Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2020

 

or

 

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to _________
	Commission File Number 333-199193

 

Cloudweb, Inc.

(Exact name of registrant as specified in its charter)

 

Florida		47-0978297
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
800 W El Camino Real Suite 180 Mountain View, CA		94040
(Address of principal executive offices)		(Zip Code)

713-583-6813

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: 

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES     ☐ NO

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ YES     ☐ NO

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES     ☒ NO

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ☐ YES     ☐ NO

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

63,140,557 common shares issued and outstanding as of July 20, 2020.

 

  

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition or Plan of Operation		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		17
Item 4.	Controls and Procedures		18
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		19
Item 1A.	Risk Factors		19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3.	Defaults Upon Senior Securities		19
Item 4.	Mine Safety Disclosures		19
Item 5.	Other Information		19
Item 6.	Exhibits		20
SIGNATURES			21

 

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PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

CLOUDWEB, INC.

CONDENSED BALANCE SHEETS

AS OF JUNE 30, 2020 AND DECEMBER 31, 2019

(Unaudited)

 

		June 30, 2020				December 31, 2019
ASSETS
Current Assets
Total Current Assets		$	-			$	-
TOTAL ASSETS		$	-			$	-
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued liabilities		$	58,116			$	63,277
Accrued interest			90,554				76,155
Promissory notes payable			2,160				19,193
Convertible notes payable			26,601				-
Total Current Liabilities			177,431				158,625
Non-Current Liabilities
Convertible notes payable – related party, net of note discount of $4,784 and $5,984, respectively			111,216				110,016
Promissory notes payable			67,326				67,326
Total Liabilities			355,973				335,967
Commitment and contingencies (Note 2)			-				-
Stockholders’ Deficit
Common stock, no par value; 500,000,000 shares authorized, 63,140,557 shares and 140,557 shares issued and outstanding, respectively			-				-
Additional paid-in capital			105,164,410				35,369,809
Stock payable			-				46,500,000
Accumulated deficit			(105,424,167	)			(82,109,560	)
Accumulated deficit from discontinued operations			(96,216	)			(96,216	)
Total Stockholders’ Deficit			(355,973	)			(335,967	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	-			$	-

 

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

 

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CLOUDWEB, INC.

CONDENSED STATEMENT OF OPERATIONS

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2020 AND 2019

(Unaudited)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2020				2019				2020				2019
OPERATING EXPENSES
Professional fees		$	8,257			$	6,353			$	13,407			$	11,255
Stock based compensation			11,625,000				-				23,250,000				-
Total Operating Expenses			11,633,257				6,353				23,263,407				11,255
OTHER EXPENSES
Interest expense			(18,711	)			(8,651	)			(51,200	)			(22,961	)
Total Operating Expenses			(18,711	)			(8,651	)			(51,200	)			(22,961	)
NET LOSS		$	(11,651,968	)		$	(15,004	)		$	(23,314,607	)		$	(34,216	)
NET LOSS PER SHARE: BASIC AND DILUTED		$	(0.18	)		$	(0.11	)		$	(0.58	)		$	(0.24	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED			63,140,557				140,557				40,343,854				140,557

 

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

 

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CLOUDWEB, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2020 AND 2019

(Unaudited)

 

		Common Stock								Additional												Discontinued				Total
		Number of Shares				Amount				Paid-in Capital				Stock Payable				Accumulated Deficit				Operations Deficit				Stockholders’ Deficiency
Balance - December 31, 2019			140,557			$	-			$	35,369,809			$	46,500,000			$	(82,109,560	)		$	(96,216	)		$	(335,967	)
Conversion of convertible notes into common stock			3,000,000				-				9,000				-				-				-				9,000
Beneficial Note Conversion Feature			-				-				21,801				-				-				-				21,801
Stock-based compensation			60,000,000				-				58,125,000				(46,500,000	)			-				-				11,625,000
Net loss			-				-				-				-				(11,662,639	)			-				(11,662,639	)
Balance - March 31, 2020			63,140,557			$	-			$	93,525,610			$	-			$	(93,772,199	)		$	(96,216	)		$	(342,805	)
Beneficial Note Conversion Feature			-				-				13,800				-				-				-				13,800
Stock-based compensation							-				11,625,000				-				-				-				11,625,000
Net loss			-				-				-				-				(11,651,968	)			-				(11,651,968	)
Balance - June 30, 2020			63,140,557			$	-			$	105,164,410			$	-			$	(105,424,167	)		$	(96,216	)		$	(355,973	)

