EXHIBIT 99.1

  

POWERTECH HOLDINGS COMPANY LIMITED   Combined and Consolidated Financial Statements For The Years Ended December 31, 2019 And 2018   (With Report of Independent Registered Public Accounting Firm Thereon)

 

   

POWERTECH HOLDINGS COMPANY LIMITED

 

INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

   

		Page
Report of Independent Registered Public Accounting Firm		F-2
Combined and Consolidated Balance Sheets		F-3
Combined and Consolidated Statements of Operations and Comprehensive Loss		F-4
Combined and Consolidated Statements of Cash Flows		F-5
Combined and Consolidated Statements of Changes in Stockholders’ Deficit		F-6
Notes to Combined and Consolidated Financial Statements		F-7 – F-20

 

F-1

 

		JP CENTURION & PARTNERS PLT (AF002366 & LLP0025093-LCA) A Firm registered with US PCAOB and Malaysian MIA
		No. 36G-2, Jalan Radin Anum, Bandar Baru Sir Petaling, 57000, Kuala Lumpur, Malayia Tel: (603) 2733 9989

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Director and Stockholder of

 

POWERTECH HOLDINGS COMPANY LIMITED

 

Opinion on the Financial Statements

 

We have audited the accompanying combined and consolidated balance sheets of Powertech Holdings Company Limited and its subsidiaries (the ‘Company’) as of December 31, 2019 and 2018, and the related combined and consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the years ended December 31, 2019 and 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the financial statements, as of December 31, 2019, the Company has suffered from an accumulated deficit of $1,000,733 and working capital deficit of $739,083. These factors create an uncertainty as to the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 2. The 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/ JP CENTURION & PARTNERS, PLT_______

JP CENTURION & PARTNERS, PLT  

 

November 27, 2020

 

We have served as the Company’s auditor since 2020.

 

Kuala Lumpur, Malaysia

 

F-2

   

POWERTECH HOLDINGS COMPANY LIMITED

COMBINED AND CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

		As of December 31,
		2019				2018
ASSETS
Current assets:
Cash and cash equivalents		$	243,641				174,584
Accounts and retention receivables			155,221				-
Deposits, prepayments and other receivables			95,999				19,497
Contract assets			676,090				359,421
Amount due from a director			-				185,233
Total current assets			1,170,951				738,735
Non-current assets:
Plant and equipment			21,362				16,006
Right-of-use assets			130,794				-
Total non-current assets			152,156				16,006
TOTAL ASSETS		$	1,323,107			$	754,741
LIABILTIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Contract liabilities		$	1,558,161			$	712,612
Accrued liabilities and other payables			152,299				86,196
Operating lease liabilities			70,375				-
Amount due to a director			129,199				-
Total current liabilities			1,910,034				798,808
Non-current liability
Operating lease liabilities			59,983				-
TOTAL LIABILITIES			1,970,017				798,808
Commitments and contingencies			-				-
STOCKHOLDERS’ DEFICIT
Ordinary shares, $0.0001 par value; 5,209,000 shares authorized; 5,209,000 shares issued and outstanding			521				521
Additional paid in capital			357,062				357,062
Accumulated other comprehensive (loss) income			(3,760	)			142
Accumulated deficit			(1,000,733	)			(401,792	)
Stockholders’ deficit			(646,910	)			(44,067	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	1,323,107			$	754,741

   

See accompanying notes to combined and consolidated financial statements.

 

F-3

 

POWERTECH HOLDINGS COMPANY LIMITED

COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”))

 

		Years ended December 31,
		2019				2018
Revenue, net		$	2,150,997				-
Cost of revenue			(1,805,076	)			-
Gross profit			345,921				-
Operating expenses:
Sales and marketing expenses			(267,126	)			(155,504	)
General and administrative expenses			(617,005	)			(239,891	)
Professional fee			(61,320	)			(6,461	)
Total operating expenses			(945,451	)			(401,856	)
Other income:
Interest income			231				64
Sundry income			358				-
Total other income			589				64
LOSS BEFORE INCOME TAXES			(598,941	)			(401,792	)
Income tax expense			-				-
NET LOSS			(598,941	)			(401,792	)
Other comprehensive (loss) income:
Foreign currency translation (loss) gain			(3,902	)			142
COMPREHENSIVE LOSS		$	(602,843	)		$	(401,650	)

  

See accompanying notes to combined and consolidated financial statements.

