Item
1. Financial statements
RITO
GROUP CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF MARCH 31, 2018 AND JUNE 30, 2017
(Currency
expressed in United States Dollars (“US$”))
|
|
As
of
|
|
|
|
March
31, 2018
|
|
|
June
30, 2017
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
-
|
|
|
|
9,767
|
|
Prepayments, deposits
and other receivables
|
|
|
5,765
|
|
|
|
1,300
|
|
Cash
and cash equivalents
|
|
|
714,789
|
|
|
|
80,487
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
720,554
|
|
|
|
91,554
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
179,764
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
900,318
|
|
|
$
|
91,554
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
5,577
|
|
|
$
|
9,109
|
|
Other payables and
accrued liabilities
|
|
|
465,959
|
|
|
|
59,898
|
|
Short-term bank loans
|
|
|
7,022
|
|
|
|
-
|
|
Convertible
notes payable
|
|
|
-
|
|
|
|
26,910
|
|
Total current
liabilities
|
|
|
478,558
|
|
|
|
95,917
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Long-term
bank loans
|
|
|
34,154
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
$
|
512,712
|
|
|
$
|
95,917
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock,
$0.0001 par value; 200,000,000 shares authorized; None issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $ 0.0001
par value; 600,000,000 shares authorized; 55,368,284 and 54,625,956 shares issued and outstanding as of March 31, 2018 and
June 30, 2017, respectively
|
|
|
5,538
|
|
|
|
5,463
|
|
Additional paid-in
capital
|
|
|
2,607,274
|
|
|
|
1,629,267
|
|
Accumulated other
comprehensive income
|
|
|
21
|
|
|
|
29
|
|
Accumulated
deficit
|
|
|
(2,225,227
|
)
|
|
|
(1,639,122
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’
EQUITY (DEFICIT)
|
|
$
|
387,606
|
|
|
$
|
(4,363
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
$
|
900,318
|
|
|
$
|
91,554
|
|
See
accompanying notes to the condensed consolidated financial statements.
RITO
GROUP CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
Three
months ended
March 31,
|
|
|
Nine
months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
REVENUE
|
|
$
|
60,060
|
|
|
$
|
47,943
|
|
|
$
|
88,569
|
|
|
$
|
62,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
(29,841
|
)
|
|
|
(26,013
|
)
|
|
|
(50,768
|
)
|
|
|
(39,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
30,219
|
|
|
|
21,930
|
|
|
|
37,801
|
|
|
|
22,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
-
|
|
|
|
-
|
|
|
|
38
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
(229,747
|
)
|
|
|
(147,165
|
)
|
|
|
(618,774
|
)
|
|
|
(578,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(199,528
|
)
|
|
|
(125,235
|
)
|
|
|
(580,935
|
)
|
|
|
(555,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,808
|
)
|
|
|
(518
|
)
|
|
|
(5,170
|
)
|
|
|
(31,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAX
|
|
|
(201,336
|
)
|
|
|
(125,753
|
)
|
|
|
(586,105
|
)
|
|
|
(587,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(201,336
|
)
|
|
$
|
(125,753
|
)
|
|
$
|
(586,105
|
)
|
|
|
(587,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss
|
|
|
2
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
|
(201,334
|
)
|
|
|
(125,753
|
)
|
|
|
(586,113
|
)
|
|
|
(587,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
- Basic and diluted
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding – Basic and diluted
|
|
|
55,142,928
|
|
|
|
54,569,734
|
|
|
|
54,869,375
|
|
|
|
52,430,765
|
|
See
accompanying notes to the condensed consolidated financial statements.
RITO
GROUP CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
COMMON
STOCK
|
|
|
ADDITIONAL
|
|
|
ACCUMULATED
|
|
|
|
|
|
|
|
|
|
Number
of shares
|
|
|
Amount
|
|
|
PAID-IN
CAPITAL
|
|
|
COMPREHENSIVE
INCOME
|
|
|
ACCUMULATED
DEFICIT
|
|
|
TOTAL
EQUITY
|
|
Balance as of June 30, 2017
(audited)
|
|
|
54,625,956
|
|
|
$
|
5,463
|
|
|
$
|
1,629,267
|
|
|
$
|
29
|
|
|
$
|
(1,639,122
|
)
|
|
$
|
(4,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued upon conversion of convertible
notes principal and accrued interest at $0.25 per share
|
|
|
27,082
|
|
|
|
3
|
|
|
|
6,768
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in IPO at $1.5 per share
|
|
|
10,000
|
|
|
|
1
|
|
|
|
14,999
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued upon conversion of convertible
notes principal and accrued interest at $0.25 per share
|
|
|
27,082
|
|
|
|
3
|
|
|
|
6,768
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in IPO at $1.5 per share
|
|
|
30,000
|
|
|
|
3
|
|
|
|
44,997
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued upon conversion of convertible
notes principal and accrued interest at $0.25 per share
|
|
|
54,164
|
|
|
|
5
|
|
|
|
13,535
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in private placement at $1.5 per
share
|
|
|
217,000
|
|
|
|
22
|
|
|
|
325,478
|
|
|
|
-
|
|
|
|
-
|
|
|
|
325,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in private placement at $1.5 per
share
|
|
|
377,000
|
|
|
|
38
|
|
|
|
565,462
|
|
|
|
-
|
|
|
|
-
|
|
|
|
565,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
(586,105
|
)
|
|
$
|
(586,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March
31, 2018 (unaudited)
|
|
|
55,368,284
|
|
|
|
5,538
|
|
|
|
2,607,274
|
|
|
|
21
|
|
|
|
(2,225,227
|
)
|
|
|
387,606
|
|
See
accompanying notes to the condensed consolidated financial statements.