 

		Common Stock								Additional								Discontinued				Total
		Number of Shares				Amount				Paid-in Capital				Accumulated Deficit				Operations Deficit				Stockholders’ Deficiency
*Balance - December 31, 2018			140,557			$	-			$	35,369,809			$	(35,536,335	)		$	(96,216	)		$	(262,742	)
Net loss			-				-				-				(19,212	)			-				(19,212	)
Balance - March 31, 2019			140,557			$	-			$	35,369,809			$	(35,555,547	)		$	(96,216	)		$	(281,954	)
Net loss			-				-				-				(15,004	)			-				(15,004	)
Balance - June 30, 2019			140,557			$	-			$	35,369,809			$	(35,570,551	)		$	(96,216	)		$	(296,958	)

 

*Retrospectively restated reverse stock split 150:1

 

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

 

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CLOUDWEB, INC.

CONDENSED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(Unaudited)

 

		Six Months Ended
		June 30,
		2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations		$	(23,314,607	)		$	(34,216	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Amortization of debt discount			36,800				8,400
Stock based compensation			23,250,000				-
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities			(5,160	)			(6,000	)
Accrued interest			14,399				14,561
Net cash used in operating activities			(18,568	)			(17,255	)
CASH FLOWS FROM INVESTING ACTIVITIES			-				-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible note			18,568				-
Proceeds from issuance of promissory note			-				17,255
Net cash provided by financing activities			18,568				17,255
Net change in cash and cash equivalents			-				-
Cash and cash equivalents - beginning of period			-				-
Cash and cash equivalents - end of period		$	-			$	-
Supplemental Cash Flow Disclosures
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-
Non-Cash Investing and Financing Activity:
Amendment of promissory note to convertible note		$	17,033			$	-
Conversion of convertible notes for common stock		$	9,000			$	-
Beneficial conversion feature		$	35,601			$	-

 

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

 

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CLOUDWEB, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2020

 

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

 

Cloudweb, Inc. (the “Company”) is a Florida corporation incorporated on May 25, 2014 as Formigli, Inc. In December, 2015 the Company changed its name to Data Backup, Inc., and on November 4, 2016, the Company changed its name to Data Backup Solutions Inc. On October 1, 2017, the Company changed its name to Cloudweb, Inc.

 

On November 27, 2019, a majority of stockholders of our company and our board of directors approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to one hundred and fifty (150) old shares for one (1) new share of common stock. The name change and reverse stock split have been reviewed by the Financial Industry Regulatory Authority (“FINRA”) and have been approved for filing with an effective date of December 19, 2019. Articles of Amendment to our Articles of Incorporation were filed on December 9, 2019 with the Florida Secretary of State in connection with the reverse split, with an effective date of December 18, 2019.

 

We are currently seeking new business opportunities with established business entities for merger with or acquisition of a target business.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2019 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2019 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on April 3, 2020. 

 

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Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

ASC 820 “Fair Value Measurements and Disclosures” establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

 

These tiers include:

 

Level 1: defined as observable inputs such as quoted prices in active markets;

Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

The carrying value of cash, prepayments and the Company’s loan from shareholder approximates its fair value due to their short-term maturity.

 

Share-based Expenses

 

ASC 718 “Compensation – Stock Compensation” prescribes accounting and reporting standards for all share-based payment transactions in which employee services and non-employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees and non-employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

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Basic and Diluted Income (Loss) Per Share

 

The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

 

For the three months and six months ended June 30, 2020 and 2019, convertible notes were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be anti-dilutive.

