NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED JUNE 30, 2018AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
1.
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 handmade accessories, necklaces, watches,
cookware, AgriGaia Farming Products, and numerous other products. Our business model remains to be Online to Offline (O2O) business,
and we have been actively expanding our product range.
Details
of the Company’s subsidiaries:
|
Company
name
|
|
Place/date
of incorporation
|
|
Particulars
of issued capital
|
|
Principal
activities
|
|
|
|
|
|
|
|
|
1.
|
Sino
Union International Limited (“Sino Union”)
|
|
Anguilla
January
3, 2014
|
|
84,500
shares of ordinary share of US$1 each
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
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
|
Rito
Group Corp. and its subsidiaries are hereinafter referred to as the “Company”.
2.
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 June 30, 2018, the Company suffered an accumulated deficit of $2,461,274 and net loss of $822,152. The continuation
of the Company as a going concern through June 30, 2018 is dependent upon improving the profitability and the continuing financial
support from its stockholders. Management believes the existing shareholders or external financing will provide the additional
cash to meet the Company’s obligations as they become due.
These
and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying consolidated financial statements reflect the application of certain significant accounting policies as described
in this note and elsewhere in the accompanying consolidated financial statements and notes.
Basis
of presentation
These
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”).
Basis
of consolidation
The
consolidated financial statements include the financial statements of Rito Group Corp. and its subsidiary. All significant inter-company
balances and transactions within the Company have been eliminated upon consolidation.
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
Use
of estimates
In
preparing these 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
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Subscription
receivables
For
the year ended June 30, 2018, the company issued 1,114,000 shares of common stock at $1.5 per share for cash of $1,671,000 with
no subscription receivable. For the year ended June 30, 2017, the Company issued 42,600 shares of common stock at $1.5 per share
for cash of $63,900 with no subscription receivable.
Impairment
of long-lived assets
Long-lived
assets primarily include intangible assets. In accordance with the provision of ASC Topic 360-10-5, “Impairment or Disposal
of Long-Lived Assets”, the Company generally conducts its annual impairment evaluation to its long-lived assets, usually
in the fourth quarter of each year, or more frequently if indicators of impairment exist, such as a significant sustained change
in the business climate. The recoverability of long-lived assets is measured at the reporting unit level. If the total of the
expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference
between the fair value and carrying amount of the asset. For the years ended June 30, 2017 and 2018, the Company recognized an
impairment charge of $Nil and $Nil, respectively for intangible assets.
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
Revenue
recognition
In
accordance with ASC Topic 605, “Revenue Recognition”, the Company recognizes revenue from sales of goods when the
following four revenue criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) selling
price is fixed or determinable; and (4) collectability is reasonably assured.
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 transfer 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 was no sale return for the
period reported.
The
Company derives its revenue from direct sales to individuals and online sales business. 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
Cost
of revenue includes the purchase cost of retail goods for re-sale to the customers.
Income
taxes
The
provision of income taxes is determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC
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
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 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 conducts much of its businesses activities in Hong Kong and is subject to tax in this jurisdiction. As a result of its
business activities, the Company will file separate tax returns that are subject to examination by the foreign tax authorities.
Net
loss per share
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.
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED JUNE 30, 2018 AND PERIOD ENDED JUNE 30, 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
Foreign
currencies translation
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates
prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional
currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting
exchange differences are recorded in the statements of operations.
The
reporting currency of the Company and its subsidiary in Anguilla is United States Dollars (“US$”). The Company’s
subsidiary in Hong Kong maintains its books and record in Hong Kong Dollars (“HK$”), which is functional currency
as being the primary currency of the economic environment in which the entity operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the US$ are translated
into US$, in accordance with ASC Topic 830-30, “
Translation of Financial Statement
”, using the exchange rate
on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.
Translation
of amounts from HK$ into US$1 and from RMB into US$1 has been made at the following exchange rates for the respective periods:
|
|
As
of and for
the year ended
June 30, 2018
|
|
|
As
of and for the
year ended
June 30, 2017
|
|
Year-end
/ average HK$: US$1 exchange rate
|
|
|
7.75
|
|
|
|
7.75
|
|
Year-end
/ average RMB¥
: US$1 exchange rate
|
|
|
6.27
|
|
|
|
-
|
|
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
Fair
value of financial instruments:
The
carrying value of the Company’s financial instruments: cash and cash equivalents, subscription receivables, prepayment and
deposits, accounts payable, and other payables and accrued liabilities approximate at their fair values because of the short-term
nature of these financial instruments.
The
Company also follows the guidance of the ASC Topic 820-10, “
Fair Value Measurements and Disclosures
” (“ASC
820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier
fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
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 e 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 do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU
2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”,
and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective
for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early
adoption is not permitted.
