NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES
|
Business
Image
Chain Group Limited, Inc. (formerly Have Gun Will Travel Entertainment, Inc.) (“ICGL” or the “Company”)
was incorporated under the laws of Nevada on December 18, 2013. From inception through the date of the Share Exchange as defined
below, the Company was an emerging forward-thinking full-service television pre-production company dedicated to the creation of
original concepts and programming with a bold and innovative edge in the reality television space for sale, option and licensure
to independent producers, cable television networks, syndication companies, and other entities. On June 11, 2015, the Company
amended its Articles of Incorporation with the State of Nevada in order to change its name to Image Chain Group Limited, Inc.
and to increase the authorized shares of common stock from 70,000,000 to 400,000,000 (the “Amendments”). The name
change was undertaken in order to more closely align with the operations of the Company’s wholly-owned subsidiary, Fortune
Delight Holdings Group Ltd (“FDHG”). The increase in authorized shares was undertaken to allow the Company to utilize
the newly available shares to raise capital. The board of directors and the stockholders of the Company approved the Amendments
on May 8, 2015.
FDHG,
previously, through its wholly-owned operating subsidiaries, was in the business of promoting and distributing its own branded
teas that are grown, harvested, cured, and packaged in the People’s Republic of China (“PRC”). The Company’s
headquarters was previously located in Guangzhou, Guangdong Province, PRC.
Share
Exchange
On
May 5, 2015, ICGL entered into a share exchange agreement (the “Exchange Agreement”) with FDHG and Wu Jun Rui, on
behalf of himself and certain other individuals who were to receive shares of ICGL pursuant to the Exchange Agreement (the “Shareholders”).
On the terms and subject to the conditions set forth in the Exchange Agreement, on May 5, 2015, Wu Jun Rui transferred all 50,000
shares of FDHG common stock, consisting of all of the issued and outstanding shares of FDHG, to ICGL in exchange for the issuance
to the shareholders of 59,620,000 shares of the Company’s common stock, par value $.001 per share and 5,000,000 shares of
the Company’s preferred stock, par value $.001 per share. The preferred stock is not convertible nor mandatorily redeemable;
it does not pay dividends or carrying any voting rights but is entitled to liquidation preference.
As
a result of the closing of the Exchange Agreement, FDHG became the Company’s wholly owned subsidiary. FDHG is an investment
holding company incorporated and domiciled in the British Virgin Islands. FDHG wholly owns Silver Channel Industrial Limited,
a limited company incorporated, registered, and domiciled in Hong Kong.
The
securities purchase agreement transaction is referred to hereafter as the “reverse-merger transaction.” The share
exchange transaction has been accounted for as a recapitalization of ICGL where ICGL (the legal acquirer) is considered the accounting
acquiree and FDHG (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, ICGL is deemed
to be a continuation of the business of FDHG.
Accordingly,
the accompanying consolidated financial statements are those of the accounting acquirer, FDHG. The historical stockholders’
equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction
occurred as of the beginning of the first period presented.
Organization
History of Silver Channel Industrial Limited and its subsidiaries
On
January 28, 2011, Silver Channel incorporated Heyuan Image Equipment Import Export Co., Ltd. (“Heyuan Image”) as a
wholly foreign owned enterprise (“WFOE”) registered in Heyuan City, Guangdong Province, PRC. Heyuan Image was dormant
for the six months ended and year ended September 30, 2016 and December 31, 2015. Heyuan Image is wholly owned by Silver Channel.
Heyuan Image has a registered capital of HKD 4,000,000 of which HKD 3,380,000 has been paid up.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
On
August 18, 2014, the Company, through its subsidiary Heyuan Image, acquired 100% equity of Guangzhou Image Agricultural Technology
Co., Ltd. (“Guangzhou Image”). Guangzhou Image is a limited liability company registered in Guangzhou City, Guangdong
Province, PRC. Guangzhou Image has not yet engaged in operating activities since its incorporation. Guangzhou Image is wholly
owned by Heyuan Image. Guangzhou Image has a registered capital of RMB 10 million of which zero was paid up and outstanding.
