EOS, INC. 11 Table of Contents Forward Looking Statements
Some of the statements contained in this Form 10-K that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
1. Our ability to attract and retain management and key employees;
2. Our ability to generate customer demand for our products;
3. The intensity of competition; and
4. General economic conditions.
All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.
Overview Description of Business General Information
On or about
On
On
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We have never been a party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.
We do not own any real property. Our principal executive office is presently
located at 7F.-1, No. 162, Sec. 2,
EOS Inc. markets and distributes a variety of consumer products selected based on its understanding of the demand for each of its products. EOS conducts its business primarily inAsia , includingthe People's Republic of China ("PRC"), Taiwan,Singapore andMalaysia . The principal products that EOS markets and sells through its subsidiaries include Nine Layer Transformation Hair Cream, Deep Seawater Mineral Extract, and Lifegenes & Youthgenes. Nine Layer Transformation Hair Cream is hair-coloring product that darkens the user's hair color to brown or black while nourishing the hair. Deep Seawater Mineral Extract is a dietary supplement that is designed to enhance the overall health and appearance of the consumer. Both Lifegenes and Youthgenes are dietary supplements designed to improve the consumer's health. In addition to the four major products, EOS also sells and distributes other dietary supplements and skin care products from time to time as it deems profitable. During the year endedDecember 31, 2021 and 2020, the net sales of dietary supplements and skin care products were$68 , 840 and$73,317 , which represented approximately 13.28% and 3.78% of the total net sales for that period, respectively.
On
In
In addition, we provided inventory, membership and business management software
that designed by
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Acquisition of Control Interest in A-Best
On
In connection with the Purchase Agreement, on
In connection with the Purchase Agreement, on
On
On
Furthermore, subject to the terms and conditions of the Strategic Alliance
Agreement, A-Best has granted the Company the exclusive sale and distribution
right of A-Best's micro-ceramic speakers in the world for one (1) year (the
"Term"), which may be renewed with mutual consent of the Parties two months
prior to the expiration of the Term, while A-Best retains its own right to sell
and distribute the micro-ceramic speakers on its own. In consideration for the
exclusive distribution right of A-Best's speakers under the Strategic Alliance
Agreement, the Company agreed to have A-Best keep the Company's 10,000,000
shares of common stock, par value
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On
On M arch 2, 2020, the Company returned 20% equity interest in A-Best to Mr.Ing-Ming Lai pursuant to the Strategic Alliance Agreement. OnApril 12, 2021 , the Company, A-Best, andIng-Ming Lai , a Taiwanese individual and the majority shareholder of A-Best, entered into a termination agreement (the "Termination Agreement") to terminate the agreement ofStrategic Alliance Agreement (the "Strategic Alliance Agreement") datedMarch 2, 2020 . In the agreement,Ing-Ming Lai has proceed to effect a return of a total of 10,000,000 shares inEOS INC , back to the company.
The Board of Directors of this Corporation authorized the return of the
10,000,000 EOSS shares from
Distribution Agreements and Supply Agreement
On
On
We, through one of our wholly-owned subsidiaries, entered into a product supply
agreement ("Fortune King Product Supply Agreement") with
Critical Accounting Policies and Estimates
Principles of Consolidation
The accompanying audited consolidated financial statements, including the
accounts of
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The functional currency of the subsidiaries in
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in
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Impairment of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic 360-10,
Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that
long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company evaluates its long-lived assets for impairment annually or more often if
events and circumstances warrant. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve breakeven operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undiscounted cash flows. Should impairment in value be indicated, the
carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. ASC 360-10 also requires assets to be disposed of be reported at the
lower of the carrying amount or the fair value less costs to sell. Management
has determined that no impairments of long-lived assets currently exist as of
The Company acquires equity investment to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
? Equity method investments when the Company has the ability to exercise
significant influence, but not control, over the investee. Its proportionate
share of the income or loss is recognized monthly and is recorded in gain
(loss) on equity investments.
? Non-marketable cost method investments when the equity method does not apply.
Significant judgment is required to identify whether an impairment exists in the valuation of the Company's non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee's fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee's industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees' revenue, costs, and discount rates. The Company's assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.
