NOTES
TO FINANCIAL STATEMENTS
December 31, 2016
NOTE
1 – ORGANIZATION
China
Herb Group Holdings Corporation (the “Company”) was incorporated under the name “Island Radio, Inc” under
the laws of the State of Nevada on June 28, 2010
.
On
June 27, 2012, Eric R. Boyer and Nina Edstrom (collectively, the “Sellers”), who were then the major shareholders
of the Company, entered into a Share Purchase Agreement with Chin Yung Kong, Qiuping Lu and Fumin Feng (collectively, the “Purchasers”),
pursuant to which the Sellers sold to the Purchasers an aggregate 4,000,000 shares of the common stock of the Company, which represented
approximately 93% of the then total issued and outstanding stock of the Company, for a total purchase price of $159,970 (the “Change
in Control”). As result of this share purchase transaction, Chin Yung Kong, Qiuping Lu and Fumin Feng became the controlling
shareholders of the Company
.
The
Company’s original business plan was to become a commercial FM radio broadcaster. Subsequently, following the Change in
Control, the Company changed its business plan and intended to become a medical and spa company with a focus on Asia. However,
after consultation with its professional and business advisors in the United States and the People’s Republic of China,
the Company’s management decided during the third quarter of 2014 that this would no longer be its plan of operations. The
Company’s plan of operations is to evaluate various industries, geographic and market opportunities. This may take the form
of acquiring a business, being acquired by an existing business or developing a business organically. Any such efforts may require
significant capital, which the Company currently lacks. There is no assurance that any such opportunity will become available.
There is also no assurance that, if any opportunity becomes available, the Company will have the financial and other resources
available to take advantage of such opportunity, since the Company’s has extremely limited liquidity. Through December 31,
2016, the Company has no revenues or operation
.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements for China Herb Group Holdings Corporation have been prepared in accordance with accounting principles
generally accepted in the United States of America and in accordance with Regulation S-X promulgated by the Securities and Exchange
Commission.
Use
of Estimates
The
accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles
in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful
judgment. Actual results may vary from these estimates.
Fair
Value of Financial Instruments
ASC
820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the
level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization
within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It
prioritizes the inputs into three levels that may be used to measure fair value
:
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities
.
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data
.
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities
.
As
of December 31, 2016 and 2015, the Company believes that the recorded values of all of its financial instruments approximate their
current fair values because of their nature and respective maturity dates or durations
.
CHINA
HERB GROUP HOLDINGS CORPORATION
NOTES
TO FINANCIAL STATEMENTS
December 31, 2016
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments (continued)
Description
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
Realized
Loss
|
|
December
31, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
December
31, 2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
ASC
825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,
unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that
instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value
option to any outstanding instruments
.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of
three months or less to be cash equivalents. As of December 31, 2016 and 2015, the Company had no cash equivalents
.
Prepaid
Expenses
Prepaid
expenses relates to cash paid in advance for rent and annual listing fee. These amounts are recognized as expense over the related
service periods. At December 31, 2016 and 2015, prepaid expenses amounted $4,367 and $0, respectively.
Income
Taxes
Deferred
income tax assets and liabilities arise from temporary differences associated with differences between the financial statements
and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences
reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the
assets or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified
as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount expected to be realized
.
The
Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition
thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue
to recognize tax positions that meet a "more-likely-than-not" threshold. As of December 31, 2016 and 2015, the Company
does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial
statements
.
Loss
per Share Calculation
Basic
net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per shares is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive. During the year ended December 31, 2016 and 2015,
the Company had no dilutive financial instruments issued or outstanding
.
Recent
Accounting Pronouncements
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have
a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated
to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures
.
CHINA
HERB GROUP HOLDINGS CORPORATION
NOTES
TO FINANCIAL STATEMENTS
December 31, 2016
NOTE
3 - GOING CONCERN
The
Company has minimal operations, and as such has devoted most of its efforts since its inception to developing its business plan,
issuing common stock, attempting to raise capital, establishing its accounting systems and other administrative functions
.
As
of December 31, 2016, the Company had $0 in cash and has been funding its working capital needs from loans from related parties.