 

F-4

 

POWERTECH HOLDINGS COMPANY LIMITED

COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”))

 

		Years ended December 31,
		2019				2018
Cash flow from operating activities:
Net loss		$	(598,941	)		$	(401,792	)
Adjustments to reconcile net loss to net cash (used in) generated from operating activities
Depreciation of plant and equipment			6,073				4,672
Depreciation of right-of-use assets			11,818				-
Loss on disposal of plant and equipment			3,369				-
Change in operating assets and liabilities:
Accounts and retention receivables			(155,221	)			-
Deposits, prepayments and other receivables			(76,502	)			(19,497	)
Contract assets			(316,669	)			(359,421	)
Contract liabilities			845,549				712,612
Accrued liabilities and other payables			66,103				86,196
Net cash (used in) generated from operating activities			(214,421	)			22,770
Cash flow from investing activities:
Purchases of plant and equipment			(15,150	)			(20,678	)
Proceed from disposal of plant and equipment			385				-
Net cash used in investing activities			(14,765	)			(20,678	)
Cash flow from financing activities:
Proceed from issuance of shares			-				357,062
Advance from (repayment to) a director			314,432				(184,712	)
Payment of lease liabilities			(12,252	)			-
Net cash generated from financing activities			302,180				172,350
Effect on exchange rate change on cash and cash equivalents			(3,937	)			142
Net change in cash and cash equivalents			69,057				174,584
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			174,584				-
CASH AND CASH EQUIVALENTS, END OF YEAR		$	243,641			$	174,584
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for tax		$	-			$	-
Cash paid for interest		$	-			$	-

 

See accompanying notes to combined and consolidated financial statements.

 

F-5

 

POWERTECH HOLDINGS COMPANY LIMITED

COMBINED AND CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

		Common stock								Additional				Accumulated other comprehensive								Total stockholders’
		No. of shares				Amount				paid-in capital				(loss) income				Accumulated losses				(deficit) equity
Balance as of January 1, 2018, restated			5,209,000			$	521			$	-			$	-			$	-			$	521
Issuance of shares			-				-				357,062				-				-				357,062
Foreign currency translation adjustment			-				-				-				142				-				142
Net loss for the year			-				-				-				-				(401,792	)			(401,792	)
Balance as of December 31, 2018			5,209,000			$	521			$	357,062			$	142			$	(401,792	)		$	(44,067	)
Balance as of January 1, 2019			5,209,000			$	521			$	357,062			$	142			$	(401,792	)		$	(44,067	)
Foreign currency translation adjustment			-				-				-				(3,902	)			-				(3,902	)
Net loss for the year			-				-				-				-				(598,941	)			(598,941	)
Balance as of December 31, 2019			5,209,000			$	521			$	357,062			$	(3,760	)		$	(1,000,733	)		$	(646,910	)

 

See accompanying notes to combined and consolidated financial statements.

  

F-6

  

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

 

Powertech Holdings Company Limited (the “Company” or “PHCL”) is incorporated as a BVI Business Company with limited liability on September 21, 2020 in the British Virgin Islands (the “BVI”). The Company through its subsidiaries, mainly provides the renewable energy products and solutions to the customers in Hong Kong.

 

Pursuant to its Memorandom of Association, the authorized capital is amounted to US$521 representing 5,209,000 ordinary shares with a par value of $0.0001 at its inception.

 

On April 24, 2020, the Company consummated the Share Exchange Transaction among SinoPower Holdings International Co. Limited (“SHIL”) and its shareholders. Both the Company and SHIL are controlled by the same management team. Upon completion of the Share Exchange Transaction, SHIL became a 100% owned subsidiary of the Company.

 

Because the Company is a shell company, SHIL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, SHIL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of SHIL, and the Company’s assets, liabilities and results of operations will be consolidated with SHIL beginning on the acquisition date. SHIL was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting acquirer (SHIL). After completion of the Share Exchange Transaction, the Company’s consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer. 

 

Description of subsidiaries

 

Name		Place of incorporation and kind of legal entity		Principal activities		Particulars of registered/ paid up share capital		Effective interest held
SinoPower Holdings International Co. Limited		Hong Kong		Sales and marketing		1,000 ordinary shares for HK$1,000			100	%
SinoPower Solar Energy Engineering Co. Limited		Hong Kong		Solar-related projects		10,000 ordinary shares for HK$10,000			100	%
SinoPower Holding (Hong Kong) Co. Limited		Hong Kong		Engineering design, installation and construction of solar power system and project development		1,000,000,000 ordinary shares for HK$10,000,001			100	%
SolarPower Investment Company Limited (formerly Byconcept Hong Kong Co. Limited)		Hong Kong		Dormant		10,000 ordinary shares for HK$10,000			100	%
SinoPower Solar Energy Co. Limited		Hong Kong		Dormant		10,000 ordinary shares for HK$10,000			100	%
SinoPower Solar Investment Co. Limited		Hong Kong		Dormant		10,000 ordinary shares for HK$10,000			100	%

 

The Company and its subsidiaries are hereinafter referred to as (the “Company”).

