UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F/A
(Amendment No. 2)
(Mark One)
¨
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
OR
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2015
OR
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from ___________
to ___________
OR
¨
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Date of event requiring this shell company report:
Commission file number:
001-35715
KBS
Fashion Group Limited
(Exact Name of Registrant
as Specified in Its Charter)
Not Applicable
(Translation of Registrant’s Name
Into English)
Republic of the Marshall Islands
(Jurisdiction of Incorporation or Organization)
Xin Fengge Building
Yupu Industrial Park
Shishi City, Fujian Province 362700
People’s Republic of China
(Address of Principal Executive Offices)
Mr. Keyan Yan, Chief Executive Officer
Xin Fengge Building
Yupu Industrial Park
Shishi City, Fujian Province 362700
People’s Republic of China
Tel: + (86) 595 8889 6198
Fax: (86) 595 8850 5328
(Name, Telephone, E-mail
and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section
12(b) of the Act:
Title of Each Class
|
Name of Each Exchange On Which Registered
|
Common Stock, $0.0001 par value
|
NASDAQ Capital Market
|
Securities registered or to be registered pursuant to Section
12(g) of the Act.
Units, Common Stock Purchase Warrants
(Title of Class)
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the annual report (December 31, 2015): 25,417,329
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
¨
No
x
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes
¨
No
x
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
x
No
¨
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 during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer.
Large Accelerated Filer
o
|
Accelerated Filer
o
|
Non-Accelerated Filer
x
|
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:
U.S. GAAP
o
|
International Financial Reporting Standards as issued by the International Accounting Standards Board
x
|
Other
o
|
If
“Other” has been checked in response to the previous question, indicate by check mark which financial statement item
the registrant has elected to follow.
o
Item
17
o
Item 18
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
o
No
x
Annual Report on Form 20-F
Year Ended December 31, 2015
TABLE OF CONTENTS
EXPLANATORY NOTE
This Amendment No. 2 to annual report on Form 20-F (this “Amendment
No.2”) amends our annual report on Form 20-F for the year ended December 31, 2015 that was filed with the Securities and
Exchange Commission (the “Commission”) on May 2, 2016 and amended on May 16, 2016 (the “Form 20-F”). This
Amendment No.2 is being filed in response to comments received from the staff of the Commission in order to amend the following
sections of the Form 20-F:
|
·
|
Auditor Report: Due solely to a clerical error, the report of our former independent registered public accounting firm, BDO China Shu Lun Pan Certified Public Accountants LLP (“BDO”) for the fiscal years ended December 31, 2013 and 2014 was inadvertently omitted in the Form 20-F. We are filing this Amendment No.2 to submit this auditor report of BDO.
|
|
·
|
Note 6, note 22, and note 23 to the financial statements for the fiscal years ended December 31, 2013, 2014 and 2015 to disclose that the recoverable amount of these assets is the fair value less cost of disposal and provided the corresponding disclosures per IAS 36 paragraph 130.
|
As required by Rule 12b-15 under the Exchange Act of 1934, as
amended, updated certifications of our principal executive officer and our principal financial officer are being filed as exhibits
to this Amendment No. 2. Other than as described above, this Amendment No. 2 speaks as of the date of the initial filing of the
Form 20-F and does not, and does not purport to, amend, update or restate the information in the Form 20-F or reflect any events
that have occurred after the Form 20-F was originally filed on May 2, 2016.
PART I
|
ITEM 8.
|
FINANCIAL
INFORMATION
|
|
A.
|
Consolidated Statements and Other Financial Information
|
Financial Statements
We have appended consolidated financial statements filed as
part of this report. See Item 18 “Financial Statements.”
Legal Proceedings
We may be subject to legal proceedings,
investigations and claims incidental to the conduct of our business from time to time. We are currently not party to any legal
or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings and those involving any
third party, which may have, or have had in the recent past, significant effects on our financial position or profitability.
Dividend Policy
As required by the Exchange Agreement,
promptly following the consummation of the Share Exchange , the Board of Directors will adopt a dividend policy for the payment
of an annual dividend for the first two fiscal years post-closing in an amount equal to at least twenty percent (20%) of our distributable
profits after tax and after compulsory statutory reserves, which can be no less than 10% of after-tax income in China. After the
first two years, the Board of Directors may elect to modify the dividend policy.
No significant change has occurred since the date of our consolidated
financial statements filed as part of this annual report.
PART II
|
ITEM 17.
|
FINANCIAL STATEMENTS
|
We have elected to provide financial statement pursuant to Item
18.
|
ITEM
18.
|
FINANCIAL
STATEMENTS
|
The financial statements are filed as part
of this annual report beginning on page F-1.
The list of exhibits in the Exhibit Index to this report is
incorporated herein by reference.
SIGNATURE
The registrant hereby
certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this report on its behalf.
Date: November 30, 2016
|
KBS Fashion Group Limited
|
|
|
|
/s/ Keyan Yan
|
|
Keyan Yan
|
|
Chief Executive Officer
|
KBS
Fashion Group Limited
Consolidated
Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(Stated
in US dollars)
Independent Auditor’s Report
To: the Board of Directors and Shareholders of KBS Fashion Group
Limited
We have audited the accompanying consolidated
statements of financial position of KBS Fashion Group Limited and its subsidiaries (the “Company”), as of December
31, 2014 and 2013 and the related consolidated statements of comprehensive income, statements of changes in equity and statements
of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of KBS Fashion Group Limited and
its subsidiaries at December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in
conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
October 27, 2015
/s/ BDO China Shu Lun Pan Certified Public Accountants LLP
Shanghai, China
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
|
To:
|
The Board of Directors and Shareholders
|
of KBS Fashion Group Limited
We have audited the accompanying consolidated
statements of financial position of KBS Fashion Group Limited and its subsidiaries (the “Company”), as of December
31, 2015 and the related consolidated statements of comprehensive income, statements of changes in equity and statements of cash
flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of KBS Fashion Group Limited and
its subsidiaries at December 31, 2015, and the results of its operations and its cash flows for the years then ended in conformity
with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We draw attention to Note 6 to the financial
statements, which describes the recognition of impairment losses by the Company for prepayments for land use rights and related
construction on such land. Our opinion is not qualified in respect of this matter.
San Mateo, California
|
/s/ WWC, P.C.
|
May 1, 2016
|
Certified Public Accountants
|
KBS Fashion Group Limited
Consolidated statements of
comprehensive income (loss)
For the years ended December 31, 2015, 2014, and 2013
(Stated in US dollars)
|
|
|
|
Year ended December 31,
|
|
|
|
Notes
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Revenue
|
|
8
|
|
|
61,343,681
|
|
|
|
58,832,481
|
|
|
|
99,559,814
|
|
Cost of sales
|
|
9
|
|
|
(46,511,274
|
)
|
|
|
(39,416,973
|
)
|
|
|
(57,363,839
|
)
|
Gross profit
|
|
|
|
|
14,832,407
|
|
|
|
19,415,508
|
|
|
|
42,195,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
10
|
|
|
302,145
|
|
|
|
252,748
|
|
|
|
367,896
|
|
Other gains and losses
|
|
11
|
|
|
(3,877,832
|
)
|
|
|
(2,036,508
|
)
|
|
|
96,806
|
|
Distribution and selling expenses
|
|
12
|
|
|
(6,621,256
|
)
|
|
|
(7,191,606
|
)
|
|
|
(6,238,995
|
)
|
Administrative expenses
|
|
13
|
|
|
(2,798,082
|
)
|
|
|
(4,649,229
|
)
|
|
|
(2,211,431
|
)
|
Profit from operations
|
|
|
|
|
1,837,381
|
|
|
|
5,790,913
|
|
|
|
34,210,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
14
|
|
|
-
|
|
|
|
(23,630
|
)
|
|
|
(116,421
|
)
|
Change in fair value of warrant liabilities
|
|
31
|
|
|
11,978
|
|
|
|
3,417,053
|
|
|
|
(45,442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
1,849,359
|
|
|
|
9,184,336
|
|
|
|
34,048,388
|
|
Income tax expense
|
|
15
|
|
|
(605,689
|
)
|
|
|
(2,307,354
|
)
|
|
|
(8,629,022
|
)
|
Profit for the year
|
|
16
|
|
|
1,243,670
|
|
|
|
6,876,982
|
|
|
|
25,419,366
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-currency translation differences
|
|
|
|
|
(6,044,772
|
)
|
|
|
(350,810
|
)
|
|
|
2,597,259
|
|
Total comprehensive income for the year
|
|
|
|
|
(4,801,102
|
)
|
|
|
6,526,172
|
|
|
|
28,016,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock attributable to the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
19
|
|
|
0.05
|
|
|
|
0.27
|
|
|
|
1.00
|
|
-Diluted
|
|
19
|
|
|
0.05
|
|
|
|
0.27
|
|
|
|
1.00
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
KBS Fashion Group Limited
Consolidated statements of
financial position
For the year ended December 31, 2015 and 2014
(Stated in US dollars)
|
|
|
|
As of December 31,
|
|
|
|
Notes
|
|
2015
|
|
|
2014
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment-net
|
|
20
|
|
|
30,536,721
|
|
|
|
33,315,513
|
|
Prepayments and premiums under operating leases
|
|
21
|
|
|
2,739,311
|
|
|
|
2,991,245
|
|
Prepayment for construction of new plant
|
|
22
|
|
|
7,160,523
|
|
|
|
8,988,397
|
|
Prepayment for acquisition of land use right
|
|
23
|
|
|
4,774,063
|
|
|
|
6,409,689
|
|
Prepaid lease payments
|
|
24
|
|
|
670,643
|
|
|
|
729,098
|
|
Deferred tax assets
|
|
15
|
|
|
1,340,268
|
|
|
|
495,444
|
|
|
|
|
|
|
47,221,529
|
|
|
|
52,929,386
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
25
|
|
|
3,527,696
|
|
|
|
793,469
|
|
Trade and other receivables
|
|
26
|
|
|
36,743,402
|
|
|
|
39,516,503
|
|
Subsidies prepaid to distributors
|
|
27
|
|
|
516,231
|
|
|
|
534,859
|
|
Prepayments and premiums under operating leases
|
|
21
|
|
|
81,147
|
|
|
|
471,580
|
|
Prepaid lease payments
|
|
24
|
|
|
16,395
|
|
|
|
17,399
|
|
Cash and cash equivalents
|
|
28
|
|
|
21,214,080
|
|
|
|
20,604,582
|
|
|
|
|
|
|
62,098,951
|
|
|
|
61,938,392
|
|
Total assets
|
|
|
|
|
109,320,480
|
|
|
|
114,867,778
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
29
|
|
|
5,114,964
|
|
|
|
5,527,158
|
|
Related parties payables
|
|
30
|
|
|
983,391
|
|
|
|
651,078
|
|
Income tax payable
|
|
|
|
|
2,401,742
|
|
|
|
3,056,079
|
|
|
|
|
|
|
8,500,097
|
|
|
|
9,234,315
|
|
Non-current liability
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
31
|
|
|
3,409
|
|
|
|
15,387
|
|
|
|
|
|
|
3,409
|
|
|
|
15,387
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
8,503,506
|
|
|
|
9,249,702
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
32
|
|
|
2,542
|
|
|
|
2,542
|
|
Share premium
|
|
32
|
|
|
5,624,875
|
|
|
|
5,624,875
|
|
Statutory surplus reserve
|
|
33
|
|
|
6,069,457
|
|
|
|
5,815,493
|
|
Retained profits
|
|
33
|
|
|
90,880,473
|
|
|
|
89,890,767
|
|
Foreign currency translation reserve
|
|
33
|
|
|
(1,760,373
|
)
|
|
|
4,284,399
|
|
|
|
|
|
|
100,816,974
|
|
|
|
105,618,076
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
|
|
109,320,480
|
|
|
|
114,867,778
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
KBS Fashion Group Limited
Consolidated statements of
changes in equity
For the year ended December 31, 2015, 2014, and 2013
(Stated in US dollars)
|
|
|
|
|
|
|
|
Statutory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
surplus
|
|
|
Retained
|
|
|
Foreign currency
|
|
|
|
|
|
|
Share capital
|
|
|
Share premium
|
|
|
reserve
|
|
|
profits
|
|
|
translation reserve
|
|
|
Total
|
|
|
|
(Note 32)
|
|
|
(Note 32)
|
|
|
(Note 33)
|
|
|
(Note 33)
|
|
|
(Note 33)
|
|
|
|
|
Balance at January 1, 2013
|
|
|
2,542
|
|
|
|
1,422,161
|
|
|
|
2,438,536
|
|
|
|
59,814,279
|
|
|
|
2,037,950
|
|
|
|
65,715,468
|
|
Profit for the year
|
|
|
-
|
|
|
|
(374,714
|
)
|
|
|
-
|
|
|
|
25,794,080
|
|
|
|
-
|
|
|
|
25,419,366
|
|
Other comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,597,259
|
|
|
|
2,597,259
|
|
Appropriation to statutory surplus reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
2,625,370
|
|
|
|
(2,625,370
|
)
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2013
|
|
|
2,542
|
|
|
|
1,047,447
|
|
|
|
5,063,906
|
|
|
|
82,982,989
|
|
|
|
4,635,209
|
|
|
|
93,732,093
|
|
Waiver of payable to ex-shareholder
|
|
|
-
|
|
|
|
5,359,811
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,359,811
|
|
Profit for the year
|
|
|
-
|
|
|
|
(782,383
|
)
|
|
|
-
|
|
|
|
7,659,365
|
|
|
|
-
|
|
|
|
6,876,982
|
|
Other comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(350,810
|
)
|
|
|
(350,810
|
)
|
Appropriation to statutory surplus reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
751,587
|
|
|
|
(751,587
|
)
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2014
|
|
|
2,542
|
|
|
|
5,624,875
|
|
|
|
5,815,493
|
|
|
|
89,890,767
|
|
|
|
4,284,399
|
|
|
|
105,618,076
