NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE
–
1
|
BASIS OF PRESENTATION
|
The accompanying unaudited condensed consolidated
financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United
States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures
normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate
to make the information not misleading.
In the opinion of management, the consolidated
balance sheet as of December 31, 2016 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 period ended September 30, 2017 are not necessarily indicative of the results to be expected for
the entire fiscal year ending December 31, 2017 or for any future period.
These unaudited condensed consolidated financial
statements and notes thereto should be read in conjunction with the audited financial statements for the year ended December 31,
2016 on Form 10.
NOTE
–
2
|
ORGANIZATION AND BUSINESS BACKGROUND
|
Cosmos Group Holdings Inc. (the “Company”
or “COSG”) incorporated in the state of Nevada on August 14, 1987, under the name Shur De Cor, Inc. and engaged in
developing certain mining claims. In April 1999, Shur De Cor merged with Interactive Marketing Technology, a New Jersey corporation
that was engaged in the business of developing and direct marketing of consumer products. As the surviving company, Shur De Cor
changed its name to Interactive Marketing Techology, Inc. Shur De Cor's then management resigned and the management of Interactive
New Jersey became the Company’s management. The prior management of Shur De Cor retained Shur De Cor’s business and
assets. The Company filed a registration statement on Form 10-SB on January 19, 2000.
The Company, through a wholly owned subsidiary,
IMT's Plumber, Inc., produced, marketed, and sold a licensed product called the Plumber's Secret, which was discontinued in fiscal
2001. In May 2002, the Company ceased to actively pursue its product development and marketing business and actively sought to
either acquire a third party, merge with a third party or pursue a joint venture with a third party in order to re-enter its former
business of development and direct marketing of proprietary consumer products in the United States and worldwide.
On November 17, 2004, the Company acquired
MPL, a company organized under the laws of the British Virgin Islands, and its subsidiaries in accordance with the terms of a Share
Exchange Agreement executed by the parties (the “2004 Agreement”). In connection with the acquisition, the Company
issued an aggregate of 109,623,006 shares of its common stock to Imperial International Limited, a company incorporated under the
laws of the British Virgin Islands (“Imperial”), the sole shareholder of MPL, in exchange for 100% of the issued and
outstanding shares of MPL capital stock (the "2004 Share Exchange"). Upon completion of the share exchange, MPL became
the Company's wholly owned subsidiary and the Company’s former owner transferred control of the Company to Imperial. The
Company relied on Rule 506 of Regulation D of the Securities Act of 1933, as amended (the "Act"), in regard to the shares
that we issued pursuant to the 2004 Share Exchange. The Company treated this transaction as a qualified "business combination"
as defined by Rule 501(d). The Company relied on the exemption from registration pursuant to Section 4(2) of, and or Regulation
D promulgated under, the Act in issuing the Company’s securities.
In connection with the 2004 Share Exchange,
the Company: (i) changed its name from Interactive Marketing Technology, Inc. to China Artists Agency, Inc. ("China Artists");
(ii) obtained a new stock symbol, "CAAY", and CUSIP Number, effective on December 21, 2004; (iii) increased its authorized
common stock to 200,000,000 shares; (iv) effectuated a 1 for 1.69 reverse stock split; and (v) spun off the Company’s existing
business into a separate public company, All Star Marketing, Inc., a Nevada corporation ("All Star"). All Star was formed
as a wholly owned subsidiary of the Company. The Spin-off was satisfied by means of a pro-rata share dividend to the Company's
shareholders of record as of December 10, 2004. The purpose of the Spin-Off was to allow the subsidiary to operate as a separate
public company and raise working capital through the sale of its own equity. This allowed the Company’s management to focus
on its business, while at the same time, allowing the spun-off company to have greater exposure by trading as an independent public
company. Additionally, the shareholders and the market would then more easily identify the results and performance of the Company
as a separate entity from that of All Star. In August 2005, the Company changed its name to China Entertainment Group, Inc. and,
effective August 9, 2005, obtained a new stock symbol "CGRP", and CUSIP Number.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
Because the Company failed to generate revenues
in its new business, prior management commenced litigation in the Superior Court for Los Angeles County California which action
was removed to the United States District Court for the Central District of California Case No. CV07-1068 GHK. On January 30, 2008,
the parties entered into a Settlement Agreement and Conditional Release (the “Settlement Agreement”), pursuant to which,
among other things, the Company’s former management reacquired control of the Company and all assets related to the Chinese
entertainment business were transferred out of the Company. The Company, under its former management, once again entered the business
of locating products to develop and mass market. These efforts did not prove fruitful and the Company, while continuing its product
development business, also began to seek another business to acquire.
