CONSOLIDATED
NOTES TO THE FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (Audited)
|
1.
|
DESCRIPTION
OF BUSINESS
|
Fountain Healthy Aging, Inc. (the
“Company” or “FHAI”) was incorporated under the laws of the State of Nevada on February 25, 2004 with the original
company name of Celtic Cross Ltd., initially for the purpose of acquiring timeshare entities and additional like entities. For unknown
reasons, FHAI was later abandoned and ceased filings with the Nevada Secretary of State for more than ten years following December 2,
2008. Thereafter, on April 2019, the district court in Nevada appointed Custodian Ventures, LLC (“Custodian”) as the custodian
of FHAI upon an application for appointment of custodian filed by the Custodian. The Custodian brought FHAI into active status with the
State of Nevada, appointed directors and officers of FHAI, and took control of FHAI. Until February 2, 2021, FHAI has not engaged in
any business, and has been a shell company.
On February 1, 2021, FHAI entered
into a Share Exchange Agreement (the “Exchange Agreement”), with Wei Lian Jin Meng Group Limited, a limited liability company
incorporated in the Cayman Islands (“WLJM Cayman” and together with its subsidiaries, the “WLJM Subsidiaries Group”),
and shareholders who together own shares constituting 100% of the issued and outstanding shares of WLJM Cayman (the “Sellers”).
Pursuant to the terms of the Exchange Agreement, the Sellers transferred to FHAI all of their shares of WLJM Cayman in exchange for the
issuance of 600,000,000 shares (the “Shares”) of FHAI’s common stock (the “Acquisition”). The Acquisition
has been accounted for as a recapitalization of FHAI, whereby WLJM Cayman is the accounting acquirer. As a result of the Acquisition,
FHAI is now a holding company, is engaged in providing products and services in the food and beverage industry, including producing and
selling “coffee tea” products, which represent drinks made from a mixture of coffee and tea, black coffee products and other
coffee products.
Immediately
after completion of the Acquisition on February 2, 2020 (the “Closing Date”), FHAI’s capital stock consisted of: (i)
750,000,000 shares of common stock, par value $0.00001 per share (“Common Stock”), authorized, of which 600,034,500 shares
are issued and outstanding; and (ii) 100,000,000 shares of preferred stock, par value $0.00001 per share, of which all 100,000,000 shares
are designated Series A Preferred Stock (“Series A Preferred Stock”), of which all 100,000,000 shares are issued and outstanding.
As a result of the Acquisition, as
of the Closing Date the Company has ceased to fall under the definition of shell company as defined in Rule 12b-2 under the Exchange Act
of 1934, as amended (the “Exchange Act”) and WLJM Cayman is now a wholly owned subsidiary. For accounting purposes, the Share
Exchange was treated as a reverse acquisition with WLJM Cayman as the acquirer and the Company as the acquired party.
WLJM
Cayman was incorporated in the Cayman Islands under the Cayman Islands Companies Law on June 30, 2020. The Company does not conduct any
substantive operations on its own but instead conducts its business operations through its subsidiaries in in the Peoples’ Republic
of China (the “PRC”).
Wei
Lian Jin Meng (Hong Kong) Co., Ltd. (“WLJM HK”) was incorporated in Hong Kong under the Hong Kong Companies’ Ordinance
(Chapter 622), on August 5, 2020. WLJM HK is a 100% owned subsidiary of WLJM Cayman.
Jin
You Wei Meng (Shenzhen) Consulting Co., Ltd. (“JYWM WFOE”) was incorporated in the Peoples’ Republic of China (the
“PRC”) on November 24, 2020. JYWM WFOE is a 100% owned subsidiary of WLJM HK.
Shenzhen
Wei Lian Jin Meng Electronic Commerce Limited (“Shenzhen Wei Lian”) was incorporated in the Peoples’ Republic of China
(the “PRC”) on October 17, 2017. Shenzhen Wei Lian is a 100% owned subsidiary of JYWM WFOE. Shenzhen Wei Lian wholesales
“coffee tea” products to retail partners and corporate customers.
