Dongxing International Inc. - FORM 10-K

Attached files

file	filename
EX-32 - RULE 13A-14(B) CERTIFICATION - Dongxing International Inc.	ex32.htm
EX-31 - RULE 13A-14(A) CERTIFICATION - Dongxing International Inc.	ex31.htm
EX-21 - LIST OF SUBSIDIARIES - Dongxing International Inc.	ex21.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-K

(Mark One)

[X]	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _____ to _____

Commission File No. 0-54112

	DONGXING INTERNATIONAL INC.
	(Exact Name of Registrant in its Charter)

Delaware		16-1783194
(State or Other Jurisdiction of incorporation or organization)		(I.R.S. Employer I.D. No.)

Room 1001, International Finance Building, 633 Keji'er Street, Songbei District, Harbin, Heilongjiang Province, P.R. China 150028
	(Address of principal executive offices)

Issuer's Telephone Number, including Area Code: 86-1394-6000887

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $.0001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 406 of the Securities Act. Yes __ No √_

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes __ No √_

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 and post such files.) Yes __ No √_

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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. (Check One)

Large accelerated filer Accelerated filer _ Non-accelerated filer Smaller reporting company X

Emerging growth company [X]

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. [X]

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

As of June 30, 2019 (the last business day of the most recently completed second fiscal quarter) the aggregate market value of the common stock held by non-affiliates was $0, as there was no market for the common stock.

As of August 13, 2020, there were 30,000,000 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED

In addition to historical information, this Annual Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Dongxing International Inc. Whether those beliefs become reality will depend on many factors that are not under Management’s control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Section 1A of this Report, entitled “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

USE OF DEFINED TERMS; CONVENTIONS

Except where the context otherwise requires and for the purposes of this report only:

●	"we," "us," "our company," "our" “Company” and "Dongxing International" refer to the combined business of Dongxing International Inc., its consolidated subsidiaries and its consolidated affiliate, as the case may be;

●

"Central Dynamic" refers to Central Dynamic Holdings Limited, our direct, wholly-owned subsidiary, a BVI corporation;

●

"Dongxing BVI" refers to Dongxing Holdings Limited, our indirect, wholly-owned subsidiary, a BVI corporation;

●	"Dongxing Hong Kong" refers to Dongxing Holdings Limited, our indirect, wholly-owned subsidiary, a Hong Kong corporation;

●	"Harbin Donghui" refers to Harbin Donghui Technology Co., Ltd., our indirect, wholly-owned subsidiary, a Chinese corporation;

●	“Harbin Dongxing” refers to Harbin Dongxing Energy Saving Technical Service Co., Ltd., our indirect, consolidated affiliate, a Chinese corporation;

●	"SEC" refers to the United States Securities and Exchange Commission;

●	"China," "Chinese" and "PRC," refer to the People's Republic of China;

●	"Renminbi" and "RMB" refer to the legal currency of China;

●

"U.S. dollars," "dollars" and "$" refer to the legal currency of the United States;

●

"Securities Act" refers to the United States Securities Act of 1933, as amended; and

●	"Exchange Act" refers to the United States Securities Exchange Act of 1934, as amended.

Solely for the convenience of the reader, this report contains conversions of certain Renminbi amounts into U.S. dollars at specified rates. Except as otherwise indicated, all conversions from Renminbi to U.S. dollars were made based on the Exchange Rate on July 21, 2020, which was RMB 6.98 to $1.00. No representation is made that the Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. See “Item 1A: Risk Factors—Risks Related to Our Business— Fluctuations in exchange rates could adversely affect our business and the value of our securities” for a discussion of the effects on the Company of fluctuating exchange rates.

PART 1

Item 1. Business

We conduct our operations through Harbin Dongxing, our consolidated affiliate. Harbin Dongxing has, since 2011, been engaged in marketing lighting products and services. Currently Harbin Dongxing is focused heavily on developing a website to facilitate multi-nation trade in connection with China's Belt and Road Initiative. Harbin Dongxing conducts a portion of its business through two wholly-owned subsidiaries: Harbin Dongcui Technology Co., Ltd. (“Harbin Dongcui”) and Harbin Dongxing Online Technology Co., Ltd. (“Dongxing Online”). The offices of Harbin Dongxing and its subsidiaries are located in Harbin City, People’s Republic of China.

The Parent Company

Dongxing International was incorporated in June 2010 in accordance with the laws of the State of Delaware under the name Apex 1, Inc. On November 19, 2015 the Company's corporate name was changed to "Dongxing International Inc." Dongxing International was a “shell company”, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, from the date of its incorporation until September 30, 2016, when it acquired control of Harbin Dongxing.

Organization of Central Dynamic and Acquisition by Dongxing International

The corporate structure of Dongxing International and its subsidiaries and affiliates was developed through the following steps:

On November 17, 2011 two individuals (Cheng Zhao and Su Dianli) organized Harbin Dongxing as a limited liability company in the PRC. The registered equity was allocated among the founders thus: Cheng Zhao - 97.5%, Su Dianli - 2.5%. Since the time of its organization, Harbin Dongxing has been engaged in the marketing of lighting products and related services.

On November 10, 2010 Central Dynamic was organized under the BVI Business Companies Act, 2004 in the British Virgin Islands. Cheng Zhao has served as its director since May 8, 2012. Cheng Zhao purchased 4,250,000 ordinary shares (of the 25,000,000 ordinary shares outstanding) from Central Dynamic for a commitment to pay $42,500, and has purchased an additional 1,750,000 shares from other shareholders for an aggregate price of $17,500. The other 19 shareholders of Central Dynamic acquired their 19,000,000 ordinary shares by committing to pay a total of $190,000 to Central Dynamic. Central Dynamic has not engaged in any business since its formation.

On November 25, 2010 Dongxing BVI was organized under the BVI Business Companies Act, 2004 in the British Virgin Islands under the name "Douce Holdings Limited". Central Dynamic has been the sole equity-owner of Dongxing BVI since December 1, 2011. On November 17, 2014 the corporate name was changed to Dongxing Holdings Limited. Dongxing BVI has not engaged in any business since its formation.

On January 12, 2011 Dongxing Hong Kong was organized in Hong Kong under the name "Dongke Holdings Limited. Dongxing BVI has been the sole equity-owner of Dongxing Hong Kong since its formation. The corporate name was changed to Dongxing Holdings Limited on November 12, 2014. Dongxing Hong Kong has not engaged in any business since its formation.

On January 13, 2016 Harbin Donghui was organized in the PRC as a Wholly Foreign-Owned Enterprise. Dongxing Hong Kong has been the sole equity owner of Harbin Donghui since its formation. Harbin Donghui has conducted no business since its formation other than pursuant to the VIE Agreements discussed below.

On March 30, 2016 Harbin Donghui, Harbin Dongxing and the equity owners in Harbin Dongxing entered into the VIE Agreements discussed below, as a result of which Harbin Dongxing became a controlled affiliate of Harbin Donghui.

On September 30, 2016 Dongxing International entered into and closed an exchange agreement with Central Dynamic and all of the shareholders of Central Dynamic (the "Exchange Agreement"), pursuant to which the shareholders of Central Dynamic transferred all of the issued and outstanding stock of Central Dynamic to Dongxing International, and we issued to the shareholders of Central Dynamic 25,000,000 shares of our common stock (the “ Share Exchange ”), representing 83.3% of the outstanding shares. This reverse acquisition transaction vested in Dongxing International ownership of the chain of subsidiaries described above.

After the Share Exchange, our current organizational structure is as follows:

Contractual Arrangements with our Controlled Consolidated Affiliate and its Shareholders

On March 30, 2016, prior to the reverse acquisition transaction, Harbin Donghui and Harbin Dongxing and its shareholders, Cheng Zhao and Su Dianli, entered into a series of agreements known as variable interest agreements (the “VIE Agreements”) pursuant to which Harbin Dongxing became Harbin Donghui’s contractually controlled affiliate. The use of VIE agreements is a common structure used to acquire PRC corporations, particularly in certain industries in which foreign investment is restricted or forbidden by the PRC government. Although Harbin Dongxing participates in an industry that is not a restricted or forbidden to foreign investment, PRC regulations make only certain methods of foreign ownership permissible. Stock exchanges are not a permissible method of gaining foreign ownership of a PRC operating company under current PRC regulations. In order for Harbin Donghui to acquire ownership of Harbin Dongxing, Harbin Donghui would have to purchase Harbin Dongxing for cash, and the purchase price would be subject to the approval of the Ministry of Commerce, which would only approve the purchase price after a lengthy review to determine that the purchase price was commercially fair.

Due to the obstacles to actual acquisition of Harbin Dongxing, the Company utilized the VIE Agreements in order to properly gain control and the economic benefits of Harbin Dongxing. The VIE Agreements included:

(1)

an Exclusive Business Cooperation Agreement between Harbin Donghui and Harbin Dongxing pursuant to which Harbin Donghui has the exclusive right and obligation to provide technical support and management and marketing services to Harbin Dongxing in exchange for (i) 95% the total annual net profit of Harbin Dongxing and (ii) RMB 10,000 per month ($1,433). The term of the agreement is indefinite, and Harbin Dongxing is specifically barred from terminating the agreement.

(2)

an Exclusive Purchase Right Agreement among Cheng Zhao, Su Dianli, Harbin Dongxing and Harbin Donghui under which the shareholders of Harbin Dongxing have granted to Harbin Donghui the irrevocable right and option to acquire all of the equity interests in Harbin Dongxing to the extent permitted by PRC law. If PRC law limits the percentage of Harbin Dongxing that Harbin Donghui may purchase at any time, then Harbin Donghui may repeatedly exercise its option in such increments as may be allowed by PRC law. The exercise price of the option is RMB10 ($1.43) or any other price permitted by PRC law. This option could be exercised if, in the future, the PRC liberalizes the regulations governing acquisition of PRC entities, or if Dongxing International transferred to Harbin Donghui sufficient capital to satisfy the requirements of the Ministry of Commerce as to an adequate purchase price. In the meantime, the Exclusive Purchase Right Agreement serves to protect the Company’s interest in Harbin Dongxing, as Harbin Dongxing shareholders agree to refrain from taking certain actions which might harm the value of Harbin Dongxing or Harbin Donghui’s option;

(3)

A Pledge of Shares Agreement among Cheng Zhao, Su Dianli, Harbin Dongxing and Harbin Donghui under which the shareholders of Harbin Dongxing have pledged all of their equity in Harbin Dongxing to Harbin Donghui to guarantee Harbin Dongxing’s and Harbin Dongxing’s shareholders’ performance of their obligations under the Exclusive Business Cooperation Agreement and the Exclusive Purchase Right Agreement.

As discussed above, share exchanges are not permitted as a method to transfer ownership of PRC operating companies to foreign investors. As a result, the VIE agreements are an attempt to give Harbin Donghui the option to gain actual ownership of the shares of Harbin Dongxing in the event it is can be achieved in accordance with PRC laws. The transfer of ownership interests in Harbin Dongxing to Harbin Donghui would be beneficial to U.S. investors because having ownership control, in contrast to contractual rights over Harbin Dongxing, strengthens the control the US parent company has over the operating company, Harbin Dongxing.

The VIE Agreements with our Chinese affiliate and its shareholders, which relate to critical aspects of our operations, may not be as effective in providing operational control as direct ownership. In addition, these arrangements may be difficult and costly to enforce under PRC law. To date, Harbin Dongxing has not made any payment to Harbin Donghui, but all amounts due under the Exclusive Business Cooperation Agreement have been accrued. Our plan for the foreseeable future is that Harbin Dongxing will make payments to Harbin Donghui to the extent necessary for that entity, Dongxing Hong Kong and Central Dynamic to pay their expenses. Harbin Dongxing may also make payments to Harbin Donghui for the purpose of funding the expenses of our U.S. parent company, although in the near term we expect to fund those expenses by borrowing U.S. Dollars from related parties. The remainder of the obligations of Harbin Dongxing to Harbin Donghui will be accrued without interest, penalties or other compensation for the delay in payment. See “Risk Factors - Risks Relating to the VIE Agreements.”

Under the terms of the VIE Agreements, Harbin Dongxing and its shareholders are contractually required to operate Harbin Dongxing prudently and effectively in a manner intended to maximize profits. Without the consent of Harbin Donghui, Harbin Dongxing’s shareholders may not allow it to: dispose of or mortgage its assets or income (except in the ordinary course of business); increase or decrease its registered capital (including issuing any equity securities); enter into any material agreements with its shareholders outside of the ordinary course of business; appoint or remove any of Harbin Dongxing’s directors or management; make any distribution of profits or dividends; or be terminated, liquidated or dissolved.

However, Harbin Dongxing is not specifically prohibited from acting in certain ways which could reduce its value to the Company. For example, Harbin Dongxing can pay its officers and directors compensation without Harbin Donghui’s consent, and such compensation could reduce the net profits payable by Harbin Dongxing to Harbin Donghui under the terms of the Exclusive Business Cooperation Agreement.

Our Business

Mengqiao Cross-Border E-commerce Platform Based on The Belt and Road

Harbin Dongxing and its subsidiaries are located in the Heilongjiang Province of China, which has a border with Russia extending over 3,000 kilometers. Heilongjiang Province's 25 ports (15 shipping ports, 4 aviation ports, 2 railway and 4 road ports) are exceeded in number only by Guangdong Province. For these reasons, Heilongjiang Province is the natural location for trade with eastern Russia, a notion repeatedly emphasized in the proclamations of both China's State Council and the Provincial government. In October 2013 the national government designated Harbin, the capital of Heilongjiang Province, as a pilot city entitled to implement cross border ecommerce.