RITO
GROUP CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
Nine
Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(586,105
|
)
|
|
$
|
(587,739
|
)
|
Adjustments to reconcile net loss to net cash
used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
-
|
|
|
|
-
|
|
Interest expenses
|
|
|
5,170
|
|
|
|
31,970
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Subscriptions receivable
|
|
|
-
|
|
|
|
30,000
|
|
Accounts receivable
|
|
|
9,767
|
|
|
|
(11,750
|
)
|
Prepayments, deposits
and other receivables
|
|
|
(4,465
|
)
|
|
|
-
|
|
Accounts payable
|
|
|
(3,532
|
)
|
|
|
(5,044
|
)
|
Other
payables and accrued liabilities
|
|
|
406,061
|
|
|
|
(4,539
|
)
|
Net cash used
in operating activities
|
|
|
(173,104
|
)
|
|
|
(547,102
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of plant and equipment
|
|
|
(179,764
|
)
|
|
|
-
|
|
Net cash used
in investing activities
|
|
|
(179,764
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of shares in private placement
|
|
|
951,000
|
|
|
|
258,900
|
|
Interest paid for
convertible notes
|
|
|
-
|
|
|
|
(3,420
|
)
|
Effect of exchange
rate changes on conversion of convertible notes
|
|
|
-
|
|
|
|
(5,373
|
)
|
Drawdown
of bank borrowings
|
|
|
45,032
|
|
|
|
-
|
|
Repayment
of bank borrowings
|
|
|
(3,856
|
)
|
|
|
-
|
|
Bank
loan interest
|
|
|
(4,998
|
)
|
|
|
-
|
|
Advances from directors
|
|
|
-
|
|
|
|
-
|
|
Advances
from a related company
|
|
|
-
|
|
|
|
-
|
|
Net cash provided
by financing activities
|
|
|
987,178
|
|
|
|
250,107
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
634,302
|
|
|
|
(296,995
|
)
|
Cash and cash
equivalents, beginning of period
|
|
|
80,487
|
|
|
|
449,328
|
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
|
$
|
714,789
|
|
|
$
|
152,333
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for
income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for
interest paid
|
|
$
|
(4,998
|
)
|
|
$
|
3,420
|
|
See
accompanying notes to the condensed consolidated financial statements.
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE
1 - BASIS OF PREPARATION
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) for interim financial reporting and the rules and regulations of
the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and
footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.
In
the opinion of management, the consolidated balance sheet as of June 30, 2017 which has been derived from audited financial statements
and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary
to state fairly the results for the periods presented. The results for the nine months ended March 31, 2018 are not necessarily
indicative of the results to be expected for the entire fiscal year ending June 30, 2018 for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s
Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year
ended June 30, 2017.
NOTE
2 - ORGANIZATION AND BUSINESS BACKGROUND
Rito
Group Corp. (the “Company”) was incorporated on March 24, 2015 under the laws of the state of Nevada.
The
Company, through its subsidiaries, mainly engages in trading of retail goods such as cookware, jewelry and watches, and numerous
other products.
Details
of the Company’s subsidiaries:
|
Company name
|
|
Place/date of incorporation
|
|
Particulars of issued capital
|
|
Principal activities
|
|
Percentage
hold
|
|
|
|
|
|
|
|
|
|
|
1.
|
Sino Union International Limited (“Sino Union”)
|
|
Anguilla
January 3, 2014
|
|
84,500 shares of ordinary share of US$1 each
|
|
Investment holding
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
2.
|
Rito International Enterprise Company Limited (“Rito International”)
|
|
Hong Kong
August 12, 2014
|
|
630,001 shares of ordinary share of HK$1 each
|
|
Trading of retail goods
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
3.
|
深圳市
汇图贸易有限公司
|
|
Shenzhen, PRC
June 27, 2017
|
|
500,000 shares of ordinary share of RMB 1 each
|
|
Trading of retail goods, business and agriculture technology consulting
|
|
100%
|
Rito
Group Corp. and its subsidiaries are hereinafter referred to as the “Company”.