|
|
Profit for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,243,670
|
|
|
|
-
|
|
|
|
1,243,670
|
|
Other comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,044,772
|
)
|
|
|
(6,044,772
|
)
|
Appropriation to statutory surplus reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
253,964
|
|
|
|
(253,964
|
)
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2015
|
|
|
2,542
|
|
|
|
5,624,875
|
|
|
|
6,069,457
|
|
|
|
90,880,473
|
|
|
|
(1,760,373
|
)
|
|
|
100,816,974
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
KBS Fashion Group Limited
Consolidated statements of
cash flow
For the years ended December 31, 2015, 2014, and 2013
(Stated in US dollars)
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
1,243,670
|
|
|
|
6,876,982
|
|
|
|
25,419,366
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance cost
|
|
|
-
|
|
|
|
23,630
|
|
|
|
116,421
|
|
Change in fair value of warrant liabilities
|
|
|
(11,978
|
)
|
|
|
(3,417,053
|
)
|
|
|
45,442
|
|
Interest income
|
|
|
(92,747
|
)
|
|
|
(136,911
|
)
|
|
|
(142,239
|
)
|
Depreciation of property, plant and equipment
|
|
|
2,015,437
|
|
|
|
2,340,082
|
|
|
|
1,875,812
|
|
Amortization of prepaid lease payments and trademark
|
|
|
17,061
|
|
|
|
17,326
|
|
|
|
15,585
|
|
Amortization of subsidies prepaid to distributors
|
|
|
1,093,036
|
|
|
|
1,163,913
|
|
|
|
1,397,789
|
|
Amortization of prepayments and premiums under operating leases
|
|
|
728,996
|
|
|
|
659,442
|
|
|
|
1,892,254
|
|
Provision/ (Reversal) of inventory obsolescence
|
|
|
342
|
|
|
|
(1,848
|
)
|
|
|
1,994
|
|
Bad debt provision of trade receivables
|
|
|
1,028,439
|
|
|
|
1,973,459
|
|
|
|
-
|
|
Gain/(loss) on disposal of property, plant and equipment
|
|
|
11,412
|
|
|
|
-
|
|
|
|
(10,132
|
)
|
Provision of impairment loss in prepayments
|
|
|
2,565,334
|
|
|
|
-
|
|
|
|
-
|
|
Operating cash flows before movements in working capital
|
|
|
8,599,002
|
|
|
|
9,499,022
|
|
|
|
30,612,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in trade and other receivables
|
|
|
(345,348
|
)
|
|
|
(11,007,437
|
)
|
|
|
(16,252,778
|
)
|
Decrease in related parties receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
414,052
|
|
(Increase)/ Decrease in inventories
|
|
|
(2,893,284
|
)
|
|
|
(126,523
|
)
|
|
|
1,170,209
|
|
Increase in trade and other payables
|
|
|
101,240
|
|
|
|
1,071,032
|
|
|
|
200,208
|
|
Increase in related parties payables
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding waiver of payables to ex-shareholder)
|
|
|
330,099
|
|
|
|
221,847
|
|
|
|
421,165
|
|
Increase/ (Decrease) in income tax payable
|
|
|
(775,117
|
)
|
|
|
(918,759
|
)
|
|
|
105,336
|
|
Increase in deferred tax assets
|
|
|
(908,889
|
)
|
|
|
(495,444
|
)
|
|
|
-
|
|
Prepayments and premiums paid under operating leases
|
|
|
(449,935
|
)
|
|
|
(515,038
|
)
|
|
|
(725,943
|
)
|
Withdraw the prepayments and premiums paid under operating leases
|
|
|
-
|
|
|
|
-
|
|
|
|
1,246,270
|
|
Subsidies prepaid to distributors
|
|
|
(1,093,036
|
)
|
|
|
(1,065,227
|
)
|
|
|
(1,253,461
|
)
|
NET CASH USED IN / FROM OPERATING ACTIVITIES
|
|
|
2,564,732
|
|
|
|
(3,336,527
|
)
|
|
|
15,937,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
92,747
|
|
|
|
136,911
|
|
|
|
142,239
|
|
Prepayment for construction of new plant
|
|
|
-
|
|
|
|
(15,755,201
|
)
|
|
|
-
|
|
Purchase of property, plant and equipment
|
|
|
(1,020,623
|
)
|
|
|
(1,919,723
|
)
|
|
|
(11,288,129
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(927,876
|
)
|
|
|
(17,538,013
|
)
|
|
|
(11,145,890
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
KBS Fashion Group Limited
Consolidated statements of
cash flow (continued)
For the year ended December 31, 2015, 2014 and 2013
(Stated in US dollars)
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
-
|
|
|
|
(23,630
|
)
|
|
|
(116,421
|
)
|
New bank loans raised
|
|
|
-
|
|
|
|
-
|
|
|
|
1,968,213
|
|
Repayment of borrowings
|
|
|
-
|
|
|
|
(1,968,213
|
)
|
|
|
(807,809
|
)
|
Repayment of loan payable-related party
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,650
|
)
|
Advance from related party
|
|
|
-
|
|
|
|
-
|
|
|
|
50,650
|
|
Payment of offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(72,105
|
)
|
NET CASH USED IN / PROVIDED BY FINANCING ACTIVITIES
|
|
|
-
|
|
|
|
(1,991,843
|
)
|
|
|
986,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
1,636,856
|
|
|
|
(22,866,383
|
)
|
|
|
5,778,338
|
|
Effects of currency translation
|
|
|
(1,027,358
|
)
|
|
|
(229,122
|
)
|
|
|
1,591,835
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
|
|
20,604,582
|
|
|
|
43,700,087
|
|
|
|
36,329,914
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR -
represented by cash and bank balances
|
|
|
21,214,080
|
|
|
|
20,604,582
|
|
|
|
43,700,087
|
|
The accompanying notes are an integral part of these consolidated financial statements.
KBS Fashion Group Limited
Notes to consolidated financial
statements
|
(1)
|
Hongri International Holdings Limited (the "Company") formerly known as Wah Ying International
Investment Inc. was incorporated in the British Virgin Islands (the "BVI") on July 8, 2008 as a limited liability company
with authorized share capital of $50,000, divided into 50,000 common shares of $1 per value each of which 10,000 common shares
were issued at par as of December 31, 2010. On January 27, 2011, the Company issued additional 10,000 common shares at a cash consideration
of $77 per share. The principal activity of the Company is investment holding. Yan Keyan, is the sole director of Hongri International.
Before the acquisition by KBS International Holding Inc. (“KBS International”), the 20,000 common shares were held
as to 30% by Cheung So Wa and 70% by Chan Sun Keung. On November 16, 2009, Yan Keyan entered into an option agreement with Cheung
So Wa and Chan Sun Keung of which Yan Keyan is entitled an exclusive right to purchase the 100% equity interest in the Company
at a cash consideration equivalent to the nominal value of issued share capital. Before the execution of the exclusive right by
Yan Keyan, the rights and obligations as a stockholder of the 100% equity interest in the Company are still vested in Yan Keyan
and the appointment of the board of directors and management is controlled by Yan Keyan. This option agreement was replaced by
a new option agreement on March 9, 2011.
|
|
(2)
|
France Cock (China) Limited ("France Cock") was incorporated in Hong Kong on September
21, 2005 as a limited liability company with authorized issued and paid up capital of HK$10,000, divided into 10,000 common shares
of HK$1 par value each. The principal activity of France Cock is trademark holding. The director of France Cock is Yan Keyan. Before
the acquisition by the Company, the 10,000 common shares were held by Yan Keyan.
|
Pursuant to a trademark transfer
agreement dated October 4, 2009, Hongri Fujian agreed to transfer a trademark "KBS" to France Cock for a consideration
of RMB100,000 (approximately $15,250). The trademark transfer procedure has been completed on October 20, 2010 and the Trademark
Authority in the People's Republic of China (the "PRC") issued a trademark registration certificate to France Cock on
March 21, 2011.
Pursuant to a trademark licensing
agreement dated December 1, 2005, France Cock agreed to license a trademark "Kabiniao" to Hongri Fujian for 10 years
commencing from January 1, 2006 at a fee of RMB1,000,000 (approximately $152,500) per annum.
Pursuant to a trademark licensing
agreement executed in 2009, France Cock agreed to license a trademark "KBS" to Hongri Fujian for 5 years commencing from
January 1, 2009 at a fee of RMB40,000,000 (approximately $6.1 million) per annum. The trademark licensing agreement was updated
on August 1, 2012. In the new agreement, France Cock agreed to waive the license fee from January 1, 2012.
|
(3)
|
Roller Rome Limited ("Roller Rome") was incorporated in the BVI on March 28, 2006 as
a limited liability company with authorized share capital of $50,000, divided into 50,000 common shares of $1 par value each of
which 1 share was issued at par. The principal activity of Roller Rome is the provision of design and development services for
sports apparel. The director of Roller Rome is Yan Keyan. Before the acquisition by the Company, the only one issued common share
was held by Chen Bizhen.
|
KBS Fashion Group Limited
Notes to consolidated financial
statements
|
1.
|
GENERAL INFORMATION – continued
|
|
(4)
|
Vast Billion Investment Limited ("Vast Billion") was incorporated in Hong Kong on November
25, 2010 as a limited liability company with authorized share capital of HK$10,000 divided into 10,000 ordinary share of HK$1 each
of which 1 ordinary share was issued at par. Vast Billion was a dormant company until the completion of acquisition of 100% equity
interest in Hongri Fujian on February 15, 2011. The director of Vast Billion is Yan Keyan,. Before the acquisition by Hongri International,
1 ordinary share was held by Chan Sun Keung, the father of Chen Bizhen.
|
|
(5)
|
Hongri (Fujian) Sports Goods Co. Ltd. ("Hongri Fujian") was established in the People's
Republic of China (the "PRC") on November 17, 2005 with a registered and paid up capital of RMB 5,000,000 (which are
not divided into shares). On March 24, 2011, Hongri Fujian increased registered capital from RMB 70,000,000 to RMB75,000,000. As
of September 30, 2011, the paid up capital was RMB 39,551,860. Hongri Fujian is engaged in the design manufacture marketing and
sale of apparel in the PRC. On August 10, 2011, Chen Bizhen replaced Wang Feiya as legal representative of Hongri Fujian. Before
the acquisition by Vast Billion, the paid up capital of RMB 5,000,000 was held as to 50% by Yan Keyan and 50% by Chen Bizhen. On
December 18, 2006, Roller Rome entered into a buy back agreement with Yan Keyan and his wife Chen Bizhen of which Roller Rome is
entitled the exclusive right to acquire all of Yan Keyan's and Chen Bizhen's 100% equity interest in Hongri Fujian at a consideration
equivalent to the paid up capital of Hongri Fujian. Before the execution of the exclusive right by Roller Rome, i) 100% equity
interest in Hongri Fujian is pledged to Roller Rome as collateral for the annual fee due to Roller Rome; ii) Roller Rome is entitled
the exclusive right to receive all of dividend declared by Hongri Fujian; and iii) the appointment of the board of directors and
management of Hongri Fujian are controlled by Roller Rome. This buy back agreement was mutually terminated upon the completion
of acquisition of Hongri Fujian by Vast Billion.
|
|
(6)
|
Anhui Kai Xin Apparel Company Limited ("Anhui Kai Xin") was established in the PRC on
March 16, 2011 with a registered and paid up capital of RMB 1,000,000. Anhui Kai Xin is a wholly owned subsidiary of Hongri Fujian.
Anhui Kai Xin provides sub-contracting service for the manufacture of sports apparel to Hongri Fujian and other brand name owners
in the PRC. Yan Keyan is the director and legal representative of Anhui Kai Xin.
|
|
(7)
|
Shishi Hongri Brand Management Company Limited ("Brand Management”) was established
in the PRC on October 17, 2011 with a registered and paid up capital of RMB 100,000, Brand Management is a wholly owned subsidiary
of Hongri Fujian and a dormant company in the PRC. Chen Bizhen is the director and legal representative of Brand Management. Brand
Management was dissolved on November 24, 2014.
|
|
(8)
|
According to a Design and Development Agreement entered into between Roller Rome and Hongri Fujian
on December 18, 2006, Roller Rome provides design and development services, including market research, product development, design
technical consulting and staff training to Hongri Fujian for an annual fee ranging from 90% to 99% of Hongri Fujian's net income
before tax. The Design and Development Agreement expired on December 31, 2011.
|
|
(9)
|
On March 24, 2014, Aquasition Investments Corp. (“Company”) entered into a Share Exchange
Agreement and Plan of Liquidation (the “Agreement”), with KBS International Holdings, Inc., a Nevada corporation (“KBS”),
Hongri International Holdings Ltd., a company organized and existing under the laws of the British Virgin Islands and wholly owned
subsidiary of KBS (“Hongri” or the “Target”); and Cheung So Wa and Chan Sun Keung, each an individual and
shareholder of KBS (each, a “Principal Stockholder”). The acquisition was accounted for as a reverse merger and recapitalization
where KBS will was the acquirer and the Company will be the acquired company. On August 1, 2014, upon completion of the acquisition,
Aquasition Investments Corp. was changed to KBS Fashion Group Limited. The Company also changed its trading symbol from "AQU"
to "KBSF".
|
KBS Fashion Group Limited
Notes to consolidated financial
statements
|
2.
|
GROUP REORGANISATION AND BASIS OF PRESENTATION OF CONSOLIDATED
FINANCIAL STATEMENTS
|
The Group structure
as at the reporting date is as follows:
The consolidated financial statements
have been prepared in accordance with international financial reporting standards ("IFRS") as issued by the International
Accounting Standards Board.
|
3.
|
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRSs")
|
Except as described below, for
the year ended December 31, 2015 the Company has consistently adopted all the new and revised standards, amendments and interpretations
(collectively IFRSs) issued by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee
(formerly known as "International Financial Reporting Interpretations Committee" ("IFRIC")) of the IASB that
are effective for financial year beginning on January 1, 2015 in the preparation of the consolidated financial statements throughout
the year.