In July 2013, seeking to take advantage of the opportunities for trade with eastern Russia, we organized Harbin Dongxing Online Business Trading Co., Ltd. ("Dongxing Online") as a subsidiary of Harbin Dongxing for the purpose of effecting online distribution of Chinese lighting products into Russia. Dongxing Online was established in China with registered capital of 1 million RMB. Since its organization, Dongxing Online has been engaged in developing the Mengqiao Cross-Border E-commerce Platform, a B2B website initially designed to distribute lighting products from China to commercial customers in Russia. The prototype website (URL: union-bridge.com) now includes over 5,000 products from almost 100 manufacturers. Among the attractive features of the union-bridge.com website are:

product listings, transactions and customer service offered in three languages: Chinese, Russian and English;

real-time currency conversion of posted prices;

supply and demand information is available to registered users, both suppliers and customers.

a wide variety of payment methods, including Paypal, Visa, MasterCard, Webmoney, Qiwi, RBK Money, UnionPay, WeChatPay, Alipay, E-bank and telegraphic transfer, permitting online payment in RMB, U.S. Dollars and Russian Roubles;

customer choice of international delivery methods;

supplier guarantees of delivery within three days.

Each supplier enters into a Distribution Agreement with Dongxing Online. The agreement provides the supplier will ship products as directed by Dongxing Online, with title and risk of loss retained by the supplier until delivery is complete. Dongxing Online is required to pay for the products upon delivery. The supplier warrants the quality of the products and takes responsibility for the after-sale service that is mandated by Chinese law. The supplier also covenants that the price posted on the website for the advertised goods is the best price offered anywhere.

In 2016 we began to expand the scope of the Mengqiao Platform, to make it a full-fledged participant in China's Belt and Road Initiative. The Belt and Road Initiative, launched in 2013, involves China underwriting billions of dollars of infrastructure investment in countries along the old Silk Road linking China with Europe. China is spending roughly $150bn a year in the 68 countries that have chosen to participate in the Initiative. The mission of the Belt and Road Initiative was described in 2015 by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, thus:

The Initiative is an ambitious economic vision of the opening-up of and cooperation among the countries along the Belt and Road. Countries should work in concert and move toward the objectives of mutual benefit and common security. To be specific, they need to improve the region’s infrastructure, and put in place a secure and efficient network of land, sea and air passages, lifting their connectivity to a higher level; further enhance trade and investment facilitation, establish a network of free trade areas that meet high standards, maintain closer economic ties, and deepen political trust; enhance cultural exchanges; encourage different civilizations to learn from each other and flourish together; and promote mutual understanding, peace and friendship among people of all countries.

Our contribution to the Belt and Road Initiative, toward which we are working, will be the expansion of our Mengqiao Platform to serve as an e-commerce platform facilitating trade and cultural exchange among 64 countries along the Silk Road Economic Belt. Our expanded Mengqiao Platform will realize the principles of the Belt and Road Initiative by integrating its multi-national trading network around a Chinese focus, promoting economic and cultural exchange for the sake of a bilateral win-win. As the majority of the countries that are participating in the Belt and Road Initiative are developing countries with limited access to foreign markets, we expect a strong favorable response from the nations that we invite to participate in the Mengqiao Platform.

During 2018 we expanded the participation in the Mengqiao Platform to include cultural and art products. The expanded Mengqiao Platform will offer each of 64 nations its own national or regional pavilion, where online visitors can browse that nation's featured cultural products and learn about the nation's culture, natural environment and opportunities for tourism. In addition to our online customer service staff, which offers assistance in Chinese, English and Russian, each national pavilion will include a customer service staff speaking that nation's principal language, able to facilitate use of the platform, solve customer problems, and aid customers in finding the product offerings they desire among the 64 national pavilions. Fulfillment of sales made on the Mengqiao Platform will be enabled by the construction of a complex of cross-border high-speed railways that is a central part of the Belt and Road Initiative.

Our goal in developing the Mengqiao Eurasian Trade E-commerce Platform was to surmount some of the difficulties that have limited the growth of Chinese manufacturing exports. In particular, we have developed extensive avenues on the website for product and market information to be exchanged between manufacturers and customers, aimed at increasing mutual understanding of the market with a view towards optimizing the benefits of trade for both purchasers and sellers. The Platform offers registered users:

an information portal, offering supply and demand statistics, information on industry trends, and reports of prior sales and customer feedback, among other items;

a transaction portal enabling contracting, documentation, and transaction tracking; and

a customer service portal, facilitated by detailed information regarding customer purchases and feedback.

Dongxing Online has obtained an import/export license from the Government of China that will allow us to facilitate trade with 64 nations. To date we have opened five pavilions on the Mengqiao Platform (China Pavilion, Russia Pavilion, East Asia Pavilion, Southeast Asia Pavilion and Australia Pavilion) housing over 30 merchants with over 100 classes of product displayed. We expect that initial operations of the Mengqiao Platform will commence several months after we secure the necessary financing. Our budget for initiating commercialization of the website is $3 million, to pay for the initial advertising and promotion activities as well as to build our first after-sales service centers. Full development of the Mengqiao Platform, including development of the national or regional pavilions for all 64 nations, with accompanying customer service staffing, is budgeted at $10 million.

Revenue from the Mengqiao Eurasian Trade E-commerce Platform will primarily come from fees paid by participants on the Platform and advertising fees for more advantageous positioning on the website. Dongxing Online will also have the benefit of holding the purchase price for products sold on the website between the date when the end user orders the product and the date on which payment is due. Dongxing Online has not formally launched this Platform yet.

Consulting Services

The Staff of Harbin Dongxing and its subsidiaries possess a broad array of skills, both technological and business-oriented. Their attention to the development of the Mengqiao Platform is subject to interruption from time to time, due to financial constraints and the need to coordinate with the progress of the Belt and Road Initiative. Our staff, therefore, have supplemented revenue by providing consulting services to small and mid-sized companies in Heilongjiang Province.

During 2019, revenue from consulting services represented almost 96% of our total revenue. The services performed by our staff included:

software development;

online marketing; and

preparation of business plans, including procurement of sci-tech novelty reports.

With one client in particular, we signed four contracts during 2019: three for software development and one for online marketing. We completed the software development contracts during 2019 and recorded the revenue; the online marketing contract is being completed during 2020 and the fee for those services is reflected on our balance sheets in "advance from customers".

Our staff offers clients a broad array of possible services, including system integration, network engineering, and business and marketing planning. Until the launch of the Mengqiao Platform, we expect our consulting services will continue to provide the majority of our revenue.

Lighting Contracting

Harbin Dongxing was organized in 2011 to engage in the distribution, installation and service of lighting systems, primarily for commercial enterprises. The overall goal of this business is to provide customers with programs for achieving cost-savings by reconstruction of a facility's lighting or cost-efficient programs for lighting new facilities. Among the services that our employees provide to customers are energy diagnosis, project design, equipment procurement, lighting engineering, technology consulting and personnel training. The customers for our services include both commercial enterprises, such as factories and office buildings, and government agencies, including hospitals, schools and roadways.

In 2016 Harbin Dongxing obtained ISO9001 certification. We also obtained China Compulsory Certification for marketing of LED products. These two certifications will allow us to market to government-related industries, such as participants in the electric grid or participants in the communications grid, as well as to bid on government procurements.

The key to our ability to offer customers cost-savings lighting alternatives is the rapid advances achieved during the past decade in the technology of LED lighting. “LED” is the acronym for light emitting diode, the element of LED lighting that transforms electric current into light. Engineers create diodes by pairing a negatively charged semiconductor. When electric power is connected to the diode, the semiconductors are forced into imbalance and release light as electrons jump to a different energy level.

Over the past decade, as the technology has improved, the popularity of LED lighting has soared. The advantages of LED lamps over traditional incandescent and fluorescent lighting include:

Longer Life Span. Electrodes in incandescent and conventional fluorescent lamps decay, producing less light over time, and are generally the limiting factor in the lives of the light. The average life span of a traditional lamp is no more than one year. By avoiding the use of electrodes, LED lamps can have life spans of up to 60,000 hours. The extended life reduces the frequency and cost of replacement. It also makes LED lamps particularly suitable for locations or structures where servicing and light replacement are difficult.

High Luminous Efficiency. Electrodes in incandescent or conventional fluorescent lighting give rise to power loss and place limits on the gas pressure and its composition. These restrictions do not apply to LED lights, as they have no electrodes. As a result, the power rating and light output of the lamps can be significantly increased.

Quick Start. LED lights can be started or restarted without pre-heating. Only a low current is necessary to initiate operation. This enables the size of the distribution box to be reduced, lowering the installation cost. Their quick start-up makes the technology particularly well suited for emergency lighting.

Automatic Brightness Adjustment. Many of our products incorporate programmable smart cards, which can adjust the level of brightness based on such factors as the time of day or the level of natural light. The lamps can function at any point down to 30% of their capacity, providing significant flexibility.

Energy Efficiency. LED technology can save as much as 75% of the energy that would be used in conventional fluorescent lamps.

High Lighting Quality. LEDs also emit steady light, producing a very limited amount of flickering under steady current.

In prior years, a number of the sales by Harbin Dongxing took the form of energy management contracts (“EMC”). In this business model, energy efficient equipment is sold to an end user on a payment plan designed to net no cost to the customer: payments by the customer are scheduled to conform to the savings realized from use of the energy efficient equipment. Typically, a customer's payment obligation to us represents 90% of the cost-savings realized in the first year after installation, 80% of the savings in year two; 70% in year three; 60% in year four and 50% in year five. At the end of the fifth year, title to the lighting systems is passed to the customer. Harbin Dongxing and Harbin Dongcui offer this option to customers directly as well as to contractors as part of a broader EMC program. Although an EMC sale results in significantly longer payment terms than a conventional net-90 days sale, profit margins on EMC sales are far higher than on conventional sales, as customers are much less price-resistant in the EMC model. In 2017 we had EMC contracts with two customers, one of which was completed at the end of 2017 and the other was completed in 2018. We cannot predict at this time whether we will have additional EMC arrangements in the future.

Most of our sales to date have occurred in Heilongjiang Province. At the end of 2019, we were involved in two ongoing construction projects, reflected as "project in progress" on our balance sheet. Nevertheless, the scale of our lighting operations has been too small to be efficient. So we have curtailed most of our lighting contracting operations: during 2019 lighting contracting provided only 4% of our revenue. In the future, we intend to attend international trade fairs to promote expanded international trade for our lighting business. In addition, we expect that when our Mengqiao Platform goes live and becomes well-known, the association of Harbin Dongxing with that website will increase recognition of our brand and increase demand for our services beyond Heilongjiang Province.

Intellectual Property

We have registered the copyright for Dongxing Online's trading platform with the National Copyright Administration of the People's Republic of China: the copyright registration number 2015SR078522.

We have also registered our trademark with the national government: trademark registration number TMZC16118206ZCSL01.

Harbin Dongxing holds a patent in China for its invention of an LED external control nixie tube. The patent number is ZL201220204547.X.

Employees

The Company has seven employees: two are employed by Harbin Dongxing, four are employed by Dongxing Online, and one is employed by Harbin Dongcui.

Item 1A.

Risk Factors

Investing in our common stock will involve risk. You should carefully consider the risks described below together with all of the other information contained in this Report, including the financial statements and the related notes, before deciding whether to purchase any shares of our common stock. If any of the following risks is realized, our business, financial condition or operating results could materially suffer. In that event, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related To Our Business

The impact of COVID-19 on the business community of Heilongjiang Province may delay our efforts to implement our business plan and expand our business operations.

The Company’s operations are affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19), which in March 2020 was declared a pandemic by the World Health Organization. The COVID-19 outbreak is causing lockdowns, travel restrictions, and closures of businesses. The Company’s business has been negatively impacted by the COVID-19 outbreak.

From early February 2020 to the end of March 2020, the Company had to temporarily suspend its operations due to government restrictions. During the temporary business closure period, the employees had very limited access to the facilities and, as a result, the Company had no new business from sales of LED lights. In addition, due to the COVID-19 outbreak, some of the customers may experience financial distress, delay or default on their payments, reduce the scale of their business, or suffer disruptions in their business due to the outbreak. Any increased difficulty in collecting accounts receivable, delayed raw materials supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact the Company’s results of operations.

In light of the current circumstances and available information, the Company estimated that for the period from January to June 2020, the Company’s revenues from product sales could be significantly lower than originally planned. The COVID-19 influence on the revenues from provision of technical and consulting services is relatively small as these services can be performed on a remote and virtual basis. In addition, the Company originally planned to expand its international trade and export sales in 2020. With the outbreak of COVID-19, all business development activities related to this were suspended with originally scheduled oversea trade fairs all cancelled.

As of the date of this filing, the COVID-19 coronavirus outbreak in China appears to have slowed down and most provinces and cities have resumed business activities under the guidance and support of the government. The Company’s business has been gradually recovering since the beginning of April with the reopening of the Company's executive office. However, there is still significant uncertainty regarding the possibility of a second wave of infections, and the breadth and duration of business disruptions related to COVID-19, which could continue to have a material impact on the Company’s operations.

We have a limited operating history and limited historical financial information upon which you may evaluate our performance.

We have only recently initiated operations, and to date we have realized very limited revenues. You should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages of development. We may not successfully address these risks and uncertainties or successfully implement our existing and new products and services. If we fail to do so, it could materially harm our business and impair the value of our common stock. Even if we accomplish these objectives, we may not generate the positive cash flows or profits we anticipate in the future. Our current business plan involves initiating online marketing of an array of lighting and other products, which we expect to be the engine for the growth of our company. However, no member of our management has experience with online product distribution, and our website remains in the development stage. Therefore, our ability to carry out our business plan successfully is completely untested. Unanticipated problems, expenses and delays are frequently encountered in establishing a new business and developing new products and services. These include, but are not limited to, inadequate funding, lack of consumer acceptance, competition, product development, and inadequate sales and marketing. Our failure to meet any of these conditions would have a materially adverse effect upon us and may force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.

Our auditor has indicated that there is a substantial doubt as to whether we will be able to continue as a going concern.

