herewith).
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	J.E.M. Capital, Inc.
Dated:    November 14, 2018	By: /s/ Earnest Leung
	Earnest Leung
	Chief Executive Officer
Dated:    November 14, 2018	By: /s/ Cheng Sze Ki
	Cheng Sze Ki
	Chief Financial Officer