 

For the three months and six months ended June 30, 2020 and 2019, respectively, the following convertible notes were excluded from the computation of diluted net loss per shares as the result of the computation was anti-dilutive:

 

		June 30,				June 30,
		2020				2019
		(Shares)				(Shares)
Convertible notes payable			44,445,917				23,200,000

 

Commitment and contingencies

 

None

 

Recent accounting pronouncements

 

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

 

NOTE 3 – GOING CONCERN

 

The Company believes that its existing capital resources may not be adequate to enable it to execute its business plan. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company estimates that it will require additional cash resources during 2020 based on its current operating plan and condition. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.

 

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NOTE 4 – RELATED PARTY TRANSACTIONS

  

On January 1, 2017, the Company entered into an agreement with an entity controlled by Mr. Liao, the Company’s executive officer and sole member of the Board of Directors, to issue a promissory note for $137,316 to replace the full amount of related party advances that had been provided to the Company between January 1, 2016 and December 31, 2016. The promissory note bears interest at 28% per annum, and is payable on December 31, 2019. On July 1, 2017, the holder of the promissory note entered into an Interest Purchase Agreement with four non-affiliated assignees whereby each assignee was assigned with a convertible promissory note at the principal amount of $34,000 and accrued interest of $4,806. The convertible notes bear interest at 4% per annum, have an expiry date of June 30, 2019 and are convertible at $0.005 per share for the Company common stock. On June 30, 2019, the maturity dates of the notes were extended for three years to June 30, 2022. The Company assessed the note amendment for a debt extinguishment or modification in accordance with ASC 470-50. As the change in fair value of the convertible notes from the note amendment fell below 10% of the carrying value of the original convertible notes, the note amendment is regarded as a note modification. As of June 30, 2020 and December 31, 2019, the convertible notes payable, net of note discount of $4,784 and $5,984, was $111,216 and $100,016, respectively.

 

On March 5, 2020, the Company issued 60,000,000 shares of restricted common stock valued at $93,000,000 based on stock trading price at $1.55 per share to Letterston Investments Limited, a BVI corporation controlled by the Company’s Chief Executive Officer, as compensation for the payment of the Chief Executive Officer’s salary for the years 2019 and 2020. During the three months and six months ended June 30, 2020, the Company has recognized $11,625,000 for the 2^nd quarter portion of the year 2020 salary and $23,250,000 for the first half portion of the year 2020 salary as the services were provided, respectively. Unrecognized stock compensation of $23,250,000 will be recognized throughout 2020.

 

NOTE 5 – PROMISSORY NOTES

 

		June 30,				December 31,				Expiry		Interest
Issuance Month		2020				2019				Date		Rate
November 2017		$	2,160			$	2,160			Due on demand		60% per annum
December 2017			-				17,033			Due on demand		60% per annum
March 2018			15,296				15,296			3/31/2028		30% per annum
June 2018			12,249				12,249			6/30/2028		30% per annum
September 2018			5,408				5,408			9/30/2028		30% per annum
December 2018			6,137				6,137			12/31/2028		30% per annum
March 2019			7,150				7,150			3/31/2029		30% per annum
June 2019			10,105				10,105			6/30/2029		30% per annum
September 2019			4,081				4,081			9/30/2029		30% per annum
December 2019			6,900				6,900			12/31/2029		30% per annum
			69,486				86,519
			(2,160	)			(19,193	)
		$	67,326			$	67,326

   

As of June 30, 2020 and December 31, 2019, the accrued interest on the promissory notes was $34,895 and $44,752, respectively.

 

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NOTE 6 – CONVERTIBLE NOTES

 

		Expiry Date		June 30, 2020				December 31, 2019
Convertible Notes - July 2017 – Related party		6/30/2022		$	116,000			$	116,000
Convertible Notes - January 2020		Due on demand			8,033				-
Convertible Notes - March 2020		Due on demand			4,768				-
Convertible Notes - June 2020		Due on demand			13,800				-
Less debt discount					(4,784	)			(5,984	)
					137,817				110,016
Less current portion of convertible note payable					(26,601	)			-
Long-term convertible notes payable				$	111,216			$	110,016

   

Convertible Notes – July 2017

 

On July 1, 2017, the Company replaced the promissory notes held by the four non-affiliated assignees with convertible notes at principal amount of $34,000, for total note principal amount of $136,000. The convertible notes bear interest at 4% per annum, expire on June 30, 2019 and are convertible at $0.005 per share for the Company common stock.

