NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016
, DECEMBER 31,
2015
AND NOVEMBER 30, 2015
NOTE 1 - ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
UNION BRIDGE HOLDINGS LIMITED (formerly Costo Inc.) (the "Company") was incorporated under the laws of the State of Nevada on May 6, 2014. The Company is developing a distribution of auto parts and components necessary for maintenance and repairs of automobiles and special equipment (construction, road machinery etc.) from China to Europe and CIS countries (Kyrgyzstan, Kazakhstan, Armenia, Azerbaijan, Tajikistan, Uzbekistan). The Company has developed a growth plan that includes expansion into businesses in the health-related industry with the goal to maintaining long term sustainable growth and shareholders' wealth creation.
On May 23, 2016, the Company changed its fiscal year end from November 30 to December 31. Since the Company elected to not file a Transition Report on Form 10-Q for the one-month transition period from December 1, 2015 to December 31, 2015 (the "Transition Period"), the Company included its unaudited financial statements for the Transition Period in the report on Form 10-Q, for the period ended September 30, 2016. The Company now operates on a fiscal year ending on December 31, 2016.
Recent Developments
On February 18, 2016, Yuhua Xu, the controlling shareholder, Chief Executive Officer and sole director of the Company, entered into and closed on a Share Purchase Agreement with Mary Ho, Rudolf Novotny, Shan Ho, Lily Ho and Moana Ho (each a "Purchaser" and collectively, the "Purchasers") whereby the Purchasers purchased a total of 39,950,000 shares of the Company's common stock (the "Shares") from Yuhua Xu, for an aggregate price of $223,720. The Shares acquired represent approximately 74.53% of the issued and outstanding shares of common stock of the Company.
Concurrently with the closing of the Share Purchase Agreement, Yuhua Xu, resigned as an officer and director of the Company and Moana Ho was appointed President and Chairman of the Board of Directors and Hui Zhou was appointed as a Chief Financial Officer and Director.
The Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State on May 23, 2016 to:
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(1)
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Change the Company's corporate name from COSTO INC. to UNION BRIDGE HOLDINGS LIMITED;
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(2)
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Increase the number of authorized shares of common stock, $0.001 par value, from 75,000,000 to 1,000,000,000;
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(3)
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Create a class of preferred stock consisting of 20,000,000 shares, the designations and attributes of which are left for future determination by our board of directors; and
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(4)
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Effect a 1 for 5 forward stock split of the Company's issued and outstanding common stock (the "Forward Stock Split").
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Effective June 21, 2016, The Financial Information Regulatory Association, Inc. ("FINRA") approved the Company's name change and forward stock split application.
All references to share and per share data have been adjusted to give effect of the Forward Stock Split discussed above.
Union Beam Investment Limited, a Hong Kong company, was formed on February 18, 2016 and First Channel Limited, a British Virgin Islands company was formed on March 18, 2016. Union Beam became a wholly owned subsidiary of First Channel on August 11, 2016 and First Channel became a wholly owned subsidiary of the Company on August 8, 2016. These newly formed subsidiaries are being used to expand the Company’s business to include business operations in the health-related industry with the goal to maintaining long term sustainable growth and shareholders' wealth creation.
Going Concern
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred a loss since inception (May 6, 2014) resulting in an accumulated deficit of $84,897 as of December 31, 2016, has a net loss of $59,661 and net cash used in operating activities of $11,141 for the year ended December 31, 2016 and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of common stock.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
Basis of Consolidation
These financial statements include the accounts of the Company and the wholly-owned subsidiaries, First Channel Limited and Union Beam Investment Limited. All material intercompany balances and transactions have been eliminated.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. The Company had $6,427, $11,141 and $13,641 in cash and cash equivalents as of December 31, 2016, December 31, 2015 and November 30, 2015, respectively.
Fair Value of Financial Instruments
As required by the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company's financial instruments consist primarily of cash and cash equivalents, prepaid expenses, and accounts payable. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.
Concentrations of Credit Risks
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Related Parties
The Company follows ASC 850, “
Related Party Disclosures,”
for the identification of related parties and disclosure of related party transactions (see Note 5).
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740,
“Accounting for Income Taxes”.
The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. As at December 31, 2016, December 31, 2015 and November 30, 2015, the Company did not have any amounts recorded pertaining to uncertain tax positions. (See Note 4)
Basic and Diluted Net Loss per Share
The Company computes loss per share in accordance with ASC 260,
“Earnings per Share,”
which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. During the year ended December 31, 2016 and November 30, 2015 and the one month ended December 31, 2015, the Company had no potential dilutive instruments and accordingly basic loss and diluted loss per share are the same.
