The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes included on page F-1 of this Annual Report on Form 10-K.
This Annual Report on Form 10-K of J.E.M. Capital, Inc. contains forward-looking
statements, principally in this Section and "Business." Generally, you can
identify these statements because they use words like "anticipates," "believes,"
"expects," "future," "intends," "plans," and similar terms. These statements
reflect only our current expectations. Although we do not make forward-looking
statements unless we believe we have a reasonable basis for doing so, we cannot
guarantee their accuracy and actual results may differ materially from those we
anticipated due to a number of uncertainties, many of which are unforeseen,
including, among others, the risks we face as described in this filing. You
should not place undue reliance on these forward-looking statements which apply
only as of the date of this annual report. To the extent that such statements
are not recitations of historical fact, such statements constitute
forward-looking statements that, by definition, involve risks and uncertainties.
In any forward-looking statement where we express an expectation or belief as to
future results or events, such expectation or belief is expressed in good faith
and believed to have a reasonable basis, but there can be no assurance that the
statement of expectation of belief will be accomplished.
We believe it is important to communicate our expectations to our investors.
There may be events in the future, however, that we are unable to predict
accurately or over which we have no control. Any risk factors listed in this
filing, as well as any cautionary language in this annual report, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Factors that could cause actual results or events to differ
materially from those anticipated, include, but are not limited to, changes in
investment and business strategies; general economic, financial and business
conditions; changes in and compliance with governmental regulations; changes in
various tax laws; and the availability of key management and other personnel.
Overview
We were incorporated on September 14, 2011 in Delaware as "Eco Planet Corp." On
October 21, 2013, we effected a 1-for-200 reverse stock split of our common
stock, $0.0001 par value per share (the "Common Stock"), and changed our name to
"Zosano, Inc." On October 31, 2013, we entered into a Stock Purchase Agreement
with Zosano Pharma Corporation (formerly known as ZP Holdings, Inc.) pursuant to
which we issued and sold 10,016,973 shares of Common Stock (the "Shares") to
Zosano Pharma Corporation. As a result of our issuance and sale of the Shares to
Zosano Pharma Corporation, a change in control of the Company occurred and
Zosano Pharma Corporation became the owner of 99.9% of our outstanding Common
Stock.
On November 14, 2016, Zosano Pharma Corporation entered into Stock Purchase
Agreements with eighteen (18) foreign investors (the "New Shareholders"),
pursuant to which Zosano Pharma Corporation sold an aggregate of 10,016,973
shares of common stock of Zosano, Inc. (the "Company") or approximately 99.9% of
the issued and outstanding common stock of the Company, to the New Shareholders.
As a result of the transaction, the New Shareholders acquired approximately
99.9% of the total votes entitled to be cast at any meeting of shareholders,
giving them voting control of the Company. The New Shareholders obtained the
funds for the purchase of the Company's common stock in the transaction from
each of their available cash on hand.
On November 21, 2016, we obtained written consent by the holder of the majority
of the voting power of the Company's capital stock approving amendments to the
Company's Articles of Incorporation to change the Company's name from Zosano,
Inc. to J.E.M. Capital, Inc. The Company has filed Articles of Amendment with
the Secretary of State of Delaware, which will become effective upon compliance
with notification requirements of the Financial Industry Regulatory Authority.
On January 5, 2017, we entered into a Share Exchange Agreement with Essential
Element Limited, a British Virgin Islands company ("ESEL"), and Leung Chi Wah
Earnest ("Mr. Leung"), the principal shareholder of ESEL, pursuant to which the
Company issued an aggregate of 2,005,400 shares of common stock, or
approximately 17% of the issued and outstanding common stock of the Company, to
Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL.
ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a
company organized under the laws of Hong Kong ("JEM Capital"). ESEL and JEM
Capital currently have no operations, but include the corporate structure that
the Company believes necessary for the acquisition of assets in Hong Kong and
China. ESEL has incurred material expenses setting up such structure.
We are a shell company as defined in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"). As a shell company, we have no
operations and assets. Our current business plan is to identify a privately held
operating company, which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged, desiring to
become a publicly held company with access to U.S. capital markets by merging
with us through a reverse merger or acquisition. We can give no assurances that
we will be successful in finding or acquiring a desirable business opportunity,
given the limited resources that are expected to be available to us for
implementation of our business plan. Furthermore, we can give no assurances that
any business combination, if one occurs, will be on terms that are favorable to
our current stockholders or us.
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Year Ended December 31, 2019 Compared To Year Ended Years Ended
December 31, 2018 December 31,
2019 2018
Operating expenses:
General and administrative expenses 34,296 87,413
Total operating expenses 34,296 87,413
Operating loss (34,296) (87,413)
Net loss (34,296) (87,413)
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Revenue
We have never generated any revenue. We do not expect to generate any revenues
before we merge with a privately-held operating company desiring to become a
publicly-held company. After a successful merger transaction, we do not know
when, or if, we will generate revenue as that will be in the control of the
private company that merges with us.
Operating expenses
Our operating expenses primarily consisted of general and administrative
expenses, such as salary and related expenses, audit and review fees, tax
returns preparation fees, transfer agent services, Edgar filing costs, franchise
and business taxes, other professional services and general office expenses.
Operating expenses for the year ended December 31, 2019 and 2018 were $34,296
and $87,413, respectively. The decrease in operating expenses was due to the
decrease in salary and related expenses paid for officers and other office
expenses of the Company for the year ended December 31, 2019. We anticipate our
operating expenses will be approximately $40,000 to $100,000 per year until we
successfully merge with a privately-held operating company.