 

F-7

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

   

2. GOING CONCERN UNCERTAINTIES

 

The accompanying combined and consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company has suffered from continuing loss from its inception, with an accumulated deficit of $1,000,733 and working capital deficit of $739,483, at December 31, 2019. In addition, with respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international economies and global trades and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s business.

 

The continuation of the Company as a going concern through December 31, 2020 is dependent upon the continued financial support from its stockholders. Management believes the Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.

 

These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These combined and consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.

   

F-8

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying combined and consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying combined and consolidated financial statements and notes.

 

·	Basis of presentation

   

These accompanying combined and consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

·	Use of estimates and assumptions

   

In preparing these combined and consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates.

 

·	Basis of consolidation

   

The combined and consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

 

·	Cash and cash equivalents

   

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

·	Accounts receivable

   

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2019 and 2018, there was no allowance for doubtful accounts.

 

Included in accounts receivables are retention receivables of $40,169 and $0 as of December 31, 2019 and 2018. Retention receivables are interest-free and recoverable at the end of the retention period of one to two years.

 

F-9

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

·	Plant and equipment

   

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

 

		Expected useful lives
Office equipment		5 years
Furniture and fixtures		5 years
Motor vehicle		3.33 years

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

·	Revenue recognition

  

The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”) as of January 1, 2019 using the modified retrospective method. This method allows the Company to apply ASC 606 to new contracts entered into after January 1, 2019, and to its existing contracts for which revenue earned through December 31, 2018 has been recognized under the guidance in effect prior to the effective date of ASC 606. The revenue recognition processes the Company applied prior to adoption of ASC 606 align with the recognition and measurement guidance of the new standard, therefore adoption of ASC 606 did not require a cumulative adjustment to opening equity.

 

Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

 

	•	identify the contract with a customer;
	•	identify the performance obligations in the contract;
	•	determine the transaction price;
	•	allocate the transaction price to performance obligations in the contract; and
	•	recognize revenue as the performance obligation is satisfied.

 

The Company recognizes revenue when or as it satisfies a performance by transferring a good or service to the customer at a point in time, generally upon the completion of the projects under fixed price contracts. Under these fixed price contracts, the Company receives an agreed upon amount for providing products and services specified in the contract, a profit or loss is recognized depending on whether actual costs are more or less than the agreed upon amount.

 

Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed as of the reporting date on contracts with customers. The contract assets are transferred to receivables when the rights become unconditional. The Company has contract assets on contracts that are generally long-term and have revenues that are recognized upon the completion.

 

Contract liabilities primarily related to billings and payments received in advance of revenue recognized. As of December 31, 2019 and 2018, the Company received cash consideration from customers before the performance obligations were satisfied.

 

F-10

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

  

·	Cost of revenue

 

Cost of revenue consists primarily of raw materials, the fees paid to contractors and labor costs, which are directly attributable to the production of renewable energy products and solutions.

 

·	Income taxes

   

The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the combined and consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the combined and consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

·	Uncertain tax positions

   

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the years ended December 31, 2019 and 2018.

 

·	Foreign currencies translation

   

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the combined and consolidated statement of operations.

 

The reporting currency of the Company is United States Dollar ("US$") and the accompanying combined and consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

 

F-11

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

Translation of amounts from HKD into US$ has been made at the following exchange rates for the years ended December 31, 2019 and 2018:

 

		December 31, 2019				December 31, 2018
Year-end HKD:US$ exchange rate			0.12840				0.12769
Annual average HKD:US$ exchange rate			0.12764				0.12759

 

·	Comprehensive income

   

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying combined and consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

   

·

Leases

  

The Company adopted Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2019 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).

 

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

 

F-12

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.

 

Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.

 

The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.