The Company is seeking sources of funding. Without limiting its available options, future equity financings will most likely be
through the sale of additional shares of its common stock. It is possible that the Company could also offer warrants, options
and/or rights in conjunction with any future issuances of its common stock. However, the Company can give no assurance that financing
will be available to it, and if available, in amounts or on terms acceptable to the Company
.
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
State of America, which contemplate continuation of the Company as a going concern. The Company has not established a source of
revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception. Further, as
of December 31, 2016, the Company had an accumulated deficit and stockholders’ deficit of $(367,970) and $(202,066), respectively.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying
financial statements do not include any adjustments or classifications that may result from the possible inability of the Company
to continue as a going concern
.
NOTE
4 - RELATED PARTIES TRANSACTIONS
Related
Parties Loans
In
year 2013, Chin Yung Kong, the director and shareholder of the Company, advanced $20,000 to the Company for working capital purposes.
These working capital advances of $20,000 are payable on demand and, at December 31, 2016 and 2015, reflected as related party
loans on the accompanying balance sheets
.
Starting
from year 2014, Qiuping Lu, President, CEO, director and shareholder of the Company, advanced funds to the Company for working
capital purposes. These working capital advances are payable on demand. As of December 31, 2016 and 2015, these working capital
advances amounted to $175,072 and $133,748, respectively, are reflected as related party loans on the accompanying balance sheets
.
During
the year ended December 31, 2016 and 2015, in connection with these related party loans, the Company imputed interest of $13,841
and $9,817, respectively, and recorded interest expense and an increase in additional paid-in capital
.
NOTE
5 – STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
The
total number of preferred shares authorized that may be issued by the Company is 5,000,000 shares with a par value of $0.001 per
share
.
As
of December 31, 2016 and 2015, the Company had no shares of its preferred stock issued and outstanding.
Common
Stock
The
total number of common shares authorized that may be issued by the Company is 70,000,000 shares with a par value of $0.001 per
share
.
As
of December 31, 2016 and 2015, the Company had 37,493,120 and 36,443,119 shares of its common stock issued and outstanding, respectively
.
Common
Stock Sold for Cash
On
August 15, 2016, the Company sold 1,050,001 shares of common stock at a purchase price of $0.001 per share to 28 investors pursuant
to a stock purchase agreement. The Company did not engage a placement agent with respect to the sale. The Company received proceeds
of $1,050.
CHINA
HERB GROUP HOLDINGS CORPORATION
NOTES
TO FINANCIAL STATEMENTS
December 31, 2016
NOTE
6 – INCOME TAXES
The
Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred
tax assets at December 31, 2016 and 2015 consist of net operating loss carryforwards. The net deferred tax asset has been fully
offset by a valuation allowance because of the uncertainty of the attainment of future taxable income. The items accounting for
the difference between income taxes at the effective statutory rate and the provision for income taxes for the year ended December
31, 2016 and 2015 were as follows
:
|
|
Year
Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Income
tax benefit at U.S. statutory rate of 35%
|
|
$
|
(21,232
|
)
|
|
$
|
(26,148
|
)
|
Non-deductible
interest
|
|
|
4,844
|
|
|
|
3,436
|
|
Change
in valuation allowance
|
|
|
16,388
|
|
|
|
22,712
|
|
Total
provision for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company’s approximate net deferred tax asset as of December 31, 2016 and 2015 was as follows:
Deferred Tax Asset:
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
Net
operating loss carryforward
|
|
$
|
111,166
|
|
|
$
|
94,778
|
|
Valuation
allowance
|
|
|
(111,166
|
)
|
|
|
(94,778
|
)
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
net operating loss carryforward was $317,619 at December 31, 2016. The Company provided a valuation allowance equal to the deferred
income tax asset for the year ended December 31, 2016 and 2015 because it was not known whether future taxable income will be
sufficient to utilize the loss carryforward. The increase in the allowance was $16,388 in 2016. The potential tax benefit arising
from the loss carryforward will expire in 2036
.
Additionally,
the future utilization of the net operating loss carryforward to offset future taxable income may be subject to an annual limitation
as a result of ownership changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any
carryforward that expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation
allowance
.
The
Company does not have any uncertain tax positions or events leading to uncertainty in a tax position
.
NOTE
7 - SUBSEQUENT EVENTS
The
Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and
has determined there are no additional events required to be disclosed
.
F-10