Wenyuan Group Corp. (WYGC) — 10-K

Filed 2025-04-15 · Period ending 2024-12-31 · 44,319 words · SEC EDGAR
# Wenyuan Group Corp. (WYGC) — 10-K

**Filed:** 2025-04-15
**Period ending:** 2024-12-31
**Accession:** 0001641172-25-004790
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/723533/000164117225004790/)
**Origin leaf:** aeef8869a8407fc2ae28f339e969c22c9e5da3f46985ff1b57483e074c99c2d7
**Words:** 44,319



---

****
****
**UNITED
STATES**
**SECURITIES
AND EXCHANGE COMMISSION**
**Washington,
D.C. 20549**
**FORM
10-K**
**ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
****
**For
the fiscal year ended: December 31, 2024**
**TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
****
**For
the transition period from _____________ to _____________**
****
**Commission
file number: 000-11596**
**WENYUAN
GROUP CORP.**
(Exact
name of small business issuer as specified in its charter)
| 
Nevada | 
| 
95-3506403 | |
| 
(State
or other jurisdiction of incorporation) | 
| 
(IRS
Employer Identification No.) | |
**RM
2404, Yinzun Building, Zunbao Plaza**
**Shangcheng
Dist.,****Hangzhou****,
Zhejiang Province, 310002, China******
(Address
of principal executive offices) (Zip Code)
**+86
0571 - 85128985**
(Registrants
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last report)
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered under Section 12(g) of the Exchange Act: Common Stock, Par Value $0.0001
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesNo
Indicate
by check mark whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. YesNo
Indicate
by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past
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. YesNo
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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). YesNo
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a small. See definition
of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one):
| 
| 
Large
accelerated filer | 
Accelerated
filer | |
| 
| 
Non-accelerated
filer | 
Smaller
reporting company | |
| 
| 
| 
Emerging
growth company | |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
include in the filing reflect the correction of an error to previously issued financial statements.
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer as of June 30, 2024 the last business
day of the Companys most recently completed second fiscal quarter was $4,596,119 based on the closing price of $0.26 per share,
as reported on the over-the-counter bulletin board.
As
of April 15, 2025, there were 80,884,279 shares of Common Stock, $0.0001 par value, outstanding.
| | |
**WENYUAN
GROUP CORP.**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP.)**
**FORM
10-K**
****
**TABLE
OF CONTENTS**
| 
| 
| 
| 
Page | |
| 
NOTE ABOUT FORWARD-LOOKING STATEMENTS | 
| 
ii | |
| 
PART I | 
| 
| 
1 | |
| 
Item
1. | 
Description of Business | 
| 
1 | |
| 
Item
1A. | 
Risk Factors | 
| 
4 | |
| 
Item
1B. | 
Unresolved Staff Comments | 
| 
20 | |
| 
Item
1C. | 
Cybersecurity | 
| 
20 | |
| 
Item
2. | 
Properties | 
| 
20 | |
| 
Item
3. | 
Legal Proceedings | 
| 
20 | |
| 
Item
4. | 
Mine Safety Disclosures | 
| 
20 | |
| 
| 
| 
| 
| |
| 
PART II | 
| 
| 
21 | |
| 
Item
5. | 
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 
| 
21 | |
| 
Item
6. | 
Selected Financial Data | 
| 
24 | |
| 
Item
7. | 
Managements Discussion and Analysis Of Financial Condition and Results of Operation | 
| 
25 | |
| 
Item
7A. | 
Quantitative and Qualitative Disclosures about Market Risk | 
| 
27 | |
| 
Item
8. | 
Consolidated Financial Statements and Supplementary Data | 
| 
27 | |
| 
Item
9. | 
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 
| 
28 | |
| 
Item
9A. | 
Controls and Procedures | 
| 
28 | |
| 
Item
9B. | 
Other Information | 
| 
29 | |
| 
Item
9C. | 
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 
| 
29 | |
| 
| 
| 
| 
| |
| 
PART III | 
| 
| 
29 | |
| 
Item
10. | 
Directors, Executive Officers and Corporate Governance | 
| 
29 | |
| 
Item
11. | 
Executive Compensation | 
| 
35 | |
| 
Item
12. | 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 
| 
35 | |
| 
Item
13. | 
Certain Relationships and Related Transactions | 
| 
37 | |
| 
Item
14. | 
Principal Accountant Fees and Services | 
| 
37 | |
| 
| 
| 
| 
| |
| 
PART IV | 
| 
| 
38 | |
| 
Item
15. | 
Exhibits; Financial Statement Schedules | 
| 
38 | |
| 
SIGNATURES | 
| 
39 | |
| i | |
In
this Annual Report on Form 10-K (this Annual Report), unless otherwise stated or as the context otherwise requires, references
to Wenyuan Group Corp. Wenyuan, the Company, we, us, our
and similar references refer to Wenyuan Group Corp. (formerly known as Longwen Group Corp.), a Nevada corporation. Our logo and other
trademarks or service marks of the Company appearing in this Annual Report are the property of Wenyuan Group Corp. This Annual Report
also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names
appearing in this Annual Report are the property of their respective holders.
**NOTE
ABOUT FORWARD-LOOKING STATEMENTS**
The
information contained in this Annual Report includes some statements that are not purely historical and that are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and as such, may involve risks and uncertainties.
These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived
opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts
or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You
can generally identify forward-looking statements as statements containing the words anticipates, believes,
continue, could, estimates, expects, intends, may,
might, plans, possible, potential, predicts, projects,
seeks, should, will, would and similar expressions, or the negatives of such
terms, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking
statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the
forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based,
in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis
of managements views and assumptions as of the time the statements are made, but there can be no assurance that managements
expectations, beliefs or projections will result or be achieved or accomplished.
In
addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause
actual results to differ materially from those discussed in the forward-looking statements: technological advances, impact of competition,
dependence on key personnel and the need to attract new management, effectiveness of cost and marketing efforts, acceptances of products,
ability to expand markets and the availability of capital or other funding on terms satisfactory to us. We disclaim any obligation to
update forward-looking statements to reflect events or circumstances after the date hereof.
For
a discussion of the risks, uncertainties, and assumptions that could affect our future events, developments or results, you should carefully
review the *Risk Factors* set forth under Item 1. Description of Business below. In light of these risks,
uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn
to be materially different from those we discuss or imply.
| ii | |
**PART
I**
**Item
1. Description of Business.**
**Organization
and Corporate History**
****
Wenyuan
Group Corp. (formerly Longwen Group Corp.) (the Company), was originally incorporated as Expertelligence, Inc in the State
of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of
various name changes, the Company amended its Articles of Incorporation (Charter Amendment) to affect its name change of
Longwen Group Corp. with trading symbol of LWLW. On April 23, 2024, pursuant to the Companys majority shareholder
consent and board approval dated on April 5, 2024, the Company amended its Article of Incorporation with Nevada State and changed its
name to Wenyuan Group Corp. On January 21, 2025, pursuant to a review by the Financial Industry Regulatory Authority (FINRA),
the Companys name was officially changed to Wenyuan Grop Corp. with the OTC Markets, and the Companys stock symbol was
changed to WYGC on the same date.
The
Company underwent a change of control on January 21, 2016, at which time Harold Minsky resigned in all officer positions. G. Reed Petersen
and White Rim Cattle Company LLC each purchased 25,000,000 shares of common stock of the Company from Harold Minsky. Mr. Petersen is
the Member Manager of White Rim Cattle Company, LLC and thus can be considered a control person of all 50,000,000 shares of stock of
the Company. Pursuant to a Board of Directors meeting, Mr. Petersen was elected to and accepted all the officer positions previously
held by Harold Minsky.
On
or about April 5, 2016, the Company affected a 1 for 750 share reverse split of its issued and outstanding common stock. On such date,
the Companys common stock was reduced from 95,164,140 to 127,061 shares outstanding.
Effective
November 29, 2016, G. Reed Peterson sold 66,667 shares of common stock of the Company to Longwen Group Corporation (Cayman Island), a
Cayman Island company (Longwen Cayman). All of the shares held by Longwen Cayman are restricted securities. As a result
of the transactions, Mr. Petersen no longer owns any of the Companys capital stock or securities and he and his affiliates waived
all loans and other amounts due to the Company. In addition, on such date, Mr. Petersen resigned in all officer capacities from the Company,
and Mr. Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the Company and President and Chief Executive Officer
and Chief Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of Board.
From
August 2018 to June 2021, the Company was seeking potential business mergers and acquisitions in order to increase its value of the common
stock. However, due to the impact of the Covid-19 pandemic, the progress was delayed and the target was not successfully achieved.
On
June 9, 2021, Anthony Lombardo (Lombardo) filed an Application for Appointment of Custodian (Application)
with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Companys non-response
and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary
custodian of the Company. Subsequently after Lombardos custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary
of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (Joseph) as CEO, CFO and Secretary and
resigned from all positions in the Company, On October 25, 2021, Mr. Xizhen Ye (Ye), who was the officer and director of
the Company prior to Lombardos custodianship, and Longwen Group Corporation, a Cayman Island corporation, filed a Motion to Dissolve
Custodianship (Motion) with the Eighth Judicial District Court of Nevada State. On January 12, 2022, in accordance with
a Settlement Agreement regarding Lombardos custodianship, Mr. Ye was reinstated his positions as the officer and director of the
Company, along with the reinstatement of the other Companys director, Lizhong Lu, who was also in place prior to Lombardos
custodianship. On February 9, 2022, pursuant to the Settlement Agreement, Joseph transferred 65,000,000 common stocks of the Company
owned by him to Mr. Ye. On February 17, 2022, the Eighth Judicial District Court formally dismissed Lombardos custodianship for
the Company.
On
February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou
Wenyuan Enterprise Management Co., Ltd. (Hangzhou Wenyuan) (FKA: Hangzhou Longwen Enterprise Management Co., Ltd or Hangzhou
Longwen), a wholly foreign-owned enterprise (WOFE) in Hangzhou, the Peoples Republic of China (the PRC),
for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Wenyuan became the Companys wholly-owned subsidiary
in the PRC. Hangzhou Wenyuan was originally registered on January 4, 2012, and has minimum operations since its inception. The Company
recognized $993 goodwill upon consummated the acquisition. On February 27, 2024, Hangzhou Longwen Enterprise Management Co., Ltd changed
its name to Hangzhou Wenyuan Enterprise Management Co., Ltd. through Hangzhou Market Supervision and Administration Bureau in China.
| 1 | |
| | |
On
October 11, 2022, the Company and its subsidiary, Hangzhou Wenyuan entered into an Acquisition Agreement with a third-party individual
to acquire 100% ownership of Hangzhou Wenyuan Art and Culture Co., Ltd. (HWAC) (fka. Hangzhou Yusu Trading Co., Ltd. or
Hangzhou Yushu), a limited liability company in Hangzhou, the Peoples Republic of China (the PRC),
for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated HWAC became Hangzhou Wenyuans wholly owned subsidiary
in the PRC. HWAC was originally registered on April 20, 2020 and has had minimum operations since its inception. The Company recognize
goodwill of $139 upon consummated the acquisition. On April 10, 2024, Hangzhou Yusu was renamed to Hangzhou Wenyuan Art and Culture Co.,
Ltd (HWAC).
On
March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Hangzhou Wenyuan Internet Technology Co., Ltd. (HWIT) (fka.
Huzhou Wohong Fishery Co., Ltd. or HWF), to operate the aquacultural breeding, wholesale and retail of aquaculture products
and etc. Due to the change in the economic situation and lower-than-expected sales of aquacultural products, our management decided to
change the HWFs operations and on March 27, 2024, HWF entered into an agreement with a counterparty to sell certain assets and
liabilities of HWF. HWF was identified as discontinued operations with aquacultural products sales. Such assets and liabilities are classified
as assets and liabilities held for sale, and the sale was closed on March 27, 2024.
The
following diagram illustrates our corporate structure as of April 15, 2025.
*
| 
| 
| 
Wenyuan
Group Corp. (fka. Longwen Group Corp.), a Nevada holding company, was originally incorporated as Expertelligence, Inc in the State
of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. | |
| 
| 
| 
| |
| 
| 
| 
Hangzhou
Wenyuan Enterprise Management Co., Ltd. (Hangzhou Wenyuan or the WOFE) (fka. Hangzhou Longwen Enterprise
Management Co., Ltd or Hangzhou Longwen), a wholly foreign-owned enterprise established in the PRC on January 4, 2012,
and now is 100% directly owned by Wenyuan Group Corp. | |
| 
| 
| 
| |
| 
| 
| 
On
October 11, 2022, the Company and its subsidiary, Hangzhou Wenyuan entered into an Acquisition Agreement with a third-party individual
to acquire 100% ownership of Hangzhou Wenyuan Art and Culture Co., Ltd. (HWAC) (fka. Hangzhou Yusu Trading Co., Ltd.
or Hangzhou Yushu), a limited liability company in Hangzhou, the Peoples Republic of China (the PRC).
Upon consummated, HWAC became Hangzhou Wenyuans wholly owned subsidiary in the PRC. HWAC was originally registered on April
20, 2020 and has minimum operations since its inception until the acquisition. | |
| 
| 
| 
| |
| 
| 
| 
On
March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Hangzhou Wenyuan Internet Technology Co., Ltd. (HWIT)
(fka. Huzhou Wohong Fishery Co., Ltd. or HWF), to operate the aquacultural breeding, wholesale and retail of aquaculture
products and etc. Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management
intended to change its operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to
sell certain assets and liabilities of HWF. | |
****
| 2 | |
| | |
**General
Business Plan**
The
Companys current primary objective is to engage in cultural and health product sales, as well as to provide project
development and management in culture fields, including antique project promotion and development, traditional magazine project
cooperation and development, the marketing and development of audio and visual products and etc. Since the fourth quarter of 2022,
the Company also entered into the E-commerce market and the aquaculture product sales industry but the aquaculture sales segment of
the Company was subsequently discontinued by the decision of the management on March 27, 2024, due to the change of the economic
situation and the sales of aquacultural products is not as expected. From the first quarter of year 2024, the Company began to sell
cultural and health products through its subsidiary Hangzhou Wenyuan. Also in the second half of 2024, HWAC developed a new mobile
application named ,
designed to promote and sell cultural products and services. The application is currently in its final stages of development and is
expected to officially launch in the first half of 2025.
| 
| 
1. | 
In
December 2022, the Company subsidiary, HWAC, worked with a third-party platform developer, formally launched our online store,
Huanyumeiyuan Mall (the HYMY), through Tencents Wechat platform. From the first quarter of year 2024, the Company
began to sell cultural and health products through HWAC. During the years ended December 31, 2024 and 2023, we have total sales of
USD $67,982 and $6,082, respectively. Our online store sales has become an important section of the Companys total revenues
in the year of 2024. | |
| 
| 
| 
| |
| 
| 
2. | 
On
March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Hangzhou Wenyuan Internet Technology Co., Ltd. (HWIT)
(fka. Huzhou Wohong Fishery Co., Ltd. or HWF), to operate the aquacultural breeding, wholesale and retail of aquaculture
products and etc. Due to the change of the economic situation and the sales of aquacultural products is not as expected, the management
intended to change its operations and subsequently on March 27, 2024, the Company entered into an agreement with a counterparty to
sell certain assets and liabilities of HWF. HWF has been identified as discontinued operations with aquacultural products. | |
****
**Sales
and Marketing**
During
the year 2024, our main revenues are mainly derived from cultural and health products sales through HWAC. Our President, Mr. Ye is an
excellent industry professional in the cultural and health product sales and project management and development field for more than 20
years. We believe he has the wealth of experience and contacts to help the Company to expand our business.
**Competition**
The
cultural and health product market is highlight competitive and many large companies of same type or chain stores may provide more products
or after-sales services than we do currently. In order to successfully compete in our industry, we will need to:
| 
| 
| 
Retain
more experienced employees of the cultural and health product market; | |
| 
| 
| 
| |
| 
| 
| 
Raise
funds to support our business plan; | |
| 
| 
| 
| |
| 
| 
| 
Set
up an effective platform and sales channel to promote our business strategy; | |
However,
there can be no assurance that even if we do these things, we will be able to compete effectively with the other companies in our industry.
We believe that we have the required management expertise in the cultural and health product industry with good marketing strategy and
compatible service package.
**Government
Regulations**
****
****Our wholly owned subsidiary, Hangzhou Wenyuan, HWAC and HWF, are incorporated and operating in mainland China. Hangzhou
Wenyuan, HWAC and HWF have received all permission required to obtain from Chinese authorities to operate its current business in China,
including Business License and Bank Account Open Permit.
****
**Intellectual
Property**
We
own no intellectual property as of December 31, 2024.
**Employees**
As
of April 2, 2025, we have seven employees in China. Meanwhile, we have also engaged accounting, legal, consultant and other part-time
and occasional services.
**Reports
to Security Holders**
The
Companys documents filed with the Securities and Exchange Commission may be inspected at the Commissions principal office
in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the
Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information
on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov
that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the
Companys filings may be located under the CIK number 00011596.
| 3 | |
| | |
**Item
1A. Risk Factors.**
An
investment in our common stock is highly speculative and should only be made by persons who can afford to lose their entire investment
in us. You should carefully consider the following risk factors and other information in this Form 10-K before deciding to become a holder
of our common stock. If any of the following risks actually occur, our business and financial results could be negatively affected to
a significant extent.
**Risks
Related to Doing Business in the Peoples Republic of China (PRC)**
**Because
all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. The Chinese
government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations
at any time, which could result in a material change in our operations and/or the value of our common stock.**
****
As
a business operating in China, we are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly. The PRC
government has the power to exercise significant oversight and discretion over the conduct of our business, and the regulations to which
we are subject may change rapidly and with little notice to us or our shareholders. As a result, the application, interpretation, and
enforcement of new and existing laws and regulations in the PRC are often uncertain. In addition, these laws and regulations may be interpreted
and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices. New laws,
regulations, and other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries
or investigations or any other government actions may:
| 
| 
| 
Delay
or impede our development; | |
| 
| 
| 
| |
| 
| 
| 
Result
in negative publicity or increase our operating costs; | |
| 
| 
| 
| |
| 
| 
| 
Require
significant management time and attention; and | |
| 
| 
| 
| |
| 
| 
| 
Subject
us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our
current or historical operations, or demands or orders that we modify or even cease our business practices. | |
The
promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise
unfavorably impact the ability or manner in which we conduct our business and could require us to change certain aspects of our business
to ensure compliance, which could reduce revenues, increase costs and require us to obtain more licenses, permits, approvals or certificates,
or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business,
financial condition and results of operations could be adversely affected as well as materially decrease the value of our common stock.
Furthermore,
if the PRC government determines that our corporate structure does not comply with PRC regulations, or if these regulations change or
are interpreted different in the future, our securities may decline in value or become worthless if the determinations, changes or interpretations
result in our inability to assert control over the assets of our PRC subsidiaries that accordingly conduct all or substantially all of
our operations.
****
**PRC
regulations relating to investments in foreign companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries
to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries ability
to increase their registered capital or distribute profits.**
As
an U.S. holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries or may make additional capital contributions
to our PRC subsidiaries, subject to satisfaction of applicable governmental registration and approval requirements.
Any
loans we extend to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, cannot exceed the statutory
limit and must be registered with the local counterpart of the State Administration of Foreign Exchange (SAFE).
In
July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents Offshore
Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaces the previous
SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC individuals and PRC corporate entities, to register with SAFE
or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our
shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may make in the future.
| 4 | |
| | |
Under
SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments
in offshore special purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition,
any PRC resident who is a direct or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE
with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident
shareholders to update their registration with the local branch of SAFE to reflect any material change. If any PRC resident shareholder
of such SPV fails to make the required registration or to update the registration, the subsidiary of such SPV in China may be prohibited
from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also
be prohibited from making additional capital contributions into its subsidiary in China. In February 2015, SAFE promulgated a Notice
on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13. Under SAFE Notice
13, applications for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those
required under SAFE Circular 37, must be filed with qualified banks instead of SAFE. Qualified banks should examine the applications
and accept registrations under the supervision of SAFE. We have used our best efforts to notify PRC residents or entities who directly
or indirectly hold shares in our U.S. holding company and who are known to us as being PRC residents to complete the foreign exchange
registrations. However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest
in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. We cannot assure you that all
other shareholders or beneficial owners of ours who are PRC residents or entities have complied with, and will in the future make, obtain
or update any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners
to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us
to fines or legal sanctions, restrict our overseas or cross-border investment activities, and limit our PRC subsidiarys ability
to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.
Furthermore,
as these foreign exchange and outbound investment related regulations are relatively new and their interpretation and implementation
has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border investments
and transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject
to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and
foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. We cannot assure
you that we have complied or will be able to comply with all applicable foreign exchange and outbound investment related regulations.
In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case
may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange
regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
In
light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding
companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government
approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our
PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive
from our future offering and to fund our PRC may be negatively affected, which could materially and adversely affect our liquidity and
our ability to fund and expand our business.