Dongguan
Dishi Coffee Limited (“Dongguan Dishi”) was incorporated in the Peoples’ Republic of China (the “PRC”)
on October 25, 2018. Dongguan Dishi is a 100% owned subsidiary of Shenzhen Wei Lian. Dongguan Dishi merchandizes “coffee tea”
products for Shenzhen Wei Lian.
Shenzhen
Nainiang Coffee Art Museum Limited (“Shenzhen Nainiang”) was incorporated in the Peoples’ Republic of China (the “PRC”)
on June 20, 2019. Shenzhen Nainiang is a 100% owned subsidiary of Shenzhen Wei Lian. Shenzhen Nainiang starts generating revenues in
the fiscal year 2020. Currently, Shenzhen Nainiang sells “coffee tea” products to individual consumers and provides pre-opening
assistance to retail partners to operate coffee stores. Shenzhen Nainiang plans to operate
their self-owned retailed stores to sell “coffee tea” products and to serve cups of freshly brewed “coffee tea”.
The Company is evaluating the number of stores to be opened subsequent to December 31, 2020, given the Covid-19 situation.
The reorganization of WLJM Cayman and its subsidiaries
was completed on December 24, 2020.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
|
(a)
|
Basis
of Presentation
|
The
accompanying financial statements include the balances and results of operations of the Company have been prepared pursuant to the rules
and regulations of the U.S. Securities and Exchanges Commission (“SEC”) and in conformity with generally accepted accounting
principles in the U.S. (“US GAAP”).
The
accompanying financial statements are presented on the basis that the Company is a going concern. The going concern assumption contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company incurred net loss of $627,870
and $351,546 during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, the Company had net current liability
of $1,442,635 and a deficit on equity of $1,035,605.
The
ability to continue as a going concern is dependent upon the Company’s profit generating 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 become due.
These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The
Company expects to finance operations primarily through cash flow from revenue and capital contributions from the shareholders of the
Company. In the event that the Company requires additional funding to finance the growth of the Company’s current and expected
future operations as well as to achieve our strategic objectives, the shareholders of the Company indicated the intent and ability to
provide additional equity financing.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation
as a going concern is dependent on the Company’s ability to meet obligations as they become due and to obtain additional equity
or alternative financing required to fund operations until sufficient sources of recurring revenues can be generated. There can be no
assurance that the Company will be successful in its plans described above or in attracting equity or alternative financing on acceptable
terms, or if at all. The consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
|
(b)
|
Basis
of Consolidation
|
Pursuant to the reorganization, WLJM
Cayman became the holding company of WLJM Subsidiaries Group, which were under the common control of the controlling shareholder before
and after the reorganization. And as a result of the acquisition with FHAI, accordingly, FHAI and its subsidiaries’ (collectively
referred to as the “Company”) financial statements have been prepared on a consolidated basis by applying the predecessor
value method as if the reorganization had been completed at the beginning of the earliest reporting period.
The consolidated statements of profit
or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the
Company for the relevant periods include the results and cash flows of all companies now comprising the Company from the earliest date
presented or since the date when the subsidiaries and/or businesses first came under the common control of the controlling shareholders,
wherever the period is shorter.
The consolidated balance sheets of
the Company as of December 31, 2020 and 2019 have been prepared to present the assets and liabilities of the subsidiaries using the existing
book values from the controlling shareholders’ perspective. No adjustments are made to reflect fair values, or to recognize any
new assets or liabilities as a result of the reorganization.
All
intra-group and inter-company transactions and balances have been eliminated on consolidation.
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
related disclosures of contingent liabilities at the balance sheet date, and revenue and expenses in the financial statements and accompanying
notes. Significant accounting estimates reflected in the Company’s financial statements include the valuation allowance for deferred
tax assets, economic lives and impairment of leasehold improvements and equipment, allowance for doubtful accounts, etc. Actual results
could differ from those estimates and such differences could affect the results of operations reported in future periods.
|
(d)
|
Cash
and Cash Equivalents
|
The
Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. All
cash and cash equivalents relate to cash on hand and cash at bank at December 31, 2020 and 2019.