  

The Company assessed the note amendment for a debt extinguishment or modification in accordance with ASC 470-50. The addition of a substantive conversion feature that is not bifurcated indicates the note amendment is regarded as a note extinguishment. As a result of note extinguishment, we recognized $73,140 and $11,896 as discount on note from beneficial conversion feature and fair value difference and gain on extinguishment of debt, respectively, for the year ended December 31, 2017.

 

On January 2, 2018, the four non-affiliated holders of the convertible notes at principal amount of $34,000 issued on July 1 2017 elected to convert $5,000 principal portion of their notes for 1,000,000 shares of common stock at $0.005 per share. An aggregate $20,000 principal amount of the four convertible notes were converted for 4,000,000 common shares.

 

Convertible Note – January 2020

 

On January 2, 2020, the Company replaced a promissory note of $17,033 originally issued to an unaffiliated party on December 31, 2017 with a convertible note of $17,033. The convertible note is due on demand, bear interest at 10% per annum and is convertible at $0.003 per share. The discount on convertible note from beneficial conversion feature of $17,033 was fully amortized during the six months ended June 30, 2020.

 

Convertible Note – March 2020

 

On March 4, 2020, the convertible note comprising of principal amount of $17,033 and accrued interest of $21,073 was sold to another unaffiliated party. On March 23, 2020, the principal amount of the convertible note of $9,000 was converted into 3,000,000 shares of common stock. (see note 7)

 

On March 31, 2020, the Company issued to an unaffiliated party a convertible note at $4,768 for paying operating expenses on behalf of the Company. The convertible note is due on demand, bears interest at 30% per annum and is convertible at $0.001 per share. The discount on convertible note from beneficial conversion feature of $4,768 was fully amortized during the six months ended June 30, 2020.

 

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Convertible Note – June 2020

 

On June 30, 2020, the Company issued to an unaffiliated party a convertible note at $13,800 for paying operating expenses on behalf of the Company. The convertible note is due on demand, bears interest at 30% per annum and is convertible at $0.001 per share. The discount on convertible note from beneficial conversion feature of $13,800 was fully amortized during the six months ended June 30, 2020.

 

During the six months ended June 30, 2020 and 2019, the Company recognized amortization of debt discount and beneficial conversion feature of $36,800 and $8,400, respectively.

 

During the three months ended June 30, 2020 and 2019, the Company recognized amortization of debt discount and beneficial conversion feature of $13,800 and $600, respectively.

 

As of June 30, 2020 and December 31, 2019, the convertible notes payable was $137,817 and $110,016, net of note discount of $4,784 and $5,984, and accrued interest payable was $55,659 and $31,403, respectively.

 

NOTE 7 - EQUITY

 

Authorized Stock

 

The Company’s authorized common stock consists of 500,000,000 shares with no par value. Transactions described herein reflect the impact of the reverse acquisition and re-capitalization completed on January 28, 2016.

 

Common Shares

 

On November 27, 2019, a majority of stockholders of our company and our board of directors approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to one hundred and fifty (150) old shares for one (1) new share of common stock. The name change and reverse stock split have been reviewed by the Financial Industry Regulatory Authority (“FINRA”) and have been approved for filing with an effective date of December 19, 2019. Articles of Amendment to our Articles of Incorporation were filed on December 9, 2019 with the Florida Secretary of State in connection with the reverse split, with an effective date of December 18, 2019.

  

On March 5, 2020, the Company issued 60,000,000 shares of restricted common stock valued at $93,000,000 to a corporation controlled by the Company’s CEO. (see note 4)

 

On March 23, 2020, principal amount of $9,000 from a convertible note was converted for 3,000,000 shares of common stock at stock trading price of $1.25 per share. (see note 6)

 

As at June 30, 2020 and December 31, 2019, we had a total of 63,140,557 and 140,557 shares issued and outstanding.