Other-Than-Temporary Impairment
The Company's long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
? Marketable equity securities include the consideration of general market
conditions, the duration and extent to which the fair value is below cost,
and our ability and intent to hold the investment for a sufficient period of
time to allow for recovery of value in the foreseeable future. The Company
also considers specific adverse conditions related to the financial health
of, and the business outlook for, the investee, which may include industry
and sector performance, changes in technology, operational and financing cash
flow factors, and changes in the investee's credit rating. The Company
records other-than-temporary impairments on marketable equity securities and
marketable equity method investments in gain (loss) on equity investments.
? Non-marketable equity investments based on the Company's assessment of the
severity and duration of the impairment, and qualitative and quantitative
analysis of the operating performance of the investee; adverse changes in
market conditions and the regulatory or economic environment; changes in
operating structure or management of the investee; additional funding
requirements; and the investee's ability to remain in business. A series of
operating losses of an investee or other factors may indicate that a decrease
in value of the investment has occurred that is other than temporary and that
shall be recognized even though the decrease in value is in excess of what
would otherwise be recognized by application of the equity method. A loss in
value of an investment that is other than a temporary decline shall be
recognized. Evidence of a loss in value might include, but would not
necessarily be limited to, absence of an ability to recover the carrying
amount of the investment or inability of the investee to sustain an earnings
capacity that would justify the carrying amount of the investment. The
Company records other-than-temporary impairments for non-marketable cost
method investments and equity method investments in gain (loss) on equity
investments.
Revenue Recognition
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Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Merchandise sales: The Company recognizes sales revenues from merchandise sales when customers obtain control of the Company's products, which typically occurs upon delivery to customer. Merchandise sales revenues are recorded at the sales price, or "transaction price".
Software sales: The Company does not develop the software products on its own. When the Company receives a purchase order from the customer, the Company would engage with the third-party software company to customize and develop the software products. The Company recognizes software revenues upon completion of the installation and testing, and transfer the control of the software products to the customer. Software revenues are recorded at the fixed sales price, or "transaction price", pursuant to the sales contracts. The Company may also charge the customer maintenance service fees on a straight-line basis over the service period pursuant to the sales contract. The Company concluded that the performance obligation for the maintenance service is distinct. Therefore, such maintenance service revenue can be separated from other elements in the arrangement.
Trade discount and allowances: The Company generally does not provide invoice discounts on product sales to its customers for prompt payment.
Product returns : The Company generally does not provide customers with the right to return a product for a full or partial refund, a credit, or an exchange for another product.
To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
The following tables provide details of revenue by major products and by geography.
Revenue by Major Products
For the year endedDecember 31, 2021 : Nutrition supplement$ 68,840 Water purifier machine 107,826 Automobile carbon reduction machine 305,868 Software 35,953 Total$ 518,487 For the year endedDecember 31, 2020 : Nutrition supplement$ 73,317 Water purifier machine 1,376,795 Automobile carbon reduction machine 400,061 Software 87,613 Total$ 1,937,786 Revenue by Geography For the year endedDecember 31, 2021 : Asia Pacific$ 518,487 Total$ 518,487 For the year endedDecember 31, 2020 : Asia Pacific$ 1,937,786 Total$ 1,937,786 Leases
The Company adopted FASB Accounting Standards Codification, Topic 842, Leases
("ASC 842") using the modified retrospective approach, electing the practical
expedient that allows the Company not to restate its comparative periods prior
to the adoption of the standard on
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The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use ("ROU") assets and lease liabilities. ROU assets represent the Company's right to use underlying assets for the lease terms and lease liabilities represent the Company's obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company's future minimum based payments used to determine the Company's lease liabilities mainly include minimum based rent payments. As most of Company's leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. In addition, the adoption of the standard did not have a material impact on the Company's results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
Advertising Costs
Advertising costs are expensed at the time such advertising commences.
Advertising expenses were
Post-retirement and Post-employment Benefits
The Company's subsidiaries in
19 Table of Contents Fair Value Measurements
FASB ASC 820, "Fair Value Measurements" defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
? Level 1 - Inputs are quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date.
Valuation of these instruments does not require a high degree of judgment as
the valuations are based on quoted prices in active markets that are readily
and regularly available.