In
August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern, Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which establishes management’s
responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and,
if so, to provide related footnote disclosures. ASU 2014-15 provides a definition of the term “substantial doubt”
and requires an assessment for a period of one year after the date that the financial statements are issued or available to be
issued. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The guidance is effective
for the annual periods ending after December 15, 2016 and interim periods thereafter with early adoption permitted. The Company
is currently evaluating the impact the adoption of ASU 2014-15 on the Company’s financial statement presentation and disclosures.
In
August 2015, the FASB issued an Accounting Standards Update to defer by one year the effective dates of its new revenue recognition
standard until annual reporting periods beginning after December 15, 2017 (2018 for calendar-year public entities) and interim
periods therein. Management is currently assessing the impact of the adoption of ASU 2014-09 and has not determined the effect
of the standard on our ongoing financial reporting.
In
February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02, Leases (Topic 842) . Under the new guidance, lessees will be required recognize the following for all leases (with
the exception of short-term leases) at the commencement date: 1) A lease liability, which is a lessee’s obligation to make
lease payments arising from a lease, measured on a discounted basis; and 2) A right-of-use asset, which is an asset that represents
the lessee’s right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified
the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities.
Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for
fiscal years beginning after December 15, 2019, including interim periods within those years. The Company is evaluating this ASU
and has not determined the effect of this standard on its ongoing financial reporting.
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
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.
4
.
SHAREHOLDERS’ EQUITY
For
the year ended June 30, 2018, the Company issued an aggregate of 1,114,000 of its common stock at $1.5 per share, for aggregate
gross proceeds of $1,671,000. For the year ended June 30, 2017, the Company issued an aggregate of 172,600 shares of its common
stock at $1.5 per share, for aggregate gross proceeds of $258,900.
As
of June 30, 2018, and 2017, the Company had a total of 55,848,284 and 54,625,956 shares of its common stock issued and outstanding.
There are no shares of preferred stock issued and outstanding.
5
.
CONVERTIBLE NOTES PAYABLE
During
August 2015 to April 2016, the Company issued a number of convertible promissory notes (collectively the “Convertible Notes”)
to investors in an aggregated principal amount of $888,410. The Convertible Notes bear interest at a rate of 8% per annum with
a maturity of two years, due in 2017 and 2018. The principal and accrued interest are payable in a lump sum at the maturity. The
notes are convertible into shares of the Company’s common stock at a conversion price ranged from $0.15 to $0.25 per share
at the note holders’ sole and exclusive option.
On
December 1, 2016, various note holders converted $863,248 in principal and $76,133 in accrued interest into 3,740,476 shares of
common stock. The conversion price is ranged from $0.15 to $0.25 per share.
As
of June 30, 2017, the outstanding convertible notes payable is $25,161 and $1,749 in principal and accrued interest, respectively.
From
August 2017 to September 2017, various note holders converted $25,000 in principal and $2,082 in accrued interest into 108,328
shares of common stock. The conversion price is $0.25 per share.
For
the years ended June 30, 2018 and 2017, the accrued interest expense of $1,749 and $32,586, respectively are recognized in the
condensed consolidated statements of operations.
6
.
PROPERTY, PLANT AND EQUIPMENT
|
|
As
of
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
|
|
Leasehold
improvement
|
|
$
|
207,062
|
|
|
$
|
-
|
|
Equipment
|
|
|
17,329
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224,391
|
|
|
|
-
|
|
Less:
Accumulated depreciation
|
|
|
2,217
|
|
|
|
-
|
|
Total
|
|
$
|
222,174
|
|
|
$
|
-
|
|
Depreciation
expense, classified as operating expenses, was $2,217 and $Nil for the year ended June 30, 2018 and year ended June 31,
2017, respectively, because the leasehold improvement is not yet completed and hence no depreciation.
7.
INVENTORIES
|
|
As
of
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
|
|
Finished
goods, at cost
|
|
$
|
19,080
|
|
|
$
|
-
|
|
Total
inventories
|
|
|
19,080
|
|
|
|
-
|
|
8.
DUE TO DIRECTORS
As
of June 30, 2018 and June 30, 2017, a director of the Company advanced $151,488 and $8,161 to the Company, which is unsecured,
interest-free with no fixed payment term, for working capital purpose. Imputed interest is considered insignificant.
9
.
BANK LOANS
|
|
As
of
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
|
|
Bank
loan from financial institution in Hong Kong
|
|
|
-
|
|
|
|
-
|
|
The
Hongkong and Shanghai Banking Corporation Limited
|
|
$
|
39,562
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,562
|
|
|
|
-
|
|
Less:
Current portion
|
|
|
(7,394
|
)
|
|
|
-
|
|
Long-term
portion
|
|
$
|
32,168
|
|
|
$
|
-
|
|
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.