In its report on our financial statements for the year ended December 31, 2019, our independent registered public accounting firm has stated that the fact that the Company has generated limited revenues and does not have positive cash flow from operations raises substantial doubt as to our ability to continue as a going concern. A “going concern” opinion is an indication that the auditor’s review of the company’s resources and business activities raised doubt as to whether the company will be able to realize its assets and discharge its liabilities in the ordinary course of business. The risk of investing in a company whose financial statements carry a going concern opinion is that you are likely to lose all of your investment if the company fails to continue as a going concern. In the case of Dongxing International, the fact that we have minimal assets and a limited source of revenue means that we will continue as a going concern only if we are able to obtain the funds necessary to implement our business plan and are successful in that implementation. If we are not able to convert our business into a going concern, investors in the Company will lose their investment.

Our expansion into the international market will require capital investment, which may result in dilution of the equity of our present shareholders or significantly increased borrowing costs.

Our business plan contemplates that we will expand our sales both domestically and internationally. To achieve that aim, we will need capital. So our business plan contemplates that we will raise $3 million in capital during the next year in order to complete development of our product distribution website and initiate marketing. Subsequently, we expect to invest an additional $7 million in expansion of our website. We intend to raise all or a large portion of the necessary funds by selling equity in our company. At present we have no commitment from any source for those funds. We cannot determine, therefore, the terms on which we will be able to raise the necessary amounts. It is possible that we will be required to dilute the value of our current shareholders’ equity in order to obtain the funds. On the other hand, if we are forced to borrow these amounts, our cost of capital will significantly increase. But if we are unable to raise the necessary funds, our growth will be limited, as will our ability to compete effectively.

We may not be able to find suitable software developers at an acceptable cost.

We have contracted with a software developer to further develop and upgrade our website and associated backend interface. We will continue to require such expertise in the future, in order to meet the demands of developing online technology. Due to the current demand for skilled software developers, we run the risk of not being able to find or retain suitable personnel at an acceptable price. We would also need to ensure that the candidates are adequately qualified to develop a website that is user friendly, free of errors and seamless in design. Without these developers, we may not be able to further develop and upgrade the software, which is the most important aspect of our business development.

Our management has limited experience in managing and operating a public company. Any failure to comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results of operations and financial condition.

Our management personnel have no prior experience managing and operating a public company. They will rely in many instances on the professional experience and advice of third parties, including our attorneys and accountants. None of the members of our management staff were educated and trained in U.S. business systems, and we may have difficulty hiring new employees in the PRC with such training. As a result, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002, as amended. This may result in significant deficiencies or material weaknesses in our internal controls, which could impact the reliability of our financial statements and prevent us from complying with the SEC rules and regulations. Failure to comply with any laws, rules, or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation, or financial condition and could result in delays in development of an active and liquid trading market for our common stock. To the extent that the market place perceives that we do not have a strong financial staff and financial controls, the market for, and price of, our stock may be impaired.

The lack of expertise in U.S. GAAP among the staff of our finance department could result in errors in our filings.

The books and records of Harbin Dongxing and its subsidiaries, our operating entities, and Harbin Donghui are maintained in accordance with bookkeeping practices that are customary in China. These financial statements are prepared in accordance with accounting principles generally accepted in China. The staff of our finance department, which prepares those financial statements, has experience with Chinese GAAP, but very limited experience with U.S. GAAP. Therefore, in order to file with the SEC consolidated financial statements prepared in accordance with U.S. GAAP, we have engaged an independent consultant who makes the adjustments to the financial statements of Harbin Dongxing and Harbin Donghui necessary to achieve compliance with U.S. GAAP, then performs the consolidation required to produce the consolidated financial statements of Dongxing International. Because that consultant, who is not present in our executive offices, is the only participant in the preparation of our financial statements possessing a familiarity with U.S. GAAP, there is a risk that the persons responsible for the initial classifications of the elements of our financial results will err in making those classifications, which will cause our reported financial statements to be erroneous. Any such errors, besides being misleading to investors, could result in subsequent restatements, which could have an adverse effect on the perception of the Company among investors.

We may not be able to meet the internal control reporting requirements imposed by the SEC resulting in a possible decline in the price of our common stock and our inability to obtain future financing.

As directed by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports. Although the Dodd-Frank Wall Street Reform and Consumer Protection Act exempts companies with a public float of less than $250 million from the requirement that our independent registered public accounting firm attest to our financial controls, this exemption does not affect the requirement that we include a report of management on our internal control over financial reporting and does not affect the requirement to include the independent registered public accounting firm’s attestation if our public float exceeds $250 million.

While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. Regardless of whether we are required to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, if we are unable to do so, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.

In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the SEC, which could also adversely affect the market for and the market price of our common stock and our ability to secure additional financing as needed.

We require highly qualified personnel and, if we are unable to hire or retain qualified personnel, we may not be able to grow effectively.

Our future success also depends upon our ability to attract and retain highly qualified personnel. Expansion of our business and the proposed growth of our business will require additional managers and employees with industry experience, and our success will be highly dependent on our ability to attract and retain skilled management personnel and other employees. We may not be able to attract or retain highly qualified personnel. Competition for skilled marketing and administrative personnel in China is significant. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.

The loss of the services of our key employees, particularly the services rendered by Cheng Zhao, our chief executive officer, could harm our business.

Our success depends to a significant degree on the services rendered to us by our key employees. If we fail to attract, train and retain sufficient numbers of these qualified people, our prospects, business, financial condition and results of operations will be materially and adversely affected. In particular, we are heavily dependent on the continued services of Cheng Zhao, who founded our business and now serves as our chief executive officer. We currently do not have key employee insurance for our officers and directors. The loss of any of these key employees, including members of our senior management team, could harm our business.

We do not anticipate paying dividends in the foreseeable future.

We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Investors requiring current or near-term income from their investment should not invest in our Company.

Risks Relating to the VIE Agreements

The PRC government may determine that the VIE Agreements are not in compliance with applicable PRC laws, rules and regulations.

Harbin Donghui provides support and consulting service to Harbin Dongxing pursuant to the VIE Agreements. Almost all economic benefits and risks arising from Harbin Dongxing’s operations are transferred to Harbin Donghui under these agreements. There are risks involved with the operation of our business in reliance on the VIE Agreements, including the risk that the VIE Agreements may be determined by PRC regulators or courts to be unenforceable. Our PRC counsel has advised that if the VIE Agreements were for any reason determined to be in breach of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such breach, including:

●	imposing economic penalties;
●	discontinuing or restricting the operations of Harbin Donghui or Harbin Dongxing;
●	imposing conditions or requirements in respect of the VIE Agreements with which Harbin Donghui or Harbin Dongxing may not be able to comply;
●	requiring our company to restructure the relevant ownership structure or operations;
●	taking other regulatory or enforcement actions that could adversely affect our company’s business; and
●	revoking the business licenses and/or the licenses or certificates of Harbin Dongxing, and/or voiding the VIE Agreements.

Any of these actions could adversely affect our ability to manage, operate and gain the financial benefits of Harbin Dongxing, which would have a material adverse impact on our business, financial condition and results of operations.

Our ability to control Harbin Dongxing under the VIE Agreements may not be as effective as direct ownership.

We conduct our business in the PRC and generate all of our revenues through the VIE Agreements. Our plans for future growth are based substantially on expanding the operations of Harbin Dongxing and its subsidiaries. However, the VIE Agreements may not be as effective in providing us with control over Harbin Dongxing as direct ownership. Under the current VIE arrangements, as a legal matter, if Harbin Dongxing fails to perform its obligations under these contractual arrangements, we may have to (i) incur substantial costs and resources to enforce such arrangements, and (ii) rely on legal remedies under PRC law, which we cannot be sure would be effective. Therefore, if we are unable to effectively control Harbin Dongxing, it may have an adverse effect on our ability to achieve our business objectives and grow our revenues.

The VIE Agreements are governed by PRC law and provide for the resolution of disputes through the jurisdiction of courts in the PRC. If Harbin Dongxing or its shareholders fail to perform the obligations under the VIE Agreements, we would be required to resort to legal remedies available under PRC law, including seeking specific performance or injunctive relief, or claiming damages. We cannot be sure that such remedies would provide us with effective means of causing Harbin Dongxing or its shareholder to meet their obligations, or recovering any losses or damages as a result of non-performance. Further, the legal environment in China is not as developed as in other jurisdictions. Uncertainties in the application of various laws, rules, regulations or policies in PRC legal system could limit our liability to enforce the VIE Agreements and protect our interests.

The payment arrangement under the VIE Agreements may be challenged by the PRC tax authorities.

We generate our revenues through the payments we receive pursuant to the VIE Agreements. We could face adverse tax consequences if the PRC tax authorities determine that the VIE Agreements were not entered into based on arm’s length negotiations. For example, PRC tax authorities may adjust our income and expenses for PRC tax purposes which could result in our being subject to higher tax liability, or cause other adverse financial consequences.

Risks Related To Doing Business In China

Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.

We conduct substantially all of our business through our operating subsidiary and affiliate in the PRC. Our operating subsidiary and affiliate are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

We are a Delaware holding company and most of our assets are located outside of the United States. All of our current business operations are conducted in the PRC through our VIE entity, Harbin Dongxing. In addition, all of our directors and officers are nationals and residents of the PRC, and the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, none of whom are residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts. China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.

Restrictions on currency exchange may limit our ability to receive and use our sales revenue effectively.

All our sales revenue and expenses are denominated in RMB. Under PRC law, the RMB is currently convertible under the “current account,” which includes dividends and trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans. Currently, our PRC operating subsidiary and affiliate may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, without the approval of the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, the relevant PRC government authorities may limit or eliminate our ability to purchase foreign currencies in the future.

Foreign exchange transactions by our PRC operating subsidiary under the capital account continue to be subject to significant foreign exchange controls and require the approval of or need to register with PRC government authorities, including SAFE. In particular, if our PRC operating subsidiary borrows foreign currency through loans from us or other foreign lenders, these loans must be registered with SAFE, and if we finance the subsidiary by means of additional capital contributions, these capital contributions must be approved by certain government authorities, including the Ministry of Commerce, or MOFCOM, or their respective local counterparts. These limitations could affect their ability to obtain foreign exchange through debt or equity financing.

Fluctuations in exchange rates could adversely affect our business and the value of our securities.

The value of our common stock will be indirectly affected by the foreign exchange rate between U.S. dollars and RMB and between those currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged into U.S. dollars as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.

Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

Restrictions under PRC law on our PRC subsidiary's ability to make dividend and other distributions could materially and adversely affect our ability to grow, make investments or complete acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our businesses.

Substantially all of our revenues are earned by our PRC subsidiary. However, PRC regulations restrict the ability of our PRC subsidiary to make dividend and other payments to its offshore parent company. PRC legal restrictions permit payments of dividends by our PRC subsidiary only out of its accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiary is also required under PRC laws and regulations to allocate at least 10% of our annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of the subsidiary's registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances or cash dividends. Any limitations on the ability of our PRC subsidiary to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

Under the EIT Law, we may be classified as a "resident enterprise" of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.

Under the New Income Tax Law, enterprises established outside the PRC whose “de facto management bodies” are located in the PRC are considered “resident enterprises” and their global income will generally be subject to the uniform 25% enterprise income tax rate. On December 6, 2007, the PRC State Council promulgated the Implementation Regulations on the New Income Tax Law, which define “de facto management bodies” as bodies that have material and overall management control over the business, personnel, accounts and properties of an enterprise. In addition, a circular issued by the State Administration of Taxation on April 22, 2009 provides that a foreign enterprise controlled by a PRC company or a PRC company group will be classified as a “resident enterprise” with its “de facto management bodies” located within the PRC if the following requirements are satisfied:

(i)	the senior management and core management departments in charge of its daily operations function mainly in the PRC;

(ii)	its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC;
(iii)	its major assets, accounting books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in the PRC; and

(iv)	more than half of the enterprise's directors or senior management with voting rights reside in the PRC.

If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiary would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC stockholders and with respect to gains derived by our non-PRC stockholders from transferring our shares.

If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be creditable against our U.S. tax.

Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary or affiliate, limit our PRC subsidiary’s and affiliate’s ability to distribute profits to us or otherwise materially adversely affect us.

On July 4, 2014, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange for Overseas Investment and Financing and Reverse Investment by Domestic Residents via Special Purpose Vehicles, or Circular 37, which replaced the Notice on Issues Relating to the Administration of Foreign Exchange for the Financing and Reverse Investment by Domestic Residents via Offshore Special Purpose Vehicles issued by SAFE in October 2005, or Circular 75. Pursuant to Circular 37, any PRC residents, including both PRC institutions and individual residents, are required to register with the local SAFE branch before making any contribution to a company set up or controlled by the PRC residents outside of the PRC for the purpose of overseas investment or financing with their legally owned domestic or offshore assets or interests, referred to in this circular as a "special purpose vehicle." Under Circular 37, the term "PRC institutions" refers to entities with legal person status or other economic organizations established within the territory of the PRC. The term "PRC individual residents" includes all PRC citizens (also including PRC citizens abroad) and foreigners who habitually reside in the PRC for economic benefits. A registered special purpose vehicle is required to amend its SAFE registration in the event of any change of basic information including PRC individual resident shareholder, name, term of operation, or PRC individual resident's increase or decrease of capital, transfer or exchange of shares, merger, division or other material changes. In addition, if a non-listed special purpose vehicle grants any equity incentives to directors, supervisors or employees of domestic companies under its direct or indirect control, the relevant PRC individual residents could register with the local SAFE branch before exercising such options. The SAFE simultaneously issued a series of guidances to its local branches with respect to the implementation of Circular 37. Circular 37 modified certain defined terms under Circular 75 to clarify the SAFE registration scope. For example, Circular 37 broadened the definition of special purpose vehicle to offshore entities that were (i) established for the purpose of overseas investments by PRC residents (in addition to for the purpose of financing as defined under Circular 75) and (ii) established by PRC residents with their legally owned offshore assets or interests (in addition to domestic assets or interests as defined under Circular 75); and it also broadened the definition of reverse investment to include establishing new foreign invested entities or projects as a way of domestic direct investment by PRC residents, directly or indirectly, through a special purpose vehicle, which was excluded by Circular 75. Furthermore, Circular 37 modified certain SAFE registration procedures and requirements for special purpose vehicles and clarified the SAFE registration procedures for equity incentive awards granted by non-listed special purpose vehicles to directors, supervisors or employees of their controlled domestic companies.