NOTE
3 - GOING CONCERN UNCERTAINTIES
The
accompanying financial statements have been prepared using the going concern basis of accounting, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
As
of March 31, 2018, the Company suffered an accumulated deficit of $2,225,227 and continuously incurred a net operating loss of
$586,105 for the nine months ended March 31, 2018. The continuation of the Company as a going concern through June 30,
2017 is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes
the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they
become due.
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINEMONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
These
and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
NOTE
4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies
as described in this note and elsewhere in the accompanying consolidated financial statements and notes.
The
accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”).
The
condensed consolidated financial statements include the accounts of Rito Group Corp. and its subsidiaries. All significant inter-company
balances and transactions within the Company have been eliminated upon consolidation.
In
preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results
may differ from these estimates.
●
|
Cash
and cash equivalents
|
The
company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational:
Categories
|
|
Estimated
useful life
|
|
Residual
value
|
|
Leasehold improvement
|
|
5 years
|
|
$
|
179,764
|
|
Expenditures
for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of plant and equipment is the difference
between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the statement of operations.
Accounts
receivable are recorded at the invoiced amount and do not bear interest. Management reviews the adequacy of the allowance for
doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically
evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments
in the allowance when it is considered necessary. Account balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote.
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
In
accordance with the Accounting Standard Codification (“ASC”) Topic 605
“Revenue Recognition”
, the
Company recognizes revenue when the following four criteria are met: (1) delivery has occurred or services rendered; (2) persuasive
evidence of an arrangement exists; (3) selling price is fixed or determinable; and (4) collectability is reasonably assured.
Revenue
is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue.
Revenue from trading of retail goods is recognized when title and risk of loss are transferred and there are no continuing obligations
to the customer. Title and the risks and rewards of ownership transferred to and accepted by the customer when the products
are collected by the customer at the Company’s office. Revenue is recorded net of sales discounts, returns, allowances,
and other adjustments that are based upon management’s best estimates and historical experience and are provided for in
the same period as the related revenues are recorded. Based on limited operating history, management estimates that there were
no sales return for the period reported.
The
Company derives its revenue from sales of goods to individuals. Generally, the Company recognizes revenue when products are sold
and accepted by the customers and there are no continuing obligations to the customer.
Cost
of revenue includes the purchase cost of retail goods for re-sale to the customers.
The
provision of income taxes is determined in accordance with the provisions of ASC Topic 740,
“Income Taxes”
(“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income
in the periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC
Topic 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial
statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC Topic 740, tax positions must initially
be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the
tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has
a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the
position and relevant facts.
The
Company did not have any unrecognized tax positions or benefits and there was no effect on the financial conditions or results
of operations for the nine months ended March 31, 2018. The Company conducts major businesses in Hong Kong and is subject to tax
in this jurisdiction. As a result of its business activities, the Company will file tax returns that are subject to examination
by the foreign tax authority.
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
Company calculates net loss per share in accordance with ASC Topic 260
“Earnings per share”
. Basic loss per
share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted
loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional
common shares were dilutive.
●
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates
prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional
currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting
exchange differences are recorded in the statements of operations.
The
reporting currency of the Company and its subsidiary in Anguilla is United States Dollars (“US$”). The Company’s
subsidiary in Hong Kong maintains its books and record in Hong Kong Dollars (“HK$”), which is functional currency
as being the primary currency of the economic environment in which the entity operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated
into US$, in accordance with ASC Topic 830-30,
“Translation of Financial Statement”
, using the exchange rate
on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.
Translation
of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective
periods:
|
|
As
of and for the
nine months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Period-end / average HK$
: US$1 exchange rate
|
|
|
7.75
|
|
|
|
7.75
|
|
Period-end / average CNY¥
: US$1 exchange rate
|
|
|
6.27
|
|
|
|
-
|
|
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
●
|
Fair
value of financial instruments
|
The
carrying value of the Company’s financial instruments: cash and cash equivalents, accounts receivable, deposits and other
receivables, accounts payable, other payables and accrued liabilities approximate at their fair values because of the short-term
nature of these financial instruments.
The
Company follows the guidance of the ASC Topic 820-10,
“Fair Value Measurements and Disclosures”
(“ASC
Topic 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC Topic 820-10 establishes
a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
Level
1
: Observable inputs such as quoted prices in active markets;
|
|
|
|
Level
2
: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
|
Level
3
: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its
own assumptions
|
Fair
value estimates are made at a specific point in time based on relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect the estimates.
