NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
Business
Image
Chain Group Limited, Inc. (formerly Have Gun Will Travel Entertainment, Inc.) (“ICGL,” the “Company,”
“we” or “us”) was incorporated under the laws of Nevada on December 18, 2013. From inception through the
date of the Share Exchange as defined below, the Company was a television pre-production company.
Share
Exchange
On
May 5, 2015, ICGL entered into a share exchange agreement (the “Exchange Agreement”) with Fortune Delight Holdings
Group Ltd (“FDHG”) and Wu Jun Rui, on behalf of himself and certain other individuals who were to receive shares of
ICGL pursuant to the Exchange Agreement (the “Shareholders”). On the terms and subject to the conditions set forth
in the Exchange Agreement, on May 5, 2015, Wu Jun Rui transferred all 50,000 shares of FDHG common stock, consisting of all of
the issued and outstanding shares of FDHG, to ICGL in exchange for the issuance to the shareholders of 59,620,000 shares of the
Company’s common stock, par value $.001 per share and 5,000,000 shares of the Company’s preferred stock, par value
$.001 per share.
As
a result of the closing of the Exchange Agreement, FDHG became the Company’s wholly owned subsidiary. FDHG, previously,
through its wholly-owned operating subsidiaries, was in the business of promoting and distributing its own branded teas that are
grown, harvested, cured, and packaged in the People’s Republic of China (“PRC”). The Company’s headquarters
was previously located in Guangzhou, Guangdong Province, PRC.
The
securities purchase agreement transaction is referred to hereafter as the “reverse-merger transaction.” The share
exchange transaction has been accounted for as a recapitalization of ICGL where ICGL (the legal acquirer) is considered the accounting
acquiree and FDHG (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, ICGL is deemed
to be a continuation of the business of FDHG.
Accordingly,
the accompanying consolidated financial statements are those of the accounting acquirer, FDHG. The historical stockholders’
equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction
occurred as of the beginning of the first period presented.
On
June 11, 2015, the Company amended its Articles of Incorporation with the State of Nevada in order to change its name to Image
Chain Group Limited, Inc. and to increase the authorized shares of common stock from 70,000,000 to 400,000,000 (the “Amendments”).
The name change was undertaken in order to more closely align with the operations of the Company’s wholly-owned subsidiary
FDHG.
Organization
History of Silver Channel Industrial Limited and its Subsidiaries
On
January 28, 2011, Silver Channel incorporated Heyuan Image Equipment Import Export Co., Ltd. (“Heyuan Image”) as a
wholly foreign owned enterprise (“WFOE”) registered in Heyuan City, Guangdong Province, PRC. Heyuan Image was dormant
for the six months ended and year ended September 30, 2016 and December 31, 2015. Heyuan Image was wholly owned by Silver Channel.
Heyuan Image has a registered capital of HKD 4,000,000 of which HKD 3,380,000 has been paid up.
On
August 18, 2014, the Company, through its subsidiary Heyuan Image, acquired 100% equity of Guangzhou Image Agricultural Technology
Co., Ltd. (“Guangzhou Image”). Guangzhou Image is a limited liability company registered in Guangzhou City, Guangdong
Province, PRC. Guangzhou Image has not yet engaged in operating activities since its incorporation. Guangzhou Image is wholly
owned by Heyuan Image. Guangzhou Image has a registered capital of RMB 10 million of which is still outstanding.
On
February 16, 2015, Guangzhou Image entered into an equity transfer agreement with all the shareholders of Yunnan Image Tea Industry
Co., Ltd. (“Yunnan Image”). Guangzhou Image paid RMB 3,000,000 to all the shareholders of Yunnan Image for 100% equity
interest in Yunnan Image. Yunnan Image is a limited liability company registered in Xishuangbanna, Yunnan Province PRC. Yunnan
Image was incorporated on August 23, 2013. Yunnan Image was the primary operating entity to carry out the Company’s core
business activities of selling and marketing its own branded teas. Yunnan Image is wholly-owned by Guangzhou Image. Yunnan Image
has a registered capital of RMB 3 million. The capital has been paid up in its entirety.