The
Renminbi is not freely convertible into foreign currencies. Under the PRC Foreign Exchange Control Regulations and Administration of
Settlement, Sales and Payment of Foreign Exchange Regulations, the Company is permitted to exchange Renminbi for foreign currencies through
banks that are authorized to conduct foreign exchange business.
|
(e)
|
Leasehold
Improvement and Equipment
|
An
item of leasehold improvement and equipment is stated at cost less any accumulated depreciation and any accumulated allowance for decrease
in value (if any).
The
cost of an item of leasehold improvement and equipment comprises its purchase price, import duties and non-refundable purchase taxes
(after deducting trade discounts and rebates) and any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management. These can include the initial estimate of costs of
dismantling and removing the item, and restoring the site on which it is located, the obligation for which an entity incurs either when
the item is acquired or as a consequence of having used the item during a particular period.
The cost of
replacing part of leasehold improvement and equipment is included in the carrying amount of the asset when it is probable that future
economic benefits will flow to the Company and the carrying amount of those replaced parts is derecognized. Repairs and maintenance are
charged to the statement of profit or loss during the financial period in which they are incurred.
Depreciation
is calculated on the straight-line basis to write off the cost of each asset to its residual value over the estimated useful life as
follows:
Leasehold
improvement
|
|
Shorter
of the lease term or estimated useful life
|
Equipment
|
|
5
years
|
Machinery
|
|
10
years
|
Computer
equipment and software
|
|
3
years
|
Motor
vehicle
|
|
4
years
|
The
assets’ residual value, useful lives, and depreciation method are regularly reviewed.
|
(f)
|
Impairment
of long-lived assets
|
The Company
reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may no longer be recoverable. Whenever there is an indication showing a permanent decrease in the amount of leasehold improvement and
equipment; such as an evidence of obsolescence or physical damage of an asset, significant changes in the manner in which an asset is
used or is expected to be used, the Company shall recognize loss on decrease in value of leasehold improvement and equipment in the statement
of profit or loss where the carrying amount of asset is higher than the recoverable amount. The Company measures impairment by comparing
the carrying value of the long-lived assets to the estimated discounted future cash flows expected to result from the use of the assets
and their eventual disposition. If the sum of the expected discounted cash flow is less than the carrying amount of the assets, the Company
would recognize an impairment loss based on the fair value of the assets. The Company recorded an impairment loss on intangible assets
of $77,264 and $nil during the years ended December 31, 2020 and 2019, respectively.
The Company recognizes revenue from
the sale of “coffee tea” products, net of value-added taxes, upon delivery at such time when title passes to the customer.
Customers are required to pay in advance before making sales orders and the advance is initially recorded as advance from customers. During
the year ended December 31, 2020 and 2019, product revenue amounted to $1,218,256 and $2,107,465,
respectively.
In addition, the Company provides
pre-opening assistance to retail partners to operate coffee stores, revenue is recognized upon
the completion of services. During the year ended December 31, 2020 and 2019, service revenue amounted to $66,022 and $nil, respectively.
The Company’s revenue recognition
policy is in compliance with ASU No. 2014-09, Revenue from Contracts with Customers whereby revenue is recognized when a customer obtains
control of promised goods and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange
for those goods. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows
arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to
receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount:
|
(i)
|
identification
of the services in the contract;
|
|
|
|
|
(ii)
|
determination of whether
the services are performance obligations, including whether they are distinct in the context of the contract;
|
|
|
|
|
(iii)
|
measurement of the transaction
price, including the constraint on variable consideration;
|
|
|
|
|
(iv)
|
allocation of the transaction
price to the performance obligations; and
|
|
|
|
|
(v)
|
recognition of revenue
when (or as) the Company satisfies each performance obligation.
|
The
Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled
to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606
at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which
of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated
to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s
performance obligations are transferred to customers at a point in time, typically upon delivery or service being rendered.