On
February 16, 2015, Guangzhou Image entered into an equity transfer agreement with all the shareholders of Yunnan Image Tea Industry
Co., Ltd. (“Yunnan Image”). Guangzhou Image paid RMB 3,000,000 to all the shareholders of Yunnan Image for 100% equity
interest in Yunnan Image. Yunnan Image is a limited liability company registered in Xishuangbanna, Yunnan Province PRC. Yunnan
Image was incorporated on August 23, 2013. Yunnan Image is the primary operating entity to carry out the Company’s core
business activities of selling and marketing its own branded teas. Yunnan Image is wholly-owned by Guangzhou Image. Yunnan Image
has a registered capital of RMB 3 million. The capital has been paid up in its entirety.
Disposal
of Silver Channel and its subsidiaries
On
or about November 15, 2016, the Company’s subsidiary FDGH disposed of its ownership in Silver Channel which included all
of the assets and liabilities of Silver Channel, Heiyuan Image, Guangzhou Image, and Yunnan Image. All of the Company’s
substantial operations were conducted through the above four mentioned subsidiaries. The disposition was carried out by, Zheng
Zewu, whom is the Director of both FDGH and Silver Channel. Silver Channel was sold to Hong Kong Private Medical Services Limited
for nominal value as indicated by the bought and sold note stamped by the Inland Revenue Department of Hong Kong. The Company
recorded a net gain on disposal, as those subsidiaries were a net liability to the Company.
As
of the date of this report, after the disposal of Silver Channel, the Company does not currently have any substantial operations.
The Company is currently reviewing potential acquisition targets.
Reverse
split
On
August 4, 2017, the Company effectuated a reverse stock split of both its common and preferred shares on a 1-for-100 basis from
395,000,000 and 5,000,000 issued and outstanding common shares with a par value of $0.001 per share to 3,950,082 and 50,000 issued
and outstanding shares with a par value of $0.001, respectively. All fractional shares were rounded up to the next whole share.
All shares outstanding and earnings per share have been retroactively restated.
Issuance
as compensation
On
or about September 4, 2017, the Company’s board of directors approved the issuance of 3,320,800 of post-reverse-split shares
of the Company’s common stock to its executives and other outside consultants as compensation for services to be rendered.
The Board of Directors valued the shares $5 per share on a pre-reverse split basis, which is equivalent to a $500 per share on
a post-reverse split basis. In accordance to the aforementioned per share valuation, the Company recorded a non-cash stock
compensation of expense of $1,660,400,000 to its results of operations.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
The
Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes. The
financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally
accepted accounting principles in the United States of America (“US GAAP”) and have been consistently applied in the
presentation of financial statements.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
|
(b)
|
Basis
of Presentation
|
The
accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP)
applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities
and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles
generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative
of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the
financial position and the results of operations and cash flows for the interim periods have been included. These interim financial
statements should be read in conjunction with the audited financial statements for the year ended December 31, 2016, as not all
disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial
statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended
December 31, 2016.
|
(c)
|
Principles
of Consolidation
|
The
consolidated financial statements include the accounts of the Company, its subsidiaries for which the Company is the primary beneficiary.
All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100%
of assets, liabilities, and net income or loss of those wholly-owned subsidiaries.
As
of September 30, 2017, the detailed identities of the consolidating subsidiaries are as follows:
Name
of company
|
|
Place
of incorporation
|
|
Attributable
equity interest%
|
|
Registered
capital
|
|
Fortune
Delight Holdings Group Limited
|
|
British
Virgin Islands
|
|
100%
|
|
$
|
50,000
|
|
|
(d)
|
Economic
and Political Risks
|
The
Company’s potential acquisition targets may operate outside of the United States. Foreign countries are subject to special
considerations and significant risks not typically associated with companies in the United States. These include risks associated
with, among others, the political, economic, legal environment and foreign currency exchange. The Company’s results may
be adversely affected by changes in the political and social conditions in foreign countries, and by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency conversion, restriction on international remittances,
and rates and methods of taxation, among other things.
