DEF 14C: Longwen Group Corp. Seeks Stockholder Approval for Name Change, Reverse Stock Split, Director Re-election, and Auditor Ratification

Longwen Group Corp. is seeking stockholder approval via written consent for several key corporate actions, including a name change to Wenyuan Group Corp., a potential reverse stock split, re-election of current directors, and ratification of the company's independent auditor.

Summary

• Longwen Group Corp. is informing its stockholders about actions taken by written consent of holders of a majority of the company's voting stock.
• These actions include changing the company's name to Wenyuan Group Corp., re-electing current directors, granting the board discretionary authority to enact a reverse stock split (between 1-for-5 and 1-for-10) before December 31, 2024, and ratifying the appointment of Simon & Edward, LLP as the independent auditor for the fiscal year ending December 31, 2024.
• The actions were approved on April 5, 2024, by the Board of Directors and the holder of 65.7% of the company's outstanding voting securities.
• The changes will become effective on or about May 6, 2024, at least 20 days after the information statement is distributed.
• The company will bear the cost of furnishing the information statement.

Sentiment

Score: 6

Explanation: The document is primarily informational, outlining corporate actions. The potential benefits of the reverse stock split are presented positively, but the associated risks are also acknowledged, resulting in a neutral to slightly positive sentiment.

Positives

• The proposed reverse stock split aims to increase the per-share price of the common stock, potentially making it more attractive to a broader range of investors and meeting listing requirements for NASDAQ or NYSE.
• Re-election of current directors ensures continuity in leadership.
• Ratification of the auditor provides assurance regarding the company's financial oversight.

Negatives

• The reverse stock split could lead to some shareholders owning odd lots of less than 100 shares, which may be more difficult to sell and incur higher brokerage commissions.
• The reverse stock split will reduce the number of outstanding shares of Common Stock without reducing the number of shares of available but unissued Common Stock, which will also have the effect of increasing the number of authorized but unissued shares.
• The issuance of additional shares of our Common Stock may have a dilutive effect on the ownership of existing shareholders.

Risks

• Even if a reverse stock split is affected, some or all of the expected benefits may not be realized or maintained.
• The market price of the common stock will continue to be based, in part, on the company's performance and other factors unrelated to the number of shares outstanding.
• The current economic environment, the company's substantial debt, and volatile equity market conditions could limit its ability to raise new equity capital in the future.

Future Outlook

The company aims to improve its stock price and attract a broader range of investors through the potential reverse stock split. The Board will decide whether and when to implement the reverse stock split based on market conditions and the company's performance.

Management Comments

• The Board of Directors believes that it is advisable and in the company's best interests to authorize and approve the Name Change Amendment in order to more accurately reflect additions to the company's business focus and its future activities.
• The Board believes that granting this discretion provides the Board with maximum flexibility to act in the best interests of our shareholders.

Industry Context

Reverse stock splits are often used by companies trading at low prices to improve their stock's perception and meet exchange listing requirements. Name changes can reflect a shift in business strategy or focus.

Comparison to Industry Standards

• Reverse stock splits are a relatively common corporate action, particularly among smaller companies seeking to improve their stock price and appeal to a broader range of investors.
• Companies like DryShips Inc. (now Top Ships Inc.) have used reverse stock splits to maintain exchange listing compliance.
• The specific ratio of the reverse stock split (1-for-5 to 1-for-10) is within the typical range seen in similar situations.

Related Party Transactions

• The company borrowed $82,107 from the President of the Company for its normal business operations and the acquisition of Hangzhou Wenyuan Enterprise Management Co., Ltd.
• The company borrowed additional $9,676 from the President of the Company from July 2022 to December 2022.
• As of December 31, 2023, the balance of the loan due to our President was $71,165.
• 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.
• The Company received advances of $156,058 in cash from and repaid $28,330 to the wife of President of the Company.
• As of December 31, 2023, the amount due to this related party was $127,345.
• 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.
• The Company purchased inventory in the total amount of $40,373 from Hangzhou Longwen Culture Media Ltd. (HZLWCM), an entity under the control by the daughter of the President of the Company.

Stakeholder Impact

• Shareholders will be affected by the name change and potential reverse stock split.
• The reverse stock split could impact the trading price and liquidity of the company's stock.
• The re-election of directors ensures continuity for employees and other stakeholders.

Next Steps

• File the Name Change Amendment with the Nevada Secretary of State by the end of April 2024.
• The Board of Directors will determine whether to implement the reverse stock split before December 31, 2024.
• Submit the reverse stock split application with Financial Industry Regulatory Authority (FINRA), in order to receive clearance from FINRA and proceed the reverse stock split.

Key Dates

Keywords

reverse stock split, name change, directors, auditor, Wenyuan Group Corp, Longwen Group Corp, corporate governance