We have advised our shareholders who are PRC residents, as defined in Circular 37, to register with the relevant branch of SAFE, as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiary and affiliate. However, as SAFE registration is a personal obligation of each shareholder, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals required by Circular 37. Moreover, because of uncertainty over how Circular 37 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 37 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 37. We also have little control over either our present or prospective direct or indirect shareholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident shareholders to comply with Circular 37, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

Additionally in October of 2016, the Interim Measures for the Administration of the Establishment and Record Alteration of Foreign Investment Enterprises (“Interim Measures”) took effect and now mandates that WFOEs, among other types of PRC domiciled companies must register with MOFCOM and request MOFCOM’s approval for any change in ownership by foreign investors. Neither our U.S. parent company nor our operating subsidiary, Harbin Dongxing, are affected by the Interim Measures, but our subsidiary Harbin Donghui is subject to the Interim Measures as a WFOE. As such, any change in ownership of Harbin Donghui would require the approval of MOFCOM, and such approval cannot be guaranteed. Any failure to seek approval of any change in ownership of Harbin Donghui could create liability affecting our U.S. parent company, and the potential barrier in changing the ownership structure of the U.S. parent and its subsidiaries owned by Harbin Donghui could limit opportunities for restructuring. Harbin Donghui has already registered its current ownership with MOFCOM prior to the effective date of the Interim Measures, so under the U.S. Company’s current corporate structure, the Interim Measures will not affect our business. Harbin Donghui does not have any material operations, and we plan to retain the current ownership structure under Harbin Donghui’s existing registration with MOFCOM in order to avoid any risk.

We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law, and any determination that we violated these laws could have a material adverse effect on our business.

We are subject to the U.S. Foreign Corrupt Practices Act, (“FCPA”) and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers for the purpose of obtaining or retaining business. We are also subject to Chinese anti-corruption law, which strictly prohibits the payment of bribes to government officials.

We principally have operations, agreements with third parties and make sales in China, which may experience corruption. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants or distributors of our company, because these parties are not always subject to our control. We believe that to date we have complied in all material respects with the provisions of the FCPA and Chinese anti-corruption law. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption law may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.

Risks Related to the Market for Our Stock Generally

The trading volume in our common stock may be inadequate to provide liquidity for our shareholders.

Our common stock is listed for trading on the OTC Pink Market. To date, however, no shares have traded. The small number of holders of our common stock means that for some indefinite period of time the trading volume in our common stock will be very low. Therefore, for some period of the future, our shareholders may find it difficult or impossible to sell their shares when they wish and for prices they consider reasonable.

Our common stock is likely to be subject to penny stock rules for the foreseeable future.

If a market for our common stock does develop, unless the market price exceeds $5.00 per share, our common stock will be subject to SEC regulations for "penny stock". SEC Rules 15g-1 through 15g-9 under the Exchange Act impose certain sales practice requirements on broker-dealers which sell penny stock to persons other than established customers and “accredited investors” (generally, individuals with net worth's in excess of $1,000,000 or annual incomes exceeding $200,000 (or $300,000 together with their spouses)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. This rule would adversely affect the ability of broker-dealers to sell our common stock and the ability of our stockholders to sell their shares of common stock.

Penny stock includes any equity security that is not listed on a national exchange and has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule set forth by the SEC relating to the penny stock market must be delivered to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for the common stock. The regulations also require that monthly statements be sent to holders of penny stock that disclose recent price information for the penny stock and information of the limited market for penny stocks. If applicable, these requirements would adversely affect the market liquidity of our common stock.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties

Harbin Dongxing leases its office facility at 633 Keji'er Street in Harbin from Cheng Zhao, its Chairman, pursuant to a lease with that will terminate on May 31, 2021. The annual rental is approximately $22,000.

Item 3. Legal Proceedings

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities.

(a) Market Information

Our shares of common stock have been listed for trading on the OTC Pink Market of OTC Markets under the trading symbol "DNXG" since December 9, 2019. There is, however, no active trading market for our shares of common stock: no shares have traded publicly at any time.

(b) Shareholders

Our shareholders list contains the names of 299 stockholders of record of the Company’s Common Stock.

20

(c) Dividends

The Company has not, within the past decade, paid or declared any cash dividends on its Common Stock and does not foresee doing so in the foreseeable future. The Company intends to retain any future earnings for the operation and expansion of the business. Any decision as to future payment of dividends will depend on the available earnings, the capital requirements of the Company, its general financial condition and other factors deemed pertinent by the Board of Directors.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

The Company had no securities authorized for issuance under equity compensation plans as of December 31, 2019.

(e) Sale of Unregistered Securities

The Company did not issue any unregistered equity securities during the 4^th quarter of fiscal 2019.

(f) Repurchase of Equity Securities

The Company did not repurchase any shares of its common stock during the 4^th quarter of 2019.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis

Accounting for Variable Interest

Dongxing International is a holding company whose only asset is an indirect 100% ownership interest in Harbin Donghui, a Wholly Foreign Owned Entity organized under the laws of the People’s Republic of China on January 13, 2016.  On March 30, 2016, Harbin Donghui entered into three agreements with Harbin Dongxing and with the equity owners in Harbin Dongxing. Collectively, the VIE agreements provide Harbin Donghui exclusive control over the business of Harbin Dongxing, and provide that 95% of the income or loss realized by Harbin Dongxing accrues to the account of Harbin Donghui.

The accounting effect of the VIE Agreements between Harbin Donghui and Harbin Dongxing is to cause the balance sheets and financial results of Harbin Dongxing to be consolidated with those of Harbin Donghui, with respect to which Harbin Dongxing is now a variable interest entity.  Since the parties to the VIE Agreements were both controlled by Cheng Zhao, who is CEO of both Harbin Donghui and Harbin Dongxing, the financial statements included in this report reflect the consolidation of the results of operations and cash flows of Harbin Dongxing since its inception.

Results of Operations

The revenue-producing business of Harbin Dongxing during 2019 consisted primarily of fees paid for consulting services that we perform for our clients. In 2018, the majority of our revenue came from the sale and installation of lighting products, primarily in new construction projects. In both years, however, the bulk of our expenses were attributable to our efforts to develop the Mengqiao Platform to participate in the Belt and Road Initiative. For the future, we expect that online sales by Dongxing Online, the subsidiary of Harbin Dongxing responsible for the Mengqiao Platform, will produce the greater portion of our revenue. But those sales will not commence until we launch operations of the Mengqiao Platform.

21

There were several clients for the consulting services we performed in 2019. In contrast, almost all of our 2018 revenue was recorded in the fourth quarter from two sales: a $41,000 sale of lighting equipment to an agency of the Provincial government and a $9,400 system upgrade for a different agency of the Provincial government. In both years our attention was primarily focused on development of the Mengqiao Platform. As a result, sales revenue from our lighting business was reduced to 4% of our overall revenue in 2019. Our plan is that, when we are able to launch the Mengqiao Platform, we will use it to leverage growth in our lighting equipment business.

Our operating expenses of $168,794 and $219,823 for 2019 and 2018, respectively, were comprised, primarily, of professional expenses, salaries and office rent. Our labor cost is high, relative to revenue, because the majority of our employees are engaged in developing the business relationships that will support our online platform when it is launched.

Our net loss of $177,952 for 2018 was identical to our loss from operations, as we incurred no interest expense nor any other income or expense, nor had income to be taxed. In 2019, however, we recorded as miscellaneous other income a government subsidy of $40,582, the second of what we expect to be a series of such subsidies relating to our involvement in the Belt and Road Initiative. The subsidy reduced our net loss for 2019 to $68,191. Our VIE agreements, however, assign to Harbin Donghui only 95% of the profit or loss reported by Harbin Dongxing. For that reason, we reduced the net loss on the Dongxing International consolidated statements by an allocation to non-controlling interest. After that allocation, the net loss attributable to the shareholders of Dongxing International Inc. was $64,788 ($0.00 per share) for 2019 and $169,063 ($0.01 per share) for 2018. We expect to continue to incur losses until our online marketing business is launched, as we are paying the expenses of that business without any offsetting revenue.

Our reporting currency is the U.S. dollar. Our local currency, the Renminbi (RMB), is our functional currency. Results of operations and cash flow are translated at average exchange rates during the period being reported upon, and assets and liabilities are translated at the exchange rate on the balance sheet date. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statements of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For 2019 foreign currency translation adjustments yielded other comprehensive gain of $9,372, while such adjustments during 2018 provided us other comprehensive gain of $19,921.

Liquidity and Capital Resources

The development of our company has been funded primarily by contributions to capital and loans from our equity-holders. As a result, at December 31, 2019 we had no debt other than $434,761 owed to related parties. This included $18,707 owed to Harbin Dongke Optronics Science and Technology Co., Ltd., representing lighting products sold to Harbin Dongcui in 2013 for a project that is not yet completed. The debt became consolidated with our balance sheet when our Chairman, Cheng Zhao, contributed Harbin Dongcui to Harbin Dongxing. A payment of $22,822 in reduction of the debt was made during 2019, and the remainder will be satisfied when the project is completed, Harbin Dongcui is paid, and in turn Harbin Dongcui pays Harbin Dongke. Cheng Zhao was the General Manager of Harbin Dongke until the end of 2015.

At December 31, 2019 we had a working capital deficit of $(493,271), an increase in the deficit of $57,587 during 2019. Our company is viable despite the working capital deficit because the amount we owe to related parties, primarily Cheng Zhao, constitutes 88% of the deficit, and Mr. Cheng will not require us to repay our debt to him unless we have adequate cash flow.

22

Our operations used $8,964 in cash during 2019 and $135,394 in cash during 2018. Our use of cash during 2019 was less than our net loss primarily due to a $32,917 increase in net advances from customers and an increase of $15,553 in our accrued expenses. Our use of cash during 2018 was less than our net loss primarily due to our amortization of prepaid rent and an increase in our accrued expenses.

The $8,964 used in our 2019 operations and $135,394 used in our 2018 operations were funded by loans from our Chairman: $24,008 during 2019 and $136,097 during 2018.

The opinion of our independent registered public accounting firm on our financial statements for the year ended December 31, 2019 expresses substantial doubt as to whether our company is a going concern, due to our working capital deficiency, accumulated deficits, limited revenue and negative cash flow. We believe that our related parties will continue to fund our operations for the foreseeable future, and so believe that we can sustain operations at our current level. However, full implementation of our business plan will require significant capital infusions or third party loans. We have no commitment for either equity or debt financing at this time.

Restrictions on Transfers of Funds

The VIE Agreements among Harbin Donghui and the Harbin Dongxing Shareholders provide that Harbin Donghui is entitled to 95% of the net profits (and will bear all losses) arising from Harbin Dongxing’s operations plus a monthly fee of RMB 10,000 ($1,433).  The VIE Agreements also entitle Harbin Donghui to manage the operations and control the cash flows of Harbin Dongxing.   Although Harbin Donghui is entitled to Harbin Dongxing’s profits, any distributions of such profits from Harbin Donghui to our U.S. parent company must comply with applicable Chinese laws affecting payments from foreign invested enterprises incorporated in China to their equity holders.

The sales revenue and expenses of Harbin Dongxing are denominated in RMB. The Chinese government strictly regulates conversion of RMB into foreign currencies.  Currently, Harbin Dongxing and Harbin Donghui may purchase foreign currencies for settlement of current account transactions, including payments of dividends, without the approval of the State Administration of Foreign Exchange (“SAFE”), by complying with certain procedural requirements. Pursuant to applicable Chinese laws and regulations, foreign invested enterprises incorporated in China, such as Harbin Donghui, are required to apply for “Foreign Exchange Registration Certificates.” Currently, conversion within the scope of the “current account” (e.g. remittance of foreign currencies for payment of dividends, trade and service-related foreign exchange transactions, etc.) can be effected without requiring the approval of SAFE, but must be effected through authorized Chinese banks in accordance with regulatory procedures. However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments, loans, securities, etc.) still requires the approval of SAFE. Compliance with those procedural requirements can result in delays in obtaining foreign exchange, which could interfere with offshore activities by the Company, such as acquisitions, offshore investments, or the payment of dividends to the Company’s shareholders.  Because of the effort involved in obtaining foreign currencies in exchange for RMB, the Company intends to pay most of the operating expenses of its U.S. parent from dollars loaned to the Company by related parties.

23

Under PRC regulations, the Company’s operating subsidiary, Harbin Dongxing, may pay dividends only out of its accumulated profits, if any, determined in accordance with the accounting standards and regulations prevailing in the PRC. In addition, Harbin Dongxing is required to set aside at least 10% of its accumulated profits each year, if any, to fund the statutory general reserve until the balance of the reserve reaches 50% of its registered capital. The amount in excess of 10% of accumulated profits that may be contributed to the statutory general reserve is at Harbin Dongxing’s discretion. The statutory general reserve is not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior year losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings, or by increasing the par value of the shares currently held by them, provided that the reserve balance after such use is not less than 25% of the registered capital.  As of December 31, 2019, no amount has been appropriated from retained earnings and set aside for the statutory reserve by Harbin Dongxing. There remains approximately 2,500,000 RMB ($358,166) to be appropriated from our future profits and set aside for the statutory reserve until we have satisfied the reserve requirement.



Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

Recent Accounting Pronouncements

There were no recent accounting pronouncements that have or will have a material effect on the Company’s financial position or results of operations

Item 7a Quantitative And Qualitative Disclosures About Market Risk.

Not Applicable.

24

Item 8. Financial Statements

INDEX TO FINANCIAL STATEMENTS

Page

F-1 Report of Independent Registered Public Accounting Firm

F-2 Consolidated Balance Sheets as of December 31, 2019 and 2018.

F-3 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019 and 2018.

F-4 Consolidated Statements of Stockholders’ Deficiency for the Years Ended December 31, 2019 and 2018.

F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018.

F-6 to F-22 Notes to Consolidated Financial Statements.