For
all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all product revenue contracts
with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.
|
(h)
|
Research
and Development Costs
|
Research
and development costs are expensed as incurred. Research and development costs included in general and administrative expenses for the
years ended December 31, 2020 and 2019 was $98,892 and $99,687, respectively.
The
Company determines if an arrangement contains a lease at inception. The Company elected the practical expedient, for all asset classes,
to account for each lease component of a contract and its associated non-lease components as a single lease component, rather than allocating
a standalone value to each component of a lease. For purposes of calculating operating lease obligations under the standard, the Company’s
lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option.
The Company’s leases do not contain material residual value guarantees or material restrictive covenants. Operating lease expense
is recognized on a straight-line basis over the lease terms. The discount rate used to measure a lease obligation is usually the rate
implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company
uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing
rate is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar
term with similar payments.
|
(j)
|
Foreign
Currency Translation
|
The
Company’s reporting currency is the U.S. dollar and the functional currency is the Chinese Renminbi (“RMB”). All assets
and liabilities are translated at exchange rates at the balance sheet date and revenue and expenses are translated at the average yearly
exchange rates and equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining
net income but are included in foreign exchange adjustment to other comprehensive income, a component of equity.
Transactions
in currencies other than the functional currencies during the year are converted into the applicable functional currencies at the applicable
rates of exchange prevailing at the dates of the transactions. Exchange gains and losses are recognized in the statements of operations.
The
exchange rates utilized as follows:
|
|
2020
|
|
|
2019
|
|
Year-end RMB exchange rate
|
|
|
6.53
|
|
|
|
6.96
|
|
Annual average RMB exchange rate
|
|
|
6.90
|
|
|
|
6.90
|
|
No
representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.
|
(k)
|
Foreign
Currency Risk
|
The
RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank
of China, controls the conversion of the RMB into other currencies. The value of the RMB is subject to changes in central government
policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System
market. All the Company’s cash and cash equivalents are in RMB.
The
Coronavirus Disease (COVID-19) outbreak and the measures taken to contain the spread of the pandemic have created a high level of uncertainty
to global economic prospects and this has impacted the Company’s operations and its financial performance in the last two months
of the financial year and subsequent to the financial year end.
As
the situation continues to evolve with significant level of uncertainty, the Company is unable to reasonably estimate the full financial
impact of the COVID-19 outbreak. The Company is monitoring the situation closely and to mitigate the financial impact, it is conscientiously
managing its cost by adopting an operating cost reduction strategy and conserving liquidity by working with major creditors to align
repayment obligations with receivable collections.
Fair
value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to
be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers
assumptions that market participants would use when valuing the asset or liability. Authoritative literature provides a fair value hierarchy
which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within
which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value
measurement as follows:
Level 1
Level 1
applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2
applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 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
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.
|
(n)
|
Fair
Value of financial instruments
|
The
Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivables, other receivables,
accounts payable, other payables and advance from customers. The carrying amounts of these balances approximate their fair values due
to the short-term maturities of these instruments.
Inventories
primarily consist of packing materials and finished goods, which are stated at the lower of cost, determined on a weighted average basis,
or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost
of completion and the estimated costs necessary to make the sale. When inventories are sold, their carrying amount is charged to expense
in the period in which the revenue is recognized. Write-downs for declines in net realizable value or for losses of inventories are recognized
as an expense in the period the impairment or loss occurs. No allowance for obsolete finished goods for the years ended December 31,
2020 and 2019.
The Company reports earnings per share
in accordance with ASC 260 “Earnings Per Share”, which requires presentation of basic and diluted earnings per share in conjunction
with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed
by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings
per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised
and converted into common stock. Further, if the number of common shares outstanding increases as a result of a stock dividend or stock
split or decreases as a result of a reverse stock split, the computations of a basic and diluted earnings per share shall be adjusted
retroactively for all periods presented to reflect that change in capital structure.