●
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE
5 - STOCKHOLDERS’ EQUITY
In
August and September 2017, the Company issued an aggregated of 40,000 shares of its common stock at $1.50 per share for aggregate
gross proceeds of $60,000.
In
August and September 2017, the Company issued an aggregate of 108,328 shares of its common stock to various investors in conversion
of outstanding convertible notes payable in aggregated principal and accrued interest of $25,000 and $2,082 respectively. The
conversion price is $0.25 per share.
In
November and December 2017, the Company issued an aggregated of 217,000 shares of its common stock at $1.50 per share for aggregate
gross proceeds of $325,500.
From
January to March 2018, the Company issued an aggregated of 377,000 shares of its common stock at $1.50 per share for aggregate
gross proceeds of $565,500.
As
of March 31, 2018, and June 30, 2017, the Company has a total of 55,368,284 and 54,625,956 shares, respectively of its
common stock issued and outstanding. There are no shares of preferred stock issued and outstanding.
NOTE
6 - OTHER PAYABLES AND ACCRUED LIABILITIES
As
of March 31, 2018, and June 30, 2017, the Company has other payables and accrued liabilities of $465,959 and $59,898. Other payables
and accrued liabilities are comprised of accruals of $71,538, due to subsidiary director of $143,289, advance collection of $43,573
and due to Wisdom Union and ONC Lawyers of $207,549
.
NOTE
7 – PROPERTY, PLANT AND EQUIPMENT
|
|
As
of
|
|
|
|
March
31, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
(audited)
|
|
Leasehold
improvement
|
|
$
|
179,764
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179,764
|
|
|
|
-
|
|
Less:
Accumulated depreciation
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
179,764
|
|
|
$
|
-
|
|
Depreciation
expense, classified as operating expenses, was $Nil and $Nil for the three months and nine months ended March 31, 2018, respectively,
because the leasehold improvement is not yet completed and hence no depreciation.
NOTE
8 - BANK LOANS
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
June 30, 2017
|
|
|
|
|
|
|
(audited)
|
|
Bank loan from financial institution in Hong Kong
|
|
|
|
|
|
|
|
|
The Hongkong and Shanghai Banking Corporation Limited
|
|
$
|
41,176
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,176
|
|
|
|
-
|
|
Less: Current portion
|
|
|
(7,022
|
)
|
|
|
-
|
|
Long-term portion
|
|
$
|
34,154
|
|
|
$
|
-
|
|
In
July 2017, the Company obtained a loan in the principal amount of HKD349,000 (approximately $45,032) from The Hongkong and Shanghai
Banking Corporation Limited, a financial institution in Hongkong which bears interest at the base lending rate less 0.7% flat
rate per month with 60 monthly installments of HKD8,260 (approximately $1,066) each and will mature in July 2022.
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE
7 - INCOME TAXES
For
the nine months ended March 31, 2018 and 2017, the local (United States) and foreign components of loss before income taxes were
comprised of the following:
|
|
For
the nine months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
– Local
|
|
$
|
(40,785
|
)
|
|
$
|
(67,723
|
)
|
– Foreign, representing
|
|
|
|
|
|
|
|
|
Anguilla
|
|
|
(4,564
|
)
|
|
|
(24,547
|
)
|
Hong Kong
|
|
|
(540,112
|
)
|
|
|
(495,469
|
)
|
PRC
|
|
|
(644
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
|
(586,105
|
)
|
|
|
(587,739
|
)
|
Provision
for income taxes consisted of the following:
|
|
|
For
the nine months ended
March 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
|
|
–
Local
|
|
$
|
-
|
|
|
$
|
-
|
|
–
Foreign (Hong Kong)
|
|
|
-
|
|
|
|
-
|
|
–
Foreign (PRC)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
–
Local
|
|
|
-
|
|
|
|
-
|
|
–
Foreign (Hong Kong)
|
|
|
-
|
|
|
|
-
|
|
–
Foreign (PRC)
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply
a broad range of income tax rates. The Company has subsidiaries that operate in various countries: United States, Anguilla, Hong
Kong and People’s Republic of China that are subject to taxes in the jurisdictions in which they operate, as follows:
United
States of America
The
Company is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of March 31, 2018,
the operations in the United States of America incurred $ 211,823 of cumulative net operating losses which can be carried forward
to offset future taxable income. The net operating loss carryforwards begin to expire in 2036, if unutilized. The Company has
provided for a full valuation allowance of $44,482 against the deferred tax assets on the expected future tax benefits
from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be
realized in the future.
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Anguilla
Under
the current laws of the Anguilla, Sino Union is registered as an international business company which is governed by the International
Business Companies Act of Anguilla and there is no income tax charged in Anguilla.