In
preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements,
as well as the reported amounts of revenues and expenses during the reporting years. These accounts and estimates include, but
are not limited to, the estimation on useful lives of property, plant and equipment. Actual results could differ from those estimates.
|
(f)
|
Cash
and Cash Equivalents
|
The
Company accounts for cash and cash equivalents as cash on hand, time deposits, certificates of deposit, and all highly liquid
debt instruments with original maturities of three months or less. As of September 30, 2017, the Company did not have any cash
and cash equivalents.
|
(g)
|
Accounts
and Other Receivables
|
Accounts
receivable would be presented net of allowance for bad debt. These provisions would be based on analysis historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
Inventories
would be stated at the lower of cost or market value.
|
(i)
|
Property,
Plant and Equipment
|
Property
and equipment will be stated at cost less accumulated depreciation.
The
Company’s revenue recognition policies are in accordance to Staff Accounting Bulletin (“SAB”) 104, included
in the Codification as ASC 605,
Revenue Recognition
. Revenue is recognized when a formal arrangement exists, the price
is fixed or determinable, the delivery is completed or service is rendered, and no other significant obligations of the Company
exist, and collectability is reasonably assured.
|
(k)
|
Selling,
General & Administrative Expenses
|
Selling,
general and administrative expenses are comprised of salaries, client entertainment, advertising, and travel, lodging expenses,
include executive compensation, general overhead such as the finance department and administrative staff, depreciation, office
rental and utilities, and professional fees.
|
(l)
|
Foreign
Currency Translation
|
The
Company’s current functional and reporting currency is the United States Dollar, USD. Its previous subsidiaries used the
Chinese Renminbi (RMB) and Hong Kong Dollars (“HKD”) as its functional currencies.
The
Company adopts SFAS No. 109, Accounting for Income Taxes, included in the Codification as ASC 740,
Income Taxes,
which
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period
end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to
be realized.
On
January 1, 2007, The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(“FIN 48”), included in the Codification as ASC 740,
Income Taxes.
The topic addresses the determination of
whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC
740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater
than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
|
(n)
|
Fair
Value of Financial Instruments
|
For
certain of the Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts
and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short
maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial
instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level
valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The
carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments
and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined
as follows:
|
●
|
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
|
|
|
●
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
|
|
|
|
|
●
|
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities
from Equity,” and ASC 815.
The
Company’s financial instruments include other payables, accrued liabilities and amounts due to related parties. Management
estimates the carrying amounts of the financial instruments approximate their fair values due to their short-term nature.
|
(o)
|
Other
Comprehensive Income
|
The
Company’s functional currency for its operating subsidiaries was the Renminbi (“RMB”). For financial reporting
purposes, the RMB was translated into United States Dollars (“USD” or “$”) as the reporting currency.
Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated
at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different
exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive
income”. Gains and losses resulting from foreign currency transactions are included in income.
The
Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive loss is comprised of net loss and
all changes to the statements of stockholders’ equity, except for changes in paid-in capital and distributions to stockholders
due to investments by stockholders.
Business
combinations are accounted for under the acquisition method of accounting in accordance with ASC 805,
Business Combinations.
Under the acquisition method the acquiring entity in a business combination recognizes 100 percent of the acquired assets
and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any
excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as
goodwill. To the extent the fair value of net assets acquired, including other identifiable assets, exceed the purchase price,
a bargain purchase gain is recognized. Assets acquired and liabilities assumed from contingencies must also be recognized at fair
value, if the fair value can be determined during the measurement period. Results of operations of an acquired business are included
in the statement of earnings from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges,
are expensed as incurred.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
|
(q)
|
Recent
Accounting Pronouncements
|
On
January 5, 2016, the FASB issued ASU 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities”, which amends the guidance in U.S. GAAP on the classification and measurement
of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting
related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair
value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated
with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those
fiscal years beginning after December 15, 2017.
On
February 25, 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, its new standard on accounting for leases. ASU
2016-02 introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying
principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related
to evaluating when profit can be recognized).