The Company’s basic earnings
per share is computed by dividing the net income available to holders by the weighted average number of the Company’s ordinary shares
outstanding. Diluted earnings per share reflects the amount of net income available to each ordinary share outstanding during the period
plus the number of additional shares that would have been outstanding if potentially dilutive securities had been issued. Series A Preferred
Stock was included in the dilutive ordinary shares as of December 31, 2020 and 2019.
Income tax expense comprises current
and deferred taxation and is recognized in profit or loss except to the extent that it relates to items recognized directly in other comprehensive
income or equity, in which case it is recognized directly in other comprehensive income or equity. Current tax is the expected tax payable
on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax
payable with respect to previous periods.
The Company accounts for income taxes
using the asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial reporting and tax basis of assets and liabilities, net of operating loss carry forwards and credits, by applying
enacted tax rates that will be in effect for the period in which the differences are expected to reverse. The effect on deferred taxes
of a change in tax rates is recognized in the statements of operations in the period of change.
The Company accounts for uncertain
tax positions by reporting a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken
in a tax return. Tax benefits are recognized from uncertain tax positions when the Company believes that it is more likely than not that
the tax position will be sustained on examination by the tax authorities based on the technical merits of the position. The Company recognizes
interest and penalties, if any, related to unrecognized tax benefits in income tax expenses.
Comprehensive
income includes net income and foreign currency translation adjustments. Comprehensive income is reported in the statements of comprehensive
income.
|
(s)
|
Concentration
of credit risk
|
Financial instruments that potentially
expose the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, other receivables and
amounts due from related parties. As of December 31, 2020 and 2019, substantially all of the Company’s cash and cash equivalents
were deposited with financial institutions with high-credit ratings and quality. The Company did not have any customers constituting
10% or more of the net revenues in the years of 2020 and 2019.
|
(t)
|
Recent
accounting pronouncements
|
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Statements. This ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the
net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost
basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. This
Accounting Standards Update affects entities holding financial assets and net investment in leases that are not accounted for at fair
value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet
credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual rights
to receive cash. For smaller public business entities, the amendments in this Update are effective for fiscal years beginning after January
1, 2023, including interim periods within those fiscal years. All entities may adopt the amendments in this Update through a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective
approach). The Company is in the process of evaluating the impact of the adoption of this pronouncement on its consolidated financial
statements.
The
Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have
a significant impact on the Company’s financial statements.
As
of December 31, 2020 and 2019, other receivables mainly consist of employees advance to be spent for company purposes and refundable
rental deposits. The balances are unsecured, non-interest bearing and repayable on demand.
|
|
As of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Raw materials (1)
|
|
$
|
51,521
|
|
|
$
|
36,849
|
|
Finished goods
|
|
|
14,516
|
|
|
|
32,669
|
|
|
|
$
|
66,037
|
|
|
$
|
69,518
|
|
(1)
|
Raw
materials mainly consist of unprocessed coffee beans and packaging materials
|
As of December 31, 2020 and 2019, prepayment
mainly consists of prepaid administrative expenses that has been utilized subsequently.
|
6.
|
LEASEHOLD
IMPROVEMENT AND EQUIPMENT, NET
|
|
|
As of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Leasehold improvement
|
|
$
|
64,191
|
|
|
$
|
60,186
|
|
Equipment
|
|
|
16,653
|
|
|
|
15,614
|
|
Machinery
|
|
|
32,563
|
|
|
|
30,531
|
|
Computer equipment and software
|
|
|
20,355
|
|
|
|
16,311
|
|
Motor vehicle
|
|
|
7,245
|
|
|
|
6,793
|
|
|
|
$
|
141,007
|
|
|
$
|
129,435
|
|
Less: accumulated depreciation
|
|
|
(53,673
|
)
|
|
|
(25,003
|
)
|
|
|
$
|
87,333
|
|
|
$
|
104,432
|
|
Depreciation expense for
the years ended December 31, 2020 and 2019 was $25,559 and $24,635 respectively.