25

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Dongxing International Inc.

Harbin, China

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Dongxing International Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive loss, stockholders’ deficiency, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the consolidated financial statements, the Company had a working capital deficiency of $493,271 and an accumulated deficit of $1,110,266 as of December 31, 2019, at which time the Company's stockholders’ deficiency was $434,315. The Company has not generated cash or income from its operation since inception. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

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

/s/ Prager Metis CPAs, LLC

We have served as the Company’s auditor since 2018

Hackensack, New Jersey

August 13, 2020

F-1

Dongxing International Inc.

Consolidated Balance Sheets

December 31, 2019 December 31, 2018

ASSETS

Current Assets

  Cash (Note 4 re VIE) $ 15,177 $ 638

  Accounts receivable, net of allowance of $19,730 and
  $20,055, respectively (Note 4 re VIE) 39,876 42,110

  Inventories (Note 4 re VIE) 2,291 2,645

  Project in progress (Note 4 re VIE) 55,181 56,089

  Other current assets (Note 4 re VIE) 410 7,889

Total Current Assets (Note 4 re VIE) 112,935 109,371

Other Assets

  Office equipment, net of accumulated depreciation
  of $9,910 and $8,865, respectively (Note 4 re VIE) 1,429 2,661

Total Assets (Note 4 re VIE) $ 114,364 $ 112,032

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Liabilities

Current Liabilities

  Due to related parties (Note 4 re VIE) $ 434,761 $ 418,436

  Advance from customers (Note 4 re VIE) 87,016 56,089

  Accrued expenses and other payables (Note 4 re VIE) 84,429 70,530

Total Current Liabilities (Note 4 re VIE) 606,206 545,055

Total Liabilities (Note 4 re VIE) 606,206 545,055

Stockholders' Deficiency

  Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding —   —

  Common stock, $0.0001 par value, 250,000,000 shares authorized, 30,000,000 shares issued and outstanding 3,000 3,000

  Additional paid-in capital 660,041 660,041

  Accumulated deficit (1,110,266 ) (1,045,478 )

  Accumulated other comprehensive income 12,910 4,007

Total Stockholders' Deficiency of Dongxing International Inc. (434,315 ) (378,430 )

  Non-controlling interest (57,527 ) (54,593 )

Total Stockholders' Deficiency (491,842 ) (433,023 )

Total Liabilities and Stockholders’ Deficiency $ 114,364 $ 112,032

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

F-2

Dongxing International Inc.

Consolidated Statements of Comprehensive Loss

For the Year Ended

December 31,

2019 2018

Revenue $ 76,562 $ 55,192

  Cost of revenue 16,541 13,321

  Gross profit 60,021 41,871

Operating expenses

  Selling, general and administrative expense 168,794 219,823

Total operating expenses 168,794 219,823

Loss from operations (108,773 ) (177,952 )

Other income

  Subsidy income 40,582 —

Total other income 40,582 —

Loss before provision for income tax (68,191 ) (177,952 )

Provision for income tax —   —

Net loss (68,191 ) (177,952 )

Less: Loss attributable to non-controlling interest (3,403 ) (8,889 )

Net loss attributable to Dongxing International Inc. (64,788 ) (169,063 )

Other comprehensive income

  Foreign currency translation adjustment 9,372 19,921

Comprehensive loss (58,819 ) (158,031 )

  Less: Comprehensive loss attributable to non-controlling interest (2,934 ) (7,893 )

Comprehensive loss attributable to Dongxing International Inc. $ (55,885 ) $ (150,138 )

Loss per share - Basic and Diluted $ (0.00 ) $ (0.01 )

Weighted average shares outstanding - Basic and Diluted 30,000,000 30,000,000

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

F-3

Dongxing International Inc.

Consolidated Statements of Stockholders' Deficiency

Preferred Stock Common Stock Accumulated

Number of Shares Amount Number
of
Shares Amount
Additional

Paid-in
Capital

Stock

Subscription
Receivable
Accumulated Deficit
Other

Comprehensive Income (loss)

Non-

Controlling Interest
Total

Balance at December 31, 2017 —   $ —   30,000,000 $ 3,000 $ 850,041 $ (200,000 ) $ (876,415 ) $ (14,918 ) $ (46,700 ) $ (284,992 )

Cancellation of subscription receivable in relation to 1-for-2,000,000 reverse split —   —   —   —   (190,000 ) 190,000 —   —   —   —

Subscription received —   —   —   —   —   10,000 —   —   —   10,000

Net loss —   —   —   —   —   —   (169,063 ) —   (8,889 ) (177,952 )

Foreign currency translation adjustment —   —   —   —   —   —   —   18,925 996 19,921

Balance at December 31, 2018 —   —   30,000,000 3,000 660,041 —   (1,045,478 ) 4,007 (54,593 ) (433,023 )

Net loss —   —   —   —   —   —   (64,788 ) —   (3,403 ) (68,191 )

Foreign currency translation adjustment —   —   —   —   —   —   —   8,903 469 9,372

Balance at December 31, 2019 —   $ —   30,000,000 $ 3,000 $ 660,041 $ —   $ (1,110,266 ) $ 12,910 $ (57,527 ) $ (491,842 )

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

F-4

Dongxing International Inc.

Consolidated Statements of Cash Flows

For the Year Ended

December 31,

2019 2018

CASH FLOW FROM OPERATING ACTIVITIES

Net loss $ (68,191 ) $ (177,952 )

Adjustment to reconcile net loss to net cash used in operating activities:

  Depreciation and amortization 1,229 1,387

  Loss on disposal of property and equipment —   68

  Reversal of bad debt provision —   (7,102 )

Change in operating assets and liabilities:

  Accounts receivable 1,604 (29,334 )

  Inventory 322 12,241

  Lease payment receivable —   3,778

  Prepaid rent —   32,574

  Other current assets 7,602 7,784

  Advance from customers 32,917 —

  Accrued expenses and other payables 15,553 21,162

Net cash used in operating activities (8,964 ) (135,394 )

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of office equipment —   (1,664 )

Net cash used in investing activities —   (1,664 )

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from related party loan, net of repayment 24,008 136,097

Net cash provided by financing activities 24,008 136,097

Effect of exchange rate changes on cash (505 ) (45 )

INCREASE (DECREASE) IN CASH 14,539 (1,006 )

Cash - beginning of year 638 1,644

Cash - ending of year $ 15,177 $ 638

Supplement disclosure information

Cash paid for interest $ —   $ —

Cash paid for income taxes $ —   $ —

Non-cash financing activities

Subscription received by conversion of related party loan $ —   $ 10,000

Cancellation of subscription receivable in relation to 1-for-2,000,000 reverse split $ —   $ 190,000

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

F-5

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 1 - CORPORATE INFORMATION

Dongxing International Inc. (the “Company” or “Dongxing”) was incorporated in June 2010 in accordance with the laws of the State of Delaware under the name Apex 1, Inc. On November 19, 2015 the Company's corporate name was changed to “Dongxing International Inc.”

On September 30, 2016, the Company entered into and closed a share exchange agreement with Central Dynamic Holdings Limited (“Central Dynamic”) and its shareholders. Pursuant to the terms of the exchange agreement, the shareholders, who together owned 100% of the ownership rights in Central Dynamic, agreed to transfer all of the issued and outstanding shares of common stock into the Company in exchange for the issuance of an aggregate of 25,000,000 shares of the Company’s common stock, par value $0.0001 per share.

As a result of the share exchange, the Central Dynamic shareholders become the majority shareholders and have control of the Company. The acquisition of Central Dynamic was accounted for as a reverse merger effected by a share exchange agreement. Dongxing is considered the legal acquirer and Central Dynamic and its subsidiaries is considered the accounting acquirer. Accordingly, the historical financial statements presented are those of Central Dynamic and its subsidiaries.

Central Dynamic is incorporated under the laws of the British Virgin Islands. Dongxing Holdings Limited (“Dongxing BVI”), which is a wholly owned subsidiary of Central Dynamic, is also incorporated under the laws of the British Virgin Islands. Dongxing Holdings Limited (“Dongxing HK”), a wholly owned subsidiary of Dongxing BVI, is incorporated under the laws of Hong Kong. Harbin Donghui Technology Co., Ltd. (“Harbin Donghui”), a wholly-owned subsidiary of Dongxing HK, is incorporated under the laws of the People's Republic of China ("PRC"). Harbin Dongxing Energy Saving Technical Service Co., Ltd. (“Harbin Dongxing”), a limited liability company incorporated under the laws of the PRC, is effectively and substantially controlled by Harbin Donghui through a series of agreements known as variable interest agreements (the “VIE agreements”) dated March 30, 2016 pursuant to which Harbin Dongxing became Harbin Donghui’s contractually controlled affiliate. The VIE Agreements provide that Harbin Donghui will receive 95% of the net profit or loss derived from the operations of Harbin Dongxing and its subsidiaries. Central Dynamic and its wholly owned subsidiaries, Dongxing BVI, Dongxing HK and Harbin Donghui, are holding companies with no business operation.

Harbin Dongxing engages in production and sales of LED lights, lighting project design and construction for urban roads, buildings and landscapes. Harbin Dongxing Online Technology Co., Ltd. (“Dongxing Online”), which is 100% owned by Harbin Dongxing, engages in software development, website production, systems integration and web/online merchandise sales. Harbin Dongcui Technology Co., Ltd. (“Harbin Dongcui”), which is 100% owed by Harbin Dongxing, is engaged in computer hardware and software development, systems integration, network engineering and technical consulting, technology transfer, technical services, business management consulting, marketing planning, and advertising. Prior to April 2020, Harbin Dongcui was named Harbin Dongrong Business Management Consulting Co., Ltd., and its business was limited to business consulting, marketing planning, and advertising.

F-6

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company had a working capital deficit of $493,271 and an accumulated deficit of $1,110,266 as of December 31, 2019, at which time the Company's stockholders’ deficiency was $434,315. The Company has not generated cash or income from its operation since inception. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company plans to rely on the proceeds from loans from both unrelated and related parties to provide the resources necessary to fund the development of its business plan and operations. The Company also plans to raise funds from domestic and foreign banks and/or financial institutions to increase working capital in order to meet capital demands. However, no assurance can be given that the Company will be successful in raising additional capital.

NOTE 3 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation and Consolidation

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or US GAAP.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and entities controlled through the VIE agreements. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The Company’s consolidated financial statements have been prepared in accordance with US GAAP. This 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 consolidated financial statements and reported amounts of revenue and expenses during the reporting period. The significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts receivable, estimated useful life and residual value of property, plant and equipment, provision for staff benefit, recognition and measurement of deferred income taxes and valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to the consolidated financial statements.



F-7

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Impairment of Long-Lived Assets

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other industrial changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows to be generated by the asset.

If assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. During the years ended December 31, 2019 and 2018, there was no impairment loss recognized on long-lived assets.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy that requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

•       Level one - Quoted market prices in active markets for identical assets or liabilities;

•       Level two - Inputs other than level one inputs that are either directly or indirectly observable; and

•       Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.

There are no financial instruments measured at fair value on a recurring basis.

Cash

Cash includes cash on hand and demand deposits placed with banks or other financial institutions that are unrestricted as to withdrawal and use and have an original maturity of three months or less. Deposits in banks in the PRC are not insured by any government entity or agency and are consequently exposed to risk of loss.

F-8

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Accounts receivable, net of allowance

Accounts receivable are stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. Based on its reviews, during the years ended December 31, 2019 and 2018, the Company provided $0 and reversed $7,102 respectively of its provision for bad debt, which was included in selling, general and administrative expenses.

Inventories

Inventories consist of raw materials and energy saving lights which are valued at the lower of cost or net realizable value. We determine cost on the basis of the weighted average method. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are reserved or written off. Although we believe that the assumptions we use in estimate inventory write-downs are reasonable, future changes in these assumptions could provide a significantly different result. During the years ended December 31, 2019 and 2018, no inventory markdown was recorded.

Property and equipment

Property and equipment, consisting of office equipment, is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of buildings, machinery and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets, generally 3 years for office equipment. Depreciation expense for the years ended December 31, 2019 and 2018 was $1,229 and $1,387 respectively.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), that replaces existing revenue recognition guidance. The new standard requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, Topic 606 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new accounting standard, Topic 606, Revenue from Contracts with Customers, and all the related amendments (new revenue standard) to all contracts using the modified retrospective method beginning on January 1, 2018.

F-9

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

In accordance with Topic 606, revenue is recognized when the Company satisfies its performance obligation by transferring promised goods or service to a customer. Revenue is measured at the transaction price, which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods or service to the customer. Generally, the Company recognizes revenue from product sales when goods are delivered to the customer, as control of goods transferred to customer at the same time. For service revenue, the Company recognizes revenue when services are performed and accepted by customers.

For revenue from LED lights installation projects, contract price is recorded as revenue once the project is completed. All projects were less than one year. Deposits received from customers before the project is completed are recorded as advance from customers. The costs of the projects, including materials used and other labor costs incurred are recorded as Project in Progress and recognized as cost of project once the project is complete.

Revenue from LED lights installation projects with profit sharing terms is recognized per ASC 840-30 Capital Leases. On the profit sharing installation projects, the Company transfers ownership of the LED lights to customers at the end of the contract period with no charge. The Company accounts for this type of transaction as a sales-type lease and records as revenue the present value of the total profit sharing receipts from the customer at the inception of the profit sharing period and records a lease payment receivable. The difference between the total amount of profit sharing receipts and the present value of the profit sharing receipts is recorded as unearned revenue to be amortized over the term of the profit sharing period.

The Company utilized the modified retrospective approach when reviewing its current accounting policies to identify potential differences that would result from applying the new requirements to its customer contracts. This approach includes the evaluation of sales terms, performance obligations, variable consideration, and costs to obtain and fulfill contracts. Based on the Company’s review, management did not need to record a cumulative effect adjustment to retained earnings as of the date of initial application and application of this guidance did not have a material impact on its consolidated financial statements for the years ended December 31, 2019 and 2018, respectively.