**PRC
regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion
may impact us to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect
our liquidity and our ability to fund and expand our business.**
Any
funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval
by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises,
or FIEs, in China, capital contributions to our PRC subsidiary are subject to the approval of or filing with the Ministry of Commerce,
or MOFCOM or its local branches and registration with a local bank authorized by the State Administration of Foreign Exchange, or SAFE.
In addition, any medium or long-term loan to be provided by us to our PRC operating subsidiaries, must be registered with certain authorities.
If we fail to complete such registrations, our ability to use the proceeds of our future offering and to capitalize our PRC operations
may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
| 5 | |
| | |
On
March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement
of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015. SAFE Circular 19 launched a nationwide reform
of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital
at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure
beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. The SAFE issued the Circular
on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective
in June 2016. Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency
to Renminbi on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under
capital account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies
to all enterprises registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated
capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations,
while such converted Renminbi shall not be provided as loans to its non-affiliated entities. As this circular is relatively new, there
remains uncertainty as to its interpretation and application and any other future foreign exchange related rules. Violations of these
Circulars could result in severe monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability
to use Renminbi converted from loans or capital contributions of the Company to fund our PRC operating subsidiary, to invest in or acquire
any other PRC companies through our PRC Subsidiary, which may adversely affect our business, financial condition and results of operations.
**Changes
in Chinas economic, political or social conditions or government policies could have a material adverse effect on our business
and operations.**
Substantially
all of our assets and operations are located in the PRC. Accordingly, our business, financial condition, results of operations and prospects
may be influenced to a significant degree by political, economic and social conditions in the PRC generally. The Chinese economy differs
from the economies of most developed countries in many respects, including the level of government involvement, development, growth rate,
control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization
of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by the government. In addition,
the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese
government also exercises significant control over the PRCs economic growth through allocating resources, controlling payment
of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or
companies.
While
the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various
sectors of the economy. Any adverse changes in economic conditions in the PRC, in the policies of the Chinese government or in the laws
and regulations in the PRC could have a material adverse effect on the overall economic growth of the PRC. Such developments could adversely
affect our business and operating results, lead to a reduction in demand for our consulting services and adversely affect our competitive
position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources.
Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition
and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In
addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace
of economic growth. These measures may cause decreased economic activity in the PRC, which may adversely affect our business and operating
results.
**Non-compliance
with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.**
We
have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various
statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance
and childbearing insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law,
or the Labor Contract Law, that became effective in January 2008 and its implementing rules that became effective in September 2008 and
was amended in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration,
determining the term of employees probation and unilaterally terminating labor contracts. In the event that we decide to terminate
some of our employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may
limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results
of operations. We believe our current practice complies with the Labor Contract Law and its amendments. However, the relevant governmental
authorities may take a different view and impose fines on us.
| 6 | |
| | |
As
the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment
practice does not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government
investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation
to our employees and our business, financial condition and results of operations could be materially and adversely affected.
**PRC
laws and regulations governing our current business operations are sometimes vague and uncertain. Uncertainties with respect to the PRC
legal system, including those regarding the enforcement of laws, and sudden or unexpected changes, with little advance notice, in laws
and regulations in China could adversely affect us and limit the legal protections available to you and us.**
There
are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to,
the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances.
The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement
could be unpredictable, with little advance notice. The effectiveness and interpretation of newly enacted laws or regulations, including
amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which
are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations
that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation
of existing or new PRC laws or regulations may have on our business.
Our
subsidiaries, Hangzhou Wenyuan, HWAC and HWF are formed under and governed by the laws of the PRC. The PRC legal system is a civil law
system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference,
but have limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly
evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations
and rules involves uncertainties.
In
1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, such
as foreign investment, corporate organization and governance, commerce, taxation and trade. The overall effect of legislation over the
past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, since
the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involves uncertainties and sudden changes, sometimes with little advance notice. As
a significant part of our business is conducted in China, our operations are principally governed by PRC laws and regulations, which
may limit legal protections available to us. Uncertainties due to evolving laws and regulations could also impede the ability of a China-based
company, such as our company, to obtain or maintain permits or licenses required to conduct business in China. In the absence of required
permits or licenses, governmental authorities could impose material sanctions or penalties on us. In addition, some regulatory requirements
issued by certain PRC government authorities may not be consistently applied by other PRC government authorities (including local government
authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example,
we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract.
However, since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms,
it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than
in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of
which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation
of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China
may be protracted, resulting in substantial costs and diversion of resources and management attention.
The
PRC government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations
as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new
policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility
that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial
condition and results of operations. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control
over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies
like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue
to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.
| 7 | |
| | |
Furthermore,
if China adopts more stringent standards with respect to certain areas such as environmental protection or corporate social responsibilities,
we may incur increased compliance costs or become subject to additional restrictions in our operations. Certain areas of the law, including
intellectual property rights and confidentiality protections in China may also not be as effective as in the United States or other countries.
In addition, we cannot predict the effects of future developments in the PRC legal system on our business operations, including the promulgation
of new laws, or changes to existing laws or the interpretation or enforcement thereof. These uncertainties could limit the legal protections
available to us and our investors, including you.
**We
may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection.
We may be liable for improper use or appropriation of personal information provided by our customers.**
We
may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection.
These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable
to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous laws and
regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other
user data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among
different jurisdictions.
We
expect to obtain information about various aspects of our operations as well as regarding our employees and third parties. We also maintain
information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer,
employee and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal
information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate
security measures to safeguard such information.
The
PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits
institutions, companies and their employees from selling or otherwise illegally disclosing a citizens personal information obtained
during the course of performing duties or providing services or obtaining such information through theft or other illegal ways. On November
7, 2016, the Standing Committee of the National Peoples Congress of China (SCNPC) issued the Cyber Security Law of the PRC, or
Cyber Security Law, which became effective on June 1, 2017.
Pursuant
to the Cyber Security Law, network operators must not, without users consent, collect their personal information, and may only
collect users personal information necessary to provide their services. Providers are also obliged to provide security maintenance
for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under
the relevant laws and regulations.
The
Civil Code of the PRC (issued by the PRC National Peoples Congress on May 28, 2020 and effective from January 1, 2021) provides
main legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the
Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas
of data security and data protection.
The
PRC regulatory requirements regarding cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including
the Cyberspace Administration of China, the Ministry of Public Security and the SAMR, have enforced data privacy and protection laws
and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity
Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information
infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.
| 8 | |
| | |
In
November 2016, the SCNPC passed Chinas first Cybersecurity Law (CSL), which became effective in June 2017. The CSL
is the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously
under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include
penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the
websites, and revocation of business license or relevant permits. In April 2020, the Cyberspace Administration of China and certain other
PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity
Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and
services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of
the Measures for Cybersecurity Review for public comments (Draft Measures), which required that, in addition to operator
of critical information infrastructure, any data processor carrying out data processing activities that affect or
may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when
assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data
or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk
of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled,
or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed
rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations
because of the risk that such data and personal information could be affected, controlled, and maliciously exploited by foreign
governments, The cybersecurity review will also investigate the potential national security risks from overseas IPOs. On June
10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect on September 1, 2021. The Data Security Law also sets forth
the data security protection obligations for entities and individuals handling personal data, including that no entity or individual
may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits.
The costs of compliance with, and other burdens imposed by, CSL and any other cybersecurity and related laws may limit the use and adoption
of our products and services and could have an adverse impact on our business. Further, if the enacted version of the Measures for Cybersecurity
Review mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties
as to whether such clearance can be timely obtained, or at all.
On
August 20, 2021, the SCNPC promulgated the PRC Personal Information Protection Law, which will take effect in November 2021. The Personal
Information Protection Law provides that any entity involving processing of personal information (Personal Information Processer)shall
take various measures to prevent the disclosure, modification or losing of the personal information processed by such entity, including,
but not limited to, formulating a related internal management system and standard of operation, conducting classified management of personal
information, taking safety technology measures to encrypt and de-identify the processed personal information, providing regular safety
training and education for staff and formulating a personal information safety emergency accident plan. The Personal Information Protection
Law further provides that a Personal Information Processer shall conduct a prior evaluation of the impact of personal information protection
before the occurrence of various situations, including, but not limited to, processing of sensitive personal information (personal information
that, once leaked or illegally used, may lead to discrimination against an individual or serious harm to an individuals personal
or property safety, including information on an individuals ethnicity, religious beliefs, personal biological characteristics,
medical health, financial accounts, personal whereabouts), using personal information to make automated decisions and providing personal
information to any overseas entity.
On
November 14, 2021, the Cyberspace Administration of China released the Regulations on Network Data Security (draft for public comments)
and accepted public comments until December 13, 2021. The draft Regulations on Network Data Security provide that data processors refer
to individuals or organizations that autonomously determine the purpose and the manner of processing data. If a data processor that processes
personal data of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors
that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data
security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace
affairs administration department before January 31 of each year. On December 28, 2021, the Measures for Cybersecurity Review (2021 version)
was promulgated and took effect on February 15, 2022, which iterates that any online platform operators controlling personal
information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review.
As advised by our PRC legal counsel, Zhejiang TaoTeng, neither we nor our subsidiaries Hangzhou Wenyuan, HWAC and HWF are among the operator
of critical information infrastructure or data processor as mentioned above.
| 9 | |
| | |
The
Company, through Hangzhou Wenyuan, HWAC and HWF, is to engage in project development and management in cultural fields, as well as aquacultural
product industry in China, and neither the Company nor its subsidiaries are engaged in data activities as defined under the Personal
Information Protection Law, which includes, without limitation, collection, storage, use, processing, transmission, provision, publication
and deletion of data. In addition, neither the Company nor its subsidiary is an operator of any critical information infrastructure
as defined under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure. However, Measures
for Cybersecurity Review (2021 version) was recently adopted and the Regulations on Network Data Security (draft for comments) is in
the process of being formulated and the Opinions remain unclear on how it will be interpreted, amended and implemented by the relevant
PRC governmental authorities.
There
remains uncertainties as to when the final measures will be issued and take effect, how they will be enacted, interpreted or implemented,
and whether they will affect us. If we inadvertently conclude that the Measures for Cybersecurity Review (2021 version) do not apply
to us, or applicable laws, regulations, or interpretations change and it is determined in the future that the Measures for Cybersecurity
Review (2021 version) become applicable to us, we may be subject to review when conducting data processing activities, and may face challenges
in addressing its requirements and make necessary changes to our internal policies and practices. We may incur substantial costs in complying
with the Measures for Cybersecurity Review (2021 version), which could result in material adverse changes in our business operations
and financial position. If we are not able to fully comply with the Measures for Cybersecurity Review (2021 version), our ability to
offer or continue to offer securities to investors may be significantly limited or completely hindered, and our securities may significantly
decline in value or become worthless.
**The
CSRC has released the Trial Administrative Measures of Overseas Securities Offering and Listing by domestic companies and five guidelines,
which will come into effect on March 31, 2023. The Chinese government may exert more oversight and control over offerings that are conducted
overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or
continue to offer our common stock to investors and could cause the value of our common stock to significantly decline or become worthless**
On
December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of
Securities by Domestic Enterprises (Draft for Comments) (the Draft Administrative Provisions) and the Measures for the
Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the Draft Filing Measures,
and collectively with the Draft Administrative Provisions, the Draft Rules Regarding Overseas Listing), which stipulate
that Chinese-based companies, or the issuer, shall fulfill the filing procedures after the issuer makes an application for initial public
offering and listing in an overseas market, and certain overseas offering and listing such as those that constitute a threat to or endanger
national security, as reviewed and determined by competent authorities under the State Council in accordance with law, may be prohibited
under the Draft Rules Regarding Overseas Listing. On February 17, 2023, with the approval of the State Council, the CSRC released the
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the Trial Measures) and
five supporting guidelines, which will come into effect on March 31, 2023. According to the Trial Measures, among other requirements,
(1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures
with the CSRC; if a domestic company fails to complete the filing procedures, such domestic company may be subject to administrative
penalties; and (2) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate
a major domestic operating entity responsible for all filing procedures with the CSRC, and such filings shall be submitted to the CSRC
within three business days after the submission of the overseas offering and listing application. On the same day, the CSRC also held
a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering
and Listing by Domestic Companies, which clarifies that (1) on or prior to the effective date of the Trial Measures, domestic companies
that have already submitted valid applications for overseas offering and listing but have not obtained approval from overseas regulatory
authorities or stock exchanges may reasonably arrange the timing for submitting their filing applications with the CSRC, and must complete
the filing before the completion of their overseas offering and listing; (2) a six-month transition period will be granted to domestic
companies which, prior to the effective date of the Trial Measures, have already obtained the approval from overseas regulatory authorities
or stock exchanges, but have not completed the indirect overseas listing; if domestic companies fail to complete the overseas listing
within such six-month transition period, they shall file with the CSRC according to the requirements; (3) the CSRC will solicit opinions
from relevant regulatory authorities and complete the filing of the overseas listing of companies with contractual arrangements which
duly meet the compliance requirements, and support the development and growth of these companies; and (4) domestic companies that are
already listed on overseas exchanges by or before March 31, 2023 are not required to make any filings with CSRC unless they raise additional
equity financing.
| 10 | |
| | |
As
of the date of this Annual Report, neither we nor any of the PRC subsidiaries have been subject to any investigation, or received any
notice, warning, or sanction from the CSRC or other applicable government authorities related to our listing. If we are required to file
with the CSRC for our future offering, there is no assurance that we can complete such filing in a timely manner or even at all. Any
failure by us to comply with such filing requirements may result in an order to rectify, warnings and fines against us and could materially
hinder our ability to offer or continue to offer our securities.
**We
are a holding company and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries
to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent
company expenses or pay dividends to holders of our common stocks.**
We
are a holding company and conduct substantially all of our business through our PRC subsidiaries. We may rely on dividends to be paid
by our PRC subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions
to our shareholders, to service any debt we may incur and to pay our operating expenses. If our PRC subsidiaries incur debt on its own
behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.
Under
PRC laws and regulations, our PRC directly owned subsidiary, Hangzhou Longwen, may pay dividends only out of its accumulated profits
as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required
to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the
aggregate amount of such fund reaches 50% of its registered capital.
Our
PRC subsidiaries generate primarily all of their revenue in Renminbi, which is not freely convertible into other currencies. As a result,
any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their Renminbi revenues to pay dividends to
us. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be
put forward by SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the
ability of our PRC subsidiaries to pay dividends or make other kinds of payments to us could materially and adversely limit our ability
to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our
business.
In
addition, the Enterprise Income Tax Law, or EIT, and its implementation rules provide that a withholding tax rate of up to 10% will be
applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to
treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident
enterprises are incorporated. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us
could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business,
pay dividends, or otherwise fund and conduct our business.
**Because
our business is conducted in RMB and the price of our common stock is quoted in United States dollars, changes in currency conversion
rates may affect the value of your investments.**
Our
business is conducted in the PRC, our books and records are maintained in RMB, which is the currently of the PRC, and the financial statements
that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between
the RMB and dollar affect the value of our assets and the results of our operations in United States dollars. The value of the RMB against
the United States dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRCs political
and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB
may materially and adversely affect our cash flows, revenue and financial condition.
The
value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political
and economic conditions in China and by Chinas foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old
policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over
the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the
U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly
and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year
review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016,
Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S.
dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the Renminbi depreciated significantly in the
backdrop of a surging U.S. dollar and persistent capital outflows of China.
| 11 | |
| | |
This
depreciation halted in 2017, and the RMB appreciated approximately 7% against the U.S. dollar during this one-year period. The Renminbi
in 2018 depreciated approximately by 5% against the U.S. dollar. Starting from the beginning of 2019, the Renminbi has depreciated significantly
against the U.S. dollar again. In early August 2019, the PBOC set the Renminbis daily reference rate at RMB7.0039 to US$1.00,
the first time that the exchange rate of Renminbi to U.S. dollar exceeded 7.0 since 2008. With the development of the foreign exchange
market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce
further changes to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly
in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact
the exchange rate between the Renminbi and the U.S. dollar in the future.
There
remains significant international pressure on the Chinese government to adopt a flexible currency policy to allow the Renminbi to appreciate
against the U.S. dollar. Significant revaluation of the Renminbi may have a material and adverse effect on your investment. Substantially
all of our revenues and costs are denominated in Renminbi. Any significant revaluation of Renminbi may materially and adversely affect
our revenues, earnings and financial position, and the value of, and any dividends payable on, our common stock in U.S. dollars.
Very
limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into
any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging
transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge
our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict
our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect
on your investment.
**Governmental
control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.**
The
PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency
out of China. We receive substantially all of our net revenues in RMB. Under our current corporate structure, our Company in the United
States relies on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC
foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange
transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore,
our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that
the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the
overseas investment registrations by the beneficial owners of our Company who are PRC residents. But approval from or registration with
appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital
expenses such as the repayment of loans denominated in foreign currencies.
In
light of the flood of capital outflows of China in 2016 due to the weakening RMB, the PRC government has imposed more restrictive foreign
exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put
in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may also at its discretion
restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents
us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign
currencies to our shareholders.
| 12 | |
| | |
**Under
the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a resident enterprise of China, which could
result in unfavorable tax consequences to us and our non-PRC shareholders.**
The
EIT Law and its implementing rules provide that enterprises established outside of China whose de facto management bodies
are located in China are considered resident enterprises under PRC tax laws. The implementing rules promulgated under the
EIT Law define the term de facto management bodies as a management body which substantially manages, or has control over
the business, personnel, finance and assets of an enterprise. In April 2009, the State Administration of Taxation, or SAT, issued the
Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in accordance
with the Actual Standards of Organizational Management, known as Circular 82, which has provided certain specific criteria for determining
whether the de facto management bodies of a PRC-controlled enterprise that is incorporated offshore is located in China.
However, there are no further detailed rules or precedents governing the procedures and specific criteria for determining de facto
management body. Although our board of directors and management are located in the PRC, it is unclear if the PRC tax authorities
will determine that we should be classified as a PRC resident enterprise.
If
we are deemed as a PRC resident enterprise, we will be subject to PRC enterprise income tax on our worldwide income at
a uniform tax rate of 25%, although dividends distributed to us from our existing PRC subsidiary and any other PRC subsidiary which we
may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC resident recipient
status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income.
Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition,
if we were considered a PRC resident enterprise, any dividends we pay to our non-PRC investors, and the gains realized
from the transfer of our common stock may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate
of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable
tax treaty). It is unclear whether holders of our common stock would be able to claim the benefits of any tax treaties between their
country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse
effect on the value of your investment in us and the price of our common stock.
**Changes
in international trade policies, trade dispute or the emergence of a trade war, may have a material adverse effect on our business.**
Political
events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy,
and could have a material adverse effect on us and our customers, service providers and other partners.
International
trade disputes could result in tariffs and other protectionist measures that could adversely affect our business. Tariffs could increase
the cost of the goods and products which could affect consumers discretionary spending levels and therefore adversely impact our
business. In addition, political uncertainty surrounding international trade disputes and the potential of the escalation to trade war
and global recession could have a negative effect on consumer confidence, which could adversely affect our business.
**U.S.
regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.**
Any
disclosure of documents or information located in China by foreign agencies may be subject to jurisdiction constraints and must comply
with Chinas state secrecy laws, which broadly define the scope of state secrets to include matters involving economic
interests and technologies. There is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect
our operations will be honored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements,
especially as those entities are located in China.
The
PRC Securities Law was promulgated in December 1998 and was subsequently revised in October 2005, June 2013, August 2014 and December
2019. According to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities
regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While there
is no detailed interpretation regarding the rule implementation under Article 177, it will be difficult for an overseas securities regulator
to conduct investigation or evidence collection activities in China.
| 13 | |
| | |
**The
disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any
regulatory bodies in the PRC.**
We
are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations
promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements
are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings
are not subject to the review by China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the capital
markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding
that no local regulator has done any review of us, our SEC reports, other filings or any of our other public pronouncements.
**The
recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable
Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of
their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our
registration statement. In the event it is later determined that the PCAOB is unable to inspect or investigate completely the Companys
auditor, then such lack of inspection could cause trading in the Companys securities to be prohibited under the HFCAA, and ultimately
result in a determination by a securities exchange to delist the Companys securities.**
On
April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint
statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including
China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers
in China and higher risks of fraud in emerging markets.
On
May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating
in Restrictive Market, (ii) adopt a new requirement relating to the qualification of management or board of director for
Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications
of the companys auditors.
On
May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned
or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not
subject to PCAOB inspection. If the PCAOB is unable to inspect the companys auditors for three consecutive years, the issuers
securities are prohibited to trade on a national securities exchange or in the over the counter trading market in the U.S. On December
2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding
Foreign Companies Accountable Act was signed into law.
On
March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure
requirements of the Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report
on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction
and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that
jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required
to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction,
and will also require disclosure in the registrants annual report regarding the audit arrangements of, and governmental influence
on, such a registrant.
On
June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (AHFCAA), which, if enacted,
would amend the HFCAA and require the SEC to prohibit an issuers securities from trading on any U.S. stock exchanges if its auditor
is not subject to PCAOB inspections for two consecutive years instead of three.