Furthermore,
the ASU addresses other concerns related to the current leases model. For example, the ASU eliminates the requirement in current
U.S. GAAP for an entity to use bright-line tests in determining lease classification. The standard also requires lessors to increase
the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The new model
represents a wholesale change to lease accounting. As a result, entities will face significant implementation challenges during
the transition period and beyond, such as those related to:
|
●
|
Applying
judgment and estimating.
|
|
●
|
Managing
the complexities of data collection, storage, and maintenance.
|
|
●
|
Enhancing
information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting
requirements.
|
|
●
|
Refining
internal controls and other business processes related to leases.
|
|
●
|
Determining
whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations.
|
|
●
|
Addressing
any income tax implications.
|
The
new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar
periods beginning on January 1, 2019), and interim periods therein.
On
March 15, 2016, the FASB issued ASU 2016-07 “Investments—Equity Method and Joint Ventures (Topic 323): Simplifying
the Transition to the Equity Method of Accounting”, which simplifies the equity method of accounting by eliminating the
requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result
of an increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity
method (as a result of an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional
interest in the investee would be added to the current basis of the investor’s previously held interest and the equity method
would be applied subsequently from the date on which the investor obtains the ability to exercise significant influence over the
investee. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to
an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the
investment qualifies for the equity method.
The
guidance in the ASU is effective for all entities for fiscal years beginning after December 15, 2016, including interim periods
within those fiscal years; early adoption is permitted for all entities. Entities are required to apply the guidance prospectively
to increases in the level of ownership interest or degree of influence occurring after the ASU’s effective date. Additional
transition disclosures are not required upon adoption.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
On
March 17, 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net)”, which amends the principal-versus-agent implementation guidance and illustrations
in the Board’s new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified by stakeholders,
including those related to (1) determining the appropriate unit of account under the revenue standard’s principal-versus-agent
guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s
control principle. Among other things, the ASU clarifies that an entity should evaluate whether it is the principal or the agent
for each specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service
is “a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer.” Therefore,
for contracts involving more than one specified good or service, the entity may be the principal for one or more specified goods
or services and the agent for others.
The
ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions
in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the
new revenue standard.
On
March 30, 2016, the FASB issued ASU 2016-09 “Compensation—Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions
for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding
requirements, as well as classification in the statement of cash flows.
On
August 26, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”. Stakeholders indicated that
there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of
cash flows under Topic 230, Statement of Cash Flows, and other Topics. This Update addresses eight specific cash flow issues with
the objective of reducing the existing diversity in practice. The amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is
permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption
must adopt all of the amendments in the same period. As a result, the Company has elected to early adopt this Update prospectively.
As of September 30, 2017, and prior period retrospective adjustments have not been applied.
As
of September 30, 2017, except for the above, there are no recently issued accounting standards not yet adopted that would have
a material effect on the Company’s financial statements.
Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company
but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses
such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the
Company’s management evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the
assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable
and material would be disclosed.
Loss
contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case
the guarantee would be disclosed.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
3.
|
GOING
CONCERN UNCERTAINTIES
|
These
financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As
of September 30,2017 and December 31, 2016, the Company had accumulated deficits of $1,720,136,986 and $59,396,597 due to the
substantial losses incurred in operations that have been discontinued in 2016; the Company also continues to incur losses to maintain
its listing as an U.S. public company. There was substantial doubt regarding the Company’s ability to continue as going
concern at September 30, 2017 and December 31, 2016. Management continues to employ its previous plan to support the Company’s
operations and maintain its business strategy by raising additional funds through public and private offerings, or loans from
related parties, or to rely on officers and directors to perform essential functions with minimal compensation was unsuccessful.
If
the Company does not raise additional money via public or private offerings or related party loans, the Company may be unable
to continue as going concern. Additional financing may not become available on acceptable terms and there can be no assurance
that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term.
The
accompanying financial statements have been adjusted to the expected recoverable amounts. Management believes no further adjustments
for recoverability and classification of assets or liabilities are necessary.
The
Company is subject to U.S. Income taxes.
The
Company’s subsidiary Fortune Delight Holdings Group Limited was incorporated in the British Virgin Islands. The British
Virgin Islands is an income tax free jurisdiction.
Silver
Channel, the Company’s former indirectly subsidiary was incorporated in Hong Kong and is subject to the Inland Revenue Ordinance
of Hong Kong. Hong Kong adopted a uniform tax rate of 16.5% for all enterprises.