|
|
As of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
APP Platform
|
|
$
|
-
|
|
|
$
|
79,885
|
|
Less: accumulated amortization
|
|
|
-
|
|
|
|
(3,339
|
)
|
|
|
$
|
-
|
|
|
$
|
76,546
|
|
Amortization
expense for the years ended December 31, 2020 and 2019 was $nil and $3,368, respectively. The Company recorded an impairment loss on
intangible assets of $77,264 to write off the APP Platform during the year ended December 31, 2020.
|
8.
|
OTHER
PAYABLES AND ACCRUALS
|
|
|
As of December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Accrued payroll and welfare payable
|
|
$
|
180,878
|
|
|
$
|
72,808
|
|
VAT and other taxes payable
|
|
|
92,608
|
|
|
|
58,435
|
|
Others (1)
|
|
|
63,118
|
|
|
|
66,114
|
|
|
|
$
|
336,604
|
|
|
$
|
197,357
|
|
(1)
|
As
of December 31, 2020 and 2019, others mainly consist of the outstanding refundable balance upon termination of the cooperative agreement
with one customer of $30,634 (RMB200,000) and $33,031 (RMB230,000), respectively. In addition, there were payables for rental expenses
of $21,865 (RMB142,748) as of December 31, 2020.
|
|
9.
|
ADVANCE
FROM CUSTOMERS
|
The
Company requires retail partners to sign cooperative agreement and to pay in advance for the supply of goods. Such advance is appropriated
against future sales orders. These advances are interest free, unsecured and short-term in nature.
FHAI
was incorporated in the State of Nevada. FHAI is an U.S. entity and is subject to the United States federal income tax. No provision
for income taxes in the United States has been made as FHAI had no United States taxable income for the years ended December 31, 2020
and 2019.
WLJM
Cayman was incorporated in Cayman Islands. Under the current tax laws of Cayman Islands, WLJM Cayman
is not subject to tax on their income or capital gains. In addition, upon of dividends by WLJM Cayman to its shareholders, no Cayman
Islands withholding tax will be imposed.
WLJM
HK was incorporated in Hong Kong and is subject to an income tax rate of 16.5% for taxable income generated from operations in Hong Kong.
JYWM
WFOE, Shenzhen Wei Lian, Dongguan Dishi and Shenzhen Nainiang were incorporated in the PRC and they are subject to profits tax rate at
25% for income generated and operation in the country.
The full realization
of the tax benefit associated with the losses carried forward depends predominantly upon the Company’s ability to generate taxable
income during the carry forward period.
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A valuation allowance
is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize
their benefits, or that future deductibility is uncertain.
The
Company did not record deferred tax assets as of December 31, 2020 and 2019.
Income
tax expense (benefits)
|
|
For the years ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Current tax expense
|
|
$
|
19,693
|
|
|
$
|
5,866
|
|
Deferred tax benefits
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
19,693
|
|
|
$
|
5,866
|
|
A
reconciliation of the effective tax rates from 25% statutory tax rates for the years ended December 31, 2020 and 2019 is as follows:
|
|
For the years ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Loss before tax
|
|
$
|
(608,177
|
)
|
|
$
|
(345,680
|
)
|
Tax benefit calculated at statutory tax rate
|
|
|
25
|
%
|
|
|
25
|
%
|
Computed expected benefits
|
|
|
(152,044
|
)
|
|
|
(86,420
|
)
|
Tax losses not recognized
|
|
|
171,737
|
|
|
|
80,554
|
|
|
|
$
|
19,693
|
|
|
$
|
5,866
|
|
The
adoption of the new lease guidance did not have a material impact on the Company’s results of operations or liquidity, but resulted
in the recognition of operating lease liabilities and operating lease right-of-use assets on its balance sheets. Right-of-use (“ROU”)
assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease
payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present
value of lease payments over the lease term. The company has leases for the office, factory and warehouse in the PRC, under operating
leases expiring on various dates through September 2023, which is classified as operating leases. There are no residual value guarantees
and no restrictions or covenants imposed by the leases. Rent expense for the years ended December 31, 2020 and 2019 were $268,120 and
$208,949, respectively. Cash paid for the operating leases was included in the operating cash flows. As of December 31, 2020, the Company
has $383,203 of right-of-use assets, $319,697 in current operating lease liabilities and $63,506 in non-current operating lease liabilities.