On
September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On
December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The
rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public
accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a
position taken by an authority in foreign jurisdictions.
| 14 | |
| | |
Pursuant
to the HFCAA, the PCOAB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate
completely registered public accounting firms headquartered in: (1) mainland China of the Peoples Republic of China, because a
position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the
PRC, because of a position taken by one or more authorities in Hong Kong. In addition the PCOABs report identified the specific
registered public accounting firms which are subject to these determinations. Our registered public accounting firm, Simon & Edward,
LLP, is not headquartered in mainland China or Hong Kong and was not identified in this report as a firm subject to the
PCAOBs determination.
On
August 26, 2022, the China Securities Regulatory Commission, or CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement
of Protocol, or the Protocol, governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant
to the Protocol, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the
unfettered ability to transfer information to the SEC.
The
lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the
auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms audit
procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could
cause existing and potential investors in their stock to lose confidence in their audit procedures and reported financial information
and the quality of their financial statements.
Our
auditor, Simon & Edward, LLP (S&E), the independent registered public accounting firm that issues the audit report
included elsewhere in this Annual Report as an auditor registered with the PCAOB, is subject to laws in the United States pursuant to
which the PCAOB conducts regular inspections to assess our auditors compliance with the applicable professional standards. S&E
is headquartered in the United States and is subject to inspection by the PCAOB on a regular basis.
While
the Companys auditor is based in the U.S. and is registered with PCAOB and subject to PCAOB inspection, in the event it is later
determined that the PCAOB is unable to inspect or investigate completely the Companys auditor because of a position taken by an
authority in a foreign jurisdiction, then such lack of inspection could cause trading in the Companys securities to be prohibited
under the Holding Foreign Companies Accountable Act, and ultimately result in a determination by a securities exchange to delist the
Companys securities. In addition, the recent developments would add uncertainties to our registration statement and we cannot
assure you whether regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness
of our auditors audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources,
geographic reach or experience as it relates to the audit of our financial statements. It remains unclear what the SECs implementation
process related to the above rules will entail or what further actions the SEC or the PCAOB will take to address these issues and what
impact those actions will have on U.S. companies that have significant operations in the PRC and have securities listed on a U.S. stock
exchange (including a national securities exchange or over-the-counter stock market). In addition, the above amendments and any additional
actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create
some uncertainty for investors, the market price of our common stock could be adversely affected, and we could be delisted if we and
our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant
expense and management time.
**Failure
to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.**
We
are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain
social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain
percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government
from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently
by the local governments in China given the different levels of economic development in different locations. As of the date of this registration
statement, we have paid and will continue to pay in the future, social insurance or housing fund contributions for all of our employees,
and we have been in compliance with the requirements of relevant PRC regulations. If in the future we are determined by local authorities
to fail to make adequate or sufficient contributions to any employee benefits as required by relevant PRC regulations, due to changes
in regulations and requirement, we may face late fees or fines in relation to the underpaid employee benefits. As a result, our financial
condition and results of operations may be materially and adversely affected.
| 15 | |
| | |
**The
M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors,
which could make it more difficult for us to pursue growth through acquisitions in China.**
The
Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory
agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional
procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including
requirements in some instances that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes
control of a PRC domestic enterprise. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control
transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii)
such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change
in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated
by the SCNPC effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover
thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds
RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million within China, or (ii) the total turnover
within China of all the operators participating in the concentration exceeded RMB 2 billion, and at least two of these operators each
had a turnover of more than RMB 400 million within China) must be cleared by MOFCOM before they can be completed.
Moreover,
the Anti-Monopoly Law requires that MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds are
triggered. In addition, the security review rules issued by MOFCOM that became effective in September 2011 specify that mergers and acquisitions
by foreign investors that raise national defense and security concerns and mergers and acquisitions through which foreign
investors may acquire de facto control over domestic enterprises that raise national security concerns are subject to strict
review by MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction
through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying
with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming,
and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability
to complete such transactions, which could affect our ability to expand our business or maintain our market share.
The
M&A Rules require an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies
and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior
to the listing and trading of such special purpose vehicles securities on an overseas stock exchange.
Our
PRC legal counsel, Zhejiang TaoTeng, has advised us that, the Company and its operating entity are full compliance with the M&A Rules
in China. As of the date of this Form 10-K, we have not received any notification of non-compliance. In the future, we may further grow
our business by acquiring businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to
complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry
of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions. Our ability to expand our business
or maintain or expand our market share through future acquisitions would be materially and adversely affected.
**You
may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us
or our management named in the registration statement based on foreign laws.**
We
conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, all our senior
executive officers reside within China for a significant portion of the time and all of them are PRC nationals. As a result, it may be
difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you to enforce
in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against
us and our officers and directors as none of them currently resides in the United States or has substantial assets located in 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 against
us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.
The
recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and
enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China
and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties
or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign
judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or
our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty,
security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by
a court in the United States.
| 16 | |
| | |
**We
face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.**
****
On
February 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties
by Non-Tax Resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer
of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe
harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also
brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets,
as such persons need to determine whether their transactions are subject to these rules and whether any withholding obligation applies.
On
October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident
Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies
the practice and procedure of the withholding of non-resident enterprise income tax.
Where
a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which
is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly
owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a substance over form principle,
the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was
established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be
subject to PRC enterprise income tax, and the transferee or other person who pays for the transfer is obligated to withhold the applicable
taxes currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee
may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
We
face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved,
such as offshore restructuring and sale of our offshore investments. Our Company may be subject to filing obligations or taxed if our
Company is transferor in such transactions, and may be subject to withholding obligations if our Company is transferee in such transactions,
under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our Company by investors who are non-PRC resident enterprises,
our PRC subsidiary may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required
to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we
purchase taxable assets to comply with these circulars, or to establish that our Company should not be taxed under these circulars, which
may have a material adverse effect on our financial condition and results of operations.
**Risks
Relating to Our Company and Our Industry**
**We
rely entirely on the operations of our subsidiaries in the PRC. Any successes or failures of our subsidiaries operations will
directly impact our financial condition and may cause your investment to be either positively or negatively impacted. Many very large
and chain companies have or are entering into various aspects of the cultural and health product industry, and project development and
management in cultural industry that we intend serve or that they are offering services that indirectly compete with businesses. These
factors could result in declining revenue, or inability to grow our business.**
****
Numerous
large and chain companies have entered into various aspects of our business categories. There currently are a number of companies worldwide
that have already occupied a big portion of the market in which we intend to operate. As a small, early-stage company, it is uncertain
if and how we will be able to compete with the competitors and products that are already being deployed and familiar by customers. While
we believe that we currently have a competitive advantage because of our experienced management team and marketing strategy. However,
we cannot give any assurance that we will in fact be able to successfully compete with the existing or new competitors in this mature
and evolving marketplace.
| 17 | |
| | |
**We
rely substantially on our President. We may be adversely affected if we lose his services or the services of other key personnel or are
unable to attract and retain additional personnel.**
Our
success is substantially dependent on the efforts of our senior management, particularly Mr. Xizhen Ye, our President. The loss of the
services of Mr. Ye or other members of our senior management may significantly delay or prevent the achievement of our business objectives.
If we lose the services of, or do not successfully recruit, key sales and marketing, technical and corporate personnel, the growth of
our business could be substantially impaired. At present, we do not maintain key man insurance for any of our senior management.
**The
requirements of being a public company may strain our resources, divert our managements attention and affect our ability to attract
and retain qualified board members.**
As
a public company, we are subject to the reporting requirements of the Exchange Act, and are required to comply with the applicable requirements
of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, and other applicable securities rules and
regulations. Compliance with these rules and regulations have increased our legal and financial compliance costs, made some activities
more difficult, time-consuming or costly and increased demand on our systems and resources. Among other things, the Exchange Act requires
that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure
controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve our disclosure
controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight
may be required. As a result, managements attention may be diverted from other business concerns, which could harm our business
and results of operations. We may need to hire more employees to comply with these requirements in the future, which will increase our
costs and expenses.
**We
may require additional capital to support growth, and such capital might not be available on terms acceptable to us, if at all. This
could hamper our growth and adversely affect our business.**
We
intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges,
including the need to recruit more experienced specialist in culture field or enhance our platform, improve our operating infrastructure
or acquire complementary businesses and technologies. Accordingly, we may need to engage in public or private equity, equity-linked or
debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities,
our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and
privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive
covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends.
This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing
on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges
could be significantly impaired, and our business could be adversely affected**.**
**We
may have difficulty establishing adequate management, legal and financial controls in the PRC.**
The
PRC historically has been deficient in Western-style management and financial reporting concepts and practices, as well as in modern
banking and other control systems. We may have difficulty in hiring and retaining a sufficient number of locally-qualified employees
to work in the PRC who are capable of satisfying the obligations of a U.S. public reporting company. As a result of these factors, we
may experience difficulty in establishing adequate management, legal and financial controls (including internal controls over financial
reporting), collecting financial data and preparing financial statements, books of account and corporate records and instituting business
practices in the PRC that meet U.S. standards as in effect from time to time.
| 18 | |
| | |
**Risks
Relating to the Companys Securities**
**We
may, in the future, issue additional shares of our common stock, which may have a dilutive effect on our stockholders.**
Our
Certificate of Incorporation authorizes the issuance of 550,000,000 shares of common stock, of which 80,884,279 shares are issued and
outstanding, as of the date of this Annual Report. The future issuance of our common shares may result in substantial dilution in the
percentage of our common shares held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary
basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the
value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
**We
may issue shares of preferred stock in the future that may adversely impact your rights as holders of our common stock.**
Our
Certificate of Incorporation authorizes us to issue up to 50,000,000 shares of preferred stock with no share issued and outstanding as
of the date of this Annual Report. Accordingly, our board of directors will have the authority to fix and determine the relative rights
and preferences of preferred shares, as well as the authority to issue such shares, without further stockholder approval.
Our
preferred stock does not have any dividend, conversion, liquidation, or other rights or preferences, including redemption or sinking
fund provisions. However, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders
preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common
stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock.
To the extent that we do issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby,
including, without limitation, dilution of your ownership interests in us. In addition, shares of preferred stock could be issued with
terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in your interest
as holders of common stock.
**We
do not currently intend to pay dividends on our common stock and consequently, your ability to achieve a return on your investment will
depend on appreciation in the price of our common stock.**
We
have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We
currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on
your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future
appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price
at which our stockholders have purchased their shares.
**The
costs to meet our reporting and other requirements as a public company subject to the Exchange Act of 1934 and will be substantial, which
may result in us having insufficient funds to expand our business or even to meet routine business obligations.**
As
a public entity, subject to the reporting requirements of the Exchange Act of 1934, we will continue to incur ongoing expenses associated
with professional fees for accounting, legal and a host of other expenses for annual reports and proxy statements. We estimate that these
costs will range up to $100,000 per year for the next few years and will be higher if our business volume and activity increases. As
a result, we may not have sufficient funds to grow our operations.
| 19 | |
| | |
**Item
1B. Unresolved Staff Comments.**
None
**Item
1C. Cybersecurity.**
We
acknowledge the increasing importance of cybersecurity in todays digital and interconnected world. Cybersecurity threats pose
significant risks to the integrity of our systems and data, potentially impacting our business operations, financial condition and reputation.
As
a smaller reporting company, we currently do not have formalized cybersecurity measures, a dedicated cybersecurity team or specific protocols
in place to manage cybersecurity risks. Our approach to cybersecurity is in the developmental stage, and we have not yet conducted comprehensive
risk assessments, established an incident response plan or engaged with external cybersecurity consultants for assessments or services.
Given
our current stage of cybersecurity development, we have not experienced any significant cybersecurity incidents to date. However, we
recognize that the absence of a formalized cybersecurity framework may leave us vulnerable to cyberattacks, data breaches and other cybersecurity
incidents. Such events could potentially lead to unauthorized access to, or disclosure of, sensitive information, disrupt our business
operations, result in regulatory fines or litigation costs and negatively impact our reputation among customers and partners.
We
are in the process of evaluating our cybersecurity needs and developing appropriate measures to enhance our cybersecurity posture. This
includes considering the engagement of external cybersecurity experts to advise on best practices, conducting vulnerability assessments
and developing an incident response strategy. Our goal is to establish a cybersecurity framework that is commensurate with our size,
complexity and the nature of our operations, thereby reducing our exposure to cybersecurity risks.
In
addition, the Board will oversee any cybersecurity risk management framework and a dedicated committee of the Board or an officer appointed
by the Board will review and approve any cybersecurity policies, strategies and risk management practices.
Despite
our efforts to improve our cybersecurity measures, there can be no assurance that our initiatives will fully mitigate the risks posed
by cyber threats. The landscape of cybersecurity risks is constantly evolving, and we will continue to assess and update our cybersecurity
measures in response to emerging threats.
For
a discussion of potential cybersecurity risks affecting us, please refer to the Risk Factors section of this Annual Report.
**Item
2. Properties.**
The
Company owns an office property located in Hangzhou, Zhejiang Province, China, which the Company purchased from a third party on September
28, 2022. We currently maintain our corporate office at RM 2404, Yin Zun Building, ZunBao Plaza, Shangcheng Dist., Hangzhou, Zhejiang
Province, China. Tel: +86 0571 -85128985.
**Item
3. Legal Proceedings.**
On
September 28, 2022, the Company consummated an office suite purchase agreement with a third party in Hangzhou City, Zhejiang Province,
China. Upon closing of the office suite purchase agreement as described in Note 5, the Company agreed to act as a guarantor for the liability
owing by the third party in the amount of $264,071 (RMB 1,900,000) associated with the office suite. During the year ended December 31,
2024, the Company was sued by the creditor due to the default by the third party. The litigation has not concluded as of the filing date.
**Item
4. Mine Safety Disclosures.**
Not
applicable.
| 20 | |
| | |
**PART
II**
**Item
5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**
**Market
Information**
There
has only been limited trading for the Companys Common Stock since it began trading in September 1996 on the Over-then-Counter
Exchange under the symbol EXGP. Over the years, as the Company grew and acquired other companies, it name changed and so
did its symbol. It went from EXGP, to trading on the OTC Markets-PINK under EXTL, to PYMB to
DPHS to LWLW and to its current symbol WYGC. There is no assurance that an active trading market
will ever develop or, if such a market does develop, that it will continue. The Securities and Exchange Commission has adopted Rule 15g-9
which establishes the definition of a penny stock, for purposes relevant to the Company, as any equity security that has
a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a persons account
for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased. In order to approve a persons account for transactions in
penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person and (ii)
make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii)
that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to
both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available
to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in penny stocks.
Because
of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may
affect the ability of our shareholders to sell their shares in the secondary market and have the effect of reducing the level of trading
activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock
in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of
our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.
On
April 15, 2025, the closing price of our common stock reported on the OTC Markets was $0.10 per share. The following table sets forth,
for each of the quarterly periods indicated, the high and low closing prices of our common stock, as reported on the OTC Markets
| 
Year 2022 | | 
Low | | | 
High | | |
| 
January 1, 2022 to March 31, 2022 | | 
$ | 0.33 | | | 
$ | 2.89 | | |
| 
April 1, 2022 to June 30, 2022 | | 
$ | 0.51 | | | 
$ | 1.00 | | |
| 
July 1, 2022 to September 30, 2022 | | 
$ | 0.51 | | | 
$ | 0.90 | | |
| 
October 1, 2022 to December 31, 2022 | | 
$ | 0.25 | | | 
$ | 0.90 | | |
| 
Year 2023 | | 
Low | | | 
High | | |
| 
January 1, 2023 to March 31, 2023 | | 
$ | 0.27 | | | 
$ | 0.65 | | |
| 
April 1, 2023 to June 30, 2023 | | 
$ | 0.16 | | | 
$ | 0.30 | | |
| 
July 1, 2023 to September 30, 2023 | | 
$ | 0.08 | | | 
$ | 0.16 | | |
| 
October 1, 2023 to December 31, 2023 | | 
$ | 0.08 | | | 
$ | 0.11 | | |
| 21 | |
| | |
| 
Year 2024 | | 
Low | | | 
High | | |
| 
January 1, 2024 to March 31, 2024 | | 
$ | 0.11 | | | 
$ | 0.26 | | |
| 
April 1, 2024 to June 30, 2024 | | 
$ | 0.26 | | | 
$ | 0.26 | | |
| 
July 1, 2024 to September 30, 2024 | | 
$ | 0.12 | | | 
$ | 0.26 | | |
| 
October 1, 2024 to December 31, 2024 | | 
$ | 0.10 | | | 
$ | 0.30 | | |
| 
Year 2025 | | 
Low | | | 
High | | |
| 
January 1, 2025 to March 31, 2025 | | 
$ | 0.10 | | | 
$ | 0.30 | | |
| 
April 1, 2025 to April 15, 2025 | | 
$ | 0.10 | | | 
$ | 0.10 | | |
**Holders**
There
are approximately 304 holders of the Companys Common Stock as of April 15, 2025. This figure does not include holders of shares
registered in street name or persons, partnerships, associates, corporations or other entities identified in security position
listings maintained by depositories.
**Dividends**
We
have not declared any cash dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable
future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend
on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
**Securities
Authorized under Equity Compensation Plans**
A
total of 10,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under
our 2022 Equity Incentive Plan. As of April 15, 2025, 8,780,000 shares of common stock have been issued from our 2022 Equity Incentive
Plan.
A
total of 5,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under
our 2023 Equity Incentive Plan. As of April 15, 2025, no shares of common stock have been issued from our 2023 Equity Incentive Plan.
**Securities
Currently Outstanding**
| 
| 
| 
Our
Certificate of Incorporation authorizes the issuance of 550,000,000 shares of common stock, of which 80,884,279 shares were issued
and outstanding, as of April 15, 2025. | |
| 
| 
| 
| |
| 
| 
| 
Our
Certificate of Incorporation authorizes us to issue up to 50,000,000 shares of preferred stock with no share issued and outstanding
as of April 15, 2025. | |
| 22 | |
| | |
**Repurchases
of Equity Securities**
None
**Reports
to Stockholders**
We
are currently subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will continue to file
periodic reports, and other information with the SEC.
**Transfer
Agent**
Our
transfer agent is West Coast Stock Transfer Inc., 721 N. Vulcan Ave. Ste 106, Encinitas, CA 92024. Their telephone number is (619) 664-4780.
**Recent
Sales of Unregistered Securities**
****
Issuance
of Common Stock
In
May and June 2023, the Company sold a total of 336,168 shares of common stock to Forty-nine (49) non-U.S. investors at $0.20 per share
for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities.
No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In
December 2023, the Company sold a total of 150,000 shares of common stock to three (3) non-U.S. investors at $0.28 per share for cash
consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions
were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In
January 2024, the Company sold a total of 143,486 shares of common stock to eight (8) non-U.S. investors at $0.30 per share for cash
consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions
were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In
February 2024, the Company sold a total of 187,242 shares of common stock to four (4) non-U.S. investors at $0.30 per share for cash
consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions
were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend. Also on February 18,
2024, the Company converted a loan in the total amount of $83,847 with a related party, to exchange issuance of 279,490 shares of the
common stock of the company to the related party, at $0.30 per share.
During
the three months ended June 30, 2024, the Company issued 367,673 shares of common stock to individual non-U.S. investors at $0.60 per
share, with total proceeds of $220,604 received in cash, which $62,184 received during the three months ended March 31, 2024.
For
the three months ended September 30, 2024, the Company sold 415,465 shares of common stock to ten non-U.S. investors at $0.60 per share,
with total proceeds of $249,279 received in cash.
On
October 23, 2024, the Company sold 23,375 shares of common stock to ten non-U.S. investors at $0.60 per share, with total proceeds of
$14,025 received in cash. On the same date, the Company converted loans payable to three third-party individuals in the amount of $30,920
into 53,534 shares of common stock at $0.60 per share.
The
Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid
regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
| 23 | |
| | |
2022
Equity Incentive Plan
On
November 7, 2022, the Board adopted an equity incentive plan to increase stockholder value and to advance the interests of the Company
by furnishing a variety of economic incentives (Incentives) designed to attract, retain and motivate employees, certain
key consultants and directors of the Company (the 2022 Equity Incentive Plan). Under the 2022 Equity Incentive Plan, the
Company can issue up to 10,000,000 shares of common stock of the Company. Incentives may be granted in any one or a combination of: (a)
incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; and (e)
performance shares. Such incentives may be subject to vesting conditions determined by the Board of Directors at grant. The maximum term
of options or other stock-based award granted is ten years or such lesser time as determined by the Board of Directors at the time of
grant.
On
November 10, 2022, the Company granted total 4,250,000 shares of common stock of the Company to four individual consultants, under the
2022 Equity Incentive Plan, vesting immediately upon grant. The fair value of the shares granted totalled $425,000 which was recorded
as share-based compensation on the consolidated statement of operations and other comprehensive income for the year ended December 31,
2022.