 

·	Related parties

   

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

 

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The combined and consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

·	Commitments and contingencies

  

The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

F-13

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s combined and consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

·	Fair value of financial instruments

   

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

 

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

F-14

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts and retention receivables, deposits, prepayments and other receivables, amount due from a director, contract assets and liabilities, accrued liabilities and other payables, operating lease liabilities and amount due to a director, approximate their fair values because of the short maturity of these instruments.

 

·	Recent accounting pronouncements

   

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

 

Accounting Standards Adopted

 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 requires a lessee to recognize a lease liability for future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term on the balance sheet for most lease arrangements. The new standard also changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize right-of-use assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance in ASC 840.

 

ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) and early adoption is permitted. In August 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which provides a new transition option in which an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment in the period of adoption. Prior period comparative balances will not be adjusted. The Company used the new transition option and was also utilizing the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. We also used the short-term lease exception for leases with a term of 12 months or less. Additionally, the Company used the practical expedient that allowed each separate lease component of a contract and the associated non-lease components to be treated as a single lease component. The exercise of lease renewal options is at our discretion and the renewal to extend the lease terms are not included in the Company’s Right-Of-Use assets and lease liabilities as they are not reasonably certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will include the renewal period in its lease term. As of the January 1, 2019, effective date the Company identified one finance lease arrangement in which it is a lessee.

 

In calculating the present value of the lease payments, the Company applied an individual discount rate for each of its leases, and determined the appropriate discount rate based on the remaining lease terms at the date of adoption. As the lessee to several lease agreements, the Company did not have insight into the relevant information that would be required to arrive at the rate implicit in the lease. Therefore, the Company utilized its outstanding borrowings as a benchmark to determine the incremental borrowing rate for its leases. The benchmark rate was adjusted to arrive at an appropriate discount rate for each lease.

 

F-15

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which expands the scope of Compensation – Stock Compensation (“Topic 718”) to include share-based payment transactions for acquiring goods and services from nonemployees. This amendment applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The Company adopted ASU 2018-07 on January 1, 2019. The impact was immaterial to the financial statements.

 

In June 2018, the FASB issued ASU No. 2018-08, Not-For-Profit Entities – Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (“ASU 2018-08”). ASU 2018-08 clarifies how an entity determines whether a resource provider is participating in an exchange transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred. The guidance is effective for annual periods beginning after June 15, 2018, including interim periods within those annual periods, and has been adopted on a modified prospective basis. The modified prospective adoption is applied to agreements that are not completed as of the effective date, or entered into after the effective date. Under the modified prospective adoption approach, prior period results have not been restated and no cumulative-effect adjustment has been recorded. The Company does not expect this standard to have a material impact on its financial statements.

 

Accounting Standards Issued, Not Adopted

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements. The Company does not expect this standard to have a material impact on its financial statements.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.

 

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers. Certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606. This guidance is effective for interim and fiscal periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations or cash flows.

 

F-16

   

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

4. PLANT AND EQUIPMENT

 

Plant and equipment consisted of the following:

 

		As of December 31,
		2019				2018
Office equipment		$	15,638			$	7,201
Furniture and furniture			14,827				8,114
Motor vehicle			-				5,363
Foreign translation difference			88				-
			30,553				20,678
Less: accumulated depreciation			(9,138	)			(4,669	)
Less: foreign translation difference			(53	)			(3	)
		$	21,362			$	16,006

  

Depreciation expense for the years ended December 31, 2019 and 2018 were $6,073 and $4,672, respectively.

    

5. BALANCE WITH A DIRECTOR

  

As of December 31, 2019, the Company’s director and major shareholder, Mr. Ng made temporary advances to the Company for its working capital, which is unsecured, interest-free and has no fixed terms of repayment.

   

As of December 31, 2018, the Company advanced temporary advances to its director and major shareholder, Mr. Ng, which is unsecured, interest-free and repayable on demand. The balance was fully recoverable during the year ended December 31, 2019. 

   

F-17

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

   

6. LEASE

 

As of December 31, 2019, the Company entered into one workshop under operating lease with a lease term of 2 years, commencing from November 16, 2019.

 

Right of use assets and lease liability – right of use are as follows:

 

		As of December 31
		2019				2018
Right-of-use assets		$	130,794			$	-

 

The lease liability – right of use is as follows:

 

		As of December 31
		2019				2018
Current portion		$	70,375			$	-
Non-current portion			59,983				-
Total		$	130,358			$	-

 

The weighted average discount rate for the operating lease is 2.75%.

 

As of December 31, 2019, the operating lease payment of $70,375 will become matured in the next 12 months.