As of December 31, 2019, the Company has $613,831 of right-of-use assets, $243,959 in current operating lease liabilities and $369,872
in non-current operating lease liabilities.
Significant
assumptions and judgments made as part of the adoption of this new lease standard include determining (i) whether a contract contains
a lease, (ii) whether a contract involves an identified asset, and (iii) which party to the contract directs the use of the asset. The
discount rates used to calculate the present value of lease payments were determined based on hypothetical borrowing rates available
to the Company over terms similar to the lease terms.
The
Company’s future minimum payments under long-term non-cancelable operating leases are as follows:
|
|
2020
|
|
Within 1 year
|
|
$
|
332,867
|
|
After 1 year but within 5 years
|
|
|
95,586
|
|
Total lease payments
|
|
$
|
428,453
|
|
Less: imputed interest
|
|
|
(45,250
|
)
|
Total lease obligations
|
|
|
383,203
|
|
Less: current obligations
|
|
|
(319,697
|
)
|
Long-term lease obligations
|
|
$
|
63,506
|
|
Other
information:
|
|
For the years ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
Operating cash flow from operating leases
|
|
$
|
268,120
|
|
|
$
|
208,949
|
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
|
|
383,203
|
|
|
|
302,396
|
|
Remaining lease term for operating leases (years)
|
|
|
1.88
|
|
|
|
2.88
|
|
Weighted average discount rate for operating leases
|
|
|
4.75
|
%
|
|
|
4.75
|
%
|
|
12.
|
RELATED
PARTIES TRANSACTIONS
|
The
Company had the following balances with related parties:
|
(a)
|
Amount
due from related parties
|
|
|
|
|
As of December 31,
|
|
|
|
Relationship
|
|
2020
|
|
|
2019
|
|
Ye Aiyun
|
|
Shareholder of the Company
|
|
|
142,450
|
|
|
|
57,446
|
|
Total
|
|
|
|
$
|
142,450
|
|
|
$
|
57,446
|
|
Amount
due from related parties represents cash advance to Ye Aiyun, shareholder of the Company. The balance is unsecured, non-interest bearing
and repayable on demand.
|
(b)
|
Amount
due to related parties
|
|
|
|
|
As of December 31,
|
|
|
|
Relationship
|
|
2020
|
|
|
2019
|
|
Zhu Hong
|
|
Shareholder of the Company
|
|
|
1,059,853
|
|
|
|
94,149
|
|
Zhu Jian Yong
|
|
Shareholder of the Company
|
|
|
1,731
|
|
|
|
1,623
|
|
Shenzhen Weilian Jin Meng Culture Spreading Limited
|
|
Zhu Hong is the shareholder
|
|
|
24,800
|
|
|
|
-
|
|
Shenzhen Nainiang Wine Limited
|
|
Zhu Hong is the shareholder
|
|
|
10,768
|
|
|
|
-
|
|
Total
|
|
|
|
$
|
1,097,152
|
|
|
$
|
95,772
|
|
The
balances represent cash advances to related parties, which were offset with the Company’s assets and expenses paid on behalf by
the related parties. The balances with a related party are unsecured, non-interest bearing and repayable on demand.