For the year ended December
31, 2015, there was no new and revised standards, amendments or interpretations that have become effective during the reporting
period.
At the date these consolidated
financial statements are authorized for issuance, the IASB has issued the following new and revised International Accounting Standards
("IASs"), IFRSs, amendments and IFRICs which are not yet effective in respect of the years. The Company has not early
applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective:
Annual improvements to IFRSs
2012–2014s, which is effective for annual periods beginning on or after January 1, 2016.
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
3.
|
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRSs") – continued
|
IFRS 9 ‘Financial Instruments’
will supersede IAS 39 ‘Financial Instruments: Recognition and Measurement’ and is effective for annual periods beginning
on or after January 1, 2018. IFRS 9 covers classification and measurement of financial assets and financial liabilities, impairment
methodology and hedge accounting.
IFRS 15 ‘Revenue from
Contracts with Customers’ provides a single model for accounting for revenue arising from contracts with customers and is
effective for annual periods beginning on or after January 1, 2018. IFRS 15 will supersede IAS 18 ‘Revenue’.
The IASB has issued IFRS 16
‘Leases’ which provides a new model for lease accounting in which all leases, other than short-term and small-ticket-item
leases, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability, and the subsequent
amortization of the right-to-use asset over the lease term. IFRS 16 will be effective for annual periods beginning on or after
January 1, 2019 and is expected to have a significant effect on the group’s financial statements, significantly increasing
the group’s recognized assets and liabilities and potentially affecting the presentation and timing of recognition of charges
in the income statement. Information on the group’s leases currently classified as operating leases, which are not recognized
on the balance sheet, is provided in Note 27.
Amendments to IFRS 10 and IAS
28 (December 2015) —defers the effective date of Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture (Amendments to IFRS 10 and IAS 28) until a future date to be determined by the IASB. Early application of the amendments
to IFRS 10 and IAS 28 is permitted. Paragraph C1C of IFRS10; Paragraph 45C of IAS 28.
Amendments to IAS 12 - Recognition
of Deferred Tax Assets for Unrealised Losses (January 2016, effective for annual periods beginning on or after January 1, 2017.
Early application is permitted. Application is retrospective, with certain optional transition relief available.) — Paragraph
98G.
Amendments to IAS 7, Disclosure
Initiative (January 2016, effective for annual periods beginning on or after January 1, 2017. Early application is permitted. Application
is prospective and comparative information is not required for preceding periods when first applied.) —Paragraphs 44A through
44E.
The Company does not expect
to adopt IFRS 9, IFRS 15, or any of the above amendments/annual improvements before their respective effective dates and has not
yet determined its date of adoption for IFRS 16. The Company has not yet completed its evaluation of the effect of adoption of
these standards.
There are no other standards
and interpretations in issue but not yet adopted that the directors anticipate will have a material effect on the consolidated
financial statements of the Company.
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES
|
The principal accounting policies
adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the
years presented, unless otherwise stated.
First-time adoption of IFRS
The financial statements for
the year ended December 31, 2014 are the first time the Company has prepared in accordance with IFRS. For periods up to and including
the year ended 31 December 2013, the Company prepared its financial statements in accordance with U.S. generally accepted accounting
principles (U.S. GAAP). Accordingly, the Company has prepared financial statements which comply with IFRS applicable for periods
ending on or after December 31, 2014, together with the comparative period data as at and for the year ended December 31, 2013,
as described in the accounting policies. In preparing these financial statements, the Company’s opening statement of financial
position was prepared as at January 1, 2013 the Company’s date of transition to IFRS.
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
The Company’s main business
activity was investment and only some administrative expenses and distribution and selling expenses incurred in the Company. There
were no substantial differences between the amounts under U.S. GAAP and IFRS. Therefore, no principal adjustments made by the Company
in restating its U.S. GAAP statement of financial position as at January 1, 2013 and its previously published U.S. GAAP financial
statements as at and for the year ended December 31, 2013.
Basis of preparation
The consolidated financial statements
have been prepared on the historical cost basis and in accordance with IFRS as issued by the IASB. The principal accounting policies
are set out below.
Basis of consolidation
The consolidated financial statements
incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved
where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Where necessary, adjustments
are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members
of the Group.
All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
Foreign currencies
The Company’s presentational currency
is the United States Dollar.
Items included in the financial statements are
measured using the currency of the primary economic environment in which the entity operates (the "functional currency").
The Group conducts its business predominately
in the PRC and hence its functional currency is the Renminbi (RMB).
Translation from RMB to USD found place at the
following rates:
|
|
Period end rates
|
|
Average rates
|
|
|
|
|
|
December 31, 2013
|
|
USD 1.00= RMB 6.0969
|
|
USD 1.00=RMB 6.1896
|
|
|
|
|
|
December 31, 2014
|
|
USD 1.00= RMB 6.1190
|
|
USD 1.00=RMB 6.1448
|
|
|
|
|
|
December 31, 2015
|
|
USD 1.00= RMB 6.4936
|
|
USD 1.00=RMB 6.2401
|
The results and financial positions in functional
currency are translated into the presentation currency of its intended ultimate legal parent as follows:
(1) Assets and liabilities for each balance
sheet presented are translated at the closing rate at the date of that balance sheet;
(2) Income and expenses for each income statement
are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions);
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
(3) Share equity, share premium and dividends
are translated at historical exchange rates; and
(4) All resulting exchange differences are recognized
in foreign currency translation reserve, a separate component of equity.
Segment reporting
Operating segments, and
the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly
to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance
of, the Group’s various lines of business and geographical locations.
Individually material operating
segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are
similar in respect of the nature of products and services, the nature of production processes, the type or class of customers,
the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments
which are not individually material may be aggregated if they share a majority of these criteria. The Group’s three segments
are wholesale, retail and subcontracting.
Revenue recognition
Revenue is measured at the fair
value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business,
net of discounts and sales related taxes.
The Group’s revenue originates
(i) from corporate owned stores, (ii) distributors and (iii) the services performed as an original design manufacturer. Revenue
from all above categories is recognized when all the following conditions are satisfied:
|
·
|
the Group has transferred to the buyer
the significant risks and rewards of ownership of the goods;
|
|
·
|
the Group retains neither continuing managerial
involvement to the degree usually associated with ownership nor effective control over the goods sold;
|
|
·
|
the amount of revenue can be measured
reliably;
|
|
·
|
it is probable that the economic benefits
associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction
can be measured reliably.
|
Specifically, revenue from
sale of goods is recognized when the goods are delivered and title has passed.
Value added tax (VAT)
Output VAT is 17% of product
sales and taxable services revenue, according to tax laws. The remaining balance of output VAT, after subtracting the deductible
input VAT of the period, is VAT payable.
Borrowing costs
Borrowing costs directly
attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial
period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets
are substantially ready for their intended use or sale.
All other borrowing costs
are recognized in profit or loss in the period in which they are incurred.
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
Retirement benefit costs
Pursuant to the relevant
regulations of the PRC government, the Group participates in a local municipal government retirement benefits scheme (the "Scheme"),
whereby the subsidiaries located in the PRC are required to contribute a certain percentage of the basic salaries of its employees
to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations
of all existing and future retired employees of the subsidiaries located in the PRC. The only obligation of the Group with respect
to the Scheme is to pay the on-going required contributions under the Scheme mentioned above. Contributions under the Scheme are
charged to the profit or loss as incurred. There are no provisions under the Scheme whereby forfeited contributions may be used
to reduce future contributions. These plans are considered defined contribution plans. The Group has no legal or constructive obligations
to pay further contributions after its payment of the fixed contributions into the national pension schemes. Contributions to national
pension schemes are recognized as an expense in the period in which the related service is performed.
Taxation
Income tax expense represents
the sum of the tax currently payable and deferred tax.
The tax currently payable is
based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statements of comprehensive
income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted
by the end of the reporting period.
Deferred tax is recognized
on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable
temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that
it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such
deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.
Deferred tax liabilities are
recognized for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent
that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.
The carrying amount of deferred
tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities
are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized,
based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement
of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects,
at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
KBS Fashion Group
Limited
Notes to consolidated
financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
Taxation –
continued
Current and deferred tax are
recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in
equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in
the accounting for the business combination.
Store pre-opening cost
Store pre-opening cost was
the start-up activity costs incurred prior to opening a new store, mainly including leasing, leasehold improvements, payroll and
supplies. The accounting policies for leasing and leasehold improvements were as below. Other store pre-opening costs were directly
charged to expenses when occurred.
Leasing
Leases are classified as finance leases whenever
the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified
as operating leases.
Leasehold improvements
Leasehold improvements, principally
comprising costs of office buildings and shops renovation, are held for administrative and selling purposes. Leasehold improvements
are initially measured at cost and amortized systematically over its useful life.
Property, plant and equipment
Property, plant and equipment
("PPE") including buildings held for use in the production or supply of goods or services, or for administrative purposes
other than construction in progress are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.
Depreciation is provided to
write off the cost of items of property, plant and equipment other than construction in progress over their estimated useful lives
and after taking into account of their estimated residual value, using the straight-line method.
Construction in progress includes
property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress
is carried at cost less any recognized impairment loss. Construction in progress is classified to the appropriate category of property,
plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property
assets, commences when the assets are ready for their intended use.
An item of property, plant and
equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the item) is included in profit or loss in the period in which the item is de-recognized.
The Group as lessor
Rental income from operating
leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease.
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
Leasehold land
When a lease includes both
land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately
based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been
transferred to the Group. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between
the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and
building element of the lease at the inception of the lease.
To the extent the allocation
of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented
as "prepaid lease payments" in the consolidated statement of financial position and is amortized over the lease term
on a straight-line basis.
Inventories
Inventories are stated at the
lower of cost and net realizable value. Costs of inventories are determined using the weighted average method. Net realizable value
represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Financial instruments
Financial assets and financial
liabilities are recognized on the consolidated statements of financial position when a group entity becomes a party to the contractual
provisions of the instrument.
Financial assets and financial
liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition.
Financial assets
The Group's financial assets
are classified as receivables.
Effective interest method
The effective interest method
is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid
or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.
Interest income is recognized on an effective interest
basis for debt instruments.
Receivables
Receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. Receivables (including trade and
other receivables, related parties receivables, and cash and cash equivalents) are measured at amortized cost using the effective
interest method, less any impairment (see accounting policy on impairment loss on receivables below).
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
Financial instruments
– continued
Financial assets
– continued
Impairments of receivables
Receivables are assessed for
indicators of impairment at the end of the reporting period. Receivables are impaired where there is objective evidence that, as
a result of one or more events that occurred after the initial recognition of the receivables, the estimated future cash flows
of the receivables have been affected.
Objective evidence of impairment
could include:
|
·
|
significant financial difficulty of the
issuer or counterparty;
|
|
·
|
default or delinquency in interest or
principal payments;
|
|
·
|
it becoming probable that the borrower
will enter bankruptcy or financial reorganization.
|
For certain categories of financial
asset, such as trade and other receivables, assets that are assessed not to be impaired individually are subsequently assessed
for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's
past experience of collecting payments, and increase in the number of delayed payments in the portfolio past the average credit
period, observable changes in national or local economic conditions that correlate with default on receivables.
An impairment loss is recognized in profit or loss
when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying
amount and the present value of the estimated future cash flows discounted at the original effective interest rate.
The carrying amount of the
receivables is reduced by the impairment loss directly for all financial assets with exception of trade and other receivables,
where the carrying amount is reduced through the use of an allowance account. Changes in carrying amount of the allowance account
are recognized in profit or loss. When a trade and other receivable are considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.
If, in a subsequent period,
the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment
losses was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying
amount of the asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment
not been recognized.
Cash and cash equivalents
Cash and cash equivalents comprise
cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments
that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having
been within three months of maturity at acquisition
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
Financial
instruments – continued
Financial liabilities and equity
Financial liabilities
and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument.
An equity instrument is
any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Effective interest method
The effective interest
method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial
recognition.
Interest expense is recognized on an effective
interest basis.
Financial liabilities
Financial liabilities
including trade and other payables, related parties payables and short-term loans are subsequently measured at amortized cost,
using the effective interest method.
Equity instruments
Equity instruments issued
by the group entities are recorded at the proceeds received, net of direct issue costs.
De-recognition
Financial assets are derecognized
when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred
substantially all the risks and rewards of ownership of the financial assets. On de-recognition of a financial asset, the difference
between the asset's carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.
Financial liabilities
are derecognized when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between
the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
Subsidies prepaid to distributors
Subsidies were paid to major
distributors for compensating their rental expenses. Such subsidies would vest to distributors when they met the sales targets
predetermined by the Company. Subsidies prepaid to distributors were recognized when payments were made and amortized over the
agreement term on a straight-line basis in selling expenses.