Hong
Kong
Rito
International is subject to Hong Kong Profits Tax, which is charged at the statutory income tax rate of 16.5% on its assessable
income. For the nine months ended March 31, 2018, no provision for income tax is required due to operating loss incurred. As of
March 31, 2018, Rito International incurred $1,894,575 of cumulative net operating losses which can be carried forward to offset
future taxable income at no expiration. The Company has provided for a full valuation allowance against the deferred tax assets
of $312,605 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more
likely than not that these assets will not be realized in the future.
People’s
Republic of China
深圳市汇图贸易有限公司
is operating in the People’s Republic of China (“PRC”) subject to the Corporate Income Tax governed by the Income
Tax Law of the People’s Republic of China with a unified statutory income tax rate of 25%. For the nine months ended March
31, 2018, no provision for income tax is required due to operating loss incurred. As of March 31, 2018, 深圳市汇图贸易有限公司
incurred $644 of cumulative net operating losses which can be carried forward to offset future taxable income at no expiration.
The Company has provided for a full valuation allowance against the deferred tax assets of $161 on the expected future tax benefits
from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be
realized in the future.
The
following table sets forth the significant components of the aggregate deferred tax assets of the Company as of March 31, 2018
and June 30, 2017:
|
|
As
of
|
|
|
|
March
31, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
(audited)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
|
|
|
|
|
|
– United States of
America
|
|
$
|
44,482
|
|
|
$
|
59,863
|
|
– Hong Kong
|
|
|
312,605
|
|
|
|
223,487
|
|
– PRC
|
|
|
161
|
|
|
|
-
|
|
|
|
|
357,248
|
|
|
|
283,350
|
|
Less: valuation
allowance
|
|
|
(357,248
|
)
|
|
|
(283,350
|
)
|
Deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Management
believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly,
the Company provided for a full valuation allowance against its deferred tax assets of $357,248 as of March 31, 2018. During
the nine months ended March 31, 2018, the valuation allowance increased by $73,898, primarily relating to net operating
loss carryforwards from the various tax regime.
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE
8 - RELATED PARTY TRANSACTIONS
|
|
For
the nine months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Professional fee paid to:
|
|
|
|
|
|
|
|
|
- Related party A
|
|
$
|
11,601
|
|
|
$
|
11,030
|
|
- Related party B
|
|
|
13,200
|
|
|
|
33,803
|
|
- Related party C
|
|
|
430
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Website design and maintenance fee
paid to:
|
|
|
|
|
|
|
|
|
- Related
party D
|
|
|
588
|
|
|
|
843
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,819
|
|
|
$
|
45,676
|
|
Related
party A, B, C and D are the fellow subsidiaries of a corporate shareholder of the Company.
The
related party transactions are generally transacted in an arm-length basis at the current market value in the normal course of
business.
NOTE
9 - CONCENTRATIONS OF RISKS
(a)
Major customers
For
the three months ended March 31, 2018, the customers who accounted for 100% of the Company’s revenues and the accounts receivable
balances at period-end are presented as follows:
|
|
For
the three months ended
March 31, 2018
|
|
|
As
of
March 31, 2018
|
|
|
|
Revenues
|
|
|
Percentage
of
revenues
|
|
|
Accounts
receivable
|
|
Customer
A
|
|
$
|
40,111
|
|
|
|
67
|
%
|
|
$
|
-
|
|
Customer
B
|
|
|
19,949
|
|
|
|
33
|
%
|
|
|
-
|
|
Total:
|
|
$
|
60,060
|
|
|
|
100
|
%
|
|
$
|
-
|
|
For the three months ended March 31, 2017,
the customers who accounted for 10% or more of the Company’s revenues and the accounts receivable balances at
period-end are presented as follows:
|
|
For the three
months ended
March 31, 2017
|
|
|
As of
March 31, 2017
|
|
|
|
Revenues
|
|
|
Percentage of
revenues
|
|
|
Accounts
receivable
|
|
Customer A
|
|
$
|
31,651
|
|
|
|
66
|
%
|
|
$
|
-
|
|
Customer B
|
|
|
11,751
|
|
|
|
25
|
%
|
|
|
11,751
|
|
Total:
|
|
$
|
43,402
|
|
|
|
91
|
%
|
|
$
|
11,751
|
|
For the nine months ended March 31, 2018, the