On January 22, 2010, the Company filed a Form
15-12G to withdraw from its reporting obligations.
Effective July 22, 2010, the Company merged
with Safe and Secure TV Channel, LLC, a Delaware limited liability company (the “Merger”). In connection with the Merger,
the management of the Company resigned and was replaced by the management and principals of Safe and Secure TV Channel, LLC. The
holders of interests in Safe and Secure TV Channel, LLC exchanged their interests for approximately 50.2% of the issued and outstanding
stock of the Company. In September 2010, the Company effectuated a 9.85 for one stock split to shareholders of record as of August
23, 2010. After the Merger, the Company became a television network and multimedia information and distribution company focused
on serving the homeland security and emergency preparedness industry.
On February 15, 2016, the Company sold to Asia
Cosmos Group Limited, a private limited liability company incorporated under the laws of British Virgin Islands (“ACOSG”),
10,000,000 shares of its common stock at a per share price of $0.027. ACOSG’s sole shareholder is Miky Wan. The Company relied
on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Act
in selling the Company’s securities to ACOSG.
In connection with the private placement to
ACOSG, a change of control occurred and Bryan Glass resigned from his position as President, Secretary, Treasurer and Chairman
of the Company. Miky Wan was appointed to serve as Chief Executive Officer, Chief Operating Officer, President and Director, effective
February 19, 2016. Peter Tong, our Chief Financial Officer, Secretary and director continued in his positions with the Company.
Calvin K.W. Lai, Anthony H.H. Chan, Jenher Jeng, Alice K.M. Tang, Connie Y.M. Kwok were appointed to serve on our Board of Directors
effective February 19, 2016. Effective February 26, 2016, the Company changed its name to Cosmos Group Holdings Inc. and filed
a Certificate of Amendment to such effect with the Nevada Secretary of State. The name change and the related stock symbol change
to “COSG” were approved by the Financial Industry Regulatory Authority on March 31, 2016. The Company also increased
the number of its authorized common stock, par value $0.001, from 90,000,0000 shares to 500,000,000 and its preferred stock, par
value $0.001, from 10,000,000 to 30,000,000 shares. After the private placement, the Company shifted its business plan to focus
on acquiring undervalued companies including those in the Greater China region.
On May 12, 2017, the Company acquired all of
the issued and outstanding shares of Lee Tat from Mr. Koon Wing CHEUNG, Lee Tat’s sole shareholder, in exchange for 219,222,938
shares of our issued and outstanding common stock. In connection with the Lee Tat acquisition, Miky Wan resigned from her positions
as Chief Executive Officer and Chief Operating Officer and Koon Wing CHEUNG and Yongwei HU were appointed to serve as our Chief
Executive Officer and Chief Operating Officer, respectively, and also as our directors. In addition, Anthony H.H. CHAN and Alice
K. M. TANG resigned from their positions as directors, and Zhigang LIAO and Weiming CHEN were appointed to fill the vacancies created
by their resignations. The Company relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or
Regulation S promulgated under the Act in selling the Company’s securities to the shareholders of Lee Tat.
Prior to the acquisition, the Company was considered
as a shell company due to its nominal assets and limited operation. Upon the acquisition, Lee Tat will comprise the ongoing operations
of the combined entity and its senior management will serve as the senior management of the combined entity, Lee Tat is deemed
to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization of the Company. Accordingly,
the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of
Lee Tat, and the Company’s assets, liabilities and results of operations will be consolidated with Lee Tat beginning on the
acquisition date. Lee Tat was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but
deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those
of the accounting acquirer (Lee Tat). Historical stockholders’ equity of the accounting acquirer prior to the merger are
retroactively restated (a recapitalization) for the equivalent number of shares received in the merger. Operations prior to the
merger are those of the acquirer. After completion of the share exchange transaction, the Company’s consolidated financial
statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
The Company, through its subsidiaries, mainly
engages in the provision of truckload transportation service in Hong Kong, in which the Company utilizes its owned trucks or independent
contractor owned trucks for the pickup and delivery of freight from port to the designated destination, upon the customers’
request.
