Notes
to the Financial Statements
May
31, 2017
(Audited)
Jin
Wan Hong International Holding Limited, formerly Karnet Capital Corp. (the “Company”) was incorporated in the State
of Nevada on January 31, 2014. On January 14, 2016, Shu Feng Lu (President and Director of the Company), Hong Xia Li, and Chen
Yang took control of the Company by purchasing shares of common stock from existing shareholders.
The
Company’s currently operates in Room 1101, Block E, Guang Hua Yuan, 2031 Bin He Nan Road, FuTian District,
Shenzhen, Guangdong, China.. The Company plans to operate in tea related business(es) in China, but there is no guarantee
that the Company will be successful in its endeavor.
The
Company has generated limited revenues and incurred a loss since Inception (January 31, 2014) resulting in an accumulated deficit
of $62,538 as of May 31, 2017 and further losses are anticipated in the development of its business. Accordingly, there is substantial
doubt about the Company’s ability to continue as a going concern.
The
ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come
due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors
and, or, the private placement of common stock.
Because
of the Company’s history of losses, its independent auditors, in the reports on the financial statements for the year ended
May 31, 2017, expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying audited
financial statements for the twelve months period ended May 31, 2017 have been prepared in conformity with accounting principles
generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that could result from the outcome of this uncertainty.
Management
anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses
The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light
of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or
become financially viable and continue as a going concern.
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3.
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SUMMARY
OF SIGNIFCANT ACCOUNTING POLICIES
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Basis
of Presentation
The
accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in
the United States of America, and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”)
and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present
the financial position, results of operations, stockholders’ equity and cash flows of the Company for the twelve month period
ended May 31, 2017.
Accounting
Basis
The
Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”
accounting). The Company has adopted a May 31 fiscal year end.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. There
were no cash equivalents as of May 31, 2017.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents and amounts due to shareholder. The carrying amount
of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements.
Income
Taxes
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and
are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be realized.
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3.
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SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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Revenue
Recognition
The
Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will
recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned
when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped
or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is
reasonably assured.
Stock-Based
Compensation
We
account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50,
Equity-Based
Payments to Non-Employees
(“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with
nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is
measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is
estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments
issued as deferred stock compensation and amortize the cost over the term of the contract.
We
account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718,
Compensation—Stock
Compensation,
which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values.
The
fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over
the period during which services are rendered.
Basic
Income (Loss) Per Share
Basic
income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net
income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt
or equity. There are no such common stock equivalents outstanding as of May 31, 2017 or May 31, 2016.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent
Accounting Pronouncements
In
August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements
Going Concern (Subtopic 205-40) –Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”
(“Update”). Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether
there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures.
The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing
and content of footnote disclosures. The amendments require management
to assess an entity’s ability to continue as a going
concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the
amendments (1) provide a definition of the term
substantial doubt,
(2) require an evaluation every reporting period including
interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain
disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express
statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year
after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective
for public and nonpublic entities for annual periods ending after May 31, 2017. Early adoption is permitted.
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
As
of May 31, 2017, the Company owed its President, Director, and major shareholder, Shu Feng Lu $28,238. The total loan of $28,238
was unsecured, non-interest bearing and due on demand.
The
Company prepaid $5,000 service fee to OTC Markets for OTC Disclosure and News Services on June 9, 2017.
The
Company has 75,000,000, $0.001 par value