On
January 19, 2023, the Company granted total 5,000,000 shares of common stock of the Company to six employees and one consultant pursuant
to the Companys 2022 Equity Incentive Plan. The fair value of the shares totalled of $500,000 on the grant dates. In December 2023,
1,200,000 shares of common stock were returned by one of the six employees to the Company for no consideration and cancelled upon receipt.
In January 2024, 1,200,000 shares of common stock were returned by another one of the six employees to the Company for no consideration
and cancelled upon receipt.
On
June 29, 2023, the Company granted a total of 200,000 shares of common stock of the Company to two employees pursuant to the Companys
2022 Equity Incentive Plan. The fair value of the shares totalled of $40,000 on the grant date, which was recorded in share-based compensation
on the consolidated statement of operations. On the same date, the Company granted 550,000 common stocks issuable to four individuals
at a fair value of $0.20 per share, subject to vesting condition in three tranches within six months, with 180,000 vested immediately.
During the year ended December 31, 2023, the Company recognized share-based compensation of $36,000 as a result of the grant of these
550,000 common stocks. As of December 31, 2023, 180,000 common stocks have been issued. During the fourth quarter of the year ended December
31, 2023, the 370,000 unvested common stocks were forfeited.
During
the three months ended March 31, 2024, the Company granted 1,200,000 shares of common stocks of the Company which vested immediately,
to two employees pursuant to the Companys 2022 Equity Incentive Plan. The fair value of the shares totalled $360,000 on the grant
dates. During the three months ended June 30, 2024, the Company granted 350,000 shares of common stocks of the Company which vested immediately,
to two employees pursuant to the Companys 2022 Equity Incentive Plan. The fair value of the shares totalled $210,000 on the grant
dates. The fair value of the total shares issued in 2024 was charged to share-based compensation of $501,346 and other loss of $68,654,
respectively.
As
of December 31, 2024 and December 31, 2023, the Companys common shares issuable under the 2022 Equity Incentive Plan totalled 1,220,000
and 1,570,000, respectively.
2023
Equity Incentive Plan
As
of December 31, 2024 and December 31, 2023, no shares have been issued under the Companys 2023 Equity Incentive Plan, and the
Companys common shares issuable under the 2023 Equity Incentive Plan totaled 5,000,000 and 5,000,000, respectively.
**Repurchase
of Equity Securities**
None
**Additional
Information**
We
are a reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can
be obtained from the SECs Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the
hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission at http://www.sec.gov.
**Item
6. Selected financial Data.**
Not
required under Regulation S-K for smaller reporting companies.
| 24 | |
| | |
**Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations**
This
Annual Report contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general
economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis
of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying
notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable
Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.*
**Overview**
Wenyuan
Group Corp. (formerly Longwen Group Corp.) (the Company), was originally incorporated as Expertelligence, Inc in the State
of California on March 31, 1980 and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of
various name changes, the Company amended its Articles of Incorporation (Charter Amendment) to affect its name change of
Longwen Group Corp. with trading symbol of LWLW. On April 23, 2024, pursuant to the Companys majority shareholder
consent and board approval dated on April 5, 2024, the Company amended its Article of Incorporation with Nevada State and changed its
name to Wenyuan Group Corp. On January 21, 2025, pursuant to a review by the Financial Industry Regulatory Authority (FINRA),
the Companys name was officially changed to Wenyuan Grop Corp. with the OTC Markets, and the Companys stock symbol was
changed to WYGC on the same date.
The
Company underwent a change of control on January 21, 2016, at which time Harold Minsky resigned in all officer positions. G. Reed Petersen
and White Rim Cattle Company LLC each purchased 25,000,000 shares of common stock of the Company from Harold Minsky. Mr. Petersen is
the Member Manager of White Rim Cattle Company, LLC and thus can be considered a control person of all 50,000,000 shares of stock of
the Company. Pursuant to a Board of Directors meeting, Mr. Petersen was elected to and accepted all the officer positions previously
held by Harold Minsky.
On
or about April 5, 2016, the Company affected a 1 for 750 share reverse split of its issued and outstanding common stock. On such date,
the Companys common stock was reduced from 95,164,140 to 127,061 shares outstanding.
Effective
November 29, 2016, G. Reed Peterson sold 66,667 shares of common stock of the Company to Longwen Group Corporation (Cayman Island), a
Cayman Island company (Longwen Cayman). All of the shares held by Longwen Cayman are restricted securities. As a result
of the transactions, Mr. Petersen no longer owns any of the Companys capital stock or securities and he and his affiliates waived
all loans and other amounts due to the Company. In addition, on such date, Mr. Petersen resigned in all officer capacities from the Company,
and Mr. Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the Company and President and Chief Executive Officer
and Chief Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director of Board.
From
August 2018 to June 2021, the Company was seeking potential business mergers and acquisitions in order to increase its value of the common
stock. However, due to the impact of the Covid-19 pandemic, the progress was delayed and the target was not successfully achieved.
On
June 9, 2021, Anthony Lombardo (Lombardo) filed an Application for Appointment of Custodian (Application)
with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Companys non-response
and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary
custodian of the Company. Subsequently after Lombardos custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary
of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (Joseph) as CEO, CFO and Secretary and
resigned from all positions in the Company, On October 25, 2021, Mr. Xizhen Ye (Ye), who was the officer and director of
the Company prior to Lombardos custodianship, and Longwen Group Corporation, a Cayman Island corporation, filed a Motion to Dissolve
Custodianship (Motion) with the Eighth Judicial District Court of Nevada State. On January 12, 2022, in accordance with
a Settlement Agreement regarding Lombardos custodianship, Mr. Ye was reinstated his positions as the officer and director of the
Company, along with the reinstatement of the other Companys director, Lizhong Lu, who was also in place prior to Lombardos
custodianship. On February 9, 2022, pursuant to the Settlement Agreement, Joseph transferred 65,000,000 common stocks of the Company
owned by him to Mr. Ye. On February 17, 2022, the Eighth Judicial District Court formally dismissed Lombardos custodianship for
the Company.
On
February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou
Wenyuan Enterprise Management Co., Ltd. (Hangzhou Wenyuan) (fka. Hangzhou Longwen Enterprise Management Co., Ltd or Hangzhou
Longwen), a wholly foreign-owned enterprise (WOFE) in Hangzhou, the Peoples Republic of China (the PRC),
for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Wenyuan became the Companys wholly owned subsidiary
in the PRC. Hangzhou Wenyuan was originally registered on January 4, 2012 and has minimum operations since its inception. The Company
recognize $993 goodwill upon consummated the acquisition.
On
October 11, 2022, the Company and its subsidiary, Hangzhou Wenyuan entered into an Acquisition Agreement with a third-party individual
to acquire 100% ownership of Hangzhou Wenyuan Art and Culture Co., Ltd. (HWAC) (fka. Hangzhou Yusu Trading Co., Ltd. or
Hangzhou Yushu), a limited liability company in Hangzhou, the Peoples Republic of China (the PRC),
for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated HWAC became Hangzhou Wenyuans wholly owned subsidiary
in the PRC. HWAC was originally registered on April 20, 2020 and has had minimum operations since its inception. The Company recognize
goodwill of $139 upon consummated the acquisition. On April 10, 2024, Hangzhou Yusu was renamed to Hangzhou Wenyuan Art and Culture Co.,
Ltd (HWAC).
On
March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Hangzhou Wenyuan Internet Technology Co., Ltd. (HWIT) (fka.
Huzhou Wohong Fishery Co., Ltd. or HWF), to operate the aquacultural breeding, wholesale and retail of aquaculture products
and etc. Due to the change in the economic situation and lower-than-expected sales of aquacultural products, our management decided to
change the HWFs operations and on March 27, 2024, HWF entered into an agreement with a counterparty to sell certain assets and
liabilities of HWF. HWF was identified as discontinued operations with aquacultural products sales. Such assets and liabilities are classified
as assets and liabilities held for sale, and the sale was closed on March 27, 2024.
**Revenue**
Starting
from the first quarter of 2024, the Company initiated the sale of cultural and health products through its subsidiary, Hangzhou Wenyuan
Art and Culture Co., Ltd. (HWAC).
| 25 | |
| | |
**Professional
Expense**
Professional
expenses mainly consist of costs associated with our auditors, legal counsel and consultant.
**General
and Administrative Expense**
General
and administrative expenses include the expenses for personnel in executive and other administrative functions, other commercial costs
necessary to support the commercial operation of our products and services. General and administrative expenses also include depreciation
and impairments of office furniture and equipment.
**Interest
Expense**
Interest
expense primarily consists of interest expense incurred for loans received from individual third parties.
**Income
taxes**
The
Company accounts for income taxes under ASC 740, *Income Taxes*. Under the asset and liability method of ASC 740,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated
financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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 income in the
period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the
Company will not realize tax assets through future operations.
**Results
of Operations**
**Results
of Operations for the Years Ended on December 31, 2024 and 2023**
****
*Discontinued
Operations Aquacultural product sales*
On
March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Hangzhou Wenyuan Internet Technology Co., Ltd. (HWIT) (fka.
Huzhou Wohong Fishery Co., Ltd. or HWF), to operate the aquacultural breeding, wholesale and retail of aquaculture products
and etc. During the year ended December 31, 2023, the Company generated $2,050,313 of revenue from its aquaculture product sales through
HWF compared to $nil revenue for the year ended December 31, 2024. The aquaculture product sales through HWF was an important source
of revenue for the Company in the year 2023. However, due to the change of the economic situation and the sales of aquacultural products
is not as expected, our management intended to change its operations. Subsequently on March 27, 2024, the Company entered into an agreement
with a counterparty to sell certain assets and liabilities of HWF. HWF has been identified as discontinued operations in the accompanying
consolidated financial statements. Net income (loss) from discontinued operations for 2024 and 2023 were $6,532 and ($3,906), respectively.
*Revenue*
During
the year ended on December 31, 2024, the Company generated $nil of revenue from its consulting services compared to $15,004 for the year
in 2023. As of June 30, 2023, the Company has terminated the consulting agreements with Linhai Dingji Auto Service Co., Ltd (China) (Linhai
Dingji) and Yunnan Yusu Import and Export Trading Co., Ltd (China) (Yunnan Yusu) due to the Companys business
strategy shifting. The Company generated $nil in revenue from online product sales for the year ended December 31, 2024, compared to
$6,082 online product sales in 2023.
During
the year ended December 31, 2024, the Company generated $60,285 in revenue from offline product sales including related party sales,
and these sales consisted of cultural and health products, as compared to $nil offline product sales in 2023. This newly added business
of cultural and health product has become a new driving force for the Companys revenue growth in 2024.
| 
| | 
For the year ended December 31, | | | 
Increase | | | 
Percentage | | |
| 
| | 
2024 | | | 
2023 | | | 
(Decrease) | | | 
Change | | |
| 
| | 
| | | 
| | | 
| | | 
| | |
| 
Consulting services | | 
$ | - | | | 
$ | 15,004 | | | 
$ | (15,004 | ) | | 
| (100 | )% | |
| 
Online product sales | | 
| - | | | 
| 6,082 | | | 
| (6,082 | ) | | 
| (100 | )% | |
| 
Offline product sales related party | | 
| 17,075 | | | 
| - | | | 
| 17,075 | | | 
| 100 | % | |
| 
Offline product sales | | 
| 43,210 | | | 
| - | | | 
| 43,210 | | | 
| 100 | % | |
| 
| | 
$ | 60,285 | | | 
$ | 21,086 | | | 
$ | 39,199 | | | 
| 186 | % | |
| 26 | |
| | |
*Operating
Expense*
For
the year ended December 31, 2024, our operating expense amounts to $869,575, as compared to $1,033,085 for the year ended December 31,
2023, a decrease of $163,510. The decrease was mainly due to the decreased professional fees.
During
the years ended December 31, 2024 and 2023, the Company incurred other general and administrative and professional expenses of $368,229
and $457,085, respectively. The professional expenses mainly included consulting expenses and financial advisor fees.
*Net
Loss*
Including
loss from discontinued operations, the net loss was $1,171,498 and $1,026,458 for the years ended December 31, 2024 and 2023, respectively.
The increase in net loss in the current year was mainly due to the increased litigation loss which was partially offset by decreased
expenses of selling, general and administrative and professional.
**Liquidity
and Capital Resources**
****
The
Company had total assets in the amount of $415,573 and $843,723 as of December 31, 2024 and December 31, 2023, respectively.
As
of December 31, 2024, the Company had cash of $27,208, comparing to $18,449 as of December 31, 2023. The Company had working capital
deficit of $184,093 as of December 31, 2024, comparing to working capital deficit of $335,139 as of December 31, 2023.
During
the year ended December 31, 2024, the Company had cash used in operating activities in the amount of $453,516 comparing to $338,609 in
the prior year. The change in cash used in operating activities is mainly due to the increase in operations. The cash provided by financing
activities increased to $510,570 in the current year comparing to the prior year of $293,640. The increase is mainly due to the increased
issuance of common shares for cash.
**Going
Concern Assessment**
The
Company demonstrates adverse conditions that raise substantial doubt about the Companys ability to continue as a going concern.
These adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated
deficit and other adverse key financial ratios.
Managements
plan to alleviate the substantial doubt about the Companys ability to continue as a going concern include attempting to improve
its business profitability, its ability to generate sufficient cash flow from its operations and execute the business plan of the Company
in order to meet its operating needs on a timely basis. However, there can be no assurance that these plans and arrangements will be
sufficient to fund the Companys ongoing capital expenditures and other requirements.
The
consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets,
or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.
**Off-Balance
Sheet Arrangements**
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that
is material to stockholders.
**Critical
Accounting Policies**
The
consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these consolidated financial statements requires making estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are
based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results
of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions.
The
critical accounting policies are discussed in further detail in the notes to the accompanying audited consolidated financial statements
appearing elsewhere in this prospectus. Management believes that the application of these policies on a consistent basis enables us to
provide useful and reliable financial information about our operating results and financial condition.
**Item
7A. Quantitative and Qualitative Disclosures About Market Risk**
Not
required under Regulation S-K for smaller reporting companies.
**Item
8. Financial Statements and Supplementary Data**
Our
audited financial statements are set forth in this Annual Report beginning on page F-3.
| 27 | |
| Table of Contents | |
**WENYUAN
GROUP CORP.**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP.)**
****
**FINANCIAL
STATEMENTS AND EXHIBITS**
**INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS**
**Audited
Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023**
| 
Report of Independent Registered Public Accounting Firm (PCAOB ID NO: 2485) | 
| 
F-2 | |
| 
| 
| 
| |
| 
Consolidated Balance Sheets as of December 31, 2024 and 2023 | 
| 
F-3 | |
| 
| 
| 
| |
| 
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2024 and 2023 | 
| 
F-4 | |
| 
| 
| 
| |
| 
Consolidate Statements of Stockholders Equity (Deficit) for the Years Ended December 31, 2024 and 2023 | 
| 
F-6 | |
| 
| 
| 
| |
| 
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 | 
| 
F-5 | |
| 
| 
| 
| |
| 
Notes to Consolidated Financial Statements | 
| 
F-7 | |
| F-1 | |
| Table of Contents | |
| 
| 
| 
17506
Colima Road, Ste 101, 
City
of Industry, CA 91748
Tel:
+1 (626) 581-0818
Fax:
+1 (626) 581-0809 | |
**Report
of Independent Registered Public Accounting Firm**
Shareholders
and Board of Directors
Wenyuan
Group Corp.
Hangzhou,
China
**Opinion
on the Consolidated Financial Statements**
****
We
have audited the accompanying consolidated balance sheets of Wenyuan Group Corp. and subsidiaries (the Company) as of December
31, 2024 and 2023, the related consolidated statements of operation, stockholders equity, and cash flows for each of the two years
in the period ended December 31, 2024, and the related notes. In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2024**,** in conformity with accounting principles generally
accepted in the United States of America.
**Substantial
Doubt About the Companys Ability to Continue as a Going Concern**
****
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described
in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency
that raise substantial doubt about its ability to continue as a going concern. Managements evaluation of the events and conditions
and managements plans regarding these matters are also described in Note 3. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
**Basis
for Opinion**
****
These
consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion
on the Companys consolidated 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 consolidated 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 Companys 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 consolidated 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 consolidated 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 consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
**Critical
Audit Matter**
****
The
critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication
of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or
disclosures to which it relates.
**Legal
Proceeding**
****
As
described in Note 13, the Company has been involved in a legal proceeding and claims arising in the ordinary course of business. This
includes disputes involving a purchase agreement consummated in 2022. Management records liabilities for legal proceedings in instances
where it can reasonably estimate the amount of the loss and when the loss is probable.
We
identified the legal proceeding as a critical audit matter because assessing the reasonableness of managements evaluation of
the legal exposure and the related accounting treatment required significant auditor judgment and effort. This was due to the
complexity of the legal arrangement and multiple parties involved in the purchase transaction, and the evolving status of the
proceedings.
The
primary procedures we performed to address this critical audit matter included:
| 
1) | Reviewed
the underlying purchase agreement, court ruling, and related correspondence to assess the
nature and extent of the Companys legal obligations. | |
| 
2) | Obtained
and evaluated legal responses from the Companys external counsel regarding the probable
outcome and exposure. | |
| 
3) | Assessed
the recognition and measurement of the litigation loss recorded by management, including
the impact of foreign currency exchange fluctuations. | |
| 
4) | Evaluated
the adequacy and accuracy of the related disclosures in the consolidated financial statements,
in accordance with applicable accounting standards. | |
/s/
Simon & Edward, LLP
We
have served as the Companys auditor since 2022.
PCAOB
ID: 2485
Rowland
Heights, California
April
15, 2025
| F-2 | |
| Table of Contents | |
**WENYUAN
GROUP CORP.**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP.)**
****
**CONSOLIDATED
BALANCE SHEETS**
| 
| | 
December 31, 2024 | | | 
December 31, 2023 | | |
| 
| | 
| | | 
| | |
| 
ASSETS | | 
| | | | 
| | | |
| 
Current assets | | 
| | | | 
| | | |
| 
Cash and cash equivalents | | 
$ | 27,208 | | | 
$ | 18,449 | | |
| 
Inventories | | 
| 44,818 | | | 
| 40,373 | | |
| 
Other current assets | | 
| 51,807 | | | 
| 45,628 | | |
| 
Current assets from discontinued operations | | 
| | | | 
| 480,569 | | |
| 
Total current assets | | 
| 123,833 | | | 
| 585,019 | | |
| 
| | 
| | | | 
| | | |
| 
Property and equipment, net | | 
| 262,352 | | | 
| 254,578 | | |
| 
Intangible assets, net | | 
| 2,226 | | | 
| 2,994 | | |
| 
Intangible assets under construction | | 
| 26,030 | | | 
| | | |
| 
Goodwill | | 
| 1,132 | | | 
| 1,132 | | |
| 
TOTAL ASSETS | | 
$ | 415,573 | | | 
$ | 843,723 | | |
| 
| | 
| | | | 
| | | |
| 
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | | 
| | | | 
| | | |
| 
Current liabilities: | | 
| | | | 
| | | |
| 
Accounts payable and accrued liabilities | | 
$ | 302,283 | | | 
$ | 119,469 | | |
| 
Shareholder loan | | 
| 5,575 | | | 
| 198,510 | | |
| 
Loans from third parties | | 
| | | | 
| 84,533 | | |
| 
Advances from customers | | 
| 68 | | | 
| 33,171 | | |
| 
Current liabilities from discontinued operations | | 
| | | | 
| 484,475 | | |
| 
Total current liabilities | | 
| 307,926 | | | 
| 920,158 | | |
| 
| | 
| | | | 
| | | |
| 
TOTAL LIABILITIES | | 
| 307,926 | | | 
| 920,158 | | |
| 
| | 
| | | | 
| | | |
| 
COMMITMENTS AND CONTINGENCIES (Note 13) | | 
| | | | 
| | | |
| 
| | 
| | | | 
| | | |
| 
STOCKHOLDERS EQUITY (DEFICIT) | | 
| | | | 
| | | |
| 
Preferred stock, $0.0001 par value, 50,000,000 authorized, nil shares issued and outstanding | | 
| | | | 
| | | |
| 
Common stock, $0.0001 par value, 550,000,000 authorized, 80,884,279 and 78,775,094 shares issued and outstanding as of December 31, 2024 and 2023, respectively | | 
| 8,089 | | | 
| 7,878 | | |
| 
Additional paid-in capital | | 
| 21,325,264 | | | 
| 19,970,306 | | |
| 
Accumulated deficit | | 
| (21,225,791 | ) | | 
| (20,054,293 | ) | |
| 
Accumulated other comprehensive income (loss) | | 
| 85 | | | 
| (326 | ) | |
| 
TOTAL STOCKHOLDERS EQUITY (DEFICIT) | | 
| 107,647 | | | 
| (76,435 | ) | |
| 
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | | 
$ | 415,573 | | | 
$ | 843,723 | | |
The
accompanying notes are an integral part of these consolidated financial statements.