customers who accounted for 10% or more of the Company’s revenues and the accounts receivable balances at period-end are
presented as follows:
|
|
For the nine months ended
March 31, 2018
|
|
|
As of
March 31, 2018
|
|
|
|
Revenues
|
|
|
Percentage of
revenues
|
|
|
Accounts
receivable
|
|
Customer A
|
|
$
|
40,111
|
|
|
|
45
|
%
|
|
$
|
-
|
|
Customer B
|
|
|
47,750
|
|
|
|
54
|
%
|
|
|
-
|
|
Total:
|
|
$
|
87,861
|
|
|
|
99
|
%
|
|
$
|
-
|
|
For the nine months ended March 31, 2017,
the customers who accounted for 10% or more of the Company’s revenues and the accounts receivable balances at period-end
are presented as follows:
|
|
For the nine
months ended
March 31, 2017
|
|
|
As of
March 31, 2017
|
|
|
|
Revenues
|
|
|
Percentage of
revenues
|
|
|
Accounts
receivable
|
|
Customer A
|
|
$
|
31,651
|
|
|
|
51
|
%
|
|
$
|
-
|
|
Customer B
|
|
|
26,066
|
|
|
|
42
|
%
|
|
|
11,751
|
|
Total:
|
|
$
|
57,717
|
|
|
|
93
|
%
|
|
$
|
11,751
|
|
RITO
GROUP CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED MARCH 31, 2018
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
(b)
Major vendors
For
the three months ended March 31, 2018, the vendors who accounted for 10% or more of the Company’s cost of revenues and its
accounts payable balance at period-end are presented as follows:
|
|
For
the three months ended
March 31, 2018
|
|
|
As
of
March 31, 2018
|
|
|
|
Purchases
|
|
|
Percentage
of
purchases
|
|
|
Accounts
payable
|
|
Vendor
A
|
|
$
|
10,917
|
|
|
|
37
|
%
|
|
$
|
-
|
|
Vendor
B
|
|
|
14,169
|
|
|
|
47
|
%
|
|
|
5,098
|
|
Total:
|
|
$
|
25,086
|
|
|
|
84
|
%
|
|
$
|
5,098
|
|
For the three months ended March 31, 2017,
the vendors who accounted for 100% of the Company’s cost of revenues and its accounts payable balance at period-end are
presented as follows:
|
|
For the three
months ended
March 31, 2018
|
|
|
As of
March 31, 2018
|
|
|
|
Purchases
|
|
|
Percentage of
purchases
|
|
|
Accounts
payable
|
|
Vendor A
|
|
$
|
26,014
|
|
|
|
100
|
%
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
26,014
|
|
|
|
100
|
%
|
|
$
|
-
|
|
For
the nine months ended March 31, 2018, the vendors who accounted for 10% or more of the Company’s cost of revenues and its
accounts payable balance at period-end are presented as follows:
|
|
For
the nine months ended
March 31, 2018
|
|
|
As
of
March 31, 2018
|
|
|
|
Purchases
|
|
|
Percentage
of
purchases
|
|
|
Accounts
payable
|
|
Vendor
A
|
|
$
|
31,505
|
|
|
|
62
|
%
|
|
$
|
-
|
|
Vendor
B
|
|
|
14,169
|
|
|
|
28
|
%
|
|
|
5,098
|
|
Total:
|
|
$
|
45,674
|
|
|
|
90
|
%
|
|
$
|
5,098
|
|
For
the nine months ended March 31, 2017, the vendors who accounted for 10% or more of the Company’s cost of revenues and its
accounts payable balance at period-end are presented as follows:
|
|
For
the nine months ended
March 31, 2017
|
|
|
As
of
March 31, 2017
|
|
|
|
Purchases
|
|
|
Percentage
of
purchases
|
|
|
Accounts
payable
|
|
Vendor A
|
|
$
|
26,014
|
|
|
|
66
|
%
|
|
$
|
-
|
|
Vendor
B
|
|
|
13,532
|
|
|
|
34
|
%
|
|
|
-
|
|
Total:
|
|
$
|
39,546
|
|
|
|
100
|
%
|
|
$
|
-
|
|
(c)
Credit risk
Financial
instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration
of credit risk in its accounts receivables is substantially mitigated by its ongoing credit evaluation process and relatively
short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an
allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other
information.
NOTE
10 - COMMITMENTS AND CONTINGENCIES
The
Company leases an office premises in Hong Kong under a non-cancellable operating lease that expire on December 2018, with an aggregate
fixed monthly rent of approximately $1,548.
The
aggregate lease expense for the three months ended March 31, 2018 and 2017 were $4,644 and $4,645, respectively.
The
aggregate lease expense for the nine months ended March 31, 2018 and 2017 were $13,932 and $12,387, respectively.
As
of March 31, 2018, the Company has the aggregate future minimum rental payments due under a non-cancellable operating lease in
the next two years, as follows:
Period ending March 31:
|
|
|
|
|
2018
|
|
$
|
13,937
|
|
|
|
|
|
|
|
|
$
|
13,937
|
|
NOTE
11 - SUBSEQUENT EVENTS
In
accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events
or transactions that occurred after March 31, 2018 up through the date the Company presented this condensed consolidated financial
statements.