 

NOTE 8 – SUBSEQUENT EVENTS

 

The World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company is monitoring the potential impact of this pandemic on the operations of the Company. While the disruption is currently expected to be temporary, there is uncertainty on its duration. As of the time of authorization of these financial statements, it is not possible to estimate the length and severity of these developments and its impact on the financial results and operations of the Company.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.

 

In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.

 

The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

As used in this quarterly report, the terms “we”, “us”, “our”, and “our company” means Cloudweb, Inc., unless otherwise indicated.

 

 General Overview

 

Our company was incorporated on May 25, 2014 under the name “Formigli, Inc.

 

Our headquarters are located at 12A, Greenhill Street, Dept. 106, Stratford Upon Avon, Warwickshire, United Kingdom CV37 6LF. We do not have a corporate website.

 

Our company was originally formed with the intent to engage in the worldwide distribution of custom handmade Italian road bikes, made by Renzo Formigli.

 

On December 3, 2015, we filed Articles of Amendment to our Articles of Incorporation with the Florida Department of State whereby we amended our Articles of Incorporation by (i) changing our name to “Cloudweb, Inc.”, (ii) increasing our company’s authorized number of shares of common stock from 100 million to 500 million, and (iii) increasing our total issued and outstanding shares of common stock by conducting a forward split of such shares at the rate of 100 shares for every one (1) share currently issued and outstanding and made submission to FINRA with respect to the corporate action and requested a change of ticker symbol to “CLOU”. Our common stock is quoted on the Pink Sheets of the OTC Markets, under the symbol “CLOW”, and first traded on the OTC Markets in November 2015.

 

On January 28, 2016, our company concluded a Share Exchange Agreement (“Share Exchange Agreement”) entered into with Zhi De Liao (“Mr. Liao”), whereby our company issued 2,500,000 shares of common stock to Mr. Liao in exchange for 100% of the issued and outstanding equity interests of Data Cloud Inc. a Nevada corporation (“Data Cloud”). Data Cloud owned 100% of the issued and outstanding equity interests of Web Hosting Solutions Ltd., a United Kingdom company (“WHS”), which it purchased from James Holland for US$72,000 (GBP 47,000) on November 25, 2015.

 

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At the time WHS had been providing web hosting solutions for approximately ten (10) years and became a UK private limited company in 2012. In connection with the Share Exchange Agreement, the Company elected to enter into the web hosting industry and discontinue its former business operations.

 

As a result of the Share Exchange Agreement, Mr. Liao became our sole executive officer and sole member of the Board of Directors. Concurrently, Mr. Liao, through his controlled entity, Letterston Investments Ltd., acquired 250,000,000 shares of common stock from our former sole officer and director Ms. Amy Chaffe. As a result, on the transaction date, Mr. Liao effectively controlled approximately 81% of our company’s issued and outstanding shares of common stock.

 

On November 4, 2016, we filed Articles of Amendment to our Articles of Incorporation with the Florida Department of State whereby we amended our Articles of Incorporation by changing our name to “Data Backup Solutions, Inc.” On November 10, 2016, we filed Articles of Amendment to our Articles of Incorporation with the Florida Department of State whereby we amended our Articles of Incorporation by decreasing our company’s total issued and outstanding shares of common stock by conducting a reverse split of such shares at the rate of 1 share for each one hundred shares (100) shares then currently issued and outstanding. The submission of the change of name to Data Backup Solutions, Inc. and the reverse stock split was not completed and the submission was closed.

 

On April 1, 2017, our company, entered into a Purchase Agreement (the “ Purchase Agreement”) with Yui Daing, an individual residing in Kuala Lumpur, Malaysia (the “Purchaser”), Data Cloud Inc., a Nevada corporation (hereinafter referred to as (“Data Cloud”), and Web Hosting Solutions Ltd., a United Kingdom private company limited by shares (hereinafter referred to as “WHS”). The transactions under the Purchase Agreement were completed on April 1, 2017 (hereinafter referred to as the “Closing”). Prior to the Closing, Data Backup owned 100% of the issued and outstanding equity interests of Data Cloud which owns 100% of the issued and outstanding equity interests of Web Hosting Solutions Ltd. (“WHS”), a United Kingdom private company limited by shares (“WHS”). Due to the continued consolidated losses experienced by our company as the result of the losses of our company’s indirect wholly-owned subsidiary, WHS, which included $50,083 USD for the fiscal year ended December 31, 2016 and $21,818 USD for the first three (3) months ended March 31, 2017, our company entered into the Purchase Agreement and transferred 100% of the issued and outstanding equity interests of Data Cloud to a third party for nominal consideration in return.