Disposal
of Silver Channel and its Subsidiaries
On
or about November 15, 2016, the Company’s subsidiary FDGH disposed of its ownership in Silver Channel which included all
of the assets and liabilities of Silver Channel, Heiyuan Image, Guangzhou Image, and Yunnan Image. All of the Company’s
substantial operations were conducted through the above four mentioned subsidiaries. The disposition was carried out by, Zheng
Zewu, whom is the Director of both FDGH and Silver Channel. Silver Channel was sold to Hong Kong Private Medical Services Limited
for nominal value as indicated by the bought and sold note stamped by the Inland Revenue Department of Hong Kong. The Company
recorded a net gain on disposal, as those subsidiaries were a net liability to the Company. The Company did not retain special
counsel or appraisers to determine a fair value for the disposition of Silver Channel and its subsidiaries. Silver Channel’s
subsidiaries: Heiyuan Image, Guangzhou Image, and Yunnan Image, which are located in the PRC, were primarily managed by Mr. Lin
Qishui whom is the authorized legal representative. It is unclear that the Company’s management would have been able to
exercise diligence in determining a fair value for the sale of those subsidiaries located in the PRC, as they were primary components
of the value of Silver Channel. Financial information regarding those subsidiaries were poorly kept and physical assets did not
appear to be properly safeguarded. Limited inspections of the Company’s inventory indicated significant moisture on its
tea products which would render their value to be impaired. The Company’s management did not find evidence that the management
of the PRC subsidiaries made efforts to recover accounts or other receivables and employ proper controls over the Company’s
bank and cash. Silver Channel was the owner of a luxury motor vehicle with dual license to operate in both in the mainland PRC
and Hong Kong; there was no evidence to support that the value of the vehicle and the license were included in the determination
of fair value for Silver Channel at the time it was disposed. Any previous net balances owed to the Company or FDGH by Silver
Channel, Heiyuan Image, Guangzhou Image, and Yunnan Image have been determined as uncollectible by the Company’s management;
accordingly, they have been written off.
As
of the date of this report, after the disposal of Silver Channel, the Company does not currently have any substantial operations.
The Company is currently reviewing potential acquisition targets.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Method of Accounting
The
Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The
financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally
accepted accounting principles in the United States of America (“US GAAP”) and have been consistently applied in the
presentation of financial statements.
(b)
Basis of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with US GAAP.
The
accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP)
applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities
and Exchange Commission. Accordingly, they may not include all of the information and disclosure required by accounting principles
generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative
of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the
financial position and the results of operations and cash flows for the interim periods have been included. These interim financial
statements should be read in conjunction with the audited financial statements for the year ended December 31, 2016, as potentially
not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim
financial statements follow the same accounting policies and methods of computations as the audited financial statements for the
year ended December 31, 2016.
(c)
Principles of Consolidation
The
consolidated financial statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary.
All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100%
of assets, liabilities, and net income or loss of those wholly-owned subsidiaries.
As
of March 31, 2017, and December 31, 2016, the detailed identities of the consolidating subsidiaries are as follows:
Name
of company
|
|
Place
of incorporation
|
|
Attributable
equity interest%
|
|
|
Registered
capital
|
|
Fortune
Delight Holdings Group Limited
|
|
British
Virgin Islands
|
|
|
100
|
%
|
|
$
|
50,000
|
|
(d)
Economic and Political Risks
The
Company’s potential acquisition targets may operate outside of the United States. Foreign countries are subject to special
considerations and significant risks not typically associated with companies in the Untied States. These include risks associated
with, among others, the political, economic, legal environment and foreign currency exchange. The Company’s results may
be adversely affected by changes in the political and social conditions in foreign countries, and by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency conversion, restriction on international remittances,
and rates and methods of taxation, among other things.
(e)
Use of Estimates
In
preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements,
as well as the reported amounts of revenues and expenses during the reporting years. These accounts and estimates include, but
are not limited to, the estimation on useful lives of property, plant and equipment. Actual results could differ from those estimates.