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
4.
|
SIGNIFICANT ACCOUNTING POLICIES – continued
|
Capital and Reserves
Share capital represents
the nominal value of shares that have been issued by the Group. Share capital is determined using the nominal value of shares that
have been issued.
Retained profits include
all current and prior period results as determined in the combined statement of comprehensive income.
Foreign currency translation
reserve arising on the translation are included in the currency translation reserve.
In accordance with the
relevant laws and regulations of PRC, the subsidiaries of the Group established in PRC are required to transfer 10% of its annual
statutory net profit (after offsetting any prior years’ losses) to the statutory reserve. When the balance of such reserve
reaches 50% of the subsidiary’s share capital, any further transfer of its annual statutory net profit is optional. Such
reserve may be used to offset accumulated losses or to increase the registered capital of the subsidiary subject to the approval
of the relevant authorities. However, except for offsetting prior years’ losses, such statutory reserve must be maintained
at a minimum of 25% of the share capital after such usage. The statutory reserves are not available for dividend distribution to
the shareholders.
All transactions with
owners of the Group are recorded separately within equity.
Earnings per share
Basic earnings per share
(“EPS”) are computed by dividing income attributable to holders of common shares by the weighted average number of
common shares outstanding during the year. Diluted EPS reflects the potential dilution that could occur if securities or other
contracts to issue common shares were exercised or converted into common shares. Potential dilutive securities are excluded from
the calculation of diluted EPS in loss periods as their effect would be anti-dilutive.
The preparation of financial
statements in conformity with IFRS requires management to exercise judgment in the process of applying the Group’s accounting
policies and requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of financial statements and reported amount of revenue and expenses
during the reporting period. The following estimates that have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year are disclosed below:
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
5.
|
SIGNIFICANT MANAGEMENT JUDGMENT IN APPLYING ACCOUNTING
POLICIES
|
Allowance for Bad and Doubtful
debts
Allowances for bad and
doubtful debts are based on an assessment of the recoverability of trade and other receivables. Allowances are applied to trade
and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification
of bad and doubtful debts requires the use of judgment and estimates, where the expected outcome is different from the original
estimate, such difference will impact carrying value of trade and other receivables and doubtful debt expenses in the period in
which such estimate has been charged.
Impairment Losses
Impairment losses are
based on an assessment of the investment or long lived assets’ ability to generate future cash flows when there is evidence
that these assets may be impaired. The calculation of the amount of impairment loss are based on estimates made by management when
applying broad accounting principles governing the accounting for these assets. The determination of these estimates requires judgment
by management. The final outcome may differ from the original estimates made by management, which may impact the carrying value
of the assets which management has determined to be impaired and charged to the Company’s profit loss during the period.
Income Tax
The Group has exposure
to income taxes in numerous jurisdictions. Significant judgment is involved in determining the Group’s provision for income
taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary
course of business. The Group recognizes liabilities for expected tax issues based on estimates of whether additional taxes will
be due. Where the final tax outcome of these matters is different from the amounts that were initially recognized, such differences
will impact the income tax and differed tax provisions in the period in which such determination is made. The carrying amount of
the Group’s income tax payable as at December 31, 2015 and 2014 amounted to $2,401,742 and $3,056,079 respectively.
|
6.
|
KEY SOURCES OF ESTIMATION UNCERTAINTY
|
In the application of
the Group's accounting policies, which are described in Note 4, management is required to make estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate
is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects
both current and future periods.
The following are the
key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that
have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year.
Depreciation of building,
machinery and equipment
As described in Note
4, the Group reviews the estimated useful lives and residual values of property, plant and equipment at the end of each reporting
period. The cost of building, machinery and equipment is depreciated on a straight-line basis over the assets' estimated useful
lives. Management estimates the useful lives of these buildings, machinery and equipment to be within 5 to 20 years. These are
the common life expectancies
applied in the same industry. Changes in the expected level of usage and technological developments could impact the economic useful
lives and the residual values of these assets, therefore future depreciation charges could be revised.
KBS
Fashion Group Limited
Notes
to consolidated financial statements
|
6.
|
KEY SOURCES OF ESTIMATION UNCERTAINTY – continued
|
Fair value of warrants
The fair value of warrants
was determined using a binomial-lattice model. This model requires the input of highly subjective assumptions, including price
volatility of the underlying stock. Changes in the subjective input assumptions can materially affect the estimate of fair value
of the warrants and the Company’s results of operations could be impacted. This model is dependent upon several variables
such as the instrument's expected term, expected strike price, expected risk-free interest rate over the expected instrument term,
the expected dividend yield rate over the expected instrument term, and the expected volatility of the Company’s stock
price over the expected term. The expected term represents the period of time that the instruments granted are expected to be outstanding.
The expected strike price is based upon a weighted average probability analysis of the strike price changes expected during the
term as a result of the down round protection. The risk-free rates are based on U.S. Treasury securities with similar
maturities as the expected terms of the options at the date of valuation. Expected dividend yield is based on historical
trends. The Company measures volatility using the volatility rates of market index.
Impairment of non-financial
assets
Property, plant and equipment
are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.
For the purpose of impairment
testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an
individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If
this is the case, the recoverable amount is determined for the cash-generating-unit (“CGU”) to which the asset belongs.
If the recoverable amount
of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to
its recoverable amount.
The difference between
the carrying amount and recoverable amount is recognized as an impairment loss in the income statement, unless the asset is carried
at revalued amount, in which case, such impairment loss is treated as a revaluation decrease.
An impairment loss for
an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognized. The carrying amount of this asset is increased to its revised
recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated
amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
A reversal of impairment
loss for an asset other than goodwill is recognized in the income statement, unless the asset is carried at revalued amount, in
which case, such reversal is treated as a revaluation increase.
During the year ended December 31, 2015, the Company recognized impairment losses
of
$1,317,295 and $1,248,039 for its prepayments for acquisition of land use rights and the related prepayments for construction on
such land, respectively. The impairment reflects the current reduction in the value of the investment as a result of the delay
in time to complete the construction projects and delay in procurement of legal certificates that would lead to the assets being
put into service that would give rise to expected future profitability which, at December 31, 2015, has been temporarily postponed
beyond the next operating period. The impairment losses charged to the prepayments has brought the carrying values to their respective
recoverable amount in its fair value less costs to sell.
For the prepayment for
acquisition of land use rights, the Company provided an estimate of its fair value based on the market value substitution rule.
The estimated fair value belongs to Level 2 of the fair value hierarchy because the input is determined through quoted prices of
similar assets without an actively quoted market. Using the market approach, the Company compares the price of the land use right
that the Company intended to acquire with the price of similar land use rights in the same geographical area, adjusted by factors
such as price index, frequency of actual transactions conducted, environmental conditions, etc. Significant assumptions used in
this estimation include the ability to legally obtain such land use rights, the usage of land as industrial use, the date of transaction
at year end, etc. As a result, the Company provided an estimate in the amount of $5,154,034. Finally, the fair value is reduced
by estimated costs to sell which include, but not limited to, legal costs, stamp duty, similar transaction tax, etc. in the amount
of $379,971. The net value is then compared to the carrying value, and the difference is recorded as impairment loss in the amount
of $1,317,295.
For the prepayment for
construction, the Company provided an estimate of its fair value based on the time value approach. The estimated fair value belongs
to Level 3 of the fair value hierarchy because the input is not easily observable. Using this approach, the Company calculates
the time value of money of the amount prepaid based on the Company’s weighted average cost of capital (“WACC”)
in order to arrive at its fair value. The Company uses this approach to determine its recoverable amount because such prepayments
are not readily resalable, and the ability to realize this amount is contingent upon the Company’s ability to successfully
acquire the land use right as mentioned above. Significant assumption used in this estimation include using the WACC, which is
comprised of the Company’s metrics of return of equity, return of debt, the relevant weights of the returns of equity and
debt, and tax rate, in determining the fair value. As a result, the Company provided an estimate in the amount of $7,160,523. Since
this asset is not resalable, the company estimated costs to sell for this asset in the amount of $0. The net value is then compared
to the carrying value, and the difference is recorded as impairment loss in the amount of $1,248,039.
KBS Fashion Group
Limited
Notes to consolidated
financial statements
Management currently identifies
the Group’s three sales models as operating segments, which are wholesale, retail and subcontracting. The segment presentation
is in accordance with management’s expectation of future business developments. These operating segments are monitored and
strategic decisions are made on the basis of segmental gross margins.
By business
|
|
Wholesale
|
|
|
Retail
|
|
|
Subcontracting
|
|
|
Consolidated
|
|
|
|
For the year
ended December 31,
|
|
|
For the year
ended December 31,
|
|
|
For the year
ended December 31,
|
|
|
For the year
ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Sales to external customers
|
|
|
40,815,528
|
|
|
|
40,654,657
|
|
|
|
78,111,563
|
|
|
|
18,091,585
|
|
|
|
16,134,537
|
|
|
|
19,093,669
|
|
|
|
2,436,568
|
|
|
|
2,043,287
|
|
|
|
2,354,582
|
|
|
|
61,343,681
|
|
|
|
58,832,481
|
|
|
|
99,559,814
|
|
Segment revenue
|
|
|
40,815,528
|
|
|
|
40,654,657
|
|
|
|
78,111,563
|
|
|
|
18,091,585
|
|
|
|
16,134,537
|
|
|
|
19,093,669
|
|
|
|
2,436,568
|
|
|
|
2,043,287
|
|
|
|
2,354,582
|
|
|
|
61,343,681
|
|
|
|
58,832,481
|
|
|
|
99,559,814
|
|
Segment gross margins
|
|
|
9,668,518
|
|
|
|
12,382,562
|
|
|
|
28,162,776
|
|
|
|
4,239,168
|
|
|
|
6,327,728
|
|
|
|
13,277,404
|
|
|
|
924,721
|
|
|
|
705,218
|
|
|
|
755,795
|
|
|
|
14,832,407
|
|
|
|
19,415,508
|
|
|
|
42,195,975
|
|
Reconciling items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,983,049
|
)
|
|
|
(10,231,172
|
)
|
|
|
(8,147,587
|
)
|
Profit before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,849,359
|
|
|
|
9,184,336
|
|
|
|
34,048,388
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(605,689
|
)
|
|
|
(2,307,354
|
)
|
|
|
(8,629,022
|
)
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,243,670
|
|
|
|
6,876,982
|
|
|
|
25,419,366
|
|
The Group does not allocate the assets because they
are shared by the three segments and cannot be split.
Geographical information
The Group’s operations are located in the
PRC and all of the Group’s revenue is derived from sales to customers in the PRC. Hence, no analysis by geographical area
of operations is provided.
KBS Fashion Group
Limited
Notes to consolidated
financial statements
|
7.
|
SEGMENT REPORTING – continued
|
Information about major
customers
Major distributors that
make up 10% or more of wholesale revenue are as below:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Distributor A
|
|
|
6,625,797
|
|
|
|
8,384,369
|
|
|
|
11,438,514
|
|
Distributor B
|
|
|
2,905,842
|
|
|
|
4,698,008
|
|
|
|
2,605,818
|
|
Distributor C
|
|
|
2,768,317
|
|
|
|
3,144,781
|
|
|
|
2,371,725
|
|
Other distributors
|
|
|
12,519,226
|
|
|
|
24,427,499
|
|
|
|
61,695,507
|
|
|
|
|
24,819,182
|
|
|
|
40,654,657
|
|
|
|
78,111,564
|
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Apparel
|
|
|
|
|
|
|
|
|
|
|
|
|
-Wholesale
|
|
|
40,815,527
|
|
|
|
40,654,657
|
|
|
|
78,111,563
|
|
-Retail
|
|
|
18,112,019
|
|
|
|
16,134,537
|
|
|
|
19,093,669
|
|
Subtotal
|
|
|
58,927,546
|
|
|
|
56,789,194
|
|
|
|
97,205,232
|
|
Subcontracting
|
|
|
2,416,135
|
|
|
|
2,043,287
|
|
|
|
2,354,582
|
|
|
|
|
61,343,681
|
|
|
|
58,832,481
|
|
|
|
99,559,814
|
|
Revenue is denominated only in USD.
Cost of sales comprises
of purchasing materials, labor costs for personnel employed in production, depreciation of non-current assets used for production
purpose, outsourced manufacturing cost, taxes and surcharges and water and electricity. The following table shows a breakdown
of cost of sales for the period under review for each category:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Changes in inventories of finished goods and work in progress
|
|
|
64,814
|
|
|
|
126,523
|
|
|
|
1,168,215
|
|
Materials consumed in production
|
|
|
183,831
|
|
|
|
107,349
|
|
|
|
63,541
|
|
Purchases of finished goods
|
|
|
44,786,912
|
|
|
|
37,757,707
|
|
|
|
53,846,922
|
|
Labor
|
|
|
787,472
|
|
|
|
581,849
|
|
|
|
934,457
|
|
Depreciation
|
|
|
252,055
|
|
|
|
250,042
|
|
|
|
252,759
|
|
Rental
|
|
|
23,184
|
|
|
|
141,258
|
|
|
|
145,082
|
|
Outsourced manufacturing cost
|
|
|
-
|
|
|
|
60,630
|
|
|
|
26,679
|
|
Taxes and surcharges *
|
|
|
212,516
|
|
|
|
353,522
|
|
|
|
754,593
|
|
Water and electricity
|
|
|
55,522
|
|
|
|
57,963
|
|
|
|
79,850
|
|
Inventory provision
|
|
|
342
|
|
|
|
(1,848
|
)
|
|
|
1,994
|
|
Others
|
|
|
197,778
|
|
|
|
97,496
|
|
|
|
17,039
|
|
Foreign currency translation difference
|
|
|
(53,152
|
)
|
|
|
(115,518
|
)
|
|
|
72,708
|
|
|
|
|
46,511,274
|
|
|
|
39,416,973
|
|
|
|
57,363,839
|
|
* Tax and surcharges are mainly
Urban Maintenance and Construction Tax (7% of Valued Added Tax payment amount), Extra Charges of Education Fund (3% of Valued Added
Tax payment amount) and Local Surcharge for Education Fund (2% of Valued Added Tax payment amount).