? Level 2 - Inputs other than quoted prices in active markets that are either
directly or indirectly observable as of the measurement date, such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities.
? Level 3 - Valuations based on inputs that are unobservable and not corroborated
by market data. The fair value for such assets and liabilities is generally
determined using pricing models, discounted cash flow methodologies, or similar
techniques that incorporate the assumptions a market participant would use in
pricing the asset or liability.
The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, advance to suppliers, prepaid expenses, accounts payable, accrued expenses, and due to shareholders, approximate fair value because of to their relatively short maturities.
Net Income Per Share
Basic income per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during each period.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
Concentration of Credit Risk
Cash and cash equivalents
: The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company places
its cash and temporary cash investments in high quality credit institutions in
Customers
: The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral.
20 Table of Contents For the year endedDecember 31, 2021 , two customers accounted for more than 10% of the Company's total revenues, representing approximately 56% and 39% of its total revenues, and 84% and 11% of accounts receivable in aggregate atDecember 31, 2021 . Net sales for the year Accounts receivable ended balance Customer December 31, 2021 as of December 31, 2021 A $ 290,749 $ 382,189 B $ 204,018 $ 134,655
For the year ended
Net sales for the year Accounts receivable
ended balance
Customer December 31, 2020 as of December, 2020
A $ 1,714,737 $ 1,054,412
Suppliers: The Company's inventory is purchased from various suppliers.
For the year ended
Net purchase for the year
ended Accounts payable balance
Supplier December 31, 2021 as of December 31, 2021
A $ - $ -
B $ 32,876 $ -
C $ - $ -
D $ - $ -
E $ 71,505 $ -
F $ 12,893 $ -
For the year ended
Net purchase for the year
ended Accounts payable balance
Supplier December 31, 2020 as of December 31, 2020
A $ 182,634 $ -
B $ 108,404 $ 18,079
C $ 50,927 $ -
D $ 49,230 $ -
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Foreign-currency Transactions
Foreign-currency transactions are recorded in New Taiwan dollars ("NTD") and Renminbi ("RMB") at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars and Renminbi, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders' equity.
Translation Adjustment
The accounts of the Company's subsidiaries were maintained, and their financial
statements were expressed in New
Comprehensive Income (loss)
Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income (loss) on its consolidated statements of operations and other comprehensive income (loss).
Recent Accounting Pronouncements
In
Results of Operations
The following presents the consolidated results of the Company for the years
ended
Net Revenue :
Net revenue was
22 Table of Contents Cost of Sales :
Cost of sales was
Gross Profit :
Gross profit was
Selling, General and Administrative Expenses : Selling, general and administrative expenses consist primarily of office rent, salary and related costs for personnel and facilities, and professional service fees. Selling, general and administrative expenses were$1,274,616 for the year endedDecember 31, 2021 , representing de crease of$1,097,058 or 46%, as compared to$2,371,674 for the year endedDecember 31, 2020 . The decrease in selling, general and administrative expenses was primarily attributable to the decrease in bad debt expense.
Income (Loss) from Operations:
Loss from operations was$1,069,080 for the year endedDecember 31, 2021 compared to loss from operations of$742,196 for the year endedDecember 31, 2020 , representing a n increase of$326,884 or 44%. Such increase was primarily due to the decrease in sales.
Other Income (expenses):
Other loss was
Net Income (Loss):
As a result of the above factors, we had net loss was
Liquidity and Capital Resources
Cash and cash equivalents were
23 Table of Contents We had a working capital of$1,245,783 onDecember 31, 2021 , compared to the working capital of$ 2,255,403 onDecember 31, 2020 . The increase in working capital was primarily attributable to the security deposit reclassify to current asset and decrease in accounts payable . Net cash used in operating activities was$194,254 during the year endedDecember 31, 2021 , as compared to$ 362,441 for the year endedDecember 31, 2020 . The decrease in net cash used in operating activities in the amount of$ 168,193 was primary attributable to the decrease in security deposits and other assets and account payable, partially offset by the increase in net income and advance to suppliers.
Net cash used in investing activities was
Net cash provided by financing activities was
Net change in cash and cash equivalents was a decrease of
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
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