Description of subsidiaries
Name
|
|
Place of incorporation
and kind of
legal entity
|
|
Principal activities
and place of operation
|
|
Particulars of issued/
registered share
capital
|
|
Effective interest
held
|
|
|
|
|
|
|
|
|
|
Cosmo Group International Holdings Limited
|
|
British Virgin Islands
|
|
Investment holding
|
|
50,000 shares at US$1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
Asia Cosmos Group (Hong Kong) Limited
|
|
Hong Kong
|
|
Corporate
|
|
10,000 ordinary shares at HK$1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
Lee Tat Transportation International Limited
|
|
Hong Kong
|
|
Logistic and delivery
|
|
10,000 ordinary shares at HK$1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
COSG and its subsidiaries are hereinafter referred
to as (the “Company”).
NOTE – 3
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The accompanying condensed consolidated financial
statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying
condensed consolidated financial statements and notes.
·
Use
of estimates
In preparing these condensed consolidated financial
statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance
sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.
·
Basis of consolidation
The condensed consolidated financial statements
include the financial statements of COSG and its subsidiaries. All significant inter-company balances and transactions within the
Company have been eliminated upon consolidation.
·
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.
·
Accounts receivable
Accounts receivable are recorded at the invoiced
amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service.
Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history.
Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days
and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates
individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of
the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses
resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid
according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution
in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and
the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its
customers. As of September 30, 2017, there was no allowance for doubtful accounts.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
·
Property, plant and equipment
Property, 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 and after taking into account their
estimated residual values:
|
|
Expected useful life
|
|
Service vehicle
|
|
8 years
|
|
Expenditure for repairs and maintenance is
expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts
and any resulting gain or loss is recognized in the results of operations.
Depreciation expense for the three months ended
September 30, 2017 and 2016 was $4,959 and $4,988, respectively.
Depreciation expense for the nine months ended
September 30, 2017 and 2016 was $14,876 and $14,968, respectively.
·
Impairment of long-lived assets
In accordance with the provisions of ASC Topic
360, “
Impairment or Disposal of Long-Lived Assets
”, all long-lived assets such as property, plant and equipment
held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying
amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the
fair value of the assets. There has been no impairment charge for the three and nine months ended September 30, 2017.
·
Revenue recognition
In accordance with the ASC Topic 605,
“Revenue
Recognition”
, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has
occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.
Revenue is recognized in full upon completion
of delivery to the receiver’s location.
·
Comprehensive income
ASC Topic 220,
“Comprehensive Income”,
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive
income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income,
as presented in the accompanying condensed consolidated statement of stockholders’ equity, consists of changes in unrealized
gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense
or benefit.
·
Income taxes
Income taxes are 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 years 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.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
For the three and nine months ended September
30, 2017 and 2016, the Company did not have any interest and penalties associated with tax positions. As of September 30, 2017,
the Company did not have any significant unrecognized uncertain tax positions.
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 files tax returns that are
subject to examination by the foreign tax authority.
·
Finance leases
Leases that transfer substantially all the
rewards and risks of ownership to the lessee, other than legal title, are accounted for as finance leases. Substantially all of
the risks or benefits of ownership are deemed to have been transferred if any one of the four criteria is met: (i) transfer of
ownership to the lessee at the end of the lease term, (ii) the lease containing a bargain purchase option, (iii) the lease term
exceeding 75% of the estimated economic life of the leased asset, (iv) the present value of the minimum lease payments exceeding
90% of the fair value. At the inception of a finance lease, the Company as the lessee records an asset and an obligation at an
amount equal to the present value of the minimum lease payments. The leased asset is amortized over the shorter of the lease term
or its estimated useful life if title does not transfer to the Company, while the leased asset is depreciated in accordance with
the Company’s depreciation policy if the title is to eventually transfer to the Company. The periodic rent payments made
during the lease term are allocated between a reduction in the obligation and interest element using the effective interest method
in accordance with the provisions of ASC Topic 835-30,
“Imputation of Interest”
.
·
Net income per share
The Company calculates net income per share
in accordance with ASC Topic 260,
“Earnings per Share.”
Basic income per share is computed by dividing the net
income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar
to basic income 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
statement of operations.
The reporting currency of the Company is the
United States Dollar ("US$"). The Company's subsidiaries in Hong Kong maintain their books and records in their local
currency, Hong Kong Dollars ("HK$"), which is the functional currency as being the primary currency of the economic environment
in which these entities operate.
In general, for consolidation purposes, assets
and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic
830-30,
“ Translation of Financial Statement
”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial
statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement
of stockholders’ equity.
·
Related parties
Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operational decisions. Companies are also considered to be related if they
are subject to common control or common significant influence.