| F-3 | |
| Table of Contents | |
**WENYUAN
GROUP CORP.**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP.)**
**CONSOLIDATED
STATEMENTS OF OPERATIONS AND**
**OTHER
COMPREHENSIVE INCOME (LOSS)**
| 
| | 
2024 | | | 
2023 | | |
| 
| | 
Years Ended December 31, | | |
| 
| | 
2024 | | | 
2023 | | |
| 
| | 
| | | 
| | |
| 
Revenues | | 
| | | | 
| | | |
| 
Consulting service income | | 
$ | | | | 
$ | 15,004 | | |
| 
Online product sales | | 
| | | | 
| 6,082 | | |
| 
Offline product sales related party | | 
| 17,075 | | | 
| | | |
| 
Offline product sales | | 
| 43,210 | | | 
| | | |
| 
Total revenues | | 
| 60,285 | | | 
| 21,086 | | |
| 
| | 
| | | | 
| | | |
| 
Cost of revenues | | 
| | | | 
| | | |
| 
Product sales | | 
| 39,140 | | | 
| 2,199 | | |
| 
Total cost of revenues | | 
| 39,140 | | | 
| 2,199 | | |
| 
Gross profit | | 
| 21,145 | | | 
| 18,887 | | |
| 
| | 
| | | | 
| | | |
| 
Operating expenses: | | 
| | | | 
| | | |
| 
Professional expenses | | 
| 83,910 | | | 
| 169,255 | | |
| 
Share-based compensation | | 
| 501,346 | | | 
| 576,000 | | |
| 
Selling, general and administrative expenses | | 
| 284,319 | | | 
| 287,830 | | |
| 
Total operating expenses | | 
| 869,575 | | | 
| 1,033,085 | | |
| 
| | 
| | | | 
| | | |
| 
Loss from operations | | 
| (848,430 | ) | | 
| (1,014,198 | ) | |
| 
| | 
| | | | 
| | | |
| 
Other income (expenses): | | 
| | | | 
| | | |
| 
Interest expenses | | 
| (26 | ) | | 
| (365 | ) | |
| 
Other loss | | 
| (68,654 | ) | | 
| | | |
| 
Reserve for litigation loss | | 
| (264,071 | ) | | 
| | | |
| 
Other income (expense), net | | 
| 4,121 | | 
| (7,989 | ) | |
| 
Total other expenses, net | | 
| (328,630 | ) | | 
| (8,354 | ) | |
| 
| | 
| | | | 
| | | |
| 
Net loss from continuing operations before income tax | | 
| (1,177,060 | ) | | 
| (1,022,552 | ) | |
| 
Income tax expense | | 
| 970 | | | 
| | | |
| 
Net loss from continuing operations | | 
| (1,178,030 | ) | | 
| (1,022,552 | ) | |
| 
| | 
| | | | 
| | | |
| 
Gain (loss) from discontinued operations (including disposal gain of $3,404 for the year ended December 31, 2024) | | 
| 6,532 | | | 
| (3,906 | ) | |
| 
Net loss | | 
$ | (1,171,498 | ) | | 
$ | (1,026,458 | ) | |
| 
| | 
| | | | 
| | | |
| 
Other comprehensive income (loss) | | 
| | | | 
| | | |
| 
Foreign currency translation gain (loss) | | 
| 411 | | | 
| (6,166 | ) | |
| 
Comprehensive loss | | 
$ | (1,171,087 | ) | | 
$ | (1,032,624 | ) | |
| 
| | 
| | | | 
| | | |
| 
Weighted average shares outstanding: | | 
| | | | 
| | | |
| 
Basic and diluted | | 
| 80,115,484 | | | 
| 79,197,184 | | |
| 
| | 
| | | | 
| | | |
| 
Loss per share: | | 
| | | | 
| | | |
| 
Continuing operations | | 
$ | (0.01 | ) | | 
$ | (0.01 | ) | |
| 
Discontinued operations | | 
| 0.00 | | | 
| (0.00 | ) | |
| 
Basic and diluted | | 
$ | (0.01 | ) | | 
$ | (0.01 | ) | |
The
accompanying notes are an integral part of these consolidated financial statements.
| F-4 | |
| Table of Contents | |
**WENYUAN
GROUP CORP.**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP.)**
**CONSOLIDATED
STATEMENTS OF CASH FLOWS**
| 
| | 
2024 | | | 
2023 | | |
| 
| | 
Years ended December 31, | | |
| 
| | 
2024 | | | 
2023 | | |
| 
Cash flows from operating activities: | | 
| | | | 
| | | |
| 
Net loss | | 
$ | (1,171,498 | ) | | 
$ | (1,026,458 | ) | |
| 
Adjustment to reconcile net loss used in operating activities: | | 
| | | | 
| | | |
| 
(Gain) Loss from discontinued operations | | 
| (6,532 | ) | | 
| 3,906 | | |
| 
Depreciation and amortization | | 
| 14,528 | | | 
| 12,604 | | |
| 
Bad debt expense | | 
| | | | 
| 6,359 | | |
| 
Other loss | | 
| 68,654 | | | 
| | | |
| 
Share-based compensation | | 
| 501,346 | | | 
| 576,000 | | |
| 
Changes in operating assets and liabilities: | | 
| | | | 
| | | |
| 
Other current assets | | 
| (4,911 | ) | | 
| 12,130 | | |
| 
Accounts receivable | | 
| | | | 
| (6,359 | ) | |
| 
Inventories | | 
| (5,640 | ) | | 
| (40,495 | ) | |
| 
Accounts payable and accrued liabilities | | 
| 183,190 | | | 
| 90,430 | | |
| 
Advances from customers | | 
| (32,653 | ) | | 
| 33,271 | | |
| 
Net cash used in operating activities from continuing operations | | 
| (453,516 | ) | | 
| (338,612 | ) | |
| 
Net cash provided by operating activities from discontinued operations | | 
| | | | 
| 3 | | |
| 
Net cash used in operating activities | | 
| (453,516 | ) | | 
| (338,609 | ) | |
| 
| | 
| | | | 
| | | |
| 
Cash flows from investing activities: | | 
| | | | 
| | | |
| 
Purchase of property and equipment | | 
| (28,849 | ) | | 
| | | |
| 
Acquisition of intangible assets | | 
| (21,126 | ) | | 
| | | |
| 
Net cash used in investing activities | | 
| (49,975 | ) | | 
| | | |
| 
| | 
| | | | 
| | | |
| 
Cash flows from financing activities: | | 
| | | | 
| | | |
| 
Proceeds from third parties loans | | 
| 30,495 | | | 
| 87,705 | | |
| 
Proceeds from a shareholders loan | | 
| 21,319 | | | 
| 142,008 | | |
| 
Repayment to a shareholder | | 
| (211,646 | ) | | 
| (45,307 | ) | |
| 
Cash proceeds from issuances of common stocks | | 
| 670,402 | | | 
| 109,234 | | |
| 
Net cash provided by financing activities | | 
| 510,570 | | | 
| 293,640 | | |
| 
| | 
| | | | 
| | | |
| 
Effect of exchange rate changes in cash and cash equivalents | | 
| 1,680 | | | 
| (4,700 | ) | |
| 
Net increase (decrease) in cash and cash equivalents | | 
| 8,759 | | | 
| (49,669 | ) | |
| 
Cash and cash equivalents, beginning balance | | 
| 18,449 | | | 
| 68,121 | | |
| 
Less: cash and cash equivalents, ending balance from discontinued operations | | 
| | | | 
| (3 | ) | |
| 
Cash and cash equivalents, ending balance | | 
$ | 27,208 | | | 
$ | 18,449 | | |
| 
| | 
| | | | 
| | | |
| 
Supplement Disclosures: | | 
| | | | 
| | | |
| 
Interest paid | | 
$ | | | | 
$ | | | |
| 
Income tax paid | | 
$ | | | | 
$ | | | |
| 
| | 
| | | | 
| | | |
| 
Supplemental Disclosures of Non-Cash Investing and Financing Activities | | 
| | | | 
| | | |
| 
Acquisition of intangible assets settled by accrued liabilities | | 
$ | 5,281 | | | 
$ | | | |
| 
Repayment of commercial loan by related party on behalf of the Company | | 
$ | | | | 
$ | 14,050 | | |
| 
Common stocks issued for debt settlement | | 
$ | 114,767 | | | 
$ | | | |
The
accompanying notes are an integral part of these financial statements
| F-5 | |
| Table of Contents | |
**WENYUAN
GROUP CORP.**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP.)**
**CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT)**
| 
| | 
Preferred Stock Shares | | | 
Preferred Stock Amount | | | 
Common Stock Shares | | | 
Common Stock Amount | | | 
Additional Paid-in Capital | | | 
Accumulated Deficit | | | 
Accumulated Other Comprehensive Income (loss) | | | 
Total Equity (Deficit) | | |
| 
Balance December 31, 2022 | | 
| | | | 
$ | | | | 
| 74,108,926 | | | 
$ | 7,411 | | | 
$ | 19,285,539 | | | 
$ | (19,027,835 | ) | | 
$ | 5,840 | | | 
$ | 270,955 | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Share-based compensation | | 
| | | | 
| | | | 
| 5,380,000 | | | 
| 538 | | | 
| 575,462 | | | 
| | | | 
| | | | 
| 576,000 | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Common shares issued for cash | | 
| | | | 
| | | | 
| 486,168 | | | 
| 49 | | | 
| 109,185 | | | 
| | | | 
| | | | 
| 109,234 | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Share cancellation | | 
| | | | 
| | | | 
| (1,200,000 | ) | | 
| (120 | ) | | 
| 120 | | | 
| | | | 
| | | | 
| | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Net loss | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| (1,026,458 | ) | | 
| | | | 
| (1,026,458 | ) | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Foreign currency translation loss | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| (6,166 | ) | | 
| (6,166 | ) | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Balance December 31, 2023 | | 
| | | | 
$ | | | | 
| 78,775,094 | | | 
$ | 7,878 | | | 
$ | 19,970,306 | | | 
$ | (20,054,293 | ) | | 
$ | (326 | ) | | 
$ | (76,435 | ) | |
| 
Balance | | 
| | | | 
$ | | | | 
| 78,775,094 | | | 
$ | 7,878 | | | 
$ | 19,970,306 | | | 
$ | (20,054,293 | ) | | 
$ | (326 | ) | | 
$ | (76,435 | ) | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Share-based compensation | | 
| | | | 
| | | | 
| 1,550,000 | | | 
| 155 | | | 
| 569,845 | | | 
| | | | 
| | | | 
| 570,000 | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Common shares issued for cash | | 
| | | | 
| | | | 
| 1,428,161 | | | 
| 143 | | | 
| 670,259 | | | 
| | | | 
| | | | 
| 670,402 | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Share cancellation | | 
| | | | 
| | | | 
| (1,200,000 | ) | | 
| (120 | ) | | 
| 120 | | | 
| | | | 
| | | | 
| | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Shares issued for debt settlement | | 
| | | | 
| | | | 
| 331,024 | | | 
| 33 | | | 
| 114,734 | | | 
| | | | 
| | | | 
| 114,767 | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Net loss | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| (1,171,498 | ) | | 
| | | | 
| (1,171,498 | ) | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Foreign currency translation gain | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| 411 | | | 
| 411 | | |
| 
Foreign currency translation gain (loss) | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| 411 | | | 
| 411 | | |
| 
| | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | | 
| | | |
| 
Balance December 31, 2024 | | 
| | | | 
$ | | | | 
| 80,884,279 | | | 
$ | 8,089 | | | 
$ | 21,325,264 | | | 
$ | (21,225,791 | ) | | 
$ | 85 | | | 
$ | 107,647 | | |
| 
Balance | | 
| | | | 
$ | | | | 
| 80,884,279 | | | 
$ | 8,089 | | | 
$ | 21,325,264 | | | 
$ | (21,225,791 | ) | | 
$ | 85 | | | 
$ | 107,647 | | |
The
accompanying notes are an integral part of these consolidated financial statements
| F-6 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
1 ORGANIZATION AND PRINCIPAL ACTIVITIES**
Wenyuan
Group Corp. (fka. Longwen Group Corp.) (the Company) was originally incorporated as Expertelligence, Inc on March 31, 1980
and reincorporated in the State of Nevada on November 17, 2005. On January 23, 2017, after a series of various name changes, the Company
amended its Articles of Incorporation (Charter Amendment) to affect the current name change of Longwen Group Corp. with
trading symbol of LWLW.
On
or about April 5, 2016, the Company affected a 1 for 750 share reverse split of its issued and outstanding common stocks and reduced
to 127,061 shares outstanding. Effective November 29, 2016, 66,667 shares of common stock of the Company were transferred to Longwen
Group Corp., a Cayman Island company (Longwen Cayman). All of the shares held by Longwen Cayman are restricted securities.
As a result of the transactions, Mr. Xizhen Ye, President of Longwen Cayman, was appointed as a sole Director of the Company, and President
and Chief Executive Officer and Chief Financial Officer of the Company. On August 22, 2018, Mr. Lizhong Lu was appointed as a director
of Board.
On
June 9, 2021, Anthony Lombardo (Lombardo) filed an Application for Appointment of Custodian (Application)
with the Eighth Judicial District Court in Nevada to request the custodianship of the Company due to the Companys non-response
and late filing with the State of Nevada. On June 24, 2021, a hearing was held on this Application, where Lombardo was named temporary
custodian of the Company. Subsequently after Lombardos custodianship, Deanna Johnson was appointed as the CEO, CFO and Secretary
of the Company. On September 1, 2021, Deanna Johnson appointed Joseph Passalaqua (Joseph) as CEO, CFO and Secretary and
resigned from all positions in the Company.
On
October 25, 2021, Mr. Xizhen Ye (Ye), the ex-officer and director of the Company prior to Lombardos custodianship,
and Longwen Cayman, filed a motion to dissolve custodianship (Motion) with the Eighth Judicial District Court of Nevada
State. Pursuant to the Settlement Agreement entered on January 12, 2022, by Longwen Cayman, Mr. Ye, Lombardo, Joseph and Deanna Johnson
regarding Lombardos custodianship, Mr. Ye and Mr. Lizhong Lu were reinstated as the officer and directors of the Company, and
65,000,000 common stocks of the Company was transferred from Joseph to Mr. Ye on February 9, 2022. Further on February 17, 2022, the
Eighth Judicial District Court officially terminated Lombardos custodianship over the Company. On April 23, 2024, pursuant to
the Companys majority shareholder consent and board approval dated on April 5, 2024, the Company amended its Article of Incorporation
with Nevada State and changed its name to Wenyuan Group Corp. On January 21, 2025, pursuant to a review by the Financial Industry Regulatory
Authority (FINRA), the Companys name was officially changed to Wenyuan Grop Corp. with the OTC Markets, and the
Companys stock symbol was changed to WYGC on the same date.
On
February 23, 2022, the Company entered into an Acquisition Agreement with a third-party individual to acquire the 100% ownership of Hangzhou
Wenyuan Enterprise Management Co., Ltd. (Hangzhou Wenyuan) (fka. Hangzhou Longwen Enterprise Management Co., Ltd or Hangzhou
Longwen), a wholly foreign-owned enterprise (WOFE) in Hangzhou, the Peoples Republic of China (the PRC),
for a total cash consideration of $1,000. As a result of the acquisition, Hangzhou Wenyuan became the Companys wholly owned subsidiary
in the PRC. Hangzhou Wenyuan was originally registered on January 4, 2012 and has minimum operations since its inception. The Company
recognize $993 goodwill upon consummated the acquisition.
On
October 11, 2022, the Company and its subsidiary, Hangzhou Wenyuan entered into an Acquisition Agreement with a third-party individual
to acquire 100% ownership of Hangzhou Wenyuan Art and Culture Co., Ltd. (HWAC) (fka. Hangzhou Yusu Trading Co., Ltd. or
Hangzhou Yushu), a limited liability company in Hangzhou, the Peoples Republic of China (the PRC),
for a total cash consideration of RMB 1,000 or about USD $141. Upon consummated HWAC became Hangzhou Wenyuans wholly owned subsidiary
in the PRC. HWAC was originally registered on April 20, 2020 and has had minimum operations since its inception. The Company recognize
goodwill of $139 upon consummated the acquisition. On April 10, 2024, Hangzhou Yusu was renamed to Hangzhou Wenyuan Art and Culture Co.,
Ltd (HWAC).
On
March 3, 2023, Hangzhou Wenyuan established a new subsidiary, Hangzhou
Wenyuan Internet Technology Co., Ltd. (HWIT) (fka. Huzhou Wohong Fishery Co., Ltd. or HWF),
to operate the aquacultural breeding, wholesale and retail of aquaculture products and etc. Due to the change in the economic situation
and lower-than-expected sales of aquacultural products, our management decided to change the HWFs operations and on March 27,
2024, HWF entered into an agreement with a counterparty to sell certain assets and liabilities of HWF. HWF was identified as discontinued
operations with aquacultural products sales. Such assets and liabilities are classified as assets and liabilities held for sale, and
the sale was closed on March 27, 2024.
| F-7 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its subsidiaries as described in Note 1. All significant
intercompany transactions and balances have been eliminated in the consolidation.
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP)
and the rules and regulations of the Securities and Exchange Commission (the SEC).
Use
of Estimates
The
preparation of the Companys consolidated financial statements in conformity with GAAP requires management to make estimates, judgments
and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those
estimates and assumptions. Signiant estimates are used in the useful lives and impairment of property and equipment, the valuation of
deferred tax assets, share-based compensation, accounting estimates used in the business combination, among others.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash in banks, bank deposits, and highly liquid investments with maturities of three months or less at the
date of origination.
Property
and equipment 
Depreciation
on property and equipment is recognized on a straight-line basis over the estimated useful lives of the assets, for which the remaining
term of the legal title for the office space and 3 years for office equipment.
Goodwill
and intangible Assets
Goodwill
is recorded when the consideration paid for an acquisition of a business exceeds the fair value of the identifiable net tangible and
intangible assets acquired.
Goodwill
is tested for impairment, at a minimum, on an annual basis at the reporting unit level by first performing a qualitative assessment to
determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting
unit does not pass the qualitative assessment, then the reporting units carrying value is compared to its fair value. Goodwill
is considered impaired if the carrying value of the reporting unit exceeds its fair value. The Companys policy is to perform its
annual impairment test of goodwill as of December 31 of each fiscal year. Based on our most recent annual impairment assessment, we determined
that no adjustment to the carrying value of goodwill of our reporting unit as required.
Intangible
assets with definite use life are amortized on a straight-line basis over the estimate useful lives of the assets.
**Impairment
of Long-Lived Assets**
The
Company evaluates property and equipment and finite-lived intangible assets for impairment whenever events or circumstances indicate
that the carrying amounts of such assets may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset
or an asset group to estimated undiscounted future net cash flows expected to be generated. If the carrying amount of the longlived
asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying
amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted
market values, and thirdparty independent appraisals, as considered necessary. The Company determined that the values of its long-lived
assets as of December 31, 2024 and 2023, are supportable and recoverable.
Nonmonetary Exchange
The
Company accounts for nonmonetary exchanges in accordance with ASC 845, Nonmonetary Transactions. A nonmonetary exchange is recognized
when the transaction has commercial substance and the fair value of the assets exchanged can be reliably measured. The Company measures
the exchanged assets at fair value, with any resulting gain or loss recognized in earnings. If the transaction lacks commercial substance
or fair value is not determinable, the asset received is recorded at the carrying amount of the asset surrendered. Gains or losses are
not recognized in such cases. The Company evaluates each transaction individually to determine the appropriate accounting treatment.
Foreign
Currency Transactions
The
Companys consolidated financial statements are presented in U.S. dollars ($), which is the Companys reporting and functional
currency. The functional currency of the Companys subsidiaries is RMB. The resulting translation adjustments are reported under
other comprehensive loss in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic 220 (ASC 220), Reporting Comprehensive Income. Gains and losses resulting from
the translation of foreign currency transactions are reflected in the consolidated statements of operations and other comprehensive income.
Monetary assets and liabilities denominated in foreign currency are translated at the functional currency using the rate of exchange
prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in
the consolidated statements of operations and other comprehensive income (loss).
The
Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the
statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the
translation from RMB into U.S. dollars are recorded in shareholders equity as part of accumulated other comprehensive loss. The
exchange rate used for financial statements are as follows:
| F-8 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**
****
SCHEDULE
OF EXCHANGE RATE USED FOR FINANCIAL STATEMENTS
| 
| | 
2024 | | 
2023 | | |
| 
| | 
Exchange rate at December 31, | |
| 
| | 
2024 | | 
2023 | | |
| 
Chinese Yuan (RMB) | | 
RMB | | 
| 7.2993 | | | 
| RMB | | | 
| 7.0978 | | |
| 
United States Dollar ($) | | 
| | 
| 1.000 | | | 
| | | | 
$ | 1.000 | | |
| 
| | 
2024 | | 
2023 | | |
| 
| | 
Average exchange rate | |
| 
| | 
2024 | | 
2023 | | |
| 
For the year ended December 31, | | 
| | 
| | | 
| | | 
| | |
| 
Chinese Yuan (RMB) | | 
RMB | | 
| 7.1950 | | | 
| RMB | | | 
| 7.0764 | | |
| 
United States Dollar ($) | | 
| | 
| 1.000 | | | 
| | | | 
$ | 1.000 | | |
Revenue
Recognition
The
Company recognizes revenue when a customer obtains control of promised products or services, in an amount that reflects the consideration
expected to be received in exchange for those products or services. The Company follows the five-step model prescribed under Topic 606:
(i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the
Company satisfies each performance obligation. Revenues are presented net of any sales or value added taxes collected from customers
and remitted to the government.