 

The Purchase Agreement was approved by the shareholders of our company owning a majority of the voting stock of our company on April 1, 2017. The Closing of the Purchase Agreement occurred on April 1, 2017. As a result of the transactions under the Purchase Agreement, our company discontinued the web hosting business.

 

On October 1, 2017, a majority of stockholders of our company and the board of directors approved a change of name of our company from Data Backup Solutions, Inc. to the previous name, Cloudweb, Inc. Articles of Amendment to the Articles of Incorporation to change the name were filed with the Florida Secretary of State on October 18, 2017.

 

On October 27, 2017, a majority of stockholders of our company and board of directors approved a reverse stock split of our issued and outstanding shares of common stock on a basis of up to four hundred (400) old shares for one (1) new share of common stock. On November 30, 2017, FINRA approved the reverse stock split. The outstanding shares have been restated retroactively.

 

On March 29, 2018, our Board of Directors elected Mr. Chen Shi Rong as a member of our Board of Directors and also appointed him as Chief Operating Officer of our company.

 

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

 

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Our Current Business

 

We are currently seeking new business opportunities with established business entities for merger with or acquisition of a target business. In certain instances, a target business may wish to become our subsidiary or may wish to contribute assets to us rather than merge. We have not yet begun negotiations or entered into any definitive agreements for potential new business opportunities, and there can be no assurance that we will be able to enter into any definitive agreements.

 

Any new acquisition or business opportunities that we may acquire will require additional financing. There can be no assurance, however, that we will be able to acquire the financing necessary to enable us to pursue our plan of operation. If our company requires additional financing and we are unable to acquire such funds, our business may fail.

 

Currently, we do not have a source of revenue. We are not able to fund our cash requirements through our current operations. We have been reliant on loans by affiliated and non-affiliated parties to provide financial contributions and services to keep our company operating. Further, we believe that our company may have difficulties raising capital from other sources until we locate a prospective merger candidate through which we can pursue our plan of operation. If we are unable to secure adequate capital to continue our acquisition efforts, our shareholders may lose some or all of their investment and our business may fail. We currently have no written or oral agreement from our majority shareholder to continue to provide financial contributions.

 

Results of Operations

 

The following summary of our operations should be read in conjunction with our unaudited financial statements for the three months ended June 30, 2020 and 2019.

 

Three months ended June 30, 2020 compared to three months ended June 30, 2019.

 

		Three Months Ended
		June 30,
		2020				2019				Changes				%
Operating Expenses
Professional fees			8,257				6,353				1,904				30	%
Stock Based Compensation			11,625,000				-				11,625,000				-
Total operating expenses			11,633,257				6,353				11,626,904				-
Other expenses			18,711				8,651				10,060				116	%
Net Loss		$	11,651,968			$	15,004			$	23,263,868				155,051	%

 

We had no revenue for the three months ended June 30, 2020 and 2019.

 

Our net loss for the three months ended June 30, 2020 was $11,651,968 compared with net loss of $15,004 for the three months ended June 30, 2019 due to the increase in operation expenses. During the three months ended June 30, 2020, we incurred stock based compensation of $11,625,000 attributed to shares issued for Chief Executive Officer’s second quarter portion of the year 2020 salary.

 

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Six months ended June 30, 2020 compared to six months ended June 30, 2019.

 

		Six Months Ended
		June 30,
		2020				2019				Changes				%
Operating expenses
Professional fees		$	13,407			$	11,255			$	2,152				19	%
Stock based compensation			23,250,000				-				23,250,000				-
Total operating expenses			23,263,407				11,255				23,252,152				206,594	%
Other expenses			51,200				22,961				28,239				123	%
Net Loss		$	23,314,607			$	34,216			$	23,280,391				68,039	%

 

We had no revenue for the six months ended June 30, 2020 and 2019.