(f)
Cash and Cash Equivalents
The
Company accounts for cash and cash equivalents as cash on hand, time deposits, certificates of deposit, and all highly liquid
debt instruments with original maturities of three months or less. As of March 31, 2017, and December 31, 2016, the Company did
not have any cash and cash equivalents.
(g)
Accounts and Other Receivable
Accounts
receivable would be presented net of allowance for bad debt. These provisions would be based on analysis historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns.
(h)
Inventories
Inventories
would be stated at the lower of cost or market value.
(i)
Property, Plant and Equipment
Property
and equipment will be stated at cost less accumulated depreciation.
(j)
Revenue Recognition
The
Company’s revenue recognition policies are in accordance to Staff Accounting Bulletin (“SAB”) 104, included
in the Codification as ASC 605,
Revenue Recognition
. Revenue is recognized when a formal arrangement exists, the price
is fixed or determinable, the delivery is completed or service is rendered, and no other significant obligations of the Company
exist, and collectability is reasonably assured.
(k)
Selling, General & Administrative Expenses
Selling,
general and administrative expenses are comprised of salaries, client entertainment, advertising, and travel, lodging expenses,
include executive compensation, general overhead such as the finance department and administrative staff, depreciation, office
rental and utilities, and professional fees.
(l)
Foreign Currency Translation
The
Company current functional and reporting currency is the United States Dollar, USD. Its previous subsidiaries used the Chinese
Renminbi (“RMB”) and Hong Kong Dollars (“HKD”) as its functional currencies.
(m)
Income Taxes
The
Company adopts SFAS No. 109, Accounting for Income Taxes, included in the Codification as ASC 740,
Income Taxes,
which
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period
end based on enacted tax laws and statutory tax 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.
On
January 1, 2007, The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(“FIN 48”), included in the Codification as ASC 740,
Income Taxes.
The topic addresses the determination of
whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC
740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater
than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
(n)
Fair Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts
and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short
maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial
instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level
valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The
carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments
and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined
as follows:
●
|
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
|
●
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
|
|
|
●
|
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities
from Equity,” and ASC 815.
The
Company’s financial instruments include other payables, accrued liabilities and amounts due to related parties. Management
estimates the carrying amounts of the financial instruments approximate their fair values due to their short-term nature.
(o)
Other Comprehensive Income
In
2016, the Company’s functional currency for its operating subsidiaries was the Renminbi (“RMB”). For financial
reporting purposes, the RMB was translated into United States Dollars (“USD” or “$”) as the reporting
currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses
are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the
use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated
other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in income.
The
Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive loss is comprised of net loss and
all changes to the statements of stockholders’ equity, except for changes in paid-in capital and distributions to stockholders
due to investments by stockholders.
(p)
Business Combination
Business
combinations are accounted for under the acquisition method of accounting in accordance with ASC 805,
Business Combinations.
Under the acquisition method the acquiring entity in a business combination recognizes 100 percent of the acquired assets
and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any
excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as
goodwill. To the extent the fair value of net assets acquired, including other identifiable assets, exceed the purchase price,
a bargain purchase gain is recognized. Assets acquired and liabilities assumed from contingencies must also be recognized at fair
value, if the fair value can be determined during the measurement period. Results of operations of an acquired business are included
in the statement of earnings from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges,
are expensed as incurred.
(q)
Recent Accounting Pronouncements
On
January 5, 2016, the FASB issued ASU 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities”, which amends the guidance in U.S. GAAP on the classification and measurement
of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting
related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair
value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated
with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those
fiscal years beginning after December 15, 2017.
On
February 25, 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, its new standard on accounting for leases. ASU
2016-02 introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying
principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related
to evaluating when profit can be recognized).