KBS Fashion Group
Limited
Notes to consolidated
financial statements
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Sales of raw material
|
|
|
-
|
|
|
|
1,819
|
|
|
|
9,875
|
|
Government grant
|
|
|
209,398
|
|
|
|
114,018
|
|
|
|
215,782
|
|
Interest income on bank deposits
|
|
|
92,747
|
|
|
|
136,911
|
|
|
|
142,239
|
|
|
|
|
302,145
|
|
|
|
252,748
|
|
|
|
367,896
|
|
|
11.
|
OTHER GAINS AND LOSSES
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Gain on disposals of property, plant and equipment
|
|
|
11,412
|
|
|
|
-
|
|
|
|
10,132
|
|
Foreign exchange gain
|
|
|
(233,532
|
)
|
|
|
(64,820
|
)
|
|
|
79,968
|
|
Provision / reversal of inventory obsolescence
|
|
|
(342
|
)
|
|
|
1,848
|
|
|
|
(1,994
|
)
|
Bad debt provision of trade receivables
|
|
|
(1,070,563
|
)
|
|
|
(1,973,459
|
)
|
|
|
-
|
|
Impairment of prepayments in land purchase and related construction
|
|
|
(2,565,334
|
)
|
|
|
|
|
|
|
|
|
Others
|
|
|
(19,473
|
)
|
|
|
(77
|
)
|
|
|
8,700
|
|
|
|
|
(3,877,832
|
)
|
|
|
(2,036,508
|
)
|
|
|
96,806
|
|
|
12.
|
DISTRIBUTION AND SELLING EXPENSES
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Rental
|
|
|
508,039
|
|
|
|
583,737
|
|
|
|
1,665,836
|
|
Depreciation
|
|
|
1,239,644
|
|
|
|
1,605,955
|
|
|
|
1,178,209
|
|
Labor
|
|
|
739,789
|
|
|
|
926,504
|
|
|
|
603,013
|
|
Subsidy to distributors
|
|
|
1,061,685
|
|
|
|
1,163,913
|
|
|
|
1,397,789
|
|
Promotion
|
|
|
899,664
|
|
|
|
1,126,349
|
|
|
|
1,092,238
|
|
Advertisement
|
|
|
1,702,863
|
|
|
|
1,628,127
|
|
|
|
-
|
|
Others
|
|
|
469,572
|
|
|
|
157,021
|
|
|
|
301,910
|
|
|
|
|
6,621,256
|
|
|
|
7,191,606
|
|
|
|
6,238,995
|
|
|
13.
|
ADMINISTRATIVE
EXPENSES
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Labor
|
|
|
757,639
|
|
|
|
1,071,820
|
|
|
|
742,797
|
|
Audit fee
|
|
|
175,859
|
|
|
|
189,673
|
|
|
|
182,620
|
|
Professional fee
|
|
|
136,499
|
|
|
|
725,359
|
|
|
|
-
|
|
Design fee
|
|
|
529,141
|
|
|
|
488,218
|
|
|
|
-
|
|
Depreciation and amortization charges
|
|
|
540,799
|
|
|
|
501,411
|
|
|
|
460,429
|
|
Bank charges
|
|
|
35,179
|
|
|
|
44,571
|
|
|
|
69,146
|
|
Rental
|
|
|
80,677
|
|
|
|
293,444
|
|
|
|
81,336
|
|
Travelling and entertainment
|
|
|
59,516
|
|
|
|
175,539
|
|
|
|
78,366
|
|
Others
|
|
|
482,774
|
|
|
|
1,159,194
|
|
|
|
596,737
|
|
|
|
|
2,798,083
|
|
|
|
4,649,229
|
|
|
|
2,211,431
|
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Interest expenses on bank borrowings wholly repayable within one year
|
|
|
-
|
|
|
|
23,630
|
|
|
|
116,421
|
|
Bank borrowings interests are charged at
a rate of 6.60% per annum. The bank loan was fully repaid in 2014.
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
PRC enterprises income tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax
|
|
|
1,514,577
|
|
|
|
2,802,798
|
|
|
|
8,629,022
|
|
Deferred tax
|
|
|
(908,888
|
)
|
|
|
(495,444
|
)
|
|
|
-
|
|
|
|
|
605,689
|
|
|
|
2,307,354
|
|
|
|
8,629,022
|
|
Hongri Fujian and Anhui Kai Xin subject to the applicable enterprise
income tax rate of 25%. As of December 31, 2015, 2014, and 2013, the Company had no unrecognized tax benefits.
France Cock and Vast Billion were incorporated in Hong Kong
and subject to Hong Kong profits tax at a tax rate of 16.5%. No provision for Hong Kong profits tax has been made as France Cock
and Vast Billion has no taxable income during the reporting period.
Hongri International Holding Limited and Roller Rome were incorporated
in the BVI and, under the current laws of the BVI, are not subject to income taxes.
KBS Fashion Group Limited was incorporated in the Marshall Island,
and, under the current laws of the Marshall Island, is not subject to income taxes.
The tax charge for the year can be reconciled to the profit
per the consolidated statements of comprehensive income as follows:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Profit before tax
|
|
|
1,849,359
|
|
|
|
9,184,336
|
|
|
|
34,048,388
|
|
Tax calculated at domestic tax rates applicable to profits in PRC (2015, 2014, and 2013: 25%)
|
|
|
462,340
|
|
|
|
2,296,084
|
|
|
|
8,512,097
|
|
Tax effect of expenses not deductible for tax purpose
|
|
|
908,974
|
|
|
|
3,842
|
|
|
|
6,133
|
|
Tax effect of tax loss of tax empty entities
|
|
|
(765,625
|
)
|
|
|
7,428
|
|
|
|
110,792
|
|
Tax charge for the year
|
|
|
605,689
|
|
|
|
2,307,354
|
|
|
|
8,629,022
|
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
15.
|
INCOME TAX EXPENSE – Continued
|
The following is the analysis of the deferred tax balances for
financial reporting purposes:
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
Temporary
difference
|
|
|
Deferred tax
assets
|
|
|
Temporary
difference
|
|
|
Deferred
tax assets
|
|
|
Temporary
difference
|
|
|
Deferred
tax assets
|
|
Beginning of the year
|
|
|
1,981,777
|
|
|
|
495,444
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Bad Debt provisions charged to profit or loss for the year
|
|
|
1,070,563
|
|
|
|
267,641
|
|
|
|
1,981,777
|
|
|
|
495,444
|
|
|
|
-
|
|
|
|
-
|
|
Impairment charged to profit or loss for the year
|
|
|
2,565,334
|
|
|
|
641,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Effect of translation
|
|
|
-
|
|
|
|
(64,150
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
End of the year
|
|
|
5,617,674
|
|
|
|
1,340,268
|
|
|
|
1,981,777
|
|
|
|
495,444
|
|
|
|
-
|
|
|
|
-
|
|
Profit for the year has been arrived at after charging:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Cost of inventories recognized as expenses
|
|
|
46,298,758
|
|
|
|
39,063,451
|
|
|
|
56,609,246
|
|
Taxes and surcharges
|
|
|
212,516
|
|
|
|
353,522
|
|
|
|
754,593
|
|
|
|
|
46,511,274
|
|
|
|
39,416,973
|
|
|
|
57,363,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
|
2,015,437
|
|
|
|
2,340,082
|
|
|
|
1,875,812
|
|
Amortization of prepaid lease payments
|
|
|
17,061
|
|
|
|
17,326
|
|
|
|
15,585
|
|
Amortization of subsidies prepaid to distributors
|
|
|
1,093,036
|
|
|
|
1,163,913
|
|
|
|
1,397,789
|
|
Amortization of prepayments and premiums under operating leases
|
|
|
728,996
|
|
|
|
659,442
|
|
|
|
1,892,254
|
|
Provision (Reversal) of inventory obsolescence
|
|
|
342
|
|
|
|
(1,848
|
)
|
|
|
1,944
|
|
Provision of bad debt allowance
|
|
|
1,028,439
|
|
|
|
1,973,459
|
|
|
|
-
|
|
Provision of impairment loss in prepayments
|
|
|
2,565,334
|
|
|
|
|
|
|
|
|
|
|
|
|
7,448,645
|
|
|
|
6,152,374
|
|
|
|
5,183,384
|
|
|
17.
|
EMPLOYEES' EMOLUMENTS
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and other short-term benefits
|
|
|
1,878,963
|
|
|
|
2,203,626
|
|
|
|
2,187,866
|
|
Defined contribution benefit schemes
|
|
|
1,888,828
|
|
|
|
376,547
|
|
|
|
92,401
|
|
Total employee benefits expense (including directors’ emoluments)
|
|
|
3,767,791
|
|
|
|
2,580,173
|
|
|
|
2,280,267
|
|
The employees of the Group’s PRC
subsidiaries are members of state-managed retirement benefit schemes operated by the local government. The subsidiaries are required
to contribute a specified percentage of its payroll costs to the retirement benefit schemes to fund the benefits. The only obligation
of the Group with respect to the retirement benefit schemes is to make the specified contributions.
KBS Fashion Group Limited
Notes to consolidated financial statements
|
18.
|
DIRECTORS' EMOLUMENTS
|
The emoluments paid or payable to the directors of the Company
were as follows:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Salaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Yan Keyan
|
|
|
105,000
|
|
|
|
105,000
|
|
|
|
105,015
|
|
Chen Bizhen
|
|
|
105,000
|
|
|
|
-
|
|
|
|
105,015
|
|
Lixia, Tu
|
|
|
62,371
|
|
|
|
-
|
|
|
|
-
|
|
Stanley Wong
|
|
|
-
|
|
|
|
126,000
|
|
|
|
126,018
|
|
Stylianos Stergios Sougioultzoglou
|
|
|
-
|
|
|
|
100,000
|
|
|
|
-
|
|
Yuyun Tristan Kuo
|
|
|
-
|
|
|
|
25,000
|
|
|
|
-
|
|
John Sano
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
-
|
|
Andrew Gaw
|
|
|
|
|
|
|
20,000
|
|
|
|
-
|
|
Zhou Meng
|
|
|
-
|
|
|
|
20,000
|
|
|
|
-
|
|
Chi Gaw
|
|
|
-
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
|
292,371
|
|
|
|
436,000
|
|
|
|
336,048
|
|
Social Welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
Yan Keyan
|
|
|
758
|
|
|
|
758
|
|
|
|
758
|
|
Chen Bizhen
|
|
|
-
|
|
|
|
-
|
|
|
|
758
|
|
|
|
|
758
|
|
|
|
758
|
|
|
|
1,516
|
|
|
|
For the years ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Basic Earnings Per Share Numerator
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to owners of the Company
|
|
$
|
1,243,670
|
|
|
$
|
6,876,982
|
|
|
$
|
25,419,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to owners of the Company
|
|
$
|
1,243,670
|
|
|
$
|
6,876,982
|
|
|
$
|
25,419,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
Original shares:
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
Additions from actual events:
|
|
|
|
|
|
|
|
|
|
|
|
|
- Issuance of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Basic weighted average shares outstanding
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
Dilutive shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential additions from dilutive events:
|
|
|
|
|
|
|
|
|
|
|
|
|
- Exercise of investor warrants*
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted Weighted Average Shares Outstanding:
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
$
|
0.05
|
|
|
$
|
0.27
|
|
|
$
|
1.00
|
|
- Diluted
|
|
$
|
0.05
|
|
|
$
|
0.27
|
|
|
$
|
1.00
|
|
Weighted Average Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
- Diluted
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
|
25,417,329
|
|
|
*
|
The were no potential dilutive additions to diluted weighted shares outstanding, as a result of the outstanding warrants
being out-of-the-money during the periods presented.
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
20.