|
|
For the years ended
December 31,
|
|
Cash advance from related parties
|
|
2020
|
|
|
2019
|
|
Zhu Jian Yong
|
|
|
-
|
|
|
|
1,623
|
|
Shenzhen Nainiang Wine Limited
|
|
|
66,683
|
|
|
|
-
|
|
Shenzhen Weilian Jin Meng Culture Spreading Limited
|
|
|
29,282
|
|
|
|
-
|
|
Total
|
|
$
|
95,965
|
|
|
$
|
1,623
|
|
|
|
For the years ended
December 31,
|
|
Cash advance to related parties
|
|
2020
|
|
|
2019
|
|
Zhu Hong
|
|
|
200,876
|
|
|
|
1,858,057
|
|
Ye Aiyun
|
|
|
76,830
|
|
|
|
-
|
|
Shenzhen Weilian Jin Meng Culture Spreading Limited
|
|
|
6,204
|
|
|
|
-
|
|
Shenzhen Nainiang Wine Limited
|
|
|
56,492
|
|
|
|
57,446
|
|
Total
|
|
$
|
340,402
|
|
|
$
|
1,915,503
|
|
|
|
For the years ended
December 31,
|
|
Cash repayment from related parties
|
|
2020
|
|
|
2019
|
|
Zhu Hong
|
|
|
1,093,131
|
|
|
|
1,505,893
|
|
Total
|
|
$
|
1,093,131
|
|
|
$
|
1,505,893
|
|
|
|
For the years ended
December 31,
|
|
Assets purchased on behalf by related parties
|
|
2020
|
|
|
2019
|
|
Zhu Hong
|
|
|
-
|
|
|
|
45,806
|
|
Total
|
|
$
|
-
|
|
|
$
|
45,806
|
|
|
|
For the years ended
December 31,
|
|
Expense paid on behalf by related parties
|
|
2020
|
|
|
2019
|
|
Zhu Hong
|
|
|
15,758
|
|
|
|
360,737
|
|
Total
|
|
$
|
15,758
|
|
|
$
|
360,737
|
|
|
|
For the years ended
December 31,
|
|
Advance from customers received on behalf by related parties
|
|
2020
|
|
|
2019
|
|
Zhu Hong
|
|
|
-
|
|
|
|
498,775
|
|
Total
|
|
$
|
-
|
|
|
$
|
498,775
|
|
|
|
For the years ended
December 31,
|
|
Advance from customers refunded on behalf by related parties
|
|
2020
|
|
|
2019
|
|
Zhu Hong
|
|
|
-
|
|
|
|
557,861
|
|
Total
|
|
$
|
-
|
|
|
$
|
557,861
|
|
Pursuant
to the laws applicable to the PRC’s Foreign Investment Enterprises, the Company must make appropriations from after-tax profit
to non-distributable reserve funds. Subject to certain cumulative limits, the general reserve requires annual appropriations of 10%
of after-tax profits as determined under the PRC laws and regulations at each year-end until the balance reaches 50% of the PRC
entity registered capital; the other reserve appropriations are at the Company’s discretion. These reserves can only be used
for specific purposes of enterprise expansion and are not distributable as cash dividends. The Company did not accrue the statutory
reserve during the years ended December 31, 2020 and 2019.
|
(b)
|
Currency
translation reserve
|
The
currency translation reserve represents translation differences arising from translation of foreign currency financial statements into
the Company’s reporting currency.
|
14.
|
COMMITMENTS
AND CONTINGENCIES
|
Commitment
consist of a non-cancelable consultancy service agreement entered into with a third-party for the provision of services related to the
US listing with a contract sum of $1,200,000. The outstanding committed contract amount is $120,000. The terms of the agreement are for
various milestones stages to be completed within two years through 2021. Future commitments within one year as of December 31, 2020 was
$120,000. No future commitments more than one year as of December 31, 2020.
Except
the above commitments and the operating lease commitment as disclosed at Note 6, there are no material commitments.
There
is no subsequent events have occurred that would require recognition or disclosure in the financial statements.
F-20