·
Segment reporting
ASC Topic 280, “
Segment Reporting
”
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business segments and major customers in financial statements.
The Company operates in one reportable operating segment in Hong Kong.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
·
Fair value of financial instruments
The carrying value of the Company’s financial
instruments (excluding short-term bank borrowing and note payable): cash and cash equivalents, accounts and retention receivable,
prepayments and other receivables, accounts payable, income tax payable, amount due to a related party, other payables and accrued
liabilities approximate at their fair values because of the short-term nature of these financial instruments.
Management believes, based on the current market
prices or interest rates for similar debt instruments, the fair value of short-term bank borrowings and note payable approximate
the carrying amount.
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:
·
|
Level 1
: Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;
|
·
|
Level 2 :
Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and
|
·
|
Level 3
: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.
|
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 do 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
–
4
|
AMOUNTS DUE TO RELATED PARTIES
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Balances due to related parties:
|
|
|
|
|
|
|
|
|
Koon Wing CHEUNG, Chief Executive Officer and Director
|
|
$
|
–
|
|
|
$
|
41,306
|
|
Cosmos Links International Holding Limited
|
|
|
59,527
|
|
|
|
–
|
|
Asia Cosmos Group Limited
|
|
|
10,000
|
|
|
|
–
|
|
|
|
$
|
69,527
|
|
|
$
|
41,306
|
|
The balances were unsecured, interest-free
and repayable upon demand. Imputed interest from related party loan is not significant.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
NOTE
–
5
|
OBLIGATION UNDER FINANCE LEASE
|
The Company purchased a service vehicle under
a finance lease agreement with the effective interest rate of 2.25% per annum, due through May 29, 2020, with principal and interest
payable monthly. The obligation under the finance lease is as follows:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Finance lease
|
|
$
|
59,335
|
|
|
$
|
71,022
|
|
Less: interest expense
|
|
|
(6,002
|
)
|
|
|
(2,265
|
)
|
|
|
|
|
|
|
|
|
|
Net present value of finance lease
|
|
$
|
53,333
|
|
|
$
|
68,757
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
20,000
|
|
|
$
|
20,124
|
|
Non-current portion
|
|
|
33,333
|
|
|
|
48,633
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
53,333
|
|
|
$
|
68,757
|
|
As of September 30, 2017, the maturities of
the finance lease for each of the three years are as follows:
Years ending September 30:
|
|
|
|
2018
|
|
$
|
20,000
|
|
2019
|
|
|
20,000
|
|
2020
|
|
|
13,333
|
|
|
|
|
|
|
Total
|
|
$
|
53,333
|
|
The provision for income taxes consisted
of the following:
|
|
Nine months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Current tax
|
|
$
|
7,733
|
|
|
$
|
–
|
|
Deferred tax
|
|
|
321
|
|
|
|
1,585
|
|
Income tax expense
|
|
$
|
8,054
|
|
|
$
|
1,585
|
|
COSG is registered in the State of Nevada and
is subject to the tax laws of United States of America.
As of September 30, 2017, the operation in
the United States of America incurred $1,868,491 of cumulative net operating losses which can be carried forward to offset future
taxable income. The net operating loss carryforwards begin to expire in 2037, if unutilized. The Company has provided for a full
valuation allowance against the deferred tax assets of $635,286 on the expected future tax benefits from the net operating loss
carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
BVI
Under the current BVI law, the Company is not
subject to tax on income.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
Hong Kong
The Company’s subsidiaries operating
in Hong Kong are subject to the Hong Kong Profits Tax at a standard income tax rate of 16.5% on the assessable income arising in
Hong Kong during its tax year. The reconciliation of income tax rate to the effective income tax rate for the nine months ended
September 30, 2017 and 2016 is as follows:
|
|
Nine months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes from HK operation
|
|
$
|
79,154
|
|
|
$
|
(41,923
|
)
|
Statutory income tax rate
|
|
|
16.5%
|
|
|
|
16.5%
|
|
Income tax expense at statutory rate
|
|
|
13,060
|
|
|
|
(6,917
|
)
|
Tax effect from non-deductible items
|
|
|
2,454
|
|
|
|
2,469
|
|
Tax effect from deductible items
|
|
|
(2,854
|
)
|
|
|
(4,054
|
)
|
Tax losses
|
|
|
(4,927
|
)
|
|
|
8,502
|
|
Income tax expense
|
|
$
|
7,733
|
|
|
$
|
–
|
|
The following table sets forth the significant
components of the deferred tax assets and liabilities of the Company as of September 30, 2017 and December 31, 2016:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated depreciation
|
|
$
|
13,191
|
|
|
$
|
12,870
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
–
|
|
|
|
5,026
|
|
Less: valuation allowance
|
|
|
–
|
|
|
|
(5,026
|
)
|
Deferred tax assets, net
|
|
$
|
–
|
|
|
$
|
–
|
|
NOTE – 7
|
STOCKHOLDERS’ EQUITY
|
The Company’s authorized share is 500,000,000
common shares with a par value of $0.001 per share.
