NOTES TO THE AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016 AND 2015
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Organization and Description of Business
MAKH GROUP CORP. (the
Company
,
we
or
us
) was incorporated under the laws of the State of Nevada on August 13, 2014 (
Inception
) and has adopted December 31 fiscal year end. The Company intends to provide business-consulting service in China.
On January 30, 2017, a private transaction closed pursuant to a stock purchase agreement between Gulmira Makhmutova, the Company's President and CEO, and Anhui Weiyang Investment Holding Co. Ltd, by which it acquired 8,618,000 shares of common stock from Gulmira Makhmutova representing, along with private transactions between other shareholders, 99.9% of the issued and outstanding share capital of the Company on a fully-diluted basis. Anhui Weiyang Investment Holding Co. Ltd paid $340,000.00 in cash from company funds as consideration for ownership. In connection with the transaction., Ms. Makhmutova released the Company from all debts owed to her. The information set forth in Item 5.02 of this Form 8-K is incorporated by reference into this Item 5.01.
Upon the change of control of the Company, which occurred on January 30, 2017, Gulmira Makhmutova resigned immediately from her official positions in the Company. Accordingly, Ms. Makhmutova ceased to be the Company
s Director, CEO, CFO, President, and Treasurer, and on the same day the shareholders of the Corporation voted Mr. Yonghua Kang, as Director & CEO, Mr. Xinlong Liu as Director and COO, Ms. Aiyun Xu as Director and CFO, Mr. Shaochun Dong as Director, and Mr. Dagen Cheng as Director.
NOTE 2
GOING CONCERN
The Company has incurred a loss since Inception (August 13, 2014) resulting in an accumulated deficit of $38,846 and $1,449 as of December 31, 2016 and 2015 respectively 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. Management believes that the Company
s capital requirements will depend on many factors including the success of the Company
s development efforts and its efforts to raise capital. Management also believes the Company needs to raise additional capital for working capital purposes. There is no assurance that such financing will be available in the future. The conditions described above raise substantial doubt about our ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable 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, obtaining 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, loans from directors and, or, the private placement of common stock.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company
s year -end is December 31.
Recent accounting pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company
s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company
s financials properly reflect the change. The Company currently does not have any recent accounting pronouncements that they are studying and feel may be applicable.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Stock-Based Compensation
As of December 31, 2016 and 2015, the Company has not issued any stock-based payments to its employees.
Stock-based compensation is accounted for at fair value in accordance with ASC 718, when applicable. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Revenue Recognition
The Company will recognize revenue in accordance with Accounting Standards Codification No. 605,
Revenue Recognition
("ASC-605"), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company's bank accounts are deposited in insured institutions. The funds are insured up to $250,000. At December 31, 2016 and 2015 the Company's bank deposits did not exceed the insured amounts.
Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260,
Earnings per Share
which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
For the years ended December 31, 2016 and 2015 there were no potentially dilutive debt or equity instruments issued or outstanding and any such shares would have been excluded from the computation because they would have been anti-dilutive as the Company incurred losses in these years.
Fair Value of Financial Instruments
ASC 820 "
Fair Value Measurements and Disclosures
" establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
Level 1: defined as observable inputs such as quoted prices in active markets;
Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Level 3: defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The carrying value of cash and the Company
s loan from shareholder approximates its fair value due to their short-term maturity.
Income Taxes
The Company accounts for income taxes pursuant to FASB ASC 740
Income Taxes
. Under ASC 740 deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At December 31, 2016 and 2015, there were no unrecognized tax benefits.
Advertising Costs
The Company
s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $0 during years ended December 31, 2016 and 2015.
NOTE 4
COMMON STOCK
The Company has 75,000,000 shares of common stock authorized with a par value of $ 0.001 per share.
On November 5, 2015, the Company issued 6,000,000 shares of its common stock to the sole director, at $0.001 per share for total proceeds of $6,000.