The
Company’s former indirectly held subsidiaries that were incorporated in the PRC and are governed by the Income Tax Law of
the PRC and various local income tax laws. Effective January 1, 2008, China adopted a uniform tax rate of 25% for all enterprises
including foreign-invested enterprises.
For
the nine months ended September 30, 2017 and 2016, the Company has not provided any provision for income tax as it incurred substantial
net operating loss during the periods.
The
Company’s management did not recognize any deferred tax benefit and related deferred tax assets at September 30, 2017 and
2016, as a result of the substantial net operating losses because the management was unable to determine when it would be able
to generate taxable income to make use of such potential future tax assets.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
The
following table sets forth the computation of basic and diluted earnings per share of common stock:
|
|
For
the nine months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Basic
and diluted net loss per share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net
loss used in computing basic earnings per share
|
|
$
|
(1,660,726,736
|
)
|
|
$
|
(439,905
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
4,267,437
|
|
|
|
3,950,082
|
|
Basic loss
per share
|
|
$
|
(389.16
|
)
|
|
$
|
(0.11
|
)
|
There
were no potentially dilutive securities outstanding during the nine months ended September 30, 2017 and 2016.
On
February 13, 2017, Xinyuan Yang, whom was transferred the right to 5,000,000 shares of the Company’s preferred stock that
was originally entitled to Mr. Wu, Jun Rui from the share exchange between the Company and FDGH and Mr. Wu, entered into an agreement
with the Company to exchange his right to the preferred stock for common shares of the Company’s stock. As of the date of
this report the exchange has not occurred.
|
|
6.
|
RELATED
PARTY TRANSACTION
|
Amounts
due from related parties consisted of the following:
|
|
September
30,
2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Wu,
Junrui, former director of FDGH
|
|
$
|
-
|
|
|
$
|
49,328
|
|
Amounts
due to related parties consisted of the following:
|
|
September
30, 2017
|
|
|
December
31,
2016
|
|
|
|
|
|
|
|
|
David
Po, Chairman and Chief Executive Officer
|
|
$
|
326,736
|
|
|
$
|
-
|
|
Mr.
Wu previously had an outstanding balance owed to the Company in the amount of $49,328 at December 31, 2016. During the nine months
ended September 30, 2017, Mr. Wu paid expenses and professional fees on behalf of the Company and has fully settled the outstanding
balance owed by him to the Company.
The
balance owed to Mr. Po was incurred for all of the professional expense payments made by him on behalf of the Company.
The
Company’s registered office and principal place of business was provided by Image Industrial Development Ltd., a major shareholder
of the Company. The terms of the lease agreement are for one year from November 1, 2016 through October 31, 2017. There was no
rental deposit paid and the annual rental expense was $90 (HKD $700). These rates may differ from fair market values. As of the
date of the this report the lease has expired. The Company is currently in discussions with Image Industrial Development Ltd.
to renew its lease.
IMAGE
CHAIN GROUP LIMITED, INC.
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(STATED
IN US DOLLARS)
7.
DISCONTINUED OPERATIONS
|
|
For
the nine months ended
|
|
|
|
September
30, 2016
|
|
Results
of Operations
|
|
|
|
|
Net
sales
|
|
$
|
319,647
|
|
Cost of sales
|
|
|
159,800
|
|
Selling,
general and administrative expenses
|
|
|
508,531
|
|
Interest
and other income
|
|
|
226
|
|
Income
tax
|
|
|
9
|
|
Loss
from discounted operations
|
|
$
|
348,467
|
|
As
detail in note 1, the Company disposed of Silver Channel and its subsidiaries on November 15, 2016.
The
values presented above are management representations of the consolidated financial position and results of operations for the
nine months ended September 30, 2016. The Company believes these values approximate the value of Silver Channel and its subsidiaries.
Those figures are unaudited.
The
Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued.
There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions
that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements,
and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance
sheet but arose subsequent to that date.
The
Company has analyzed its operations subsequent to September 30, 2017 to the date these financial statements were issued, and has
determined that it does not have any material events to disclose.