F-10

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Disaggregation of revenue

Revenue disaggregated by major source was as follows:

For the Years Ended December 31,

2019 2018

Service contracts - Non-related parties $ 73,384 $ 12,342

Service contracts - Related parties —   1,834

Sales of goods 3,178 40,989

Profit sharing contracts —   27

Total $ 76,562 $ 55,192

Lease

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases on their balance sheet and disclose key information about the leasing arrangements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

The new standard is effective for us on January 1, 2019, with early adoption permitted. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information is not provided for the dates and periods before January 1, 2019. The new standard provides a number of optional expedients in transition. The Company elected the package of practical expedients which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

The new standard has no material effect on our consolidated financial statements as the Company does not have a lease with a term longer than 12 months.

Income Taxes

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns.

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 settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

F-11

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by shareholders and distributions to shareholders. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation gain, net of tax.

Foreign Currency

The Company and its subsidiaries maintain their books and records in their functional currency, RMB or HKD. The consolidated financial statements of the Company are translated from Renminbi (“RMB”) or Hong Kong dollars (“HKD”) into United States dollars (U.S. Dollars or “US$” or “$”). Accordingly, assets and liabilities of the Company and its subsidiaries are translated from RMB or HKD to U.S. Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statements of comprehensive income (loss) and cash flows are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income (loss).

F-12

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

The exchange rates used to translate amounts in RMB or HKD into U.S. Dollars for the purposes of preparing the consolidated financial statements are based on the rates as published on the website of People’s Bank of China and are as follows:

December 31,
2019 December 31,
2018

Balance sheet items, except for equity accounts US$1=RMB6.9762 US$1=RMB6. 8632

US$1=HKD7.7877 US$1=HKD7.8329

Years Ended December 31

2019 2018

Items in the statements of comprehensive loss and cash flows US$1=RMB6.7468 US$1=RMB6.6174

US$1=HKD7.8458 US$1=HKD7.8377

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the above rates. The value of RMB against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of U.S. dollar reporting.

Recent Accounting Pronouncements

In August 2018, the FASB Accounting Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company does not expect this guidance will have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to Accounting Standards Codification (“ASC”) 718 upon vesting, which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not believe the adoption of this ASU will have a material effect on the Company’s consolidated financial statements or related disclosures.

F-13

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 4 – VARIABLE INTEREST ENTITY

The VIE contractual arrangements

Harbin Dongxing and its subsidiaries, Dongxing Online and Harbin Dongcui, are controlled through contractual arrangements in lieu of direct equity ownership by the Company.

These agreements include an Exclusive Business Cooperation Agreement, an Exclusive Purchase Right Agreement and a Pledge of Shares Agreement (collectively “VIE Agreements”). Pursuant to the VIE Agreements, Harbin Donghui has the exclusive right and obligation to provide technical support and management and marketing services to Harbin Dongxing. All the above contractual agreements obligate Harbin Donghui to absorb 95% of the risk of loss from Harbin Dongxing’s activities and entitle Harbin Donghui to receive 95% of their residual returns. Such contractual arrangements are designed so that the operation of Harbin Dongxing is for the benefit of Harbin Donghui and ultimately, the Company. In essence, Harbin Donghui has gained effective control over Harbin Dongxing.

Harbin Donghui is deemed to have a controlling financial interest in and be the primary beneficiary of Harbin Dongxing because it has both of the following characteristics:

· The power to direct activities at Harbin Dongxing that most significantly impact such entity’s economic performance; and

· The obligation to absorb losses of, and the right to receive benefits from Harbin Dongxing that could potentially be significant to such entity.

In accordance with accounting standards regarding consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. The VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. Therefore, the Company believes that Harbin Dongxing should be considered a Variable Interest Entity (“VIE”) under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”.

F-14

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Risks associated with the VIE structure

The Company believes that the contractual arrangements with its VIE and the VIE’s shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

· revoke the business and operating licenses of the Company’s PRC subsidiary and VIE;

· discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and VIE;

· limit the Company’s business expansion in China by way of entering into contractual arrangements;

· impose fines or other requirements with which the Company’s PRC subsidiary and VIE may not be able to comply;

· require the Company or the Company’s PRC subsidiary and VIE to restructure the relevant ownership structure or operations; or

· restrict or prohibit the Company’s use of the proceeds from public offering to finance the Company’s business and operations in China.

The Company’s ability to conduct its business through its VIE may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE and its VIE’s subsidiary in its consolidated financial statements as it may lose the ability to exert effective control over the VIE and its shareholders and it may lose the ability to receive economic benefits from the VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and its VIE.

F-15

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

The following assets and liabilities of the consolidated VIE were included in the accompanying consolidated financial statements of the Company as of December 31, 2019 and 2018 after elimination of intercompany balances:

December 31, 2019 December 31, 2018

Current Assets

  Cash $ 15,150 $ 594

  Accounts receivable, net 39,876 42,110

  Inventories 2,291 2,645

  Project in progress 55,181 56,089

  Other current assets 410 7,889

Total Current Assets 112,908 109,327

Other Assets

  Office equipment, net 1,429 2,661

Total Assets $ 114,337 $ 111,988

Current Liabilities

  Due to related parties $ 440,063 $ 423,708

  Advance from customers 87,016 56,089

  Accrued expenses and other payables 84,429 70,530

Total Current Liabilities 611,508 550,327

Total Liabilities $ 611,508 $ 550,327

NOTE 5 – OTHER CURRENT ASSETS

Other current assets consist of the following:

December 31,
2019 December 31,
2018

Bid deposit $ 72 $ 73

Other receivables 27 8,113

Other 311 (297 )

$ 410 $ 7,889

F-16

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 6 – PROJECT IN PROGRESS

Projects in progress represents costs accumulated on two projects at various stages of completion. Payments made by the customers to offset those costs are recorded as Advances from Customers. The Company started the two projects in 2013 and could not complete the projects since the projects' sites were not ready for the installation of energy saving lights. The Company could not estimate the time when the projects could be completed. During 2014 and 2015, the Company performed impairment tests based on the available information and had recorded impairment loss to decrease the net book value of project in progress to the amount received by the end of 2015. These two projects were not completed by the end of 2019.

NOTE 7 - RELATED PARTY TRANSACTIONS AND BALANCES

Due to related parties are non-interest bearing and due on demand. The balance of due to related parties consists of the following:

Notes December 31,
2019 December 31,
2018

Stockholders

Cheng, Zhao (1) $ 408,887 $ 369,702

Jufang, Yang (3) 7,167 7,285

Other related parties

Harbin Dongke Optronics Science and Technology Co., Ltd.  ("Dongke") (2) 18,707 41,449

Total due to related parties $ 434,761 $ 418,436

(1)       Mr. Cheng is the Company's CEO and a stockholder. During the years ended December 31, 2019 and 2018, Mr. Cheng advance $46,830 and $173,804 respectively to the Company. During the year ended December 31, 2018, Mr. Cheng agreed to reduce the Company's obligation by $10,000 in satisfaction of Mr. Cheng's stock subscription in that amount (See Note 9).

On May 31, 2018, the Company signed a lease agreement with Mr. Cheng to lease office space from Mr. Cheng in China for approximately $18,000 (RMB120,000) per annum for one year from June 1, 2018 to May 31, 2019. The lease was renewed on April 30, 2019 for one year from June 1, 2019 to May 31, 2020 for approximately $22,000 (RMB150,000) per annum. On January 3, 2020, the lease agreement was further renewed for one year from June 1, 2020 to May 31, 2021 for approximately $22,000 (RMB150,000) per annum. Lease payments of approximately $40,000 (RMB270,000) and $12,000 (RMB80,000) were paid during the years ended December 31, 2019 and 2018, respectively. Rent expense incurred for this related party lease was approximately $19,000 and $12,000 for the years ended December 31, 2019 and 2018, respectively (See Note 11).

(2)       Dongke is a company organized in China. Mr. Cheng was the president of Dongke until 2015. During the years ended December 31, 2019 and 2018, the Company made repayment of $22,822 and $37,707 respectively to Dongke on account of prior advances. In addition, the Company’s subsidiary, Harbin Dongxing, provided design service to Dongke in the amount of $1,834 during the year ended December 31, 2018.

(3)       Ms. Jufang Yang is a stockholder of the Company. The balance of approximately $7,000 (RMB50,000) as of December 31, 2019 and 2018 was advanced to the Company as an investment deposit.

F-17

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 8 - ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables consisted of the following:

December 31,
2019 December 31,
2018

Accrued expenses $ 45,861 $ 38,115

Tax payable —   516

Deposit payable 24,440 24,843

Salary payable 5,637 6,844

Others 8,491 212

$ 84,429 $ 70,530



NOTE 9 - STOCKHOLDERS’ DEFICIENCY

Reverse split and forward split

On August 9, 2018 the Company filed a Certificate of Amendment of Certificate of Incorporation. The Amendment effected a 1-for-2,000,000 reverse split of the Company's common stock. The Amendment further provided that any fractional shares resulting from the reverse split will be purchased by the Company for a price based on Ten Cents ($.10) per full share, upon delivery of the stock certificate to the Company's transfer agent. The effect of the reverse split was that 10,000,000 shares previously held by Cheng Zhao were reduced to five shares, and the remaining 20,000,000 shares previously held by the shareholders of the Company were eliminated.

The Amendment further provided that after giving effect to the reverse split, a 6,000,000-for-1 forward split of the common stock was implemented. The effect of the forward split was to increase the number of shares held by Cheng Zhao to 30,000,000.

Stock subscription receivable

During the period from May 8, 2012 to November 30, 2015, Mr. Cheng Zhao purchased 6,000,000 ordinary shares from Central Dynamic for a commitment to pay $60,000. During the period from May 8, 2012 to November 30, 2015, 19 shareholders of Central Dynamic acquired 19,000,000 ordinary shares by committing to pay a total of $190,000 to Central Dynamic. On September 30, 2016, those 20 shareholders exchanged their shares of Central Dynamic for 25,000,000 shares of the Company's common stock. Effective as of August 9, 2018, before the reverse split, Mr. Cheng Zhao satisfied his $60,000 payment commitment in full. At the time of reverse split, the Company cancelled the $190,000 subscription receivable that related to the 19,000,000 shares issued to other shareholders on September 30, 2016 and eliminated as a result of the reverse split on August 9, 2018.

F-18

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

NOTE 10 - INCOME TAXES

The Company was incorporated in the United States and has operations in four tax jurisdictions - the United States, the Hong Kong Special Administrative Region (“HK SAR”), the PRC, and the British Virgin Islands (“BVI”).

The Company’s BVI operations are not subject to any taxes according to BVI tax law. The Company’s HK SAR subsidiary is subject to a 16.5% profit tax based on its taxable net profit. The Company’s U.S. operations are subject to income tax according to U.S. tax law.

The Company’s three operating subsidiaries, Harbin Dongxing, Dongxing Online and Harbin Dongcui, are generally subject to PRC enterprise income tax (“EIT”). These three companies are subject to an EIT rate of 25% under China’s Unified Enterprise Income Tax Law (“New Tax Law”).

A reconciliation of the provision for income taxes determined at the U.S. statutory rate of 21% to the Company's effective income tax rate is as follows:

Years ended December 31,

2019 2018

Loss before provision for income tax $ (68,191 ) $ (177,952 )

U.S. federal corporate income tax rate 21 % 21 %

Expected U.S. income tax credit (14,320 ) (37,370 )

Tax rate difference between U.S. and foreign operations (2,728 ) (7,111 )

Change of valuation allowance 17,048 44,481

Effective tax expense $ —   $ —

The Company had deferred tax assets as follows:

December 31, December 31,

2019 2018

Net operating losses carried forward $ 206,685 $ 225,558

Less: Valuation allowance (206,685 ) (225,558 )

Net deferred tax assets $ —   $ —

As of December 31, 2019, the Company has approximately $828,000 net operating loss carryforwards available in China and HK SAR to reduce future taxable income. The net operating loss of Chinese subsidiaries could be carried forward for a period of not more than five years from the year of the initial loss pursuant to relevant PRC tax laws and regulations. The net operating loss from Hong Kong operations can be carried forward with no time limit from the year of the initial loss pursuant to relevant Hong Kong tax laws and regulations. It is more likely than not that the deferred tax assets cannot be utilized in the future because there will not be significant future earnings from the entity which generated the net operating loss. Therefore, the Company recorded a full valuation allowance on its deferred tax assets.

F-19

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

As of December 31, 2019 and 2018, the Company has no material unrecognized tax benefits which would favorably affect the effective income tax rate in future periods, and does not believe that there will be any significant increases or decreases of unrecognized tax benefits within the next twelve months. No interest or penalties relating to income tax matters have been imposed on the Company during the years ended December 31, 2019 and 2018, and no provision for interest and penalties is deemed necessary as of December 31, 2019 and 2018.

According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or its withholding agent. The statute of limitations extends to five years under special circumstances, which are not clearly defined. In the case of a related party transaction, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion.

The U.S. Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively. The Tax Act requires the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings. Since the Company’s foreign subsidiaries have not generated income since inception, the Company believes that Tax Act will not have significant impact on the Company’s consolidated financial statements.

NOTE 11 - COMMITMENT AND CONTINGENCIES

Lease commitments

Lease with third parties

The Company entered into office lease agreements with third parties which expired on April 17, 2018. On December 1, 2017, the Company renewed the lease for another half year from May 1, 2018 to October 31, 2018 with rent of approximately $21,000 (RMB138,000) for six months before moving to a new office. The Company’s lease payments were paid annually in advance and had been paid in full as of December 31, 2017.

The Company subleased part of the office space to a third party with annual rent of approximately $17,000. The sublease expired on April 17, 2018. The rental income from the sublease was recorded as net of rental expense. Uncollected rent was recorded as rent receivable on the Company's balance sheet. The rental income received in 2018 under the noncancelable sublease aggregates approximately $4,800.