On January 13, 2017, the Company issued 200,000,000
shares of its common stock for total proceed of $200,000 for work capital purpose.
On May 12, 2017, the Company completed the
acquisition of 100% equity interest in Lee Tat Transportation International Limited in exchange of 219,222,938 shares of its common
stock. These common stocks were subsequently issued to the shareholders of Lee Tat Transportation International Limited.
As of September 30, 2017, the Company had a
total of 429,848,898 shares of its common stock issued and outstanding.
NOTE – 8
|
RELATED PARTY TRANSACTIONS
|
Advances from Stockholder
From time to time, the stockholder and director
of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and
due on demand. The imputed interest on the loan from a related party was not significant.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
Free Office Space
from its Stockholder
The Company has been provided office space
by its stockholder at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its
consolidated financial statements.
Apart from the transactions and balances
detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or
material related party transactions during the periods presented.
NOTE – 9
|
CONCENTRATIONS OF RISK
|
The Company is exposed to the following concentrations of risk:
(a) Major
customers
For the three and nine months ended September
30, 2017 and 2016, the customers who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances
as at period-end dates, are presented as follows:
|
|
Three months ended
September 30, 2017
|
|
|
|
|
September 30, 2017
|
|
Customers
|
|
Sales
|
|
|
Percentage
of sales
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
78,603
|
|
|
|
27%
|
|
|
|
|
$
|
–
|
|
Customer B
|
|
|
86,205
|
|
|
|
29%
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
164,808
|
|
|
|
56%
|
|
|
Total:
|
|
$
|
–
|
|
|
|
Nine months ended
September 30, 2017
|
|
|
|
|
September 30, 2017
|
|
Customers
|
|
Sales
|
|
|
Percentage
of sales
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
218,075
|
|
|
|
38%
|
|
|
|
|
$
|
–
|
|
Customer B
|
|
|
143,507
|
|
|
|
25%
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
361,582
|
|
|
|
63%
|
|
|
Total:
|
|
$
|
–
|
|
|
|
Three months ended
September 30, 2016
|
|
|
|
|
September 30, 2016
|
|
|
|
Sales
|
|
|
Percentage
of sales
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
21,816
|
|
|
|
24%
|
|
|
|
|
$
|
–
|
|
Customer B
|
|
|
33,729
|
|
|
|
37%
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
55,545
|
|
|
|
61%
|
|
|
Total:
|
|
$
|
–
|
|
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
|
|
Nine months ended
September 30, 2016
|
|
|
|
|
September 30, 2016
|
|
|
|
Sales
|
|
|
Percentage
of sales
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
91,699
|
|
|
|
33%
|
|
|
|
|
$
|
–
|
|
Customer B
|
|
|
40,887
|
|
|
|
15%
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
132,586
|
|
|
|
48%
|
|
|
|
|
$
|
–
|
|
All customers are located in Hong Kong.
(b) Major
vendors
No vendor represented more than 10% of
the Company’s operating cost for the three and nine months ended September 30, 2017 and 2016.
All vendors are located in Hong Kong.
(c) Credit
risk
Financial instruments that are potentially
subject to credit risk consist principally of trade receivables. 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) Interest rate risk
As the Company has no significant interest-bearing
assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.
The Company’s interest-rate risk arises
from borrowing under notes and bank borrowings. The Company manages interest rate risk by varying the issuance and maturity dates
variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest
rates. As of September 30, 2017, borrowing under finance lease was at fixed rate.
NOTE
–
10
|
COMMITMENTS AND CONTINGENCIES
|
(a) Operating lease commitments
As of September 30, 2017, the Company has no
material commitments under operating leases.
(b) Capital commitment
As of September 30, 2017, the Company has no
material capital commitments in the next twelve months.
COSMOS GROUP HOLDINGS
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
(Unaudited)
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 September 30, 2017, up through
the date the Company issued the unaudited condensed financial statements. During the period, the Company did not have any material
recognizable subsequent events.