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
Plant
|
|
|
Machinery
|
|
|
Office
equipment
|
|
|
Motor
vehicles
|
|
|
Furniture
and
fixtures
|
|
|
Leasehold
improvements
-factories and
offices
|
|
|
Leasehold
improvements
-shops
|
|
|
Distributor
shops'
furniture and
fixtures
|
|
|
Construction
in progress
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
COST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2014
|
|
|
8,963,510
|
|
|
|
1,053,975
|
|
|
|
166,343
|
|
|
|
139,643
|
|
|
|
49,056
|
|
|
|
276,733
|
|
|
|
2,661,208
|
|
|
|
2,771,971
|
|
|
|
16,456,792
|
|
|
|
32,539,231
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
3,173
|
|
|
|
-
|
|
|
|
116,359
|
|
|
|
518,488
|
|
|
|
1,281,703
|
|
|
|
-
|
|
|
|
6,766,804
|
|
|
|
8,686,527
|
|
Disposals
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Translation adjustment
|
|
|
(32,374
|
)
|
|
|
(3,806
|
)
|
|
|
(587
|
)
|
|
|
(504
|
)
|
|
|
313
|
|
|
|
1,186
|
|
|
|
(4,209
|
)
|
|
|
(10,012
|
)
|
|
|
(30,914
|
)
|
|
|
(80,907
|
)
|
At December 31, 2014
|
|
|
8,931,136
|
|
|
|
1,050,169
|
|
|
|
168,929
|
|
|
|
139,139
|
|
|
|
165,728
|
|
|
|
796,407
|
|
|
|
3,938,702
|
|
|
|
2,761,959
|
|
|
|
23,192,682
|
|
|
|
41,144,851
|
|
Additions
|
|
|
22,960,220
|
|
|
|
52,937
|
|
|
|
25,822
|
|
|
|
-
|
|
|
|
2,365
|
|
|
|
-
|
|
|
|
217,321
|
|
|
|
625,266
|
|
|
|
-
|
|
|
|
23,883,931
|
|
Disposals
|
|
|
-
|
|
|
|
-
|
|
|
|
(55,176
|
)
|
|
|
(449
|
)
|
|
|
(2,176
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(57,801
|
)
|
Transferred to Plant
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,960,220
|
)
|
|
|
(22,960,220
|
)
|
Translation adjustment
|
|
|
(1,411,606
|
)
|
|
|
(62,648
|
)
|
|
|
(8,600
|
)
|
|
|
(8,009
|
)
|
|
|
(9,568
|
)
|
|
|
(45,943
|
)
|
|
|
(235,698
|
)
|
|
|
(183,742
|
)
|
|
|
(232,462
|
)
|
|
|
(2,198,276
|
)
|
At December 31, 2015
|
|
|
30,479,750
|
|
|
|
1,040,458
|
|
|
|
130,975
|
|
|
|
130,681
|
|
|
|
156,349
|
|
|
|
750,464
|
|
|
|
3,920,325
|
|
|
|
3,203,483
|
|
|
|
-
|
|
|
|
39,812,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEPRECIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2014
|
|
|
(470,584
|
)
|
|
|
(321,384
|
)
|
|
|
(60,059
|
)
|
|
|
(84,929
|
)
|
|
|
(17,331
|
)
|
|
|
(241,609
|
)
|
|
|
(2,461,328
|
)
|
|
|
(1,842,030
|
)
|
|
|
-
|
|
|
|
(5,499,254
|
)
|
Provided for the year
|
|
|
(400,214
|
)
|
|
|
(241,904
|
)
|
|
|
(30,843
|
)
|
|
|
(16,796
|
)
|
|
|
(41,083
|
)
|
|
|
(46,280
|
)
|
|
|
(711,246
|
)
|
|
|
(851,716
|
)
|
|
|
-
|
|
|
|
(2,340,082
|
)
|
Eliminated upon disposal of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Translation adjustment
|
|
|
13
|
|
|
|
141
|
|
|
|
87
|
|
|
|
236
|
|
|
|
(111
|
)
|
|
|
678
|
|
|
|
5,891
|
|
|
|
3,063
|
|
|
|
-
|
|
|
|
9,998
|
|
At December 31, 2014
|
|
|
(870,785
|
)
|
|
|
(563,147
|
)
|
|
|
(90,815
|
)
|
|
|
(101,489
|
)
|
|
|
(58,525
|
)
|
|
|
(287,211
|
)
|
|
|
(3,166,683
|
)
|
|
|
(2,690,683
|
)
|
|
|
-
|
|
|
|
(7,829,338
|
)
|
Provided for the year
|
|
|
(394,103
|
)
|
|
|
(244,380
|
)
|
|
|
(35,712
|
)
|
|
|
(16,526
|
)
|
|
|
(84,832
|
)
|
|
|
(91,903
|
)
|
|
|
(974,363
|
)
|
|
|
(181,862
|
)
|
|
|
-
|
|
|
|
(2,023,681
|
)
|
Eliminated upon disposal of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
46,123
|
|
|
|
404
|
|
|
|
1,959
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,486
|
|
Translation adjustment
|
|
|
65,620
|
|
|
|
42,027
|
|
|
|
4,831
|
|
|
|
6,484
|
|
|
|
6,612
|
|
|
|
20,156
|
|
|
|
220,721
|
|
|
|
162,318
|
|
|
|
-
|
|
|
|
528,769
|
|
At December 31, 2015
|
|
|
(1,199,268
|
)
|
|
|
(765,500
|
)
|
|
|
(75,573
|
)
|
|
|
(111,127
|
)
|
|
|
(134,786
|
)
|
|
|
(358,958
|
)
|
|
|
(3,920,325
|
)
|
|
|
(2,710,227
|
)
|
|
|
-
|
|
|
|
(9,275,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARRYING AMOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2014
|
|
|
8,060,351
|
|
|
|
487,022
|
|
|
|
78,114
|
|
|
|
37,650
|
|
|
|
107,203
|
|
|
|
509,196
|
|
|
|
772,019
|
|
|
|
71,276
|
|
|
|
23,192,682
|
|
|
|
33,315,513
|
|
At December 31, 2015
|
|
|
29,280,482
|
|
|
|
274,958
|
|
|
|
55,402
|
|
|
|
19,554
|
|
|
|
21,563
|
|
|
|
391,506
|
|
|
|
-
|
|
|
|
493,256
|
|
|
|
-
|
|
|
|
30,536,721
|
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
20.
|
PROPERTY, PLANT AND EQUIPMENT – continued
|
Depreciation is provided on straight-line basis for all property,
plant and equipment over their estimated useful lives of the assets as follows:
|
|
Useful life
|
|
Residual value
|
|
Plant
|
|
20 years
|
|
|
10
|
%
|
Machinery
|
|
5 years
|
|
|
10
|
%
|
Office equipment
|
|
5 years
|
|
|
10
|
%
|
Motor vehicles
|
|
5 years
|
|
|
10
|
%
|
Furniture and fixtures
|
|
5 years
|
|
|
10
|
%
|
Leasehold improvements-factories and offices
|
|
Shorter of estimated useful life of 5 years or lease term
|
|
|
10
|
%
|
Leasehold improvements-shops
|
|
Shorter of estimated useful life of 1.5 years or lease term
|
|
|
Nil
|
|
Distributor shops' furniture and fixtures
|
|
1.5 years
|
|
|
Nil
|
|
All the plant mentioned above were owned by Anhui Kaixin.
Buildings on leasehold land are comprised of the following:
Location
|
|
Description
|
|
Gross area (m
2
)
|
|
Jinxi Town, Longshan Road, Taihu City, Anhui Province, the PRC
|
|
Dormitory
|
|
|
8,573
|
|
Jinxi Town, Longshan Road, Taihu City, Anhui Province, the PRC
|
|
Factory
|
|
|
22,292
|
|
The gross carrying amount of the fully depreciated property,
plant and equipment that is still in use is $38,198 and $38,270 as at December 31, 2015 and 2014, respectively.
|
21.
|
PREPAYMENTS AND PREMIUMS UNDER OPERATING LEASES
|
|
|
Amount
|
|
At January 1, 2014
|
|
|
3,620,916
|
|
additions for the year
|
|
|
515,038
|
|
charge for the year
|
|
|
(659,442
|
)
|
translation adjustment
|
|
|
(13,687
|
)
|
At December 31, 2014
|
|
|
3,462,825
|
|
additions for the year
|
|
|
107,178
|
|
charge for the year
|
|
|
(491,895
|
)
|
translation adjustment
|
|
|
(257,650
|
)
|
At December 31, 2015
|
|
|
2,820,458
|
|
Analyzed for reporting purposes as:
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Current asset
|
|
|
81,147
|
|
|
|
471,580
|
|
Non-current asset
|
|
|
2,739,311
|
|
|
|
2,991,245
|
|
|
|
|
2,820,458
|
|
|
|
3,462,825
|
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
22.
|
PREPAYMENT FOR CONSTRUCTION OF NEW PLANT
|
On November 20, 2010, Hongri Fujian entered
into an agreement with a third party, Anqing Zhongfang Construction and Installation Co., Ltd., for the construction of the new
plant in Anhui at a consideration of $17,826,251. In 2012, Kaixin Anhui made a prepayment of $6,363,853 for the second phase of
the project. In 2013, Kaixin Anhui made another prepayment of $9,747,897 for the second phase of the project. The amount of $16,401,778
was recognized in Construction in progress.
In 2014, Kaixin Anhui made another prepayment
of $15,525,413 for the second and third phase of the project, and an amount of $6,537,016 was recognized in construction in progress.
In 2015, an amount of $110,041 was recognized
in construction in progress, which was subsequently recognized as fixed asset along with the completion of the second phase of
the project. The total amount transferred to fixed assets from construction in progress amounted to $22,960,220.
The third phase of the
project
is related to the construction of a building. The construction site is located on a piece of land whose land use right was to be
acquired by the Company. Due to reasons as set forth in note 23, the anticipated completion date of the project is expected to
be delayed and, in the worst case, may be terminated. Accordingly, management provided a provision of impairment loss against the
carrying value of such prepayment. The net carrying amount represents the fair value less cost to sell. The detail of estimation
of such provision is explained in note 6.
As at December 31, 2015, the carrying amount
of the prepayment for construction of new plant is as follows:
|
|
As at December 31,
2015
|
|
Prepaid in 2015
|
|
|
8,469,878
|
|
Recognized as construction in progress
|
|
|
(110,041
|
)
|
|
|
|
8,359,837
|
|
Impairment loss:
|
|
|
(1,199,314
|
)
|
|
|
|
7,160,523
|
|
|
23.
|
PREPAYMENT FOR ACQUISITION OF LAND USE RIGHT
|
On September 2, 2010, Hongri Fujian entered into an agreement with a third party, Taihu Weiqi Sports Apparel
Co., Ltd., to acquire a land use right in relation to the development of factories in Anhui Kaixin for a total
consideration
of $6,340,456. As of December 31, 2015, the transaction has not been completed yet due to disputes between the original owner of
the land and the government regarding the compensation for vacating the premises. In relation to this dispute, the Company expected
that the project would be delayed or, in the worst case, be terminated. Accordingly, the Company provided a provision of impairment
loss against the carrying value for such prepayment. The net carrying amount represents the fair value less cost to sell. The detail
estimation of such provision is explained in note 6.
As at December 31, 2015, the carrying amount of the prepayment
for acquisition of land use right is as follows:
|
|
As at December 31,
2015
|
|
Prepaid in 2010
|
|
|
6,039,930
|
|
Impairment loss:
|
|
|
(1,265,867
|
)
|
|
|
|
4,774,063
|
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
24.
|
PREPAID LEASE PAYMENTS
|
|
|
Amount
|
|
COST
|
|
|
|
|
At January 1, 2014
|
|
|
819,721
|
|
additions for the year
|
|
|
-
|
|
translation adjustment
|
|
|
(2,961
|
)
|
At December 31, 2014
|
|
|
816,760
|
|
additions for the year
|
|
|
-
|
|
translation adjustment
|
|
|
(47,117
|
)
|
At December 31, 2015
|
|
|
769,643
|
|
|
|
|
|
|
AMORTIZATION
|
|
|
|
|
At January 1, 2014
|
|
|
(53,056
|
)
|
charge for the year
|
|
|
(17,326
|
)
|
translation adjustment
|
|
|
119
|
|
At December 31, 2014
|
|
|
(70,263
|
)
|
charge for the year
|
|
|
(17,061
|
)
|
translation adjustment
|
|
|
4,719
|
|
At December 31, 2015
|
|
|
(82,605
|
)
|
|
|
|
|
|
CARRYING AMOUNTS
|
|
|
|
|
At December 31, 2014
|
|
|
746,497
|
|
At December 31, 2015
|
|
|
687,038
|
|
|
|
|
|
|
Analyzed for reporting purposes as:
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Current asset
|
|
|
16,395
|
|
|
|
17,399
|
|
Non-current asset
|
|
|
670,643
|
|
|
|
729,098
|
|
|
|
|
687,038
|
|
|
|
746,497
|
|
The amounts represent the prepayment of rentals for land use
right (industrial use) situated in the PRC. The leasehold lands have the term of 50 years.
All the leasehold lands mentioned above were owned by Anhui
Kaixin.
The leasehold land is comprised of the following:
Location
|
|
Expiry date of
tenure
|
|
Land area (m
2
)
|
|
Longshan Road, Economic development District, Taihu County
|
|
2062-05-23
|
|
|
2,440
|
|
Longshan Road, Economic development District, Taihu County
|
|
2061-11-06
|
|
|
7,405
|
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
2,718,044
|
|
|
|
-
|
|
|
|
-
|
|
Work in progress
|
|
|
33,841
|
|
|
|
57,459
|
|
|
|
42,658
|
|
Finished goods
|
|
|
776,263
|
|
|
|
736,141
|
|
|
|
624,419
|
|
Provision for obsolete inventories
|
|
|
(452
|
)
|
|
|
(131
|
)
|
|
|
(1,994
|
)
|
|
|
|
3,527,696
|
|
|
|
793,469
|
|
|
|
665,083
|
|
|
26.
|
TRADE AND OTHER RECEIVABLES
|
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
33,896,430
|
|
|
|
37,537,401
|
|
|
|
30,401,177
|
|
Bad debt provision for trade receivables
|
|
|
(1,028,439
|
)
|
|
|
(1,981,777
|
)
|
|
|
-
|
|
Other receivables
|
|
|
4,753
|
|
|
|
26,169
|
|
|
|
89,666
|
|
Subtotal financial assets
|
|
|
32,872,744
|
|
|
|
35,581,793
|
|
|
|
30,490,843
|
|
Prepayments
|
|
|
3,870,658
|
|
|
|
3,934,710
|
|
|
|
-
|
|
|
|
|
36,743,402
|
|
|
|
39,516,503
|
|
|
|
30,490,843
|
|
The fair value of trade and other receivables
have not been disclosed as, due to their short duration, management considers the carrying amounts recognized in the consolidated
statements of financial position to be reasonable approximation of their fair values.