F-20

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Lease with related parties

On May 31, 2018, the Company signed a lease agreement with Mr. Cheng to lease office space from Mr. Cheng in China for approximately $18,000 (RMB120,000) per annum for one year from June 1, 2018 to May 31, 2019. The lease was renewed on April 30, 2019 for one year from June 1, 2019 to May 31, 2020 for approximately $22,000 (RMB150,000) per annum, which was paid in full as of December 31, 2019. On January 3, 2020, the lease agreement was further renewed for one year from June 1, 2020 to May 31, 2021 for approximately $22,000 (RMB150,000) per annum. Lease payments of approximately $40,000 (RMB270,000) and $12,000 (RMB80,000) were paid during the years ended December 31, 2019 and 2018, respectively.

The net rental expense (third parties and related parties) was approximately $19,000 and $44,000 for the years ended December 31, 2019 and 2018, respectively.

NOTE 12 - MAJOR CUSTOMERS

Revenue from three customers represented 42%, 25% and 23% of total sales for the year ended December 31, 2019, respectively and revenue from two customers represented 74% and 17% of total sales for the year ended December 31, 2018, respectively.

As of December 31, 2019 and 2018, one customer accounted for approximately 98% and 98% respectively of the Company’s accounts receivable balance.

NOTE 13 - SUBSEQUENT EVENT

The Company has evaluated the existence of significant events subsequent to the balance sheet date through the date the financial statements were issued and has determined that the following subsequent events or transactions which would require recognition or disclosure in the financial statements.

COVID-19

The Company’s operations are affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19), which in March 2020 was declared a pandemic by the World Health Organization. The COVID-19 outbreak is causing lockdowns, travel restrictions, and closures of businesses. The Company’s business has been negatively impacted by the COVID-19 outbreak.

From early February 2020 to the end of March 2020, the Company had to temporarily suspend its operations due to government restrictions. During the temporary business closure period, the employees had very limited access to the facilities and, as a result, the Company had no new business from sales of LED lights. In addition, due to the COVID-19 outbreak, some of the customers may experience financial distress, delay or default on their payments, reduce the scale of their business, or suffer disruptions in their business due to the outbreak. Any increased difficulty in collecting accounts receivable, delayed raw materials supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact the Company’s results of operations.

F-21

DONGXING INTERNATIONAL INC.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

In light of the current circumstances and available information, the Company estimated that for the period from January to June 2020, the Company’s revenues from product sales could be significantly lower than originally planned. The COVID-19 influence on the revenues from provision of technical and consulting services is relatively small as these services can be performed on a remote and virtual basis. In addition, the Company originally planned to expand its international trade and export sales in 2020. With the outbreak of COVID-19, all business development activities related to this were suspended with originally scheduled oversea trade fairs all cancelled.

As of the date of this filing, the COVID-19 coronavirus outbreak in China appears to have slowed down and most provinces and cities have resumed business activities under the guidance and support of the government. The Company’s business has been gradually recovering since the beginning of April with the reopening of the Company's executive office. However, there is still significant uncertainty regarding the possibility of a second wave of infections, and the breadth and duration of business disruptions related to COVID-19, which could continue to have a material impact on the Company’s operations.

F-22

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As of December 31, 2019, Cheng Zhao, our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures have the following material weaknesses:

The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system.

Our internal financial staff lack expertise in identifying and addressing complex accounting issued under U.S. Generally Accepted Accounting Principles.

Our Chief Financial Officer is not familiar with the accounting and reporting requirements of a U.S. public company.

We have not developed sufficient documentation concerning our existing financial processes, risk assessment and internal controls.

Based on his evaluation, Mr. Cheng concluded that the Company’s system of disclosure controls and procedures was not effective as of December 31, 2019 for the purposes described in this paragraph.

Changes in Internal Controls. There was no change in internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding paragraph that occurred during Dongxing International Inc.’s fourth fiscal quarter that has materially affected or is reasonably likely to materially affect Dongxing International Inc.’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of December 31, 2019 using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Integrated Framework (1992) as a basis for our assessment.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

26

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified three material weaknesses in our internal control over financial reporting. These material weaknesses consisted of:

The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system.

Our internal financial staff lack expertise in identifying and addressing complex accounting issued under U.S. Generally Accepted Accounting Principles.

Our Chief Financial Officer is not familiar with the accounting and reporting requirements of a U.S. public company.

We have not developed sufficient documentation concerning our existing financial processes, risk assessment and internal controls.

Management does not believe that the current level of the Company’s operations warrants a remediation of the weaknesses identified in this assessment. However, because of the above condition, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of December 31, 2019.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Item 9B Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Dongxing International Inc.

The name of the sole officer and director of Dongxing International Inc., our U.S. parent company, and certain information about him, is set forth below:

Name Age Position(s) Director Since

Cheng Zhao 45
Chairman of the Board, Chief Executive Officer,

Chief Financial Officer

2015

27

       Cheng Zhao. Cheng Zhao has been employed for more than the past fifteen years in managerial positions in the People's Republic of China. Since 2011 he has served as President and Chief Executive Officer of Harbin Dongxing. From 2008 to 2015, Mr. Cheng was employed as General Manager of Harbin Dongke Optronics Science and Technology Co., Ltd., which manufactured and marketed electronic lighting products. From 2004 to 2008, Mr. Cheng was employed as General Manager of Harbin Litian Scientific and Technological Development Co., Ltd., which developed high-tech products for the agriculture industry. In 2004 Mr. Cheng was awarded a Master's Degree in Business Administration by the City University of Seattle (State of Washington). In 1998, he earned a Bachelor's Degree with a concentration in International Business at the Heilongjiang University of Commerce (Heilongjiang Province).

Harbin Dongxing Energy Saving Technical Service Co., Ltd.

The names of officers of Harbin Dongxing, our operating company, and certain information about them, are set forth below:

Name Age Position(s)

Cheng Zhao 45 President

Zhao Zhongnan 50 Finance Manager

Cheng Zhao. See above.

Zhao Zhongnan. Zhao Zhongnan has over twenty years experience in financial management. Prior to being engaged as Finance Manager by Harbin Dongxing in 2016, Ms. Zhao was employed for ten years as Finance Manager of Harbin Zhengda Longxiang Pharmaceutical Co., Ltd. Previously, from 2000 to 2007, Ms. Zhao was employed as Finance Director of Harbin Shenlan Jiade Technology R&D Co., Ltd., and from 1997 to 2000 as an Accounting Assistant in the Harbin Dazheng Accounting Firm. Ms. Zhao graduated from the Harbin University of Commerce in 1997 with a major in Commercial Economic Administration. She was certified as a Middle-Level Certified Accountant in 2005.

Audit Committee

The Board of Directors has not appointed an Audit Committee. The functions that would be performed by an Audit Committee are performed by the Board of Directors. The Board of Directors does not have an “audit committee financial expert,” because there is only one Board member.

Code of Ethics

The Company has not adopted a formal code of ethics applicable to its executive officers. The Board of Directors has determined that the Company’s financial operations are not sufficiently complex to warrant adoption of a formal code of ethics.

Section 16(a) Beneficial Ownership Reporting Compliance

None of the officers, directors or beneficial owners of more than 10% of the Company’s common stock failed to file on a timely basis the reports required by Section 16(a) of the Exchange Act during the year ended December 31, 2019, except that Cheng Zhao has failed to file a Form 3 when due.

28

Item 11. Executive Compensation

The following table sets forth all compensation awarded to, earned by, or paid by Dongxing International Inc. and its subsidiaries to its Chief Executive Officer during the past three fiscal years. There was no officer or employee whose compensation for 2019 exceeded $100,000.

Fiscal

Year

Salary

Bonus

Stock

Awards

Option

Awards

Other

Compensation

Cheng Zhao 2019 $ 9,535 —   —   —   $ 1,927

2018 $ 5,587 —   —   —   $ 1,707

2017 $ 11,000 —   —   —   $ 2,200

Employment Agreements

Dongxing International does not have any employment agreements with any of its directors or executive officers. Harbin Dongxing, our operating affiliate, has employment agreements with all of its officers other than Cheng Zhao, as required by Chinese labor laws.

        PRC employment law requires an employee be paid severance pay based on the number of years worked with the employer at the rate of one month’s wage for each full year worked.  Any period of more than six months but less than one year shall be counted as one year.　The severance pay payable to an employee for any period of less than six months shall be one-half of his monthly wages. The monthly salary mentioned above is defined as the average salary of 12 months before revocation or termination of the employment contract.

We have not provided retirement benefits (other than a state pension scheme in which all of our employees in China participate) or severance or change of control benefits to our named executive officers.

Equity Grants

The following tables set forth certain information regarding the stock options acquired by the Company’s Chief Executive Officer during the year ended December 31, 2019 and those options held by him on December 31, 2019.

Option Grants in the Last Fiscal Year

Potential realizable
value at assumed
annual rates of
appreciation
for option term

Number of

securities

underlying

option

granted

Percent

of total

options

granted to

employees

in fiscal

year

Exercise

Price

($/share)

Expiration

Date
5% 10%

Cheng Zhao —   —   —   —   —   —

29

The following tables set forth certain information regarding the stock grants received by the executive officers named in the table above during the year ended December 31, 2019 and held by them unvested at December 31, 2019.

Unvested Stock Awards in the Last Fiscal Year

Number of

Shares That

Have Not

Vested

Market Value

of Shares That

Have Not

Vested

Cheng Zhao —   —

Compensation of Directors

The members of our Board of Directors receive no compensation for their services on the Board.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of the date of this report by the following:

· each shareholder known by us to own beneficially more than 5% of our common stock;

· Cheng Zhao;

· each of our directors; and

· all directors and executive officers as a group.

There are 30,000,000 shares of our common stock outstanding on the date of this report. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below have sole voting power and investment power with respect to their shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.

In computing the number of shares beneficially owned by a person and the percent ownership of that person, we include shares of common stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days. We do not, however, include these “issuable” shares in the outstanding shares when we compute the percent ownership of any other person.

Beneficial Owner⁽¹⁾
Amount and Nature

of Beneficial

Ownership

Percentage

of Class

Cheng Zhao 9,130,000 30.4%

All officers and directors

As a group (1 person)
9,130,000 30.4%

____________________________

⁽¹⁾ The address of each shareholder, unless otherwise noted, is c/o Dongxing International Inc., Room 1101, International Finance Building, 633 Keji'er Street, Songbei District, Harbin, Heilongjiang Province, P.R. China

30

Item 13.   Certain Relationships and Related Transactions and Director Independence

Certain Relationships and Related Transactions

Except as set forth in Note 7 "Related Party Transactions and Balances" in the Notes to Consolidated Financial Statements, there have been no transactions since the beginning of the 2019 fiscal year, or any currently proposed transaction, in which Dongxing International or any of its subsidiaries was or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of the total assets of Harbin Dongxing at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest.

Director Independence

None of the members of the Board of Directors is independent, as “independence” is defined in the Rules of the NYSE American.

Item 14.    Principal Accountant Fees and Services

Prager Metis CPAs LLC was engaged to serve as the Company's independent registered public accounting firm on October 12, 2018. Prior to that date, Paritz & Company, P.A. was engaged as the Company's independent registered public accounting firm.

Audit Fees

Prager Metis CPAs LLC billed $39,000 and $27,000 respectively in connection with the audit and reviews of the Company’s financial statements for the years ended December 31, 2019 and 2018. Paritz & Company, P.A. billed $10,000, in connection with the audit and reviews of the Company’s financial statements for the year ended December 31, 2018. Also included are those services normally provided by the accountant in connection with the Company’s statutory and regulatory filings.

Audit-Related Fees

Prager Metis CPAs LLC did not bill the Company for any Audit-Related fees in fiscal 2019 or 2018.

Tax Fees

Prager Metis CPAs LLC billed the Company $2,500 and $3,500 respectively in fiscal 2019 and 2018 for professional services rendered for tax compliance, tax advice and tax planning.

All Other Fees

Prager Metis CPAs LLC did not bill the Company for any other fees in fiscal 2019 or 2018.

It is the policy of the Company that all services, other than audit, review or attest services, must be pre-approved by the Board of Directors.

31

Item 15.   Exhibits and Financial Statement Schedules

Exhibits

3.1 Certificate of Incorporation - filed as an exhibit to the Company’s Registration Statement on Form 10 filed on September 8, 2010, and incorporated herein by reference.

3.1(a) Certificate of Amendment of Certificate of Incorporation dated May 20, 2011 - filed as an exhibit to the Current Report on Form 8-K filed on May 31, 2011, and incorporated herein by reference.

3.1(b) Certificate of Amendment of Certificate of Incorporation dated December 23, 2013 - filed as an exhibit to the Current Report on Form 8-K filed on December 27, 2013, and incorporated herein by reference.

3.1(c) Certificate of Amendment of Certificate of Incorporation dated November 19, 2015 - filed as an exhibit to the Current Report on Form 8-K filed on November 20, 2015, and incorporated herein by reference.

3.1(d) Certificate of Amendment of Certificate of Incorporation dated August 9, 2018 - filed as an exhibit to the Current Report on Form 8-K filed on August 13, 2018, and incorporated herein by reference.

3.2 By-laws - filed as an exhibit to the Company’s Registration Statement on Form 10 filed on September 8, 2010, and incorporated herein by reference.

10.1 Exclusive Business Cooperation Agreement dated March 30, 2016 between Harbin Donghui Technology Co., Ltd. and Harbin Dongxing Energy Saving Technical Service Co., Ltd. (1)

10.2 Exclusive Purchase Right Agreement dated March 30, 2016 between Harbin Donghui Technology Co., Ltd., Cheng Zhao, Su Dianli and Harbin Dongxing Energy Saving Technical Service Co., Ltd. (1)

10.3 Pledge of Shares Agreement dated March 30, 2016 between Harbin Donghui Technology Co., Ltd., Cheng Zhao, Su Dianli and Harbin Dongxing Energy Saving Technical Service Co., Ltd. (1)

10.4 Letter of Authority dated March 30, 2016 given by Cheng Zhao to Harbin Donghui Technology Co., Ltd. (1)

10.5 Letter of Consent dated March 30, 2016 given by Ding Xue to Harbin Donghui Technology Co., Ltd. (1)

10.6 Letter of Authority dated March 30, 2016 given by Su Dianli to Harbin Donghui Technology Co., Ltd. (1)

10.7 Letter of Consent dated March 30, 2016 given by Shu Xueli to Harbin Donghui Technology Co., Ltd. (1)

10.8 Form of Distribution Agreement between Harbin Dongxing Online Technology Co., Ltd. and suppliers. (1)

21 Subsidiaries

31   Rule 13a-14(a) Certification

32 Rule 13a-14(b) Certification

101.INS XBRL Instance

101.SCH XBRL Schema

101.CAL XBRL Calculation

101.DEF XBRL Definition

101.LAB XBRL Label

101.PRE XBRL Presentation

____________________

⁽¹⁾ Filed as an exhibit to the Current Report on Form 8-K filed on October 14, 2016 and incorporated herein by reference.