The
Companys consulting service income consists of the delivery of focused insights and recommendations that assist customers with
their challenges in developing and executing strategies around their trade business and financial reporting processes. The consulting
services provided are fixed-fee arrangements that are generally in one-year term. The Company has concluded that each contract represents
a single performance obligation as each is a single promise to deliver a customized engagement and deliverable. For the majority of these
services, either practically or contractually, the work performed and delivered to the customer has no alternative use to the Company.
Additionally, the Company maintains an enforceable right to payment at all times throughout the contract.
The
Companys online product sales consists of selling products to end customers through online channel, such as apps embedded in Wechat.
Revenue is recognized at a point in time when the product is delivered to and accepted by end customers. 
The
Companys aquaculture product sales consist of selling aquacultural products to customers through offline channel. Revenue is recognized
at a point in time when the products are delivered to and accepted by end customers. The Company concludes the presentation of revenue
generated from selling of aquaculture products is at a gross basis as the Company acts as a principal by controlling sales transactions
provided to their customers. Due to the change of the economic situation and the sales of aquacultural products was not as expected,
the management intended to change the Companys operations and on March 27, 2024, the Company entered into an agreement with a
counterparty to sell certain assets and liabilities of HWF. HWF was identified as discontinued operations with aquacultural products.
Income
Taxes
The
Company accounts for income taxes under ASC 740, *Income Taxes*. Under the asset and liability method of ASC 740,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated
financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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 income in the
period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the
Company will not realize tax assets through future operations.
| F-9 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**
Business
Combination 
We
allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired
based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable
assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination.
Share-based
Compensation
The
Company accounts for stock options and other equity-based compensation issued in accordance with ASC 718 Stock Compensation,
which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards
that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based
compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees requisite service
period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718.
ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported.
Earnings
Per Share
Basic
earnings per common share (EPS) is computed by dividing net income attributable to the common shareholders of the Company
by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number
of shares includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been
issued. As of December 31, 2024 and 2023, the Company does not have any potentially dilutive instrument.
Fair
Value Measurements
Fair
value accounting establishes a framework for measuring fair value and expands disclosure about fair value measurements. Fair value, which
is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three levels as follows:
| 
| 
| 
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| 
| 
| 
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments. | |
| 
| 
| 
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value. | |
| F-10 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**
Fair
Value Measurements (continued)
As
of December 31, 2024 and 2023, the Company did not have any assets or liabilities that were required to be measured at fair value on
a recurring basis or on a non-recurring basis. The carrying amounts of the Companys cash, accounts receivable, prepaid expenses
and other current assets, shareholder loan, commercial loans, accounts payable and accrued liabilities, and deferred revenue approximate
fair value because of the short maturity of these items.
Related
Parties
The
Company follows ASC 850, *Related Party Disclosures,* for the identification of related parties and disclosure of related party
transactions.
Segment
Reporting
The Company
adopted ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures (ASU 2023-07) on January 1, 2024
retrospectively, which focuses on improving reportable segment disclosure requirements, primarily through enhanced disclosures about
significant segment expenses. The Company reports segment information based on the management approach. The management
approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Companys
reportable segments. During the years ended December 31, 2024 and 2023, the Company had one single segment based on management structure
located in Hangzhou, PRC. Because substantially all of the Companys long-lived assets and revenues are located in and derived
from the PRC, the Company does not distinguish between markets for the purpose of internal reporting, and therefore, geographical segments
are not presented. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. Since the
Company operates in one segment, segment revenue, profit or loss required by Segment Reporting is disclosed in the consolidated
statements of operations and other comprehensive income (loss). The Company determines that selling, general and administrative expenses
(SG&A) are the significant segment expenses. SG&A expenses for the years ended December 31, 2023 and 2024 were
$287,830 and $284,319, respectively. Other segment items, representing the aggregated residual amount reconciling from segment revenue,
significant segment expense and segment profit or loss, mainly professional fees and personnel compensation expenses.
Commitments
and Contingencies 
In
the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business,
that might cover a wide range of matters. Liabilities for the contingencies are recorded when it is probable that a liability has been
incurred and the amount of the liability can be reasonably estimated. Certain conditions may exist as of the date the consolidated 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 these contingent liabilities, which inherently involves judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or unasserted claims that may result in legal proceedings, the Company,
in consultation with its legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought therein. 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, the estimated liability would be accrued in
the consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, or is
probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of the reasonably possible
loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the nature of the guarantee would be disclosed.
Accounting
Standards Issued Recently Adopted
*Segment Reporting*
In November 2023, the FASB issued ASU 2023-07, *Segment
Reporting (Topic 280)*: *Improvements to Reportable Segment Disclosures*. The amended guidance requires incremental reportable
segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment
to provide all disclosures required by these amendments, and all existing segment disclosures. The amendments will be applied retrospectively
to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim
periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of ASU No.
2023-07 did not have a material impact on its financial position and results of operations.
Accounting
Standards Issued but Not Yet Adopted
In
December 2023, the FASB issued ASU 2023-09, *Income Taxes (Topic 740): Improvements to Income Tax Disclosures*. The amended guidance
enhances income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid information. This guidance
requires disclosure of specific categories in the effective tax rate reconciliation and further information on reconciling items meeting
a quantitative threshold. In addition, the amended guidance requires disaggregating income taxes paid (net of refunds received) by federal,
state, and foreign taxes. It also requires disaggregating individual jurisdictions in which income taxes paid (net of refunds received)
is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amended guidance is effective for fiscal
years beginning after December 15, 2024. The guidance can be applied either prospectively or retrospectively. The Company is currently
in the process of evaluating the impact this amended guidance may have on the footnotes to our consolidated financial statements.
In
November 2024, the FASB issued ASU No. 2024-03,Disaggregation of Income Statement Expenses(ASU 2024 03), and
in January 2025, the FASB issued ASU No. 2025-01,Clarifying the Effective Date(ASU 2025-01). The amendments
are intended to enhance disclosures regarding an entitys costs and expenses by requiring additional disaggregated information
disclosures about certain income statement expense line items. The amendments, as clarified by ASU 2025-01, are effective for fiscal
years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is
permitted. The Company is currently in the process of evaluating the impact this amended guidance may have on the footnotes to our consolidated
financial statements.
There
were also other updates recently issued and the management does not believe that other than those disclosed above, accounting
pronouncements recently issued but not yet adopted will have a material impact on its financial position results of operations
or cash flows.
| F-11 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
3 GOING CONCERN**
The
Companys consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and settlement of liabilities and commitments in the normal course of business. During the year ended December 31, 2024, the Company
incurred a net loss of $1,171,498 and had an accumulated deficit of $21,225,791 as of December 31, 2024. These factors, among others,
raise substantial doubt about the Companys ability to continue as a going concern.
The
Companys future success is dependent upon its ability to acquire or expand businesses with profitable operations, generate cash
from operating activities and obtain additional financing. The Company intends to raise funds from the issuance of equity and/or debt
securities, but there is no assurance that additional funds from the issuance of equity will be available for the Company to finance
its operations on acceptable terms, or at all. These consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
**NOTE
4 OTHER CURRENT ASSETS**
As
of December 31, 2024 and 2023, prepaid expenses and other current assets comprised as follows:
SCHEDULE
OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
| 
| | 
December 31, 2024 | | | 
December 31, 2023 | | |
| 
| | 
| | | 
| | |
| 
Prepaid OTC fee | | 
$ | 17,320 | | | 
$ | 16,713 | | |
| 
Prepaid rent and parking lot | | 
| 12,434 | | | 
| 2,788 | | |
| 
Prepayments to suppliers and other | | 
| 22,053 | | | 
| 26,127 | | |
| 
Total | | 
$ | 51,807 | | | 
$ | 45,628 | | |
**NOTE
5 PROPERTY AND EQUIPMENT, NET**
As
of December 31, 2024 and 2023, property and equipment consisted of the following:
SCHEDULE
OF PROPERTY AND EQUIPMENT, NET
| 
| | 
December 31, 2024 | | | 
December 31, 2023 | | |
| 
| | 
| | | 
| | |
| 
Equipment | | 
$ | 35,446 | | | 
$ | 7,209 | | |
| 
Property | | 
| 256,373 | | | 
| 263,651 | | |
| 
Less: accumulated depreciation | | 
| (29,467 | ) | | 
| (16,282 | ) | |
| 
Total property and equipment, net | | 
$ | 262,352 | | | 
$ | 254,578 | | |
On
September 28, 2022, the Company consummated an office suite purchase agreement with a third party. Pursuant to the agreement, the
Company issued 2,651,780
common stocks of the Company to purchase a 118-square-meter office suite located in Hangzhou City, Zhejiang Province, China. The
cost of the office suite was measured at the fair value of the issued common stocks on the closing date of $265,178
less value-added tax of $2,108.
The difference of $581
between the addition of $263,070
and the cost as of December 31, 2023 is due to the fluctuation of the foreign exchange rate. The difference of $6,697
between the addition of $263,070
and the cost as of December 31, 2024 is due to the fluctuation of the foreign exchange rate. Upon closing of the agreement, the
Company agreed to act as the guarantor for the liability owed by the third party in the amount of $264,071
(RMB 1,900,000)
associated with the office suite. During the year ended December 31, 2024, the Company was sued by the creditor due to the default
by the third party. The litigation has not concluded as of December 31, 2024 and the reporting date. During the year, the Company
recognized a litigation loss of $264,071
given the unfavourable outcome based on managements best estimate.
Depreciation
expenses were $12,523
and $12,074 for the
years ended December 31, 2024 and 2023, respectively, which were included in selling, general and administrative expenses on the
consolidated statements of operations and other comprehensive income. The difference with the change in accumulated depreciation was
due to fluctuation in the exchange rate.
| F-12 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
6 INTANGIBLE ASSETS, NET**
During
the year ended December 31, 2022, HWAC paid a developing fee of $3,517
in cash to a third party in designing and developing an application which can be embedded in certain large online platforms. The
Company intends to use the application for online product sales, with an estimated useful life of 5
years. As of December 31, 2024 and 2023, the application was ready for use and the carrying value of the intangible assets
totaled $2,226
and $2,994,
respectively.
During
the year ended December 31, 2024, HWAC entered into a contract with a third party to develop an online application and platform for
its sale of products, for a total contract amount of RMB 380,000
(approximately $52,060).
As of December 31, 2024, the progress of completion is estimated at 50%, and the Company has paid RMB 152,000
(approximately $21,126),
with RMB 38,000
(approximately $5,281)
in accrued liabilities. As of December 31, 2024, the intangible assets under construction were $26,030.
The difference of $377
is due to fluctuation in foreign exchange.
**NOTE
7 LOANS FROM THIRD PARTIES**
The
Companys loans from third parties consisted of the following as of December 31, 2024 and 2023:
SCHEDULE
OF LOANS FROM THIRD PARTIES
| 
| | 
December 31, 2024 | | | 
December 31, 2023 | | |
| 
Loan from a third-party lender; unsecured, bearing an interest rate of 0.5% per annum, and due in one year | | 
$ | | | | 
$ | 84,533 | | |
| 
Total loans | | 
| | | | 
| 84,533 | | |
| 
Less: current portion | | 
| | | | 
| (84,533 | ) | |
| 
Total non-current portion | | 
$ | | | | 
$ | | | |
During
the three months ended March 31, 2023, the Company borrowed $87,705 (RMB 600,000) from a third-party individual. The loans are unsecured,
bearing an interest rate of 0.5% per annum, and due in one year. On February 18, 2024, the Company entered into a debt settlement agreement
with the third party. Pursuant to the agreement, the Company issued 279,490 common stocks with total fair value of $83,847 to settlement
the total loan principal and interest payable of $83,847 (RMB 603,000), which resulted in no gain or loss. The change in value as of
transaction date was due to the fluctuation in foreign exchange rates. The interest expenses were not material for the years ended December
31, 2024 and 2023.
During
the three months ended June 30, 2024, the Company borrowed $30,495 (RMB 220,000) from three third-party individuals. The loans are unsecured,
bearing an interest rate of 0.5% per annum, and due in one year. On October 23, 2024, the Company converted the above loans, including
accrued interest with the three third-party individuals, to exchange issuance of 51,534 shares of the common stock of the Company, at
$0.60 per share.
On
December 31, 2019, the Company entered into a loan agreement of $12,250
with a third-party individual with a three-year term. The borrowing bears interest of $300
at the effective date of the contract and fixed rate at $500
per annum, which matured on December
31, 2022 and immediately became due on demand. As of December 31, 2022, the outstanding balance of the borrowing was $12,250
with $1,800
interest payable. During the three months ended March 31, 2023, the loan and interest payable in the total amount of $14,050
was repaid by the wife of the President, on behalf of the Company.
In
the first quarter of 2023, the Company borrowed $46,776
(RMB 320,000)
from two third-party individuals through HWF. The loans were unsecured, non-interest-bearing, and due on December
30, 2023. After the first quarter of 2023, the Company borrowed an additional $76,934
(RMB 550,000)
and repaid $123,710
(RMB 870,000)
to the two individuals. As of December 31, 2023, the loans are fully paid off.
**NOTE
8 INCOME TAX**
As
of December 31, 2024 and 2023, the Company has incurred an accumulated net loss of approximately $21.0 million and $20.0 million which
resulted in a net operating loss (NOL) for income tax purposes. NOLs can carry forward indefinitely up to offset 80 percent
of taxable income after CARES Act effect on December 31, 2017. The deferred tax asset has been fully reserved for valuation allowance
as the Company believes they will most-likely-than-not realize the benefits.
| F-13 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
8 INCOME TAX (CONTINUED)**
Significant
components of the deferred tax assets and liabilities for income taxes as of December 31, 2024 and 2023 consisted of the following:
SCHEDULE
OF DEFERRED TAX ASSETS AND LIABILITIES
| 
| 
December 31, 2024 | | | 
December 31, 2023 | | |
| 
Deferred tax assets | | 
| | | 
| | |
| 
Net operating loss carry-forward | | 
$ | 1,093,917 | | | 
$ | 846,531 | | |
| 
Total | | 
$ | 1,093,917 | | | 
$ | 846,531 | | |
| 
Valuation allowance | | 
| (1,093,917 | ) | | 
| (846,531 | ) | |
| 
Net deferred tax assets - noncurrent | | 
$ | | | | 
$ | | | |
Reconciliation
of income tax provision and the accounting profit multiplied by U.S. federal income tax rate for the years ended December 31, 2024 and
2023:
SCHEDULE
OF RECONCILIATION OF INCOME TAX PROVISION
| 
| | 
2024 | | | 
2023 | | |
| 
| | 
For the year ended December 31, | | |
| 
| | 
2024 | | | 
2023 | | |
| 
Loss at 21% statutory tax rate | | 
$ | (247,386 | ) | | 
$ | (215,556 | ) | |
| 
Permanent differences | | 
| | | | 
| | | |
| 
Increase (decrease) in income taxes resulting from: | | 
| | | | 
| | | |
| 
Net operating loss carry forward | | 
| | | | 
| | | |
| 
Change in valuation allowance | | 
$ | 248,356 | | | 
$ | 215,556 | | |
| 
Income tax provision | | 
| 970 | | 
| | | |
**NOTE
9 STOCKHOLDERS EQUITY**
As
of December 31, 2024 and 2023, the Company had 80,884,279 and 78,775,094 shares of common stock issued and outstanding, respectively.
In
May and June 2023, the Company sold a total of 336,168 shares of common stock to forty-nine (49) non-U.S. investors at $0.20 per share
for cash consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities.
No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
In
December 2023, the Company sold a total of 150,000 shares of common stock to three (3) non-U.S. investors at $0.28 per share for cash
consideration. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions
were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
During
the three months ended March 31, 2024, the Company sold 621,649 shares of common stock to fifteen non-U.S. investors at $0.30 per share,
with total proceeds of $186,494 received in cash. Additionally, during the three months ended June 30, 2024, the Company issued 367,673
shares of common stock to individual non-U.S. investors at $0.60 per share, with total proceeds of $220,604 received in cash, which $62,184
received during the three months ended March 31, 2024. For the three months ended September 30, 2024, the Company sold 415,465 shares
of common stock to ten non-U.S. investors at $0.60 per share, with total proceeds of $249,279 received in cash. On October 23, 2024,
the Company issued 23,375 shares of common stocks to a non-U.S. investor at $0.60 per share for a total cash consideration of $14,025.
The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were
paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
On
February 18, 2024, the Company converted a loan in the total amount of $83,847 with a related party, to exchange issuance of 279,490
shares of the common stock of the company to the related party, at $0.30 per share.
On
October 23, 2024, the Company issued 51,534 shares of common stocks to settle loan payable of $30,920 from three non-U.S. third party
individuals, at a fair value of $0.60 per share. The settlement resulted in no gain or loss.
| F-14 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
9 STOCKHOLDERS EQUITY (CONTINUED)**
*2022
Equity Incentive Plan*
On
November 7, 2022, the Board adopted an equity incentive plan to increase stockholder value and to advance the interests of the Company
by furnishing a variety of economic incentives (Incentives) designed to attract, retain and motivate employees, certain
key consultants and directors of the Company (the 2022 Equity Incentive Plan). Under the 2022 Equity Incentive Plan, the
Company can issue up to 10,000,000 shares of common stock of the Company. Incentives may be granted in any one or a combination of: (a)
incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; and (e)
performance shares. Such incentives may be subject to vesting conditions determined by the Board of Directors at grant. The maximum term
of options or other stock-based award granted is ten years or such lesser time as determined by the Board of Directors at the time of
grant.
On
January 19, 2023, the Company granted total 5,000,000 shares of common stock of the Company to six employees and one consultant pursuant
to the Companys 2022 Equity Incentive Plan and vested upon grant. The fair value of the shares totaled of $500,000 on the grant
date. On December 2023, 1,200,000 shares of common stock were returned by one employee for no consideration, and cancelled upon receipt.
In January 2024, 1,200,000 shares of common stock were returned by another one employee for no consideration, and cancelled upon receipt.
On
June 29, 2023, the Company granted a total of 200,000 shares of common stock of the Company to two employees pursuant to the Companys
2022 Equity Incentive Plan. The fair value of the shares totaled of $40,000 on the grant date, which was recorded in share-based compensation
on the consolidated statement of operations. On the same date, the Company granted 550,000 common stocks issuable to four individuals
at a fair value of $0.20 per share, subject to vesting condition in three tranches within six months, with 180,000 vested immediately.
During the year ended December 31, 2023, the Company recognized share-based compensation of $36,000 as a result of the grant of these
550,000 common stocks. As of December 31, 2023, 180,000 common stocks have been issued. During the fourth quarter of the year ended December
31, 2023, the 370,000 unvested common stocks were forfeited.
During
the three months ended March 31, 2024, the Company granted 1,200,000 shares of common stocks of the Company which vested immediately,
to two employees pursuant to the Companys 2022 Equity Incentive Plan. The fair value of the shares totaled $360,000 on the grant
dates. During the three months ended June 30, 2024, the Company granted 350,000 shares of common stocks of the Company which vested immediately,
to two employees pursuant to the Companys 2022 Equity Incentive Plan. The fair value of the shares totaled $210,000 on the grant
dates. The total fair value of the shares issued in 2024 was charged to share-based compensation of $501,346 and other loss of $68,654,
respectively, on the consolidated statements of operations and other comprehensive loss.
As
of December 31, 2024 and 2023, the Companys common shares issuable under the 2022 Equity Incentive Plan totaled 1,220,000 and
1,570,000, respectively.
*2023
Equity Incentive Plan*
As
of December 31, 2024 and 2023, no shares have been issued under the Companys 2023 Equity Incentive Plan, and the Companys
common shares issuable under the 2023 Equity Incentive Plan totalled 5,000,000 and 5,000,000, respectively.
The
following table represents the restricted stock award activities during the years ended December 31, 2024 and 2023:
SCHEDULE
OF EQUITY INCENTIVE ACTIVITIES
| 
| | 
Number of Shares | | | 
Weighted Average Grant Date Fair Value | | |
| 
Issued and vested as of December 31, 2022 | | 
| 4,250,000 | | | 
| 0.10 | | |
| 
Granted and vested | | 
| 5,750,000 | | | 
| 0.11 | | |
| 
Forfeited and cancelled | | 
| (1,570,000 | ) | | 
| 0.12 | | |
| 
Issued and vested as of December 31, 2023 | | 
| 8,430,000 | | | 
$ | 0.10 | | |
| 
Forfeited and cancelled | | 
| (1,200,000 | ) | | 
| 0.10 | | |
| 
Granted and vested | | 
| 1,550,000 | | | 
| 0.37 | | |
| 
Issued and vested as of December 31, 2024 | | 
| 8,780,000 | | | 
$ | 0.15 | | |
| F-15 | |
| Table of Contents | |
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
10 RELATED PARTY TRANSACTIONS**
During
the three months ended March 31, 2022, the Company borrowed total $82,107 from the President of the Company for its normal business operations
and the acquisition of Hangzhou Wenyuan. The borrowing bear is unsecured, non-interest-bearing and due on demand. During the three months
ended March 31, 2023, the Company repaid $14,618 (RMB100,000) to the President. In addition, the Company paid $2,359 (RMB 23,000) during
the remaining of the year in 2023. As of December 31, 2023, the balance of the loan due to our President was $71,165, with difference
of $2,350 due to the fluctuation in foreign exchange. During the year ended December 31, 2024, the Company repaid $64,770 (RMB 465,544)
to the President. As of December 31, 2024, the balance of the loan due to our President was $5,575, with difference due to the fluctuation
in foreign exchange.