 

Our net loss for the six months ended June 30, 2020 was $23,314,607 compared with net loss of $34,216 for the six months ended June 30, 2019 due to the increase in operation expenses. During the six months ended June 30, 2020, we incurred stock based compensation of $23,250,000,000 attributed to shares issued for Chief Executive Officer’s first half of the year 2020 salary.

 

Liquidity and Capital

 

Working Capital

 

		As of				As of
		June 30,				December 31,
		2019				2019				Changes				%
Current Assets		$	-			$	-			$	-
Current Liabilities		$	177,431			$	158,625			$	18,806				12	%
Working Capital Deficiency		$	(177,431	)		$	(158,625	)		$	(18,806	)			12	%

 

As at June 30, 2020 and December 31, 2019, our company had no cash and assets.

 

As at June 30, 2020, our company had total liabilities of $355,973, of which included convertible notes payable of $137,817, accrued interest of $90,554, promissory notes payable of $69,486 and accounts payable and accrued liabilities of $58,116. As at December 31, 2019, our company had total liabilities of $335,967, of which included convertible notes payable of $110,016, accrued interest of $76,155, promissory note payable of $86,519 and accounts payable and accrued liabilities of $63,277. 

 

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As at June 30, 2020, our company had a working capital deficiency of $177,431 compared with a working capital deficiency of $158,625 as at December 31, 2019. The increase in working capital deficit was primarily due to an increase in convertible notes payable and accrued interest.

Cash Flows

 

		Six Months Ended
		June 30,
		2020				2019				Changes				%
Cash flows used in operating activities		$	(18,568	)		$	(17,255	)		$	(1,313	)			8	%
Cash flows used in investing activities			-				-				-				n/a
Cash flows provided by financing activities			18,568				17,255				1,313				8	%
Net changes in cash		$	-			$	-			$	-				n/a

 

Cash Flow from Operating Activities

 

We have not generated positive cash flow from operating activities. During the six months ended June 30, 2020, net cash used in operating activities was $18,568 compared to $17,255 used during the six months ended June 30, 2019. Cash flows used in operating activities during the six months ended June 30, 2020, comprised of a net loss of $23,314,607, which was reduced by non-cash expenses of $23,250,000 for stock based compensation, $36,800 for amortization of debt discount and a net change in working capital of $9,239. Cash flows used in operating activities during the six months ended June 30, 2019, comprised of a net loss from of $34,216, which was reduced by non-cash expenses of $8,400 for amortization of debt discount and a net change in working capital of $8,561.

 

Cash Flow from Investing Activities

 

During the six months ended June 30, 2020 and 2019, our company did not have any investing activities.

 

Cash Flow from Financing Activities

 

During the six months ended June 30, 2020 and 2019, our company received $18,568 from proceeds from issuance of convertible note and $17,255 for proceeds from issuance of promissory notes, respectively.

 

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 are material to stockholders.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

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Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three month and six month period ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

The specific material weakness identified by our management was ineffective controls over certain aspects of the financial reporting process because of a lack of a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements and inadequate segregation of duties. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements would not be prevented or detected on a timely basis.

 

We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.

 

Changes in Internal Controls

 

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

The following exhibits are included as part of this report:

 

Exhibit Number		Description
(31)		Rule 13a-14(a)/15d-14(a) Certification
31.1		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
(32)		Section 1350 Certification
32.1**		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
101		Interactive Data Files
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

_________

(1)	Incorporated by reference to the Registration Statement filed with the Commission on November 29, 2005
(2)	Incorporated by reference to Form 8-K filed with the Commission on February 22, 2017
*	Filed herewith. In addition, in accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
**	XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		CLOUDWEB, INC.
		(Registrant)
Dated: July 23, 2020		/s/ Zhi De Liao
		Zhi De Liao
		President, Chief Executive Officer, Chief Financial Officer and Director
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

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