   

7. STOCKHOLDERS’ DEFICIT

 

Authorized shares

 

At inception, the Company’s authorized shares were 5,209,000 ordinary shares, with a par value of $0.0001.

 

Issued and outstanding shares

 

At inception, the Company had 5,209,000 ordinary shares issued and outstanding.

 

F-18

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

8. INCOME TAX

 

The Company mainly operates in Hong Kong that is subject to taxes in the governing jurisdictions in which it operates. The effective tax rate in the period presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:

 

BVI

 

Under the current BVI law, the Company is not subject to tax on income.

 

Hong Kong

 

The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the years ended December 31, 2019 and 2018 is as follows:

 

		Years ended December 31,
		2019				2018
Loss before income taxes		$	(598,941	)		$	(401,792	)
Statutory income tax rate			16.5	%			16.5	%
Income tax expense at statutory rate			(98,825	)			(66,295	)
Tax effect of non-deductible items			1,171				971
Tax effect of non-taxable items			(2,890	)			(2,691	)
Net operating loss			100,544				68,015
Income tax expense		$	-			$	-

 

The following table sets forth the significant components of the deferred tax assets and liabilities of the Company as of December 31, 2019 and 2018:

 

		As of December 31,
		2019				2018
Deferred tax assets:
Net operating loss carryforwards		$	100,544			$	-
Less: valuation allowance			(100,544	)			-
Deferred tax assets, net		$	-			$	-

 

As of December 31, 2019, the operation in Hong Kong incurred $598,941 of cumulative net operating losses which can be carried forward to offset future taxable income at no expiry. The Company has provided for a full valuation allowance against the deferred tax assets of $100,544 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

   

9. RELATED PARTY TRANSACTIONS 

 

From time to time, the director of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and have no fixed terms of repayment.

 

For the years ended December 31, 2019 and 2018, the Company paid the material cost totaling $1,205,571 and $294,162 to its related companies which were controlled by the director of the Company.

   

Also, for the years ended December 31, 2019 and 2018, the Company was granted with the right to use the patents to their products at no fee charge by its related companies, which were controlled by the director of the Company. The management determined that such cost was nominal and did not recognize the patent expense in its financial statements. 

  

Apart from the transactions and balances detailed elsewhere in these accompanying combined and consolidated financial statements, the Company has no other significant or material related party transactions during the years presented.

   

F-19

 

POWERTECH HOLDINGS COMPANY LIMITED

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

10. CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a) Major customers

 

For the year ended December 31, 2019, there is one single customer who accounted for 15.6% of the Company’s revenues.

  

For the year ended December 31, 2018, there is no single customer who accounted for 10% or more of the Company’s revenues.

  

(b) Major vendors

 

For the year ended December 31, 2019, there is one single vendor (a related company) who accounted for more than 10% of the Company’s purchases.

 

For the year ended December 31, 2018, there is no single vendor who accounted for more than 10% of the Company’s purchases.

 

(c) Economic and political risk

 

The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.

 

(d) Exchange rate risk

 

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.

   

11. COMMITMENTS AND CONTINGENCIES

 

As of December 31, 2019 and 2018, the Company has no material commitments or contingencies.

  

12. SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2019, up through the date the Company issued the audited financial statements. During the period, the Company had the following material subsequent events.

 

On November 18, 2020, the Company consummated the Share Exchange Transaction among SinoPower Holdings International Co. Limited (“SHIL”) and its shareholders. Both the Company and SHIL are controlled by the same management team and the controlling person. Upon completion of the Share Exchange Transaction, SHIL became a 100% owned subsidiary of the Company.

 

On November 25, 2020, the Company and its shareholders executed a Share Exchange Agreement (“the “Share Exchange Agreement”) with Folkup Development Inc., a limited company organized under the laws of the State of Nevada (“FLDI”). Pursuant to the Share Exchange Agreement, the Company agreed to sell its aggregate of 5,209,000 ordinary shares representing 100% of the issued and outstanding ordinary shares of the Company. As consideration, the Company’s shareholders were received 6,000,000 shares of FLDI’s common stock, at a value of $4.5 per share, for an aggregate value of $27 million (the “Shares”). The parties are entitled to terminate the Share Exchange Agreement if closing has not occurred on or prior to December 31, 2020. The consummation of the transactions contemplated in the Share Exchange Agreement is subject to normal and customary conditions precedent including, without limitation, satisfactory due diligence of the Company by FLDI.

     

F-20