During
the three months ended March 31, 2023, the wife of President of the Company, repaid commercial loan and accrued interest in the total
amount of $14,050 on behalf of the Company. During the year ended December 31, 2023, the Company received advances of $156,058 in cash
from and repaid $28,330 to the wife of President of the Company. During the year ended December 31, 2024, the Company received advances
of $21,319 and made repayments of $146,942 to the wife of President of the Company. As of December 31, 2024 and 2023, the amount owed
to this related party by the Company totalled $nil and $127,345, respectively. The amount due to this related party is unsecured, non-interest-bearing
and due on demand.
During
the year ended December 31, 2023, the Company recognized compensation expenses of $30,976, $16,166 and $22,045 to the President, his
wife and daughter, respectively. During the year ended December 31, 2024, the Company recognized compensation expenses of $12,508, $11,119
and $21,682 to the President, his wife and daughter, respectively. As of December 31, 2024 and 2023, the compensation payable to these
related parties totalled $14,193 and $31,446, which was included in accounts payable and accrued liabilities on the consolidated balance
sheet.
During
the year ended December 31, 2023, HWAC purchased inventory in the total amount of $40,373 from Hangzhou Wenyuan Yiyun Media Co., Ltd.
(FKA: Hangzhou Longwen Culture Media Ltd.) (HZWY), an entity under the control by the daughter of the President of the
Company. As of December 31, 2024 and 2023, the amount payable to HZWY totalled $6,850 and $40,373, respectively, which was included in
accounts payable and accrued liabilities on the consolidated balance sheet.
**NOTE
11 DISCONTINUED OPERATIONS**
Management
intended to change its operation focus and entered into an agreement with a counterparty to sell certain assets and liabilities of
HWF subsequently on March 27, 2024. By selling off these assets and liabilities, management is signaling a shift away from
aquaculture trading, which meets the criteria to be
reported as a discontinued operation and HWF has been identified as a discontinued operation
as a result. Such assets and liabilities are classified as assets and liabilities held for sale, which was closed on March 31,
2024.
Total
assets and liabilities from discontinued operations as of March 31, 2024 and December 31, 2023, are as below: 
SCHEDULE
OF DISCONTINUED OPERATIONS
| 
| | 
March 31, 2024 | | | 
December 31, 2023 | | |
| 
| | 
| | | 
| | |
| 
ASSETS | | 
| | | | 
| | | |
| 
Current assets | | 
| | | | 
| | | |
| 
Cash and cash equivalents | | 
$ | | | | 
$ | 3 | | |
| 
Other receivable | | 
| | | | 
| 176 | | |
| 
Assets held for sales accounts receivable and other | | 
| 471,802 | | | 
| 480,390 | | |
| 
Total current assets | | 
$ | 471,802 | | | 
| 480,569 | | |
| 
TOTAL ASSETS FROM DISCONTINUED OPERATIONS | | 
$ | 471,802 | | | 
$ | 480,569 | | |
| 
| | 
| | | | 
| | | |
| 
LIABILITIES | | 
| | | | 
| | | |
| 
Current liabilities: | | 
| | | | 
| | | |
| 
Liabilities held for sale - accounts payable and accrued liabilities | | 
$ | 475,206 | | | 
$ | 483,794 | | |
| 
Other accrued liabilities | | 
| | | | 
| 681 | | |
| 
Total current liabilities | | 
| 475,206 | | | 
| 484,475 | | |
| 
TOTAL LIABILITIES FROM DISCONTINUED OPERATIONS | | 
$ | 475,206 | | | 
$ | 484,475 | | |
| F-16 | |
| Table of Contents | |
****
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
****
**NOTE
11 DISCONTINUED OPERATIONS (CONTINUED)**
****
For
the years ended December 31, 2024 and 2023, results of operations from HWF are as below:
****
| 
| | 
2024 | | | 
2023 | | |
| 
| | 
Years Ended December 31, | | |
| 
| | 
2024 | | | 
2023 | | |
| 
| | 
| | | 
| | |
| 
Revenues | | 
| | | | 
| | | |
| 
Aquaculture product sales | | 
$ | | | | 
$ | 2,050,313 | | |
| 
Total revenues | | 
| | | | 
| 2,050,313 | | |
| 
| | 
| | | | 
| | | |
| 
Cost of revenues | | 
| | | | 
| | | |
| 
Cost of Aquaculture product | | 
| | | | 
| 1,913,524 | | |
| 
Total cost of revenues | | 
| | | | 
| 1,913,524 | | |
| 
Gross profit | | 
| | | | 
| 136,789 | | |
| 
| | 
| | | | 
| | | |
| 
Operating expenses: | | 
| | | | 
| | | |
| 
Selling, general and administrative expenses | | 
| | | | 
| 136,234 | | |
| 
Total operating expenses | | 
| | | | 
| 136,234 | | |
| 
| | 
| | | | 
| | | |
| 
Income from operations of discontinued operations | | 
| | | | 
| 555 | | |
| 
| | 
| | | | 
| | | |
| 
Other expenses: | | 
| | | | 
| | | |
| 
Other expenses, net | | 
| 13 | | | 
| 1,271 | | |
| 
Total other expenses, net | | 
| 13 | | | 
| 1,271 | | |
| 
| | 
| | | | 
| | | |
| 
Net loss before income tax from discontinued operations | | 
| (13 | ) | | 
| (716 | ) | |
| 
Income tax recovery (expense) | | 
| 3,141 | | | 
| (3,190 | ) | |
| 
Net gain (loss) from discontinued operations, net of taxes before loss from sale of discontinued operations | | 
| 3,128 | | | 
| (3,906 | ) | |
| 
Gain from sale of discontinued operations, net of taxes | | 
| 3,404 | | | 
| | | |
| 
Gain (Loss) from discontinued operations | | 
$ | 6,532 | | | 
| (3,906 | ) | |
For
the years ended December 31, 2024 and 2023, net cash from discontinued operations, are as below:
****
| 
| | 
Years Ended December 31, | | |
| 
| | 
2024 | | | 
2023 | | |
| 
Cash flow of discontinued operations: | | 
| | | | 
| | | |
| 
Net cash provided by operating activities | | 
$ | | | | 
$ | 3 | | |
| 
Net cash provided by discontinued operations | | 
$ | | | | 
| 3 | | |
| F-17 | |
| Table of Contents | |
****
**WENYUAN
GROUP CORP. AND SUBSIDIARY**
**(FORMERLY
KNOWN AS LONGWEN GROUP CORP. AND SUBSIDIARY)**
**NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS**
**NOTE
12 CREDIT RISKS AND CONCENTRATION**
The
Company is subject to credit risks on its cash and cash equivalents. The Company mitigates credit risks on cash and cash equivalents
by placing cash and cash equivalents with financial institutions of high credit worthiness.
During
the year ended December 31, 2024, the Company generated 25% and 11% of revenues from the top 2 customers, including one related party
and one third party, respectively. During the year ended December 31, 2023, the Company generated 41% and 31% of revenues from the top
2 customers, respectively. The Companys cost of revenues consisted of 95% and 94% purchases from one top vendor for the year ended
December 31, 2024. The Companys cost of revenues was not material during the year ended December 31, 2023.
**NOTE
13 CONTINGENCY**
On
September 28, 2022, the Company consummated an office suite purchase agreement with a third party (the Seller).
Pursuant to the agreement, the Company issued 2,651,780
common stocks of the Company to purchase a 118-square-meter office suite located in Hangzhou City, Zhejiang Province, China. Upon
closing of the office suite purchase agreement as described above, Hangzhou Wenyuan agreed to act as a guarantor for the liability
owing by the Seller to a creditor in the amount of $264,071
(RMB 1,900,000)
associated with the office suite. During the year ended December 31, 2024, the Company was sued by the creditor due to the default
by the Seller. On October 22, 2024, The Shangcheng District Peoples Court of Hangzhou City, Zhejiang Province, ruled that
Hangzhou Wenyuan is required to pay the creditor a total amount of approximately $264,071
(RMB 1,900,000). At
the same time, the Seller is jointly liable for repayment. After the companys management team evaluated the situation and
considering the possible outcome of the lawsuit, the Company recognized a reserve for litigation loss of $264,071
since the management believe its probable. As of December 31, 2024, the Company recorded $260,299
included in accounts payable and accrued expenses on the consolidated balance sheet. The difference is due to the fluctuation in
foreign exchange. However, the Company, along with Hangzhou Wenyuan, is preparing materials to sue the creditor and the Seller.
At the same time, we are preparing to file a lawsuit in Nevada State, to sue the Seller in order to recover the shares
previously issued as purchase consideration.
**NOTE
14 SUBSEQUENT EVENT**
The
Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange
Commission. Based on our evaluation, no event has occurred requiring adjustment or disclosure.
| F-18 | |
| Table of Contents | |
****
**Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**
None.****
**Item
9A. Controls and Procedures**
**Evaluation
of Disclosure Controls and Procedures**
Disclosure
controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports
filed with the Securities and Exchange Commission, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported
within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective
of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order
to allow timely consideration regarding required disclosures.
The
evaluation of our disclosure controls by our principal executive officer included a review of the controls objectives and design,
the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including
our Chief Executive Officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject
to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As
of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were significant deficiency
in our internal controls over Financial reporting as of December 31, 2024 and they were therefore not as effective as they could be to
ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules
and forms. The significant deficiency in our controls and procedure were lack of evidence for proper approval and review of disbursements.
Management does not believe that any of these significant deficiencies materially affected the results and accuracy of its consolidated
financial statements. However, in view of this discovery of such weaknesses, management has begun a review to improve them.
**MANAGEMENTS
ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance
with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and
the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles,
and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the
Internal Control - Integrated Framework that was issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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 or procedures may deteriorate. Management identified a lack of segregation of duties.
| 28 | |
| Table of Contents | |
Managements
assessment of the effectiveness of the small business issuers internal control over financial reporting is as of the year ended
December 31, 2024. We believe that internal controls over financial reporting as set forth above shows material weaknesses and are not
effective. We have identified material weaknesses considering the nature and extent of our current operations and any risks or errors
in financial reporting under current operations.
This
annual report does not include an attestation report of the companys registered public accounting firm regarding internal control
over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting
firm pursuant to rules of the SEC that permit the Company to provide only managements report in this annual report.
Subsequent
to the end of the period covered by this report, and in light of the weakness described above, management is in the process of designing
and implementing improvements in its internal control over financial reporting and we currently plan tom hire an independent third-party
consultant to assist in identifying and determining the appropriate accounting procedures and controls to implement.
**Item
9B. Other Information**
None.
**Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.**
Not
applicable.
**PART
III**
**Item
10. Directors, Executive Officers and Corporate Governance**
The
following table presents information with respect to our officers, directors and significant employees as of April 15, 2025:
| 
Name | | 
Age | | 
Position(s) | |
| 
Xizhen Ye | | 
62 | | 
Director | |
| 
| | 
| | 
| |
| 
Lili Ye | | 
35 | | 
Director | |
| 
| | 
| | 
| |
| 
Tianhui Luan | | 
35 | | 
Director | |
| 
| | 
| | 
| |
| 
Xianrong Liu | | 
59 | | 
Director | |
| 
| | 
| | 
| |
| 
Songhua Wang | | 
69 | | 
Director | |
| 
| | 
| | 
| |
| 
Chunrong Yao | | 
82 | | 
Director | |
| 
| | 
| | 
| |
| 
Yinong Zhao | | 
65 | | 
Director | |
****
**Xizhen
Ye** has been the Companys Chief Executive Officer and Chief Financial Officer since November 29, 2016. Mr. Ye is also the President
of Longwen Group Corporation (Cayman Island), a Cayman Island company since year 2015 which is also a shareholder of the Company. From
February 2016 to August 2018, he served as the President of Zhejiang Longwen Investment Management Co., Ltd. (China), and his job duties
include to supervise the management team, review the financial performance and etc. Moreover, Mr. Ye is the General Manager of Hangzhou
Wenyuan Culture & Media Co., Ltd. (China) since year 2011.He has a BS degree in Journalism of Bijing Institute of Humanities (China).
Mr. Yes business background led to the decision to appoint him to the Companys Board of Directors.
| 29 | |
| Table of Contents | |
**Lili
Ye** was born in Zhejiang Province, China, She was graduated from the Cod College of Capital Normal University in 2013 with Education
Bachelor degree. Ms. Ye is the daughter of Mr. Xizhen Ye, the President and CEO of the Company, and she has served as the Chairman of
Longwen Media Co., Ltd. since 2011. Ms. Ye has many years of successful writing, editing and directing experiences, and she is also a
member of Zhejiang Writers Association. Ms. Ye has published novels The Curse of Love, My Heart Will Let You Hear,
The Rose of Sassland (upper and lower parts) and a collection of essays Yinghuo, Insects Lover
Heart and so forth. In 2011, her novella Green Lotus Snow, Dreams Fleeing Years and Stay With Me Like Clothes
participated in the first Spark Burning Winter and the second session held by Cinderella Dream of Midsummer
national literature competition, both won the second place. In 2013, she became a director of the World Chinese Poetry Association.
**Tianhui
Luan**was born in Mudsanjiang, Heilongjiang Province, China. She was graduated from Tianjin Normal University with a bachelors
degree in Management. From March 2014 to March 2015, she worked in Huideng International Travel Agency, engaged in planning and planning.
From March 2015 to September 2016, she worked in Beijing Times Feilu Culture Communication Co., Ltd., as a marketing editor. From September
2016 to March 2023, she worked in Houlang Publishing Company, as a marketing manager. During her inauguration, she successfully planned
and marketed the million-dollar best-selling book Lifetime Growth, and planned and marketed many best-selling books: 642
Things to Write, Micro Habits, Reasons to Live, What Kind of Life Do You Want to Live,
Wu Leis first personal photo Flying on the Ground, and Mayday guitarist Stones prose Because I Cant
Stay. At the same time, she is fond of writing. In 2010, she participated in the first Midsummer Painting Dream
National Literary Competition held by Cinderella, and her work Singing Love Songs is worse than Falling in Love with Me
won the third prize. In 2011, her novella Love Songs Didnt Tell My Business and Cute Pet Family participated
in the first Spark Burning Winter and the second Midsummer Painting Dream National Literary Competition held
by Cinderella, and both won the second place.
**Xianrong
Liu**was born in Hangzhou, Zhejiang Province, China, high school degree. Mr. Liu has many years of management experiences and organizational
capabilities. From November 1983 to 2001, he worked for Hangzhou Electronic Instrument Industry Company. From October 2002 to 2023, he
has been engaged in administrative management at West Lake Times Square.
**Songhua
Wang**was graduated from Zhejiang Institute of Finance and Economics Education. From 2002 to 2005, she worked at Hangzhou Xingbao
Auto Parts Co., Ltd. as the head of finance department. From 2005 to 2007, she worked at Sinopharm Holding Branch as the Chief Accountant.
From 2007 to 2011, she was the financial director at Hangzhou Cultural Communication Company. From 2011 to 2016, Mrs. Wang worked as
a self-accounting business and engaged in accounting works. Mrs. Wang has comprehensive financial management capabilities such as budget
management, process control, accounting, cost control, financial analysis, internal audit, SASAC audit, listing audit, training management
and taxation management. She is also familiar with various national tax laws and regulations in China.
**Chunrong
Yao** was born in Chong Qing City, China. She used to be the chairman of the trade union of the Second Construction and Installation
Company of the 12th Bureau of China Hydropower Bureau and an associate research librarian. Member of Chinese Musicians Association, honorary
director of Zhejiang Musicians Association. He has composed more than 3,000 songs, 9 dance music pieces, and 4 TV music pieces, 89 of
which won national awards. 56 Strings Connecting Beijing won the highest award of the national Five One Project
in 1997, China Sings to the World won the first prize in the fifth China Art Festival festival song evaluation
and was designated as a festival song, Dear People won the highest award of the Stars Award in the 10th China Art
Festival. Ode won the United Nations Millennium Development Goals Contribution Award in 2015, My Family Lives
by the Canal, Stories of Spring and Autumn, Love in July, Communist, Voice of
Power Builders, Song of Youth , Pearls in Hands for You, Tent, Tent, Fragrant
Four Seas, Three Gorges of the Yellow River, Green Zhejiang, Gold and Silver for You,
The Story of Watermelon Peel, Mei Pai Dozens of works such as Little Biography and After School
Time have won the first prize of the National Song Competition. In 2010, the Shanka Works Concert was successfully
held in Zhejiang. In 2000, Shanka Songs (211 songs) was published by Peoples Music Publishing House and distributed
nationwide. In 1995, he was awarded the National Employee Self-taught Award (51 people in total), and was jointly commended by five ministries
and commissions including the All-China Federation of Trade Unions, the Ministry of Education, and the Ministry of Labor.
| 30 | |
| Table of Contents | |
**Yinong
Zhao** was graduated from: Beijing Technology and Business University (Beijing Institute of Light Industry), director and researcher
of the Smart City Research Institute of the Chinese Academy of Management Sciences, and has been engaged in the media industry for more
than 20 years, served as the editor-in-chief of China United Business Daily, concurrently served as the deputy secretary-general
of the Capital Youth Journalists Association, the deputy secretary-general of the China International Exchange Promotion Association,
the deputy secretary-general of the Beijing Human Resources Association, and the executive of the China International City Case Study
Committee Secretary-General and Advisor to the Peoples Government of Zigong City, Sichuan Province, Executive Director of CDM
Global Environmental Protection Fund, Director of Taihu Cultural Forum, etc. In 2004, he began to study urbanization and urban development.
In 2010, he served as the deputy secretary-general of the Chinese Academy of Management Sciences. In 2017, he served as the vice president
of the Chinese Academy of Management Sciences. In 2011, he began to enter the field of smart city research. In 2015, entrusted by the
Peoples Government of Jiexiu City, Shanxi Province, he led the compilation of the Outline of the 13th Five-Year Plan for Jiexiu
City, Shanxi Province. In 2017, he served as the vice president of the Chinese Academy of Management Sciences. In 2019, he served as
an expert editorial board member of Digital China - Selected High-Quality Cases of Smart City. In 2021, entrusted by the
Peoples Government of Yushe County, Shanxi Province, he lead the compilation of the Outline of the Tenth, Fourth, and Fifth
Plans of Yushe County, Shanxi Province.
Each
of our directors primary qualification to serve as such involves his or her extensive experience with different aspects of business
management, financial management and/or aquacultural operating.
**Term
of office**
All
officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors
have been duly elected and qualified or until removed from office in accordance with our bylaws. There are no agreements with respect
to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or
reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors.
Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors.
We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors fees and reimburse
Directors for expenses related to their activities.
None
of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings
or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five
(5) years.
**Family
Relationships**
Mrs.
Lili Ye is the daughter of Mr. Xizhen Ye. There are no other family relationships between or among the above Directors, executive officers
or persons nominated or charged by us to become directors or executive officers.
**Involvement
in Certain Legal Proceedings**
Except
as disclosed below, to our knowledge, none of our current directors or executive officers has, during the past ten (10) years:
| 
| 
| 
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor
offenses); | |
| 
| 
| 
| |
| 
| 
| 
had
any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business
association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two (2)
years prior to that time; | |
| 
| 
| 
| |
| 
| 
| 
been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his or her involvement
in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to
be associated with persons engaged in any such activity; | |
| 31 | |
| Table of Contents | |
| 
| 
| 
been
found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| 
| 
| 
| |
| 
| 
| 
been
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions
or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or | |
| 
| 
| 
| |
| 
| 
| 
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization
(as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange
Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons
associated with a member. | |
**Director
Independence**
We
use the definition of independence of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2)
provides that an independent director is a person other than an officer or employee of our Company or any other individual
having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The NASDAQ rules provide that a director cannot be considered independent if:
| 
| 
| 
the
director is, or at any time during the past three years was, an employee of our Company; | |
| 
| 
| 
| |
| 
| 
| 
the
director or a family member of the director accepted any compensation from our Company in excess of $120,000 during any period of
12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including,
among other things, compensation for board or board committee service); | |
| 
| 
| 
| |
| 
| 
| 
a
family member of the director is, or at any time during the past three years was, an executive officer of our Company; | |
| 
| 
| 
| |
| 
| 
| 
the
director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to
which our Company made, or from which our Company received, payments in the current or any of the past three fiscal years that exceed
5% of the recipients consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions); | |
| 
| 
| 
| |
| 
| 
| 
the
director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three
years, any of the executive officers of our Company served on the compensation committee of such other entity; or | |
| 
| 
| 
| |
| 
| 
| 
the
director or a family member of the director is a current partner of our Companys outside auditor, or at any time during the
past three years was a partner or employee of our Companys outside auditor, and who worked on our Companys audit.