Recently Issued Accounting Pronouncements
In January 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-04,
“Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.”
These amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Effective for public business entities that are a SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 should be adopted on a prospective basis. The Company is currently evaluating the potential impact that the adoption of this ASU may have on its financial statements.
In December 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-20,
“Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.”
The amendments affect narrow aspects of the guidance issued in ASU 2014-09 including Loan Guarantee Fees, Contract Costs, Provisions for Losses on Construction-Type and Production-Type Contracts, Disclosure of Remaining Performance Obligations, Disclosure of Prior Period Performance Obligations, Contract Modifications, Contract Asset vs. Receivable, Refund Liability, Advertising Costs, Fixed Odds Wagering Contracts in the Casino Industry, and Costs Capitalized for Advisors to Private Funds and Public Funds. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for FASB Accounting Standards Codification Topic 606. Public entities should apply Topic 606 (and related amendments) for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. The Company is currently evaluating the potential impact that the adoption of this ASU may have on its financial statements.
NOTE 3 - STOCKHOLDERS' EQUITY
Preferred Stock
The Company has authorized 20,000,000 preferred shares with a par value of $0.001 per share.
Common Stock
The Company has authorized 1,000,000,000 common shares with a par value of $0.001 per share.
During the year ended November 30, 2015, the Company issued 13,600,000 shares of its common stock in May 2016, at $0.002 per share for total proceeds of $27,200.
During the year ended December 31, 2016, the Company effectuated a 1 for 5 forward stock-split on the Company’s issued and outstanding shares. All references to share and per share data have been adjusted to give effect of the Forward Stock Split.
As of December 31, 2016, December 31, 2015 and November 30, 2015, the number of common shares issued and outstanding is 53,600,000.
NOTE 4 - INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Accounting for Uncertainty in Income Taxes when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.
We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.
The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the statutory federal income tax rate at 34% and Hong Kong income tax rate at 16.5% to the income tax amount recorded as of December 31, 2016, December 31, 2015 and November 30, 2015 is as follows:
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For the Period
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Year
Ended
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Year
Ended
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from
December 1 to
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December 31,
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November 30,
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December 31,
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2016
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2015
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2015
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USA
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HK
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Total
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USA
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USA
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Net operating loss carryforward
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$
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80,829
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$
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4,068
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$
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84,897
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$
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23,719
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$
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200
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Effective Tax rate
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34
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%
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16.5
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%
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33
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%
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34
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%
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34
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%
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Deferred Tax Asset
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27,482
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671
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28,153
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8,064
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68
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Less: Valuation Allowance
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(27,482
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)
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(671
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)
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(28,153
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)
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(8,064
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)
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(68
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)
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Net deferred tax asset
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$
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-
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$
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-
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$
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-
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$
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-
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$
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-
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Net Operating losses from the US Company
At December 31, 2016, the Company had $80,829 in net operating losses (“NOLs”) that may be available to offset future taxable income, which begin to expire 2034. In accordance with Section 382 of the U.S. Internal Revenue Code, the usage of the Company’s net operating loss carry forwards are subject to annual limitations following greater than 50% ownership changes.
The Company’s tax returns are subject to examination by tax authorities from the year 2014 through 2016.
Net Operating losses from the Hong Kong Companies
As at December 31, 2016, the Company had $4,068 in net operating loss in net operating losses (“NOLs”) that may be available to offset future taxable income indefinitely.
The Company’s tax returns are subject to examination by tax authorities from 2016.
NOTE 5 - RELATED-PARTY TRANSACTIONS
During the year ended December 31, 2016 and November 30, 2015, directors advanced $44,697 and $0 to pay operating expenses on behalf of the Company, respectively.
During the year ended December 31, 2016 and November 30, 2015, a director has advanced $6,427 and $2,800 into the bank account of the Company., respectively.
As of December 31, 2016, December 31, 2015 and November 30, 2015, the Company owed to related parties $54,601, $3,477 and $3,477, respectively.
The Company’s principal executive offices in Hong Kong, which it shares with its controlling shareholder, are furnished to the Company without any charge.
NOTE 6 - SUBSEQUENT EVENTS
The Company has evaluated other subsequent events from the balance sheet date through the date the financial statements were available to be issued and has determined that there are no additional events to disclose.