Furthermore,
the ASU addresses other concerns related to the current leases model. For example, the ASU eliminates the requirement in current
U.S. GAAP for an entity to use bright-line tests in determining lease classification. The standard also requires lessors to increase
the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The new model
represents a wholesale change to lease accounting. As a result, entities will face significant implementation challenges during
the transition period and beyond, such as those related to:
|
●
|
Applying
judgment and estimating.
|
|
●
|
Managing
the complexities of data collection, storage, and maintenance.
|
|
●
|
Enhancing
information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting
requirements.
|
|
●
|
Refining
internal controls and other business processes related to leases.
|
|
●
|
Determining
whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations.
|
|
●
|
Addressing
any income tax implications.
|
The
new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar
periods beginning on January 1, 2019), and interim periods therein.
On
March 15, 2016, the FASB issued ASU 2016-07 “Investments—Equity Method and Joint Ventures (Topic 323): Simplifying
the Transition to the Equity Method of Accounting”, which simplifies the equity method of accounting by eliminating the
requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result
of an increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity
method (as a result of an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional
interest in the investee would be added to the current basis of the investor’s previously held interest and the equity method
would be applied subsequently from the date on which the investor obtains the ability to exercise significant influence over the
investee. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to
an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the
investment qualifies for the equity method.
The
guidance in the ASU is effective for all entities for fiscal years beginning after December 15, 2016, including interim periods
within those fiscal years; early adoption is permitted for all entities. Entities are required to apply the guidance prospectively
to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. Additional
transition disclosures are not required upon adoption.
On
March 17, 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net)”, which amends the principal-versus-agent implementation guidance and illustrations
in the Board’s new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified by stakeholders,
including those related to (1) determining the appropriate unit of account under the revenue standard’s principal-versus-agent
guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s
control principle. Among other things, the ASU clarifies that an entity should evaluate whether it is the principal or the agent
for each specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service
is “a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer.” Therefore,
for contracts involving more than one specified good or service, the entity may be the principal for one or more specified goods
or services and the agent for others.
The
ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions
in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the
new revenue standard.
On
March 30, 2016, the FASB issued ASU 2016-09 “Compensation—Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions
for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding
requirements, as well as classification in the statement of cash flows.
On
August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”. Stakeholders indicated that
there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of
cash flows under Topic 230, Statement of Cash Flows, and other Topics. This Update addresses eight specific cash flow issues with
the objective of reducing the existing diversity in practice. The amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is
permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption
must adopt all of the amendments in the same period. As a result, the Company has elected to early adopt this Update prospectively.
As of March 31, 2017 and prior periods retrospective adjustments have not been applied.
As
of March 31, 2017, except for the above, there are no recently issued accounting standards not yet adopted that would have a material
effect on the Company’s financial statements.
(r)
Contingencies
Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company
but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses
such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the
Company’s management evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the
assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable
and material would be disclosed.
Loss
contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case
the guarantee would be disclosed.
3.
GOING CONCERN UNCERTAINTIES
These
financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As
of March 31, 2017, and December 31, 2016, the Company had accumulated deficits of $59,447,223 and $59,396,597 due to the substantial
losses incurred in operations that have been discontinued in 2016; the Company also continues to incur losses to maintain its
listing as U.S. public company. There was substantial doubt regarding the Company’s ability to continue as going concern
at March 31, 2017, and December 31, 2016. Management plans to employ its previous plan to support the Company’s operations
and maintain its business strategy by raising additional funds through public and private offerings, or loans from related parties,
or to rely on officers and directors to perform essential functions with minimal compensation was unsuccessful.
If
the Company does not raise additional money via public or private offerings or related party loans, the Company may be unable
to continue as going concern. Additional financing may not become available on acceptable terms and there can be no assurance
that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term.
The
accompanying financial statements have been adjusted to the expected recoverable amounts. Management believes no further adjustments
for recoverability and classification of assets or liabilities are necessary.
4.
INCOME TAX
The
Company is subject to US Income taxes.
The
Company’s subsidiary Fortune Delight Holdings Group Limited was incorporated in the British Virgin Islands. The British
Virgin Islands is an income tax free jurisdiction.
Silver
Channel, the Company former indirectly subsidiary was incorporated in Hong Kong and is subject to the Inland Revenue Ordinance
of Hong Kong. Hong Kong adopted a uniform tax rate of 16.5% for all enterprises.