Our
Board of Directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly.
Based on this review, our Board of Directors has determined that Mr. Xianrong Liu, Mrs. Songhua Wang, Mr. Chunrong Yao and Mr. Yinong
Zhao are independent directors as defined in the NASDAQ Listing Rules and Rule 10A-3 promulgated under the Exchange
Act. As such, all four independent directors serve on all three of our standing Board Committees, with Mrs. Songhua Wang, Mr. Xianrong
Liu and Mr. Yinong Zhao, members of the Audit Committee, Mr. Xianrong Liu, Mrs. Songhua Wang and Mr. Chunrong Yao, members of the
Compensation Committee and Mr. Xianrong Liu, Mr. Chunrong Yao and Mr. Yinong Zhao, members of the Nominating and Corporate Governance
Committee. | |
| 32 | |
| Table of Contents | |
**Meetings
of the Board**
During
our fiscal year ended December 31, 2024, the Board met from time to time informally and acted by written consent on numerous occasions.
**Board
Leadership**
Our
Company is led by Mr. Xizhen Ye, who has served as our Chief Executive Officer, Chief Financial Officer and Chairman of the Board since
our incorporation in 2016. Our Board leadership structure is the traditional one most commonly utilized by other public companies in
the United States, and we believe that this leadership structure has been effective for our Company. We believe that having a combined
Chief Executive Officer/Chief Financial Officer/Chairman of the Board provides the right form of leadership and balance for our Company,
given our small size. This structure provides us with a single leader for our company to ensure continuity of our operational, executive
and Board functions.
**Committees
of the Board of Directors**
The
board of directors has created three committees - the audit committee, the compensation committee and the nominating and corporate governance
committee. Each of the committees has a charter which we believe meets the NASDAQ requirements and will be composed of three independent
directors.
*Audit
Committee*
Our
Audit Committee is comprised of three individuals including Mrs. Songhua Wang, Mr. Xianrong Liu and Mr. Yinong Zhao, each of whom is
an independent director and at least one of whom is an audit committee financial expert, as defined in Item 407(d)(5)(ii)
of Regulation S-K. Mrs. Songhua Wang is appointed as the Chair of the Audit Committee.
Our
Audit Committee oversees our corporate accounting, financial reporting practices and the audits of financial statements. For this purpose,
the Audit Committee does have a charter (which is reviewed annually) and perform several functions. The Audit Committee performs the
following:
| 
| 
| 
evaluate
the independence and performance of, and assess the qualifications of, our independent auditor and engage such independent auditor; | |
| 
| 
| 
| |
| 
| 
| 
approve
the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services and approve in advance any non-audit
service to be provided by our independent auditor; | |
| 
| 
| 
| |
| 
| 
| 
monitor
the independence of our independent auditor and the rotation of partners of the independent auditor on our engagement team as required
by law; | |
| 
| 
| 
| |
| 
| 
| 
review
the financial statements to be included in our future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and review with
management and our independent auditor the results of the annual audit and reviews of our quarterly financial statements; and | |
| 
| 
| 
| |
| 
| 
| 
oversee
all aspects our systems of internal accounting control and corporate governance functions on behalf of the Board of Directors. | |
*Compensation
Committee*
Our
Compensation Committee is comprised of three individuals including Mrs. Songhua Wang, Mr. Xianrong Liu and Mr. Chunrong Yao, three of
the members are independent directors. Mr. Xianrong Liu is appointed as the Chair of the Compensation Committee.
The
Compensation Committee does review or recommend the compensation arrangements for our management and employees and also assist our Board
of Directors in reviewing and approving matters such as company benefit and insurance plans, including monitoring the performance thereof.
The Compensation Committee has a charter (which is reviewed annually) and perform several functions.
| 33 | |
| Table of Contents | |
The
Compensation Committee does have the authority to directly engage, at our expense, any compensation consultants or other advisers as
it deems necessary to carry out its responsibilities in determining the amount and form of employee, executive and director compensation.
*Nominating
and Corporate Governance Committee*
Our
Nominating and Corporate Governance Committee is comprised of three individuals including Mr.Xianrong Liu, Mr. Chunrong Yao and Mr. Yinong
Zhao, each of whom is an independent director. Mr. Yinong Zhao is appointed as the Chair of the Nominating and Corporate Governance Committee.
The
Nominating and Corporate Governance Committee is charged with the responsibility of reviewing our corporate governance policies and with
proposing potential director nominees to the Board of Directors for consideration. This committee has the authority to oversee the hiring
of potential executive positions in our Company. The Nominating and Corporate Governance Committee has a charter (which will be reviewed
annually) and performs several functions.
**Code
of Ethics**
Our
Board has adopted a written code of business conduct and ethics (Code) that applies to our directors, officers and employees,
including our principal executive officer, principal financial officer and principal accounting officer or controller or persons performing
similar functions. We intend to post on our website a current copy of the Code and all disclosures that are required by law in regard
to any amendments to, or waivers from, any provision of the Code.
**Indemnification
of Officers and Directors**
The
Companys articles of incorporation and bylaws provide that, to the fullest extent permitted by the laws of the State of Nevada,
any officer or director of the Company, who was or is a party or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was
or has agreed to serve at the request of the Company as a director, officer, employee or agent of the Company, or while serving as a
director or officer of the Company, is or was serving or has agreed to serve at the request of the Company as a director, officer, employee
or agent (which, for purposes hereof, shall include a trustee, partner or manager or similar capacity) of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity. For the avoidance of doubt, the foregoing indemnification obligation includes, without limitation, claims for monetary
damages against Indemnitee to the fullest extent permitted under Section 78.7502 of the Nevada Revised Statutes as in existence on the
date hereof.
The
indemnification provided shall be from and against expenses (including attorneys fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the indemnitee or on the indemnitees behalf in connection with such action, suit or proceeding
and any appeal therefrom, but shall only be provided if the indemnitee acted in good faith and in a manner the indemnitee reasonably
believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action, suit or proceeding,
had no reasonable cause to believe the indemnitees conduct was unlawful.
At
present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification
will be required or permitted. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
**Communications
with the Board**
Shareholders
and any interested parties may send correspondence to the Board or to any individual director, by mail to Corporate Secretary, Wenyuan
Group Corp. (fka. Longwen Group Corp.), RM2404, Yinzun Building, ZunBao Plaza, Shangcheng Dist., Hangzhou, Zhejiang Province, China or
by e-mail to yxz_0099@163.com.
| 34 | |
| Table of Contents | |
**Item
11. Executive Compensation**
The
Summary Compensation Table shows certain compensation information for services rendered in all capacities for the fiscal years ended
December 31, 2024, 2023 and 2022. Other than as set forth herein, no executive officers salary and bonus exceeded $100,000 in
any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether paid or deferred.
**Summary
Compensation Table**
| 
Name and Principal Position | | 
Year | | | 
Salary ($) | | | 
Bonus ($) | | | 
Stock Awards ($) | | | 
Option Awards ($) | | | 
Non-equity incentive plan compensation ($) | | | 
Non-qualified deferred compensation earnings ($) | | | 
All other compensation ($) | | | 
Total ($) | | |
| 
Xizhen Ye | | 
| 2024 | | | 
| 12,508 | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| 12,508 | | |
| 
Chief Executive Officer/ | | 
| 2023 | | | 
| 30,976 | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| 30,976 | | |
| 
Chief Financial Officer/Director | | 
| 2022 | | | 
| 22,373 | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| 22,373 | | |
**Employment
Agreements**
The
Company currently has no employment agreements with its executive officers or other employees.
**Director
Compensation**
For
the years ended December 31, 2024, 2023 and 2022, the directors were not awarded any options or paid any cash for director compensation.
**Stock
Equity Plan**
A
total of 10,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under
our 2022 Equity Incentive Plan. As of April 15, 2025, 8,780,000 shares of common stock have been issued from our 2022 Equity Incentive
Plan.
A
total of 5,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under
our 2023 Equity Incentive Plan. As of April 15, 2025, no shares of common stock have been issued from our 2023 Equity Incentive Plan.
**Director
Compensation**
The
following table provides information regarding the total compensation that was earned by or paid to each person who served as our directors
during the year ended December 31, 2024. Ms. Xizhen Ye is not included in the table below as his compensation information are provided
in the Summary Compensation Table above.
| 
Name | | 
Fees earned or paid in cash($) | | | 
Stock awards($) | | | 
Option awards($) | | | 
Non-equity incentive plan compensation($) | | | 
Nonqualified deferred compensation earnings($) | | | 
All other compensation($) | | | 
Total($) | | |
| 
Lili Ye | | 
$ | 21,682 | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
$ | 21,682 | | |
| 
Tianhui Luan | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | |
| 
Xianrong Liu | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | |
| 
Songhua Wang | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | |
| 
Chunrong Yao | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | |
| 
Yinong Zhao | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | | 
| - | | |
**Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**
The
following table sets forth as April 15, 2025 the number and percentage of the outstanding shares of common stock, which, according to
the information available to us, were beneficially owned by:
| 
(i) | 
each
person who is currently a director, | |
| 
| 
| |
| 
(ii) | 
each
executive officer, | |
| 
| 
| |
| 
(iii) | 
all
current directors and executive officers as a group, and | |
| 
| 
| |
| 
(iv) | 
each
person who is known by us to own beneficially more than 5% of our outstanding common stock. | |
| 35 | |
| Table of Contents | |
Except
as indicated below, each of the stockholders listed below possesses sole voting and investment power with respect to their shares. The
percentage of ownership set forth below is based upon 80,884,279 shares of common stock issued and outstanding as of April 9, 2025. Unless
otherwise specified, the address of each of the persons set forth below is in care of the Company.
| 
Name and Address | | 
Amount and Nature of Beneficial Ownership | | | 
Percentage of Common Stock(1) | | |
| 
| | 
| | | 
| | |
| 
Xizhen Ye President, Chief Executive Officer, Chief Financial Officer, Director | | 
| | | | 
| | | |
| 
Rm 219, No. 25, Caihe Rd., Shangcheng Dist., | | 
| | | | 
| | | |
| 
Hangzhou City, Zhejiang Province, China | | 
| 54,715,755 | (2)(3)(4) | | 
| 67.6 | % | |
| 
| | 
| | | | 
| | | |
| 
Lili Ye(5) Director | | 
| | | | 
| | | |
| 
Rm 219, No. 25, Caihe Rd., Shangcheng Dist., | | 
| | | | 
| | | |
| 
Hangzhou City, Zhejiang Province, China | | 
| 6,729,500 | (6) | | 
| 8.32 | % | |
| 
| | 
| | | | 
| | | |
| 
Tianhui Luan Director | | 
| | | | 
| | | |
| 
Rm 219, No. 25, Caihe Rd., Shangcheng Dist., | | 
| | | | 
| | | |
| 
Hangzhou City, Zhejiang Province, China | | 
| -0- | | | 
| * | | |
| 
| | 
| | | | 
| | | |
| 
Xianrong Liu Independent Director | | 
| | | | 
| | | |
| 
Rm 219, No. 25, Caihe Rd., Shangcheng Dist., | | 
| | | | 
| | | |
| 
Hangzhou City, Zhejiang Province, China | | 
| 1,271,271 | (7) | | 
| 1.57 | % | |
| 
| | 
| | | | 
| | | |
| 
Songhua Wang Independent Director | | 
| | | | 
| | | |
| 
Rm 219, No. 25, Caihe Rd., Shangcheng Dist., Hangzhou City, Zhejiang Province, China | | 
| -0- | | | 
| * | | |
| 
| | 
| | | | 
| | | |
| 
Chunrong Yao Independent Director | | 
| | | | 
| | | |
| 
Rm 219, No. 25, Caihe Rd., Shangcheng Dist., | | 
| -0- | | | 
| * | | |
| 
Hangzhou City, Zhejiang Province, China | | 
| | | | 
| | | |
| 
| | 
| | | | 
| | | |
| 
Yinong Zhao Independent Director | | 
| | | | 
| | | |
| 
Rm 219, No. 25, Caihe Rd., Shangcheng Dist., | | 
| -0- | | | 
| * | | |
| 
Hangzhou City, Zhejiang Province, China | | 
| | | | 
| | | |
| 
| | 
| | | | 
| | | |
| 
Yonggang Wang(8) | | 
| | | | 
| | | |
| 
Beijing, China | | 
| 6,729,500 | (9) | | 
| 8.32 | % | |
| 
Officers and Directors as a Group (7 Persons) | | 
| 62,716,526 | | | 
| 77.49 | % | |
| 
* | 
less
than 1% | |
| 
(1) | 
Based
upon 80,884,279 shares outstanding as of April 15, 2025. | |
| 
(2) | 
Includes
52,573,448 shares owned by Mr. Xizhen Ye. | |
| 
(3) | 
Includes
Mr. Yes beneficial ownership of 63.46% of Longwen Cayman, which owns 66,667 shares of the Companys common stock. | |
| 
(4) | 
Includes
2,100,000 shares owned by Mr. Yes wife | |
| 
(5) | 
Mrs.
Lili Ye is the daughter of Mr. Xizhen Ye, the CEO of the Company. | |
| 
(6) | 
Includes
4,729,500 shares owned by Mrs. Lili Yes husband, | |
| 
(7) | 
Includes
1,271,271 shares owned by Mr. Lius wife. | |
| 
(8) | 
Mr.
Wang is the son-in-law of Mr. Xizhen Ye, and the husband of Mrs. Lili Ye. | |
| 
(9) | 
Includes
2,000,000 shares owned by Mr. Wangs wife, Mrs. Lili Ye. | |
| 36 | |
| Table of Contents | |
**Changes
in Control**
There
are no arrangements, to our knowledge, including any pledge by any person of securities of the Company, the operation of which may at
a subsequent date result in a change in control of the Company.
**Item
13. Certain Relationships and Related Transactions**
**Family
Relationships**
Mrs.
Lili Ye is the daughter of Mr. Xizhen Ye. There are no other family relationships between or among the above Directors, executive officers
or persons nominated or charged by us to become directors or executive officers.
**Related
Party Transactions**
During
the three months ended March 31, 2022, the Company borrowed total $82,107 from the President of the Company for its normal business operations
and the acquisition of Hangzhou Wenyuan. The borrowing bear is unsecured, non-interest-bearing and due on demand. During the three months
ended March 31, 2023, the Company repaid $14,618 (RMB100,000) to the President. In addition, the Company paid $2,359 (RMB 23,000) during
the remaining of the year in 2023. As of December 31, 2023, the balance of the loan due to our President was $71,165, with difference
of $2,350 due to the fluctuation in foreign exchange. During the year ended December 31, 2024, the Company repaid $64,770 (RMB 465,544)
to the President. As of December 31, 2024, the balance of the loan due to our President was $5,575, with difference due to the fluctuation
in foreign exchange.
During
the three months ended March 31, 2023, the wife of President of the Company, repaid commercial loan and accrued interest in the total
amount of $14,050 on behalf of the Company. During the year ended December 31, 2023, the Company received advances of $156,058 in cash
from and repaid $28,330 to the wife of President of the Company. During the year ended December 31, 2024, the Company received advances
of $21,319 and made repayments of $146,942 to the wife of President of the Company. As of December 31, 2024 and 2023, the amount owed
to this related party by the Company totaled $nil and $127,345, respectively. The amount due to this related party is unsecured, non-interest-bearing
and due on demand.
During
the year ended December 31, 2023, the Company recognized compensation expenses of $30,976, $16,166 and $22,045 to the President, his
wife and daughter, respectively. During the year ended December 31, 2024, the Company recognized compensation expenses of $12,508, $11,119
and $21,682 to the President, his wife and daughter, respectively. As of December 31, 2024 and 2023, the compensation payable to these
related parties totaled $14,193 and $31,446, which was included in accounts payable and accrued liabilities on the consolidated balance
sheet.
During
the year ended December 31, 2023, HWAC purchased inventory in the total amount of $40,373 from Hangzhou Wenyuan Yiyun Media Co., Ltd.
(FKA: Hangzhou Longwen Culture Media Ltd.) (HZWY), an entity under the control by the daughter of the President of the
Company. As of December 31, 2024 and 2023, the amount payable to HZWY totaled $6,850 and $40,373, respectively, which was included in
accounts payable and accrued liabilities on the consolidated balance sheet.
**Item
14. Principal Accounting Fees and Services**
During
2024 and 2023, Simon & Edward, LLP, the Companys independent auditors have billed for their services as set forth below. In
addition, fees and services related to the audit of the consolidated financial statements of the Company for the period ended December
31, 2024, as contained in this Report, are estimated and included for the fiscal year ended December 31, 2024.
| 
| | 
Year ended December 31, | | |
| 
| | 
2024 | | | 
2023 | | |
| 
Audit Fees | | 
$ | 23,500 | | | 
$ | 23,500 | | |
| 
| | 
| | | | 
| | | |
| 
Audit-Related Fees | | 
$ | -0- | | | 
$ | -0- | | |
| 
| | 
| | | | 
| | | |
| 
Tax Fees | | 
$ | 3,500 | | | 
$ | 3,500 | | |
| 
| | 
| | | | 
| | | |
| 
All Other Fees | | 
$ | -0- | | | 
$ | -0- | | |
**Pre-Approval
Policy**
Our
Board as a whole pre-approves all services provided by Simon & Edward, LLP. For any non-audit or non-audit related services, the
Board must conclude that such services are compatible with the independence as our auditors.
| 37 | |
| Table of Contents | |
**PART
IV**
**Item
15. Exhibits, Financial Statement Schedules**
| 
3.1* | 
Articles of Incorporation (filed as Exhibit 3.1 to the Form 10 filed with the SEC on June 10, 2022) | |
| 
| 
| |
| 
3.2* | 
By-laws (filed as an Exhibit 3.2 to Form 10 filed with the SEC on June 10, 2022) | |
| 
| 
| |
| 
21.1** | 
List of Subsidiaries of the Registrant | |
| 
| 
| |
| 
24.1** | 
Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K) | |
| 
| 
| |
| 
31.1** | 
Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended. | |
| 
| 
| |
| 
31.2** | 
Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended. | |
| 
| 
| |
| 
32.1** | 
Certification of Chief Executive Officer and President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 
| 
| |
| 
101.INS** | 
Inline
XBRL Instance Document | |
| 
101.SCH** | 
Inline
XBRL Taxonomy Extension Schema Document | |
| 
101.CAL** | 
Inline
XBRL Taxonomy Extension Calculation Linkbase Document | |
| 
101.DEF** | 
Inline
XBRL Taxonomy Extension Definition Linkbase Document | |
| 
101.LAB** | 
Inline
XBRL Taxonomy Extension Label Linkbase Document | |
| 
101.PRE** | 
Inline
XBRL Taxonomy Extension Presentation Linkbase Document | |
| 
104** | 
Cover
Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
| 
* | 
Incorporated
by reference to the Companys Registration Statement on Form 10 as filed with the SEC on June 10, 2022. | |
| 
| 
| |
| 
** | 
Filed
herewith | |
| 38 | |
| Table of Contents | |
**SIGNATURES**
In
accordance with the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 15th day of April, 2025.
| 
| 
WENYUAN
GROUP CORP. 
(FORMERLY
KNOWN AS LONGWEN GROUP CORP.) | |
| 
| 
| 
| |
| 
| 
By: | 
/s/
Xizhen Ye | |
| 
| 
| 
Xizhen
Ye, Chief Executive Officer | |
| 
Name | 
| 
Position | 
| 
Date | |
| 
| 
| 
| 
| 
| |
| 
/s/
Xizhen Ye | 
| 
Chief
Executive Officer, President, Chief Financial Officer, Chairperson of the Board of Directors | 
| 
April
15, 2025 | |
| 
Xizhen
Ye | 
| 
(Principal
Executive Officer, Principal Financial and Accounting Officer) | 
| 
| |
| 
| 
| 
| 
| 
| |
| 
/s/
Lili Ye | 
| 
Director | 
| 
April
15, 2025 | |
| 
Lili
Ye | 
| 
| 
| 
| |
| 
| 
| 
| 
| 
| |
| 
/s/
Tianhui Luan | 
| 
Director | 
| 
April
15, 2025 | |
| 
Tianhui
Luan | 
| 
| 
| 
| |
| 
| 
| 
| 
| 
| |
| 
/s/
Xianrong Liu | 
| 
Director | 
| 
April
15, 2025 | |
| 
Xianrong
Liu | 
| 
| 
| 
| |
| 
| 
| 
| 
| 
| |
| 
/s/
Songhua Wang | 
| 
Director | 
| 
April
15, 2025 | |
| 
Songhua
Wang | 
| 
| 
| 
| |
| 
| 
| 
| 
| 
| |
| 
/s/
Chunrong Yao | 
| 
Director | 
| 
April
15, 2025 | |
| 
Chunrong
Yao | 
| 
| 
| 
| |
| 
| 
| 
| 
| 
| |
| 
/s/
Yinong Zhao | 
| 
Director | 
| 
April
15, 2025 | |
| 
Yinong
Zhao | 
| 
| 
| 
| |
| 39 | |