Before accepting any new customer, the
Group assesses the potential customer's credit quality and defined credit limits by customer. Limits attributed to customers are
reviewed once a year. The aging analysis of trade receivables is as follows:
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
6,865,179
|
|
|
|
17,722,534
|
|
|
|
20,436,960
|
|
Past due for less than 4 months
|
|
|
27,031,251
|
|
|
|
19,814,867
|
|
|
|
9,964,217
|
|
|
|
|
33,896,430
|
|
|
|
37,537,401
|
|
|
|
30,401,177
|
|
The Group allows an average credit period
of 90 -120 days to its trade customers. For the overdue trade receivable, the Company provided a bad debt allowance amounting $1,028,439
during the year ended December 31, 2015.
Among the amounts of trade receivables,
$4,925,122 and $5,454,152 Output VAT was included as of December 31, 2015 and 2014, respectively.
KBS Fashion Group Limited
Notes to consolidated financial statements
|
27.
|
SUBSIDIES PREPAID TO DISTRIBUTORS
|
|
|
Amount
|
|
|
|
|
|
At January 1, 2013
|
|
|
759,293
|
|
additions for the year
|
|
|
1,253,461
|
|
charge for the year
|
|
|
(1,397,789
|
)
|
translation adjustment
|
|
|
21,293
|
|
At December 31, 2013
|
|
|
636,258
|
|
additions for the year
|
|
|
1,065,227
|
|
charge for the year
|
|
|
(1,163,913
|
)
|
translation adjustment
|
|
|
(2,713
|
)
|
At December 31, 2014
|
|
|
534,859
|
|
additions for the year
|
|
|
1,074,409
|
|
charge for the year
|
|
|
(1,061,685
|
)
|
translation adjustment
|
|
|
(31,352
|
)
|
At December 31, 2015
|
|
|
516,231
|
|
Subsidies were paid to major distributors
for compensating their rental expenses. Such subsidies would vest to distributors when they met the sales targets predetermined
by the Company. Subsidies prepaid to distributors were recognized when payments were made and amortized over the agreement term
on a straight-line basis in selling expenses. The amortization for 2015 and 2014 were $1,061,685 and $1,163,913, respectively.
|
28.
|
CASH AND CASH EQUIVALENTS
|
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Cash on hand
|
|
|
20,127
|
|
|
|
20,648
|
|
|
|
16,519
|
|
Bank deposits
|
|
|
21,193,953
|
|
|
|
20,583,934
|
|
|
|
43,683,568
|
|
|
|
|
21,214,080
|
|
|
|
20,604,582
|
|
|
|
43,700,087
|
|
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Renminbi
|
|
|
21,205,383
|
|
|
|
20,582,709
|
|
|
|
39,798,525
|
|
Hong Kong Dollars
|
|
|
7,879
|
|
|
|
328
|
|
|
|
19,457
|
|
United States Dollars
|
|
|
818
|
|
|
|
21,545
|
|
|
|
3,882,105
|
|
|
|
|
21,214,080
|
|
|
|
20,604,582
|
|
|
|
43,700,087
|
|
Cash and cash equivalents comprise cash
held by the Group and short-term deposits with an original maturity of three months or less. Bank deposits as at December 31, 2015
carry interest at market rates which ranged from 0.35% to 0.50% (2014: 0.35%-0.50%) per annum.
KBS Fashion Group Limited
Notes to consolidated financial statements
|
29.
|
TRADE AND OTHER PAYABLES
|
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
77,647
|
|
|
|
37,385
|
|
|
|
166,049
|
|
Employee benefits payable
|
|
|
204,495
|
|
|
|
275,542
|
|
|
|
1,178,682
|
|
Other payables
|
|
|
2,869,372
|
|
|
|
2,847,429
|
|
|
|
1,070,329
|
|
Subtotal financial liabilities
|
|
|
3,151,514
|
|
|
|
3,160,356
|
|
|
|
2,415,060
|
|
Other taxes payable
|
|
|
1,963,450
|
|
|
|
2,366,802
|
|
|
|
2,041,066
|
|
|
|
|
5,114,964
|
|
|
|
5,527,158
|
|
|
|
4,456,126
|
|
The fair value of trade and other payables
have not been disclosed as, due to their short duration, management considers the carrying amounts recognized in the consolidated
statements of financial position to be reasonable approximation of their fair values.
Trade payables comprise amounts outstanding
for trade purchase. The average credit period is 30 days from the time when the services are rendered by or goods received from
suppliers. The aging analysis of trade payables is as follows:
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
15,220
|
|
|
|
29,710
|
|
|
|
166,049
|
|
Past due for less than 4 months
|
|
|
46,328
|
|
|
|
7,675
|
|
|
|
-
|
|
Past due for over 4 months
|
|
|
16,099
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
77,647
|
|
|
|
37,385
|
|
|
|
166,049
|
|
The Company was granted a credit term of
30 days. The balances past due were mainly for the Company's high bargaining power.
|
30.
|
RELATED PARTIES PAYABLES
|
(1) Nature of relationship with related parties:
Name
|
|
Relationship with the Group
|
Yan Keyan
|
|
Chairman, Director and Chief Executive Officer
|
Chen Bizhen
|
|
Wife of Yan Keyan
|
KBS International
|
|
Ex-shareholder of Hongri
|
Shishi City Lingxiu Hongri Knitwear Factory*
|
|
Company owned by Chen Bizhen
|
(2) Significant balances between the Group and the above related
parties:
|
|
|
|
As at December 31,
|
|
Name
|
|
Nature
|
|
2015
|
|
|
2014
|
|
Yan Keyan
|
|
Borrowing of funds
|
|
|
958,961
|
|
|
|
626,666
|
|
Chen Bizhen
|
|
Borrowing of funds
|
|
|
24,430
|
|
|
|
24,412
|
|
|
|
|
|
|
983,391
|
|
|
|
651,078
|
|
Related parties payables were unsecured, non-interest bearing
and repayment on demand.
*The Company entered into a lease arrangement for office space
with this related party in 2010. The breakdown of the commitment to the lease is disclosed in note 35.
KBS Fashion Group Limited
Notes to consolidated financial statements
On November 1, 2012, the Company sold 5,000,000
Units at an offering price of $10.00 per Unit generating gross proceeds of $50,000,000 in the Public Offering. Each Unit consisted
of one share of common stock of the Company and one warrant to purchase one share of common stock of the Company (“Redeemable
Warrants”). Each Redeemable Warrant entitled the holder to purchase one share of common stock at a price of $11.50 which
would commence on the later of either the completion of an initial Acquisition Transaction or October 24, 2013, and would expire
five years from the completion date of an initial Acquisition Transaction, provided that there is an effective registration statement
covering the shares of common stock underlying the Redeemable Warrants. The Company is entitled to redeem the Redeemable Warrants
at a price of $0.01 per Redeemable Warrant upon providing 30 days’ notice, subject to the last sale price of the common stock
was at a minimum of $17.50 per share for any 20 trading days within a 30-trading day period (“30-Day Trading Period”)
that ended on the third day prior to the date on which notice of redemption is given, provided that there is a current registration
statement in effect with respect to the shares of common stock underlying such Redeemable Warrants commencing ten days prior to
the 30-Day Trading Period and continuing each day thereafter until the date of redemption. The Company is required to use its best
efforts to maintain the effectiveness of the registration statement covering the Redeemable Warrants. However, there are no contractual
penalties for failure to deliver securities if a registration statement is not effective at the time of exercise. Additionally,
in the event that a registration statement is not effective at the time of exercise, the holder of such Redeemable Warrant shall
not be entitled to exercise such Redeemable Warrant for cash and in no event (whether in the case of a registration statement not
being effective or otherwise) will the Company be required to net cash settle the Redeemable Warrant exercise.
Simultaneously with the consummation of
the Public Offering, the Company consummated a Private Placement for the sale of 337,750 Placement Units to its Founders at a price
of $10.00 per share, generating total proceeds of $3,377,500. The Placement Units are identical to the Units sold in the Public
Offering except that the warrants included in the Placement Units (i) were not redeemable by the Company and (ii) may be exercised
for cash, or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees. Additionally,
the Placement Units have been placed in escrow and the purchasers have agreed not to transfer, assign or sell any of the Placement
Units, including the underlying securities (except to certain permitted transferees) until 30 days following the completion of
an initial Acquisition Transaction. The securities held in the escrow account will only be released prior to the end of the escrow
period if following the initial Acquisition Transaction, the Company consummates a subsequent transaction that results in all stockholders
having a right to exchange their shares for cash or other consideration.
The Company granted the underwriter in
the Public Offering a 45-day option to purchase up to an additional 750,000 Units solely to cover over-allotments, if any. On November
7, 2012, the underwriters exercised a portion of their option and the Company sold an additional 550,000 Units at a price of $10.00
per Unit generating gross proceeds of $5,500,000. In addition, the Company sold an additional 30,250 Private Placement Units generating
gross proceeds of $302,500.
The table below provides a reconciliation
of the beginning and ending balances for the liabilities measured using fair significant unobservable inputs:
KBS Fashion Group Limited
Notes to consolidated financial statements
|
31.
|
WARRANT LIABILITIES – continued
|
Balance – January 26, 2012 (inception)
|
|
|
-
|
|
Correction of an error
|
|
|
3,200,223
|
|
Issuance of warrants as part of Units on November 7, 2012
|
|
|
322,884
|
|
Change in fair value
|
|
|
(45,225
|
)
|
Balance – December 31, 2012
|
|
|
3,477,882
|
|
Change in fair value
|
|
|
(45,442
|
)
|
Balance – December 31, 2013
|
|
|
3,432,440
|
|
Change in fair value
|
|
|
(3,417,053
|
)
|
Balance – December 31, 2014
|
|
|
15,387
|
|
Change in fair value
|
|
|
(11,978
|
)
|
Balance – December 31, 2015
|
|
|
3,409
|
|
The fair value of warrants was determined
using a binomial-lattice model. This model requires the input of highly subjective assumptions, including price volatility of the
underlying stock. Changes in the subjective input assumptions can materially affect the estimate of fair value of the warrants
and the Company’s results of operations could be impacted. This model is dependent upon several variables such as the instrument's
expected term, expected strike price, expected risk-free interest rate over the expected instrument term, the expected dividend
yield rate over the expected instrument term, and the expected volatility of the Company’s stock price over the expected
term. The expected term represents the period of time that the instruments granted are expected to be outstanding. The expected
strike price is based upon a weighted average probability analysis of the strike price changes expected during the term as a result
of the down round protection. The risk-free rates are based on U.S. Treasury securities with similar maturities as the expected
terms of the options at the date of valuation. Expected dividend yield is based on historical trends. The Company measures volatility
using the volatility rates of market index.
The inputs to the model were as follows:
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Stock price
|
|
$
|
2.80
|
|
|
$
|
4.25
|
|
|
$
|
10.20
|
|
Dividend yield
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Risk-free rate
|
|
|
1.57
|
%
|
|
|
1.54
|
%
|
|
|
1.75
|
%
|
Expected term (in years)
|
|
|
3.58
|
|
|
|
4.58
|
|
|
|
5.0
|
|
Expected volatility
|
|
|
24.7
|
%
|
|
|
16.5
|
%
|
|
|
20.5
|
%
|
At December 31, 2015, there were 5,918,000 unexpired warrants
outstanding.
KBS Fashion Group Limited
Notes to consolidated financial statements
|
32.
|
SHARE CAPITAL AND SHARE PREMIUM
|
The details of the Group's share capital are as follows:
|
|
Number of shares
|
|
|
Share capital
|
|
|
Share premium
|
|
Issue of shares at December 31, 2013
|
|
|
7,305,500
|
|
|
$
|
731
|
|
|
$
|
5,621,277
|
|
Adjustments during merger
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption
|
|
|
(4,981,736
|
)
|
|
|
|
|
|
|
|
|
Issue to advisor
|
|
|
178,110
|
|
|
|
|
|
|
|
|
|
Shares cancelled
|
|
|
(42,000
|
)
|
|
|
|
|
|
|
|
|
New issue to acquiree
|
|
|
22,957,455
|
|
|
|
|
|
|
|
|
|
|
|
|
18,111,829
|
|
|
|
1,811
|
|
|
|
(4,573,830
|
)
|
Shares outstanding after adjustments of merger
|
|
|
25,417,329
|
|
|
$
|
2,542
|
|
|
$
|
1,047,447
|
|
Reverse acquisition
|
|
|
|
|
|
|
|
|
|
|
(782,383
|
)
|
Waiver of payable to ex-shareholder
|
|
|
|
|
|
|
|
|
|
|
5,359,811
|
|
Shares outstanding as December 31, 2014
|
|
|
25,417,329
|
|
|
$
|
2,542
|
|
|
$
|
5,624,875
|
|
Shares outstanding as December 31, 2015
|
|
|
25,417,329
|
|
|
$
|
2,542
|
|
|
$
|
5,624,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized Common shares of US$0.0001 as at December 31, 2014
|
|
|
150,000,000
|
|
|
$
|
15,000
|
|
|
$
|
-
|
|
Issue and fully paid common shares of US$0.0001 as at December 31, 2014
|
|
|
25,417,329
|
|
|
$
|
2,542
|
|
|
$
|
5,624,875
|
|
Issue and fully paid common shares of US$0.0001 as at December 31, 2015
|
|
|
25,417,329
|
|
|
$
|
2,542
|
|
|
$
|
5,624,875
|
|
Preferred Stock
The Company is authorized to issue 5,000,000
preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may be determined by the
Company’s board of directors. No preferred shares are currently issued or outstanding.