10.
ACCRUED EXPENSES AND OTHER PAYABLES
|
|
As
of
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
|
|
Accrued audit fee
|
|
|
18,000
|
|
|
|
16,000
|
|
Accrued accounting fee
|
|
|
4,106
|
|
|
|
7,021
|
|
Accrued other expenses
|
|
|
34,631
|
|
|
|
28,716
|
|
Other payable
|
|
|
231,129
|
|
|
|
-
|
|
|
|
$
|
287,866
|
|
|
$
|
51,737
|
|
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
11
.
INCOME TAXES
For
the years ended June 30, 2018 and 2017 the local (United States) and foreign components of loss before income taxes were comprised
of the following:
|
|
For
the year ended
June 30, 2018
|
|
|
For
the year ended
June 30, 2017
|
|
|
|
|
|
|
|
|
Tax
jurisdictions from:
|
|
|
|
|
|
|
|
|
-
Local
|
|
$
|
(78,185
|
)
|
|
$
|
(98,555
|
)
|
-
Foreign, representing
|
|
|
|
|
|
|
|
|
Anguilla
|
|
|
(5,543
|
)
|
|
|
(25,509
|
)
|
Hong
Kong
|
|
|
(737,300
|
)
|
|
|
(580,246
|
)
|
Shenzhen
|
|
|
(1,124
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss
before income tax
|
|
$
|
(822,152
|
)
|
|
$
|
(704,310
|
)
|
The
provision for income taxes consisted of the following:
|
|
For
the year ended
June 30, 2018
|
|
|
For
the year ended
June 30, 2017
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
-
Local
|
|
$
|
-
|
|
|
$
|
-
|
|
-
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
-
Local
|
|
|
-
|
|
|
|
-
|
|
-
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
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 and its 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
Rito
Group Corp. is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of June 30,
2018 and 2017, the operations in the United States of America incurred $249,224 and $ 171,038 of cumulative net
operating losses, respectively, which can be carried forward to offset future taxable income. The net operating loss carryforwards
begin to expire in 2035, if unutilized. The Company has provided for a full valuation allowance of $52,337 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.
Anguilla
Under
the current laws of the Republic of Anguilla (“Anguilla”), Sino Union International Limited is registered as an international
business company which governs by the International Business Companies Act of Anguilla. A company is subject to Anguilla income
tax if it does business in Anguilla. A company that incorporated in Anguilla, but does not do business in Anguilla, is not subject
to income tax there. Sino Union International Limited did not do business in Anguilla for the year ended June 30, 2018, and it
does not intend to do business in Anguilla in the future. For the years ended June 30, 2018 and 2017, Sino Union International
Limited had a net operating loss of $5,543 and $25,509, respectively.
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
Hong
Kong
Rito
International Enterprise Company Limited 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 year ended June 30, 2018 and 2017, Rito International incurred a cumulative
operating loss of $2,091,763 and $1,354,464, respectively for income tax purposes 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 $345,141 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 year ended June 30, 2018, no provision for income tax is required due to operating loss incurred. As of June 30, 2018,
深圳市汇图贸易有限公司
incurred $1,124 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 $281 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 June 30, 2018
and 2017:
|
|
As
of June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
|
|
|
|
|
|
|
-
United States of America
|
|
$
|
52,337
|
|
|
$
|
59,863
|
|
-
Hong Kong
|
|
|
345,141
|
|
|
|
223,487
|
|
-
Shenzhen
|
|
|
281
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
397,759
|
|
|
|
283,350
|
|
Less:
valuation allowance
|
|
|
(397,759
|
)
|
|
|
(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 $397,759 as of June 30, 2018. During the
year ended June 30, 2018, the valuation allowance increased by $114,409, primarily relating to net operating loss carryforwards
from the various tax regime.
12
.
RELATED PARTY TRANSACTIONS
|
|
For
the year ended
June 30, 2018
|
|
|
For
the year ended
June 30, 2017
|
|
Professional
fee paid:
|
|
|
|
|
|
|
|
|
-
Related party A
|
|
|
15,706
|
|
|
|
14,982
|
|
-
Related party B
|
|
|
20,403
|
|
|
|
42,113
|
|
-
Related party C
|
|
|
861
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Website
design and maintenance fee paid:
|
|
|
|
|
|
|
|
|
-
Related party D
|
|
|
1,177
|
|
|
|
843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,147
|
|
|
|
57,938
|
|
Related
party A, B, C and D are the fellow subsidiaries of a corporate shareholder of the Company.
The
related party transactions are generally transacted in an arm-length basis at the current market value in the normal course of
business.