On
April 6, 2018, Rito Group Corp. (the “Company”) completed the issuance and sale of an aggregate of 10,000 shares at
a price of $1.50 per share with each share consisting of one share of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) in a private placement to Shum Bun Chuen Banny (the “investor”), pursuant to
the Subscription Agreements dated as of April 6, 2018 between the Company and the investor. The net proceeds to the Company amounted
to $15,000. The $15,000 in proceeds went directly to the Company as working capital.
On
April 17, 2018, Rito Group Corp. (the “Company”) completed the issuance and sale of an aggregate of 30,000 shares
at a price of $1.50 per share with each share consisting of one share of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) in a private placement to Lam Mei Yi Olive and Tsang Pui Ming (the “investors”),
pursuant to the Subscription Agreements dated as of April 17, 2018 between the Company and the investors. Lam Mei Yi Olive purchased
20,000 shares, while Tsang Pui Ming purchased 10,000 shares. The net proceeds to the Company amounted to $45,000. The $45,000
in proceeds went directly to the Company as working capital.
On
April 24, 2018, Rito Group Corp. (the “Company”) completed the issuance and sale of an aggregate of 90,000 shares
at a price of $1.50 per share with each share consisting of one share of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) in a private placement to three investors (the “investors”), pursuant to the
Subscription Agreements dated as of April 24, 2018 between the Company and the investors. Lui Tin Shing & Tse Lai Nar Lana
purchased 20,000 shares, Lui Man Hei purchased 20,000 shares and Wong Hei purchased 50,000. The net proceeds to the Company amounted
to $135,000. The $135,000 in proceeds went directly to the Company as working capital.
On
April 26, 2018, Rito Group Corp. (the “Company”) completed the issuance and sale of an aggregate of 20,000 shares
at a price of $1.50 per share with each share consisting of one share of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) in a private placement to tow investors (the “investors”), pursuant to the
Subscription Agreements dated as of April 26, 2018 between the Company and the investors. Leung Mei Ha purchased 10,000 shares,
while Leung Mee Yee Minnie purchased 10,000 shares. The net proceeds to the Company amounted to $30,000. The $30,000 in proceeds
went directly to the Company as working capital.
On
April 27, 2018, Rito Group Corp. (the “Company”) completed the issuance and sale of an aggregate of 10,000 shares
at a price of $1.50 per share with each share consisting of one share of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) in a private placement to an investor (the “investor”), pursuant to the Subscription
Agreements dated as of April 27, 2018 between the Company and the investor. Choi Kam Tong purchased 10,000 shares. The net proceeds
to the Company amounted to $15,000. The $15,000 in proceeds went directly to the Company as working capital.
Item
2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for
the year ended June 30, 2017 and presumes that readers have access to, and will have read, the “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following
discussion and analysis also should be read together with our financial statements and the notes to the financial statements included
elsewhere in this Form 10-Q.
The
following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including,
without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations. “These
statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict
or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue
reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form
S-1 Amendment No.6, dated April 18, 2016, in the section entitled “Risk Factors” for a description of certain risks
that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility
to update the forward-looking statements contained in this transition report on Form10-Q. The following should also be read in
conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.
Company
Overview
Rito
Group Corp. (the “Company” or “Rito”) was incorporated under the laws of the State of Nevada on March
24, 2015. Rito Group Corp is a company that operates through its wholly owned subsidiary, Sino Union International Limited, a
Company organized under the laws of the British Colony, Anguilla. It should be noted that the wholly owned subsidiary, Sino Union
International Ltd. owns 100% of Rito International Enterprise Company Limited, a Hong Kong Company. We have incorporated a new
company namely 深圳市汇图贸易有限公司 in China, with 100% equity
interest owned by Rito International Enterprise Company Limited.
At
this time, we operate exclusively through our wholly owned subsidiary and share the same business plan of our subsidiary which
is the sale of miscellaneous retail goods. To date the goods sold have been sold through the individual efforts of our management
by selling to personal contacts, and the sales have consisted of stainless steel and crystal accessories from Steela + Steelo
as well as cookware from Malox. Sino Union International Limited also shares the same business plan of Rito International Enterprise
Company Limited.
The
future business of Rito is the development of “Rito Online mall” which will provide a platform for merchants and customers
to facilitate transactions and take advantage of the growth opportunity we have identified in Hong Kong’s E-Commerce Industry.
The Rito Online Mall has not yet been developed and is not operational at this time.
Results
of Operation
For
the three months ended March 31, 2018 and 2017
Revenues
For
the three months ended March 31, 2018 and 2017, the Company generated revenue in the amount of $60,060 and $47,943 respectively.