The
Company’s former indirectly held subsidiaries that were incorporated in the PRC and are governed by the Income Tax Law of
the PRC and various local income tax laws. Effective January 1, 2008, China adopted a uniform tax rate of 25% for all enterprises
including foreign-invested enterprises.
For
the three months ended March 31, 2017, and 2016, the Company has not provided for income tax provision as it incurred substantial
net operating loss during the years.
The
Company’s management did not recognize any deferred tax benefit and related deferred tax assets at March 31, 2017 and 2016,
as a result of the substantial net operating losses because the management was unable to determine when it would be able to generate
taxable income to make use of such potential future tax assets.
5.
LOSS PER SHARE
The
following table sets forth the computation of basic and diluted earnings per share of common stock:
|
|
For
the three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Basic
and diluted net loss per share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net
loss used in computing basic earnings per share
|
|
$
|
50,626
|
|
|
$
|
61,611
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
395,000,000
|
|
|
|
395,000,000
|
|
Basic loss
per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
There
were no potentially dilutive securities outstanding during the three months ended March 31, 2017 and 2016.
On
February 13, 2017, Xinyuan Yang, whom was granted 5,000,000 shares of the Company’s preferred stock pursuant to the Exchange
Agreement, entered into an agreement with the Company to exchange his right to the preferred stock for common shares of the Company’s
stock. As of this date of this report this transaction has not been completed. The preferred stock is not convertible into common
stocks and does not impact the loss per share calculation.
6.
RELATED PARTY TRANSACTION
Amounts
due from related parties consisted of the following:
|
|
March
31, 2017
|
|
|
December 31, 2016
|
|
Wu
Junrui, former director of FDGH
|
|
$
|
-
|
|
|
$
|
49,328
|
|
Amounts
due to related parties consisted of the following:
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
Wu
Junrui, former director of FDGH
|
|
$
|
5,802
|
|
|
$
|
-
|
|
Mr.
Wu previously had an outstanding balance owed the Company in the amount of $49,328 at December 31, 2017. During the three months
ended March 31, 2017, Mr. Wu paid expenses and professional fees on behalf of the Company in the accumulated amount of $55,130.
As a result of the payments made by Mr. Wu on the Company’s behalf, the balance previously owed by Mr. Wu was settled, and
the Company incurred a net balance owed to Mr. Wu of $5,802. The amounts that were due from or due to Mr. Wu were and are unsecured,
interest-free and due on demand.
The
Company’s registered office and principal place of business was provided by Image Industrial Development Ltd., a major shareholder
of the Company. The terms of the lease agreement are for one year from November 1, 2016 through October 31, 2017. There was no
rental deposit paid and the annual rental expense was $90 (HKD $700). These rates may differ from fair market values.
7.
RISKS CONCENTRATION
FDHG
is incorporated in the British Virgin Islands and it intends to conduct physical business in Hong Kong and the PRC. Accordingly,
the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic,
and legal environments in the British Virgin Islands, Hong Kong, and the PRC. Business operations conducted in these localities
are subject to special considerations and significant risks not typically associated with companies in North America.
8.
DISCONTINUED OPERATIONS
|
|
For
the three months ended
|
|
Results
of Operations
|
|
March
31, 2016
|
|
Net
sales
|
|
|
101,219
|
|
Cost of sales
|
|
|
33,280
|
|
Selling,
general and administrative expenses
|
|
|
98,717
|
|
Interest
income
|
|
|
1
|
|
Income
tax
|
|
|
4
|
|
Loss
from discounted operations
|
|
|
30,781
|
|
As
detail in note 1, the Company disposed of Silver Channel and its subsidiaries on November 15, 2016.
The
values presented above are management representations of the consolidated financial position and results of operations for the
three months ended March 31, 2016. Management believes these values approximate the value of Silver Channel and its subsidiaries.
Those figures are unaudited.
9.
SUBSEQUENT EVENT
The
Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued.
There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions
that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements,
and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance
sheet but arose subsequent to that date. There were no material events that occurred after the balance sheet date.