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
13
.
CONCENTRATIONS OF RISKS
(a)
Major customers
For
the year ended June 30, 2018, the customers who accounted for 10% or more of the Company’s revenues and its accounts receivable
balance at year end are presented as follows:
|
|
For
the year ended June 30, 2018
|
|
|
As
of
June 30, 2018
|
|
|
|
Revenue
|
|
|
Percentage
of revenue
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
$
|
119,110
|
|
|
|
51.2
|
%
|
|
$
|
-
|
|
Customer
B
|
|
|
92,878
|
|
|
|
39.9
|
%
|
|
|
23,837
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Total:
|
|
$
|
211,988
|
|
|
|
91.1
|
%
|
|
$
|
23,837
|
|
For
the year ended June 30, 2017, one customer represented more than 10% of the Company’s revenues. This customer accounted
for 62% of the Company’s revenues amounting to $73,979, with $5,082 of accounts receivable.
(b)
Major vendors
For
the year ended June 30, 2018, the vendors who accounted for 10% or more of the Company’s purchases and its outstanding payable
balance at period-end are presented as follows:
|
|
For
the year ended June 30, 2018
|
|
|
As
of
June 30, 2018
|
|
|
|
Purchases
|
|
|
Percentage
of purchases
|
|
|
Accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
$
|
87,809
|
|
|
|
57
|
%
|
|
$
|
-
|
|
Vendor
B
|
|
|
36,923
|
|
|
|
24
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
124,732
|
|
|
|
81
|
%
|
|
$
|
-
|
|
For
the year ended June 30, 2017, the vendors who accounted for 10% or more of the Company’s purchases and its accounts payable
balance at year-end are presented as follows:
|
|
For
the year ended June 30, 2017
|
|
|
As
of
June 30, 2017
|
|
|
|
Purchases
|
|
|
Percentage
of purchases
|
|
|
Accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
$
|
13,533
|
|
|
|
19
|
%
|
|
$
|
-
|
|
Vendor
B
|
|
|
26,014
|
|
|
|
36
|
%
|
|
|
-
|
|
Vendor
C
|
|
|
8,072
|
|
|
|
11
|
%
|
|
|
6,685
|
|
Total:
|
|
$
|
47,619
|
|
|
|
66
|
%
|
|
$
|
6,685
|
|
RITO
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency
expressed in United States Dollars (“US$”, except for number of shares)
(c)
Credit risk
Financial
instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration
of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short
collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance
for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
(d)
Exchange rate risk
The
Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company
could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher
or lower profit depending on exchange rate of HK$ converted to US$ on that date. The exchange rate could fluctuate depending on
changes in political and economic environments without notice.
14
.
COMMITMENTS AND CONTINGENCIES
The
Company leases office premise in Hong Kong under operating lease that expire at December 31, 2018.
The
aggregate lease expense for the years ended June 30, 2018 and 2017 are $18,580 and $17,032, respectively.
As
of June 30, 2018, the Company has future minimum rental payments of $9,290 for office premise in the next six months.
15
.
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 June 30, 2018 up through the date the Company issued the audited consolidated financial
statements.
On
July 9, 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 Chu Ka Yan Ada (the “Investor A”), pursuant
to the Subscription Agreements dated as of July 9, 2018 between the Company and the Investor A. The net proceeds to the
Company amounted to $15,000. The $15,000 in proceeds went directly to the Company as working capital.
On
July 12, 2018, 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 Leung Mee Yee Minnie (the “Investor B”), pursuant to the Subscription Agreements
dated as of July 12, 2018 between the Company and the Investor B. The net proceeds to the Company amounted to $30,000.
The $30,000 in proceeds went directly to the Company as working capital.
On
July 17, 2018, the Company completed the issuance and sale of an aggregate of 100,000 shares at a price of $2.00 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 Yan Wai Ko Cedric (the “Investor C”), pursuant to the Subscription Agreements dated
as of July 17, 2018 between the Company and the Investor C. The net proceeds to the Company amounted to $200,000. The $200,000
in proceeds went directly to the Company as working capital.
On
August 16, 2018, the Company completed the issuance and sale of an aggregate of 15,000 shares at a price of $2.00 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 Chen Yuzhen (the “Investor D”), pursuant to the Subscription Agreements dated as
of August 16, 2018 between the Company and the Investor D. The net proceeds to the Company amounted to $ 30,000. The $30,000
in proceeds went directly to the Company as working capital.
The
shares sold in the private placement were issued in reliance on an exemption from registration under Section 4(a)(2) and/or Regulation
S of the Securities Act of 1933, as amended (“Regulation S”). The bases for the availability of this exemption include
the facts that 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.