Item 16. Form 10-K Summary

None.

32

SIGNATURES

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

Dongxing International Inc.

By: /s/ Cheng Zhao

Cheng Zhao, Chief Executive Officer

In accordance with the Exchange Act, this Report has been signed below on August 13, 2020 by the following persons, on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Cheng Zhao

Cheng Zhao, Director

Chief Executive Officer,

Chief Financial and Accounting Officer

33

Dongxing International Inc. Reports

02/28/2011 - 10-K

04/16/2012 - 10-K

05/08/2013 - 10-K

04/14/2014 - 10-K

09/17/2015 - 10-K

02/19/2016 - 10-K

04/17/2017 - 10-K

03/30/2018 - 10-K

08/13/2020 - 10-K

05/16/2011 - 10-Q

08/15/2011 - 10-Q

11/14/2011 - 10-Q

05/21/2012 - 10-Q

08/20/2012 - 10-Q

11/19/2012 - 10-Q

05/20/2013 - 10-Q

08/08/2013 - 10-Q

11/19/2013 - 10-Q

05/19/2014 - 10-Q

08/18/2014 - 10-Q

11/18/2014 - 10-Q

09/17/2015 - 10-Q

09/17/2015 - 10-Q

11/03/2015 - 10-Q

05/13/2016 - 10-Q

08/04/2016 - 10-Q

11/21/2016 - 10-Q

05/09/2017 - 10-Q

08/10/2017 - 10-Q

11/13/2017 - 10-Q

05/14/2018 - 10-Q

08/14/2018 - 10-Q

11/13/2018 - 10-Q

	Page
	F-1	Report of Independent Registered Public Accounting Firm

	F-2	Consolidated Balance Sheets as of December 31, 2019 and 2018.

	F-3	Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019 and 2018.

	F-4	Consolidated Statements of Stockholders’ Deficiency for the Years Ended December 31, 2019 and 2018.

	F-5	Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018.

	F-6 to F-22	Notes to Consolidated Financial Statements.

/s/ Prager Metis CPAs, LLC

We have served as the Company’s auditor since 2018

Hackensack, New Jersey
August 13, 2020

Dongxing International Inc.
Consolidated Balance Sheets

		December 31, 2019			December 31, 2018
ASSETS
Current Assets
Cash (Note 4 re VIE)	$	15,177		$	638
Accounts receivable, net of allowance of $19,730 and $20,055, respectively (Note 4 re VIE)		39,876			42,110
Inventories (Note 4 re VIE)		2,291			2,645
Project in progress (Note 4 re VIE)		55,181			56,089
Other current assets (Note 4 re VIE)		410			7,889
Total Current Assets (Note 4 re VIE)		112,935			109,371

Other Assets
Office equipment, net of accumulated depreciation of $9,910 and $8,865, respectively (Note 4 re VIE)		1,429			2,661
Total Assets (Note 4 re VIE)	$	114,364		$	112,032

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Liabilities
Current Liabilities
Due to related parties (Note 4 re VIE)	$	434,761		$	418,436
Advance from customers (Note 4 re VIE)		87,016			56,089
Accrued expenses and other payables (Note 4 re VIE)		84,429			70,530
Total Current Liabilities (Note 4 re VIE)		606,206			545,055
Total Liabilities (Note 4 re VIE)		606,206			545,055

Stockholders' Deficiency
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.0001 par value, 250,000,000 shares authorized, 30,000,000 shares issued and outstanding		3,000			3,000
Additional paid-in capital		660,041			660,041
Accumulated deficit		(1,110,266	)		(1,045,478	)
Accumulated other comprehensive income		12,910			4,007
Total Stockholders' Deficiency of Dongxing International Inc.		(434,315	)		(378,430	)
Non-controlling interest		(57,527	)		(54,593	)
Total Stockholders' Deficiency		(491,842	)		(433,023	)
Total Liabilities and Stockholders’ Deficiency	$	114,364		$	112,032
The accompanying notes are an integral part of these consolidated financial statements.

Dongxing International Inc.
Consolidated Statements of Comprehensive Loss

	For the Year Ended
	December 31,
	2019			2018
Revenue	$	76,562		$	55,192
Cost of revenue		16,541			13,321
Gross profit		60,021			41,871

Operating expenses
Selling, general and administrative expense		168,794			219,823
Total operating expenses		168,794			219,823

Loss from operations		(108,773	)		(177,952	)

Other income
Subsidy income		40,582			—
Total other income		40,582			—

Loss before provision for income tax		(68,191	)		(177,952	)
Provision for income tax		—			—
Net loss		(68,191	)		(177,952	)
Less: Loss attributable to non-controlling interest		(3,403	)		(8,889	)
Net loss attributable to Dongxing International Inc.		(64,788	)		(169,063	)

Other comprehensive income
Foreign currency translation adjustment		9,372			19,921
Comprehensive loss		(58,819	)		(158,031	)
Less: Comprehensive loss attributable to non-controlling interest		(2,934	)		(7,893	)
Comprehensive loss attributable to Dongxing International Inc.	$	(55,885	)	$	(150,138	)

Loss per share - Basic and Diluted	$	(0.00	)	$	(0.01	)
Weighted average shares outstanding - Basic and Diluted		30,000,000			30,000,000


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

Dongxing International Inc.
Consolidated Statements of Stockholders' Deficiency

	Preferred Stock			Common Stock													Accumulated
	Number of Shares		Amount	Number of Shares		Amount		Additional Paid-in Capital			Stock Subscription Receivable			Accumulated Deficit			Other Comprehensive Income (loss)			Non- Controlling Interest			Total
Balance at December 31, 2017	—	$	—	30,000,000	$	3,000	$	850,041		$	(200,000	)	$	(876,415	)	$	(14,918	)	$	(46,700	)	$	(284,992	)
Cancellation of subscription receivable in relation to 1-for-2,000,000 reverse split	—		—	—		—		(190,000	)		190,000			—			—			—			—
Subscription received	—		—	—		—		—			10,000			—			—			—			10,000
Net loss	—		—	—		—		—			—			(169,063	)		—			(8,889	)		(177,952	)
Foreign currency translation adjustment	—		—	—		—		—			—			—			18,925			996			19,921
Balance at December 31, 2018	—		—	30,000,000		3,000		660,041			—			(1,045,478	)		4,007			(54,593	)		(433,023	)
Net loss	—		—	—		—		—			—			(64,788	)		—			(3,403	)		(68,191	)
Foreign currency translation adjustment	—		—	—		—		—			—			—			8,903			469			9,372
Balance at December 31, 2019	—	$	—	30,000,000	$	3,000	$	660,041		$	—		$	(1,110,266	)	$	12,910		$	(57,527	)	$	(491,842	)


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

Dongxing International Inc.
Consolidated Statements of Cash Flows

		For the Year Ended
		December 31,
		2019			2018
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$	(68,191	)	$	(177,952	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,229			1,387
Loss on disposal of property and equipment		—			68
Reversal of bad debt provision		—			(7,102	)
Change in operating assets and liabilities:
Accounts receivable		1,604			(29,334	)
Inventory		322			12,241
Lease payment receivable		—			3,778
Prepaid rent		—			32,574
Other current assets		7,602			7,784
Advance from customers		32,917			—
Accrued expenses and other payables		15,553			21,162
Net cash used in operating activities		(8,964	)		(135,394	)

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of office equipment		—			(1,664	)
Net cash used in investing activities		—			(1,664	)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from related party loan, net of repayment		24,008			136,097
Net cash provided by financing activities		24,008			136,097

Effect of exchange rate changes on cash		(505	)		(45	)
INCREASE (DECREASE) IN CASH		14,539			(1,006	)
Cash - beginning of year		638			1,644
Cash - ending of year	$	15,177		$	638

Supplement disclosure information
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	—

Non-cash financing activities
Subscription received by conversion of related party loan	$	—		$	10,000
Cancellation of subscription receivable in relation to 1-for-2,000,000 reverse split	$	—		$	190,000

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

	For the Years Ended December 31,
	2019		2018

Service contracts - Non-related parties	$	73,384	$	12,342
Service contracts - Related parties		—		1,834
Sales of goods		3,178		40,989
Profit sharing contracts		—		27
Total	$	76,562	$	55,192

	December 31, 2019	December 31, 2018
Balance sheet items, except for equity accounts	US$1=RMB6.9762	US$1=RMB6. 8632
	US$1=HKD7.7877	US$1=HKD7.8329

	Years Ended December 31
	2019	2018
Items in the statements of comprehensive loss and cash flows	US$1=RMB6.7468	US$1=RMB6.6174
	US$1=HKD7.8458	US$1=HKD7.8377

	December 31, 2019		December 31, 2018
Bid deposit	$	72	$	73
Other receivables		27		8,113
Other		311		(297	)
	$	410	$	7,889

	Notes		December 31, 2019		December 31, 2018
Stockholders
Cheng, Zhao		(1)	$	408,887	$	369,702
Jufang, Yang		(3)		7,167		7,285
Other related parties
Harbin Dongke Optronics Science and Technology Co., Ltd. ("Dongke")		(2)		18,707		41,449
Total due to related parties			$	434,761	$	418,436

	December 31, 2019		December 31, 2018
Accrued expenses	$	45,861	$	38,115
Tax payable		—		516
Deposit payable		24,440		24,843
Salary payable		5,637		6,844
Others		8,491		212
	$	84,429	$	70,530

	Years ended December 31,
	2019			2018
Loss before provision for income tax	$	(68,191	)	$	(177,952	)
U.S. federal corporate income tax rate		21	%		21	%
Expected U.S. income tax credit		(14,320	)		(37,370	)
Tax rate difference between U.S. and foreign operations		(2,728	)		(7,111	)
Change of valuation allowance		17,048			44,481
Effective tax expense	$	—		$	—

The Company had deferred tax assets as follows:
		December 31,			December 31,
		2019			2018
Net operating losses carried forward	$	206,685		$	225,558
Less: Valuation allowance		(206,685	)		(225,558	)
Net deferred tax assets	$	—		$	—

Name	Age	Position(s)
Cheng Zhao	45	President
Zhao Zhongnan	50	Finance Manager

	Fiscal Year		Salary		Bonus		Stock Awards		Option Awards		Other Compensation
Cheng Zhao		2019	$	9,535		—		—		—	$	1,927
		2018	$	5,587		—		—		—	$	1,707
		2017	$	11,000		—		—		—	$	2,200

3.1	Certificate of Incorporation - filed as an exhibit to the Company’s Registration Statement on Form 10 filed on September 8, 2010, and incorporated herein by reference.
3.1(a)	Certificate of Amendment of Certificate of Incorporation dated May 20, 2011 - filed as an exhibit to the Current Report on Form 8-K filed on May 31, 2011, and incorporated herein by reference.
3.1(b)	Certificate of Amendment of Certificate of Incorporation dated December 23, 2013 - filed as an exhibit to the Current Report on Form 8-K filed on December 27, 2013, and incorporated herein by reference.
3.1(c)	Certificate of Amendment of Certificate of Incorporation dated November 19, 2015 - filed as an exhibit to the Current Report on Form 8-K filed on November 20, 2015, and incorporated herein by reference.
3.1(d)	Certificate of Amendment of Certificate of Incorporation dated August 9, 2018 - filed as an exhibit to the Current Report on Form 8-K filed on August 13, 2018, and incorporated herein by reference.
3.2	By-laws - filed as an exhibit to the Company’s Registration Statement on Form 10 filed on September 8, 2010, and incorporated herein by reference.
10.1	Exclusive Business Cooperation Agreement dated March 30, 2016 between Harbin Donghui Technology Co., Ltd. and Harbin Dongxing Energy Saving Technical Service Co., Ltd. (1)
10.2	Exclusive Purchase Right Agreement dated March 30, 2016 between Harbin Donghui Technology Co., Ltd., Cheng Zhao, Su Dianli and Harbin Dongxing Energy Saving Technical Service Co., Ltd. (1)
10.3	Pledge of Shares Agreement dated March 30, 2016 between Harbin Donghui Technology Co., Ltd., Cheng Zhao, Su Dianli and Harbin Dongxing Energy Saving Technical Service Co., Ltd. (1)
10.4	Letter of Authority dated March 30, 2016 given by Cheng Zhao to Harbin Donghui Technology Co., Ltd. (1)
10.5	Letter of Consent dated March 30, 2016 given by Ding Xue to Harbin Donghui Technology Co., Ltd. (1)
10.6	Letter of Authority dated March 30, 2016 given by Su Dianli to Harbin Donghui Technology Co., Ltd. (1)
10.7	Letter of Consent dated March 30, 2016 given by Shu Xueli to Harbin Donghui Technology Co., Ltd. (1)
10.8	Form of Distribution Agreement between Harbin Dongxing Online Technology Co., Ltd. and suppliers. (1)
21	Subsidiaries
31	Rule 13a-14(a) Certification
32	Rule 13a-14(b) Certification
101.INS	XBRL Instance
101.SCH	XBRL Schema
101.CAL	XBRL Calculation
101.DEF	XBRL Definition
101.LAB	XBRL Label
101.PRE	XBRL Presentation

Dongxing International Inc. - FORM 10-K - August 13, 2020

Attached files

Dongxing International Inc. Reports