Common Stock
The Company is authorized to issue 150,000,000
shares of common stock with a par value of $0.0001 per share.
On August 1, 2014, the Company issued 22,957,455
of common stock in exchange of 100% equity interest of Hongri International Holding Limited.
Statutory surplus reserve
As stipulated by the relevant laws and
regulations applicable to China’s foreign investment enterprises, the Company’s PRC subsidiaries are required to maintain
a statutory surplus reserve which is non-distributable. Appropriations to such reserve are made out of net profit after tax of
the statutory financial statements of the PRC subsidiaries at the amounts determined by their respective boards of directors annually
up to 50% of authorized capital, but must not be less than 10% of the net profit after tax.
The statutory surplus reserve can be used
for making up losses of the group entities in Mainland China, if any. The statutory surplus reserve may also be used to increase
capital or to meet unexpected or future losses. The statutory surplus reserve is non-distributable other than upon liquidation.
KBS Fashion Group Limited
Notes to consolidated financial statements
The statutory surplus reserve of the Group
amounts to $6,069,457 and $5,815,493 at December 31, 2015 and 2014, respectively. The statutory surplus reserve of the Group is
related to Hongri Fujian and Anhui Kaixin.
Retained profits
The retained profits comprise the cumulative
net gains and losses recognized in the Company's income statement.
Foreign currency translation reserve
(other comprehensive income)
Foreign currency translation reserve represents
the foreign currency translation difference arising from the translation of the financial statements of companies within the Group
from their functional currency to the Group's presentation currency.
The Group manages its capital to ensure
that entities in the Group will be able to continue as a going concern while maximizing the return to owners through the optimization
of the debt and equity balance. The Group's overall strategy remains unchanged during the year.
The capital structure of the Group consisted
of borrowings net of bank balances and cash, and equity attributable to owners of the Company comprising issued share capital and
various reserves.
The directors of the Company review the
capital structure regularly. As part of this review, the Group considers the cost of capital and the risks associated with each
class of capital, and will balance its overall capital through the payment of dividends, new share issues as well as the issue
of new debt or the redemption of existing debt.
The Group monitors capital using the Gearing
Ratio, which is net debt divided by total equity. Net debt represents borrowings less cash and cash equivalents.
The Company and its subsidiaries are not
subject to externally imposed capital requirements.
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
Total borrowing
|
|
|
-
|
|
|
|
-
|
|
Less: cash and cash equivalents
|
|
|
(21,214,080
|
)
|
|
|
(20,604,582
|
)
|
Net debt
|
|
|
(21,214,080
|
)
|
|
|
(20,604,582
|
)
|
Total equity
|
|
|
100,816,974
|
|
|
|
105,618,076
|
|
Total capital
|
|
|
79,602,894
|
|
|
|
85,013,494
|
|
Gearing ratio
|
|
|
(21
|
%)
|
|
|
(20
|
%)
|
KBS Fashion Group Limited
Notes to consolidated financial statements
|
34.
|
RISK MANAGEMENT – continued
|
Financial risk management objectives and
policies
The Group's major financial instruments
include trade and other receivables, related parties receivables, cash and cash equivalents, trade and other payables, related
parties payables and short-term loans. Details of these financial instruments are disclosed in the respective notes. The risks
associated with these financial instruments include credit risk, market risk (interest rate risk and currency risk) and liquidity
risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure
appropriate measures are implemented on a timely and effective manner.
(i) Foreign currency risk
While our reporting currency is the U.S.
dollar, substantially all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. Substantially
all of our assets are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations
may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S.
dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets
and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average
exchange rates and equity is translated at historical exchange rates. Any resulting translation adjustments are not included in
determining net income but are included in determining other comprehensive income, a component of equity. An average appreciation
(depreciation) of the RMB against the U.S. dollar of (6)% would increase (decrease) our comprehensive income by $(6.0) million
based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of December 31, 2015. As of
December 31, 2015, our accumulated other comprehensive loss was $(1.8) million. We have not entered into any hedging transactions
in an effort to reduce our exposure to foreign exchange risk.
(ii) Interest rate risk
We deposit surplus funds with Chinese banks
earning daily interest. We do not invest in any instruments for trading purposes. Most of our outstanding debt instruments carry
fixed rates of interest. Our operations generally are not directly sensitive to fluctuations in interest rates and we currently
do not have any long-term debt outstanding. Management monitors the banks’ prime rates in conjunction with our cash requirements
to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions
in an effort to reduce our exposure to interest rate risk.
Credit risk
As at December 31, 2015, the Group's maximum
exposure to credit risk which will cause a financial loss to the Group due to failure to perform an obligation by the counterparties
is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial
position.
In order to minimize the credit risk, the
management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring
procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount
of each individual trade debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable
amounts. In this regard, the directors of the Group consider that the Group’s credit risk is significantly reduced.
KBS Fashion Group Limited
Notes to consolidated financial statements
|
34.
|
RISK MANAGEMENT – continued
|
The Group has concentration of credit risk
on the Group’s trade receivables. The outstanding balance of the five largest customers represented approximately 40% of
the trade receivables of the Group at December 31, 2014 (2014: 68%). In order to minimize the credit risk, management continuously
monitors the level of exposure to ensure that follow-up actions and/or corrective actions are taken promptly to lower the risk
exposure or to recover overdue balances.
Liquidity risk
In the management of the liquidity risk,
the Group monitors and maintains a level of cash and bank balances deemed adequate by the management to finance the Group’s
operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank borrowings and
ensures compliance with loan covenants.
Liquidity tables
The following tables detail the Group’s
remaining contractual maturity for its non-derivative financial liabilities as at December 31, 2015 based on agreed repayment terms.
The tables have been drawn up based on undiscounted cash flows of financial liabilities based on the earliest date on which the
Group can be required to pay. The tables include both interest and principal cash flows.
As at December 31, 2015
|
|
Within 1 year
|
|
|
Over 1 year
|
|
|
Total
|
|
Trade and other payables
|
|
|
5,114,964
|
|
|
|
-
|
|
|
|
5,114,964
|
|
Related parties payables
|
|
|
983,391
|
|
|
|
-
|
|
|
|
983,391
|
|
Total
|
|
|
6,098,355
|
|
|
|
-
|
|
|
|
6,098,355
|
|
As at December 31, 2014
|
|
Within 1 year
|
|
|
Over 1 year
|
|
|
Total
|
|
Trade and other payables
|
|
|
3,160,356
|
|
|
|
-
|
|
|
|
3,160,356
|
|
Related parties payables
|
|
|
651,078
|
|
|
|
-
|
|
|
|
651,078
|
|
Total
|
|
|
3,811,434
|
|
|
|
-
|
|
|
|
3,811,434
|
|
Fair value
The fair value of financial assets and
financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
The directors of the Company consider that
the carrying amounts of financial assets and financial liabilities recorded at amortized cost approximate their fair values.
KBS Fashion Group Limited
Notes to consolidated financial
statements
|
35.
|
COMMITMENTS AND CONTINGENCIES
|
|
(1)
|
The Company had the following capital commitments in respect
of the construction of plant and equipment which were contracted but not provided for in the financial statements:
|
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Contracted and authorized
|
|
|
67,735,983
|
|
|
|
71,798,392
|
|
|
(2)
|
As at December 31, 2015, the Company had lease commitments
as follows:
|
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Within 1 year
|
|
|
102,783
|
|
|
|
509,206
|
|
2-5 years
|
|
|
323,407
|
|
|
|
307,297
|
|
Thereafter
|
|
|
2,429,200
|
|
|
|
2,660,188
|
|
|
|
|
2,855,030
|
|
|
|
3,476,691
|
|
The amount of $2,855,030 as of December 31, 2015 represents
leases of two offices and one warehouse. One of these two offices is leased by a related party as disclosed in note 30. The commitment
pertains to this particular lease is as follows:
|
|
As at December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Within 1 year
|
|
|
77,528
|
|
|
|
82,274
|
|
2-5 years
|
|
|
310,111
|
|
|
|
329,095
|
|
Thereafter
|
|
|
2,429,200
|
|
|
|
2,660,188
|
|
|
|
|
2,816,839
|
|
|
|
3,071,557
|
|
The Company has prepaid this lease in the full amount.
* * * * *
EXHIBIT INDEX
Exhibit No.
|
Description
|
|
|
1.1
|
Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.3 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).
|
|
|
1.2
|
Articles of Amendment, filed with the Office of the Registrar of Corporations of Republic of the Marshall Islands on October 31, 2014 (incorporated by reference to Exhibit 1.2 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)
|
|
|
1.3
|
By-laws as amended on September 22, 2014 (incorporated by reference to Exhibit 1.3 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)
|
|
|
2.1
|
Specimen of Unit Certificate (incorporated by reference to Exhibit 2.1 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)
|
|
|
2.2
|
Specimen of Common Stock Certificate (incorporated by reference to Exhibit 2.2 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)
|
|
|
2.3
|
Specimen of Public Redeemable Warrant Certificate (incorporated by reference to Exhibit 2.3 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)
|
|
|
2.4
|
Specimen Placement Unit Certificate (incorporated by reference to Exhibit 4.4 to the Amendment No. 3 to the registrant’s Registration Statement on Form F-1 filed on October 15, 2012 (Commission File No. 333-180571)).
|
|
|
2.5
|
Specimen Placement Warrant Certificate (incorporated by reference to Exhibit 4.5 to the Amendment No. 1 to the registrant’s Registration Statement on Form F-1 filed on June 5, 2012 (Commission File No. 333-180571)).
|
|
|
2.6
|
Form of Warrant Agreement (incorporated by reference to Exhibit 4.6 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).
|
|
|
2.7
|
Form of Unit Purchase Option (incorporated by reference to Exhibit 4.7 to the Amendment No. 3 to the registrant’s Registration Statement on Form F-1 filed on October 15, 2012 (Commission File No. 333-180571)).
|
|
|
4.1
|
Form of Letter Agreement by and among the registrant, Lazard Capital Markets LLC and the founders (incorporated by reference to Exhibit 10.1 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).
|
|
|
4.2
|
Form of Investment Management Trust Agreement between American Stock Transfer & Trust Company and the registrant (incorporated by reference to Exhibit 10.2 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).
|
|
|
4.3
|
Form of Securities Escrow Agreement between the registrant, American Stock Transfer & Trust Company and the Founders (incorporated by reference to Exhibit 10.2 to the Amendment No. 2 to the registrant’s Registration Statement on Form F-1 filed on August 31, 2012 (Commission File No. 333-180571)).
|
|
|
4.4
|
Form of Services Agreement between the registrant and Seacrest Shipping Co. Ltd. (incorporated by reference to Exhibit 10.4 to the Amendment No. 1 to the registrant’s Registration Statement on Form F-1 filed on June 5, 2012 (Commission File No. 333-180571)).
|
|
|
Exhibit No.
|
Description
|
|
|
4.5
|
Form of Registration Rights Agreement among the Registrant and the founders (incorporated by reference to Exhibit 10.5 to the Amendment No. 1 to the registrant’s Registration Statement on Form F-1 filed on June 5, 2012 (Commission File No. 333-180571)).
|
|
|
4.6
|
Form of Placement Unit Purchase Agreement between the registrant and the founders (incorporated by reference to Exhibit 10.6 to the Amendment No. 4 to the Registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).
|
|
|
4.7
|
Share Exchange Agreement and Plan of Liquidation, dated March 24, 2014, by and among Aquasition Corp., KBS International Holdings, Inc., Hongri International Holdings Limited, Cheung So Wa and Chan Sun Keung (incorporated by reference to Exhibit 10.1 to the Registration Report on Form 6-K filed by the registrant on April 4, 2014)
|
|
|
4.8
|
Frist Amendment to Share Exchange Agreement and Plan of Liquidation, dated June 21, 2014 by and among Aquasition Corp., KBS International Holdings, Inc., Hongri International Holdings Limited, Cheung So Wa and Chan Sun Keung (incorporated by reference to Exhibit (D)(3) to Amendment No.4 to the Schedule TO filed by the registrant on July 9, 2014)
|
|
|
4.9
|
Voting Agreement , dated August 1, 2014, by and among Aquasition Corp., Aquasition Investments Corp., Cheung So Wa and Chan Sun Keung (incorporated by reference to Exhibit 4.11 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)
|
|
|
4.10
|
Form of Resale Lock-Up Agreement, dated August 1, 2014, by and among Aquasition Corp., Aquasition Investments Corp., Cheung So Wa, Chan Sun Keung and other named parties(incorporated by reference to Exhibit 4.12 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)
|
|
|
4.11
|
Employee Agreement with Keyan Yan, dated August 1, 2014 (incorporated by reference to Exhibit 4.13 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)
|
|
|
4.12
|
Employee Agreement with Lixia Tu, dated June 25, 2015 (incorporated by reference to Exhibit 4.12 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)
|
|
|
8.1
|
List of the registrant’s subsidiaries (incorporated by reference to Exhibit 8.1 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)
|
|
|
11.1
|
Code of Ethics, adopted on October 25, 2014 (incorporated by reference to Exhibit 11.1 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)
|
|
|
12.1*
|
Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
|
|
|
12.2*
|
Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
|
|
|
13.1*
|
Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
13.2*
|
Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
______________________
*Filed herewith.
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