Our gross profits for the three months ended March 31, 2018 and 2017 was $30,219 and $21,930 respectively. The gross profit margin
for the three months ended March 31, 2018 and 2017 was 50% and 46% respectively. The increase in gross profits is due to increase
in sales.
General
and administrative expenses
For
the three months ended March 31, 2018 and 2017, we have had general and administrative expenses in the amount of $229,747 and
$147,165 respectively, an increase of $82,582 or 56%. These expenses are comprised of advertising and promotion expenses of $28,773,
marketing expenses of $12,038 information technology development expenses of $19,466 and payroll expenses of $73,203 for
the three months ended March 31, 2018.
Net
loss
Our
net loss for the three months ended March 31, 2018 and 2017 was $201,336 and $125,753 respectively. The net loss mainly
derived from the general and administrative expenses incurred.
For
the nine months ended March 31, 2018 and 2017
Revenues
For
the nine months ended March 31, 2018 and 2017, the Company generated revenue in the amount of $88,569 and $62,258 respectively.
Our gross profits for the nine months ended March 31, 2018 and 2017 was $37,801 and $22,712, respectively. The increase in revenue
and gross profits is due to higher sales order from a customer. The gross profit margin for the nine months ended March
31, 2018 and 2017 was 43% and 36% respectively. We believe that in order to attract more customers in the future we must increase
our marketing efforts and or develop new products.
General
and administrative expenses
For
the nine months ended March 31, 2018 and 2017, we have had general and administrative expenses in the amount of $618,774
and $578,481 respectively, an increase of $40,293 or 7%. The increase is mainly due to the business is still under development
and expansion. These expenses are mainly comprised of information technology development expenses of $30,829, advertising and
promotion expenses of $55,427, marketing expenses of $127,634, payroll expenses of $189,332 and entertainment expenses of $39,275
for the nine months ended March 31, 2018.
Net
loss
Our
net loss for the nine months ended March 31, 2018 and 2017 was $586,105 and $587,739 respectively. The net loss mainly
derived from the general and administrative expenses incurred.
Liquidity
and Capital Resources
Cash
Used in Operating Activities
Net
cash used in operating activities was $173,104 for the nine months ended March 31, 2018 as compared to net cash used in
operating activities of $547,102 for the nine months ended March 31, 2017. The cash used in operating activities was a result
of our net loss attributable to payroll expenses, marketing expenses and advertising and promotion.
Cash
Used in Investing Activities
Net
cash used in investing activities was $179,764 and $0 for the nine months ended March 31, 2018 and 2017, respectively. The cash
used in investing activities for the nine months ended March 31, 2018 was resulted from the purchase of plant and equipment.
Cash
Provided by Financing Activities
Net
cash provided by financing activities were $987,178 and $250,107 for the nine months ended March 31, 2018 and 2017 respectively.
The cash provided by financing activities was contributed from the aggregate proceeds of $951,000 from the issuance of
shares in initial public offering and private placement during the nine months ended March 31, 2018 and draw down of bank
borrowings of $45,032.
There
were no advances from directors and related company as of March 31, 2018 and June 30, 2017.
In
regards to all of the above transactions we claim an exemption from registration afforded by Section 4(a)(2) and/or Regulation
S of the Securities Act of 1933, as amended (“Regulation S”) for the above sales of the stock since the sales of the
stock were made to non-U.S. persons (as defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant to offshore transactions,
and no directed selling efforts were made in the United States by the issuer, a distributor, any of their respective affiliates,
or any person acting on behalf of any of the foregoing.
Going
Concern
As
of March 31, 2018, the Company suffered an accumulated deficit of $2,225,227 and incurred a continuous net operating loss of $586,105
for the nine months ended March 31, 2018. These matters raise substantial doubt about our ability to continue as a going concern.
Our unaudited condensed consolidated financial statements included elsewhere in this report have been prepared in conformity with
accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern
and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets
and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable
or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the
outcome of this uncertainty.
Off-balance
Sheet Arrangements
We
have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our
financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources that are material to our stockholders as of March 31, 2018.
Related
party transactions
|
|
For
the nine months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Professional fee paid to:
|
|
|
|
|
|
|
|
|
- Related party A
|
|
$
|
11,601
|
|
|
$
|
11,030
|
|
- Related party B
|
|
|
13,200
|
|
|
|
33,803
|
|
- Related party C
|
|
|
430
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Website design and maintenance fee
paid to:
|
|
|
|
|
|
|
|
|
- Related
party D
|
|
|
588
|
|
|
|
843
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,819
|
|
|
$
|
45,676
|
|
Related
party A, B, C and D are the fellow subsidiaries of a corporate shareholder of the Company.
The
related party transactions are generally transacted in an arm-length basis at the current market value in the normal course of
business.
Contractual
Obligations
As
of March 31, 2018, the Company has no contractual obligations involved.