At September 30, 2016, the Company issued 2,620,000 shares of its common stock to 29 shareholders at $0.01 per share for total proceeds of $26,200.
As at December 31, 2015, 8,620,000 shares of common stock were issued and outstanding.
NOTE 5
PREPAID EXPENSES
As at December 31, 2016, the Company had $6,667 in prepaid expenses, consisting entirely of prepayment of an annual fee paid to OTC Markets Group. A prepaid expense is carried on the balance sheet of the Company as a current asset and amortized monthly.
Accumulated amortization was calculated over 12 months period to be equivalent of $833 monthly.
NOTE 6
INCOME TAXES
Deferred income tax assets and liabilities are computed annually for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
As of December 31, 2016 the Company had net operating loss (NOL) carry forwards of $33,397. The deferred tax asset applicable to the net loss of $11,055 was offset entirely by a valuation allowance, which changed by $11,092 during 2016. As of December 31, 2015 the Company had net operating loss carry forwards of $773 that may be available to reduce future years
taxable income through 2035. However, the Company
s ability to use the carryover net operating loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The Company adopted the provisions of ASC 740-10-50, formerly FIN 48, and
Accounting for Uncertainty in Income Taxes
. The Company had no material unrecognized income tax assets or liabilities as of December 31, 2016.
NOTE 7
LOAN FROM FORMER SHAREHOLDER
In support of the Company
s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
As of December 31, 2015 and 2016, the amount outstanding was $1,525 and $9,625 respectively. The loan is non-interest bearing, due upon demand and unsecured.
The Company
s former sole shareholder and former director donated office space free of charge and will devote approximately 20 hours a week to the Company
s operations without payments. The revenue earned during the year ended were a result of the former director
s donated consulting hours to an independent third party.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Commitments:
The Company currently has no long-term commitments as of our balance sheet date.
Contingencies:
None as of our balance sheet date.
NOTE 9
SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2016 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements, other than as follows
On January 30, 2017, a private transaction closed pursuant to a stock purchase agreement between Gulmira Makhmutova, the Company's President and CEO, and Anhui Weiyang Investment Holding Co. Ltd, by which it acquired 8,618,000 shares of common stock from Gulmira Makhmutova representing, along with private transactions between other shareholders, 99.9% of the issued and outstanding share capital of the Company on a fully-diluted basis. Anhui Weiyang Investment Holding Co. Ltd paid $340,000 in cash from company funds as consideration for ownership. In connection with the transaction., Ms. Makhmutova released the Company from all debts owed to her. The information set forth in Item 5.02 of this Form 8-K is incorporated by reference into this Item 5.01.
Upon the change of control of the Company, which occurred on January 30, 2017, Gulmira Makhmutova resigned immediately from her official positions in the Company. Accordingly, Ms. Makhmutova ceased to be the Company
s Director, CEO, CFO, President, and Treasurer, and on the same day the shareholders of the Corporation voted Mr. Yonghua Kang, as Director & CEO, Mr. Xinlong Liu as Director and COO, Ms. Aiyun Xu as Director and CFO, Mr. Shaochun Dong as Director, and Mr. Dagen Cheng as Director.
Item 9A(T). Controls and Procedures
Management
s Report on Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company
s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company
s internal control over financial reporting as of December 31, 2016 using the criteria established in
Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company
s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2016, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
1.
We do not have an Audit Committee
While not being legally obligated to have an audit committee, it is the management
s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company
s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management
s activities.
2. We did not maintain appropriate cash controls
As of December 31, 2016, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company
s bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.
3.
We did not implement appropriate information technology controls
As at December 31, 2016, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company
s data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors.
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company
s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2016 based on criteria established in Internal Control
Integrated Framework issued by COSO.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2016, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of the Company
s registered public accounting firm regarding internal control over financial reporting. Management
s report was not subject to attestation by the Company
s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management
s report in this annual report.