Net loss
Net loss for the fiscal year ended December 31, 2019 was $34,296, or $0.003 per
share, as compared to $87,413, or $0.007 per share for the year ended December
31, 2018. The decrease in net loss was due to the decrease in salary and related
expenses paid for the year ended December 31, 2019. We will continue to operate
at a net loss until we merge with a privately-held operating company desiring to
become a publicly-held company. After a successful merger transaction, we do not
know when, or if, we will operate at a net profit as that will be in the control
of the private company that merges with us. We anticipate our net loss will
primarily consist of our operating expenses until we successfully merge with a
private company.
Liquidity and Capital Resources
During the years ended December 31, 2019 and 2018, because of our operating
losses, we did not generate positive operating cash flows. Our cash on hand as
of December 31, 2019 and 2018 was $Nil and $164 respectively and our monthly
cash flow burn rate is minimal due to our lack of operations. Our current cash
needs are being satisfied by stockholders. We do not believe we will be able to
satisfy our cash needs internally until we consummate a merger transaction with
a private company, and even then there is no assurance we will be able to do so.
Our cash, current assets, total assets, current liabilities, and total
liabilities as of December 31, 2019 compared to December 31, 2018 are as
follows:
December 31, December 31,
2019 2018 Change
Cash - 164 (164)
Prepaid expenses 12,000 - 12,000
Total current assets 12,000 164 11,836
Equipment, net - 496 (496)
Total assets 12,000 660 11,340
Total current liabilities 132,456 110,820 21,636
Total liabilities 132,456 110,820 21,636
Assets and Liabilities
As of December 31, 2019, we had prepaid expenses of $12,000 in respect of the
unvested awards of stock based compensation. We had liabilities totalling
$132,456 and $110,820 as of December 31, 2019 and December 31, 2018,
respectively, which consisted of accrued expenses related to salary, office
expenses, audit fees, transfer agent services, legal fees and advances from
shareholders.
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Stockholders' Deficit
Stockholders' deficit consisted primarily of shares issued to founders in the
amount of $1,403, capital raised to fund our operations of $55,589, and
additional capital provided to settle obligations for $245,679, offset by the
accumulated deficit of $446,927 as of December 31, 2019.
Sources and Uses of Cash
As of December 31, 2019 and 2018, we had cash of $Nil and $164, respectively, no
significant change in cash position.
Cash Flows from Operating Activities . For the fiscal year ended December 31,
2019, our net cash used in operations was $25,650 compared to net cash used in
operations of $47,947 for the fiscal year ended December 31, 2018. This was
mainly attributable to decrease in expenses for the year ended December 31,
2019.
Cash Flows from Financing Activities . Net cash flows provided by financing
activities in the fiscal year ended December 31, 2019 was $25,486, compared to
net cash provided by financing activities of $47,945 in the same period in 2018.
Net cash provided by financing activities in 2019 and 2018 were primarily due to
advances from shareholders.
Going Concern
Our independent auditors have added an explanatory paragraph to their audit
opinion issued in connection with our consolidated financial statements for our
fiscal year ended December 31, 2019 and 2018 regarding our ability to continue
as a going concern. Our ability to continue as a going concern is dependent upon
our ability to locate a private company to merge with and our ability to
successfully borrow money from our shareholders.
The consolidated financial statements do not include any adjustments that might
be necessary if we are unable to continue as a going concern.
Contractual Obligations
We have no contractual obligations as of December 31, 2019.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
Use of Estimates
The Company's consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (U.S. GAAP) which requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the consolidated financial statements and
reported amounts of revenue and expense during the reporting period. Estimates
are used when accounting for certain items such as accounting for income tax
valuation allowances. Estimates are based on historical experience, where
applicable, and assumptions that management believes are reasonable under the
circumstances. Due to the inherent uncertainty involved with estimates, actual
results may differ.
Principles of Consolidation
The consolidated financial statements include the financial statements of J.E.M.
Capital, Inc. and its subsidiaries for which it is the primary beneficiary. Upon
making this determination, the Company is deemed to be the primary beneficiary
of the entity, which is then required to be consolidated for financial reporting
purposes. All significant intercompany transactions and balances have been
eliminated upon consolidation.
Business acquisitions
The Company has accounted for all of its acquisitions using the acquisition
method. The operating results of each acquisition have been included in the
consolidated financial statements since the respective dates of acquisition.
There were no business acquisitions for the years ended December 31, 2019 and
2018.
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Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the consolidated
financial statements or tax returns. Deferred tax liabilities and assets are
determined based on the difference between the financial statement basis and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. The Company estimates the
degree to which tax assets and credit carryforwards will result in a benefit
based on expected profitability by tax jurisdiction. A valuation allowance for
such tax assets and loss carryforwards is provided when it is determined to be
more likely than not that the benefit of such deferred tax asset will not be
realized in future periods. Tax benefits of operating loss carryforwards are
evaluated on an ongoing basis, including a review of historical and projected
future operating results, the eligible carryforward period, and other
circumstances. If it becomes more likely than not that a tax asset will be used,
the related valuation allowance on such assets would be reduced.
The Company recognizes tax benefits from uncertain tax positions 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. Once this
threshold has been met, the Company's measurement of its expected tax benefits
is recognized in its consolidated financial statements. The Company accrues
interest on unrecognized tax benefits as a component of income tax expense.
Penalties, if incurred, would be recognized as a component of income tax
expense.
The Company' income tax returns are subject to examination for three years from
the date filed or the due date, whichever is later. The Company did not identify
any material uncertain tax positions.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial
Accounting Standards Board ("FASB") or other standard setting bodies and adopted
by the Company as of the specified effective date. Unless otherwise discussed,
the recently issued accounting standards will not have a material impact on our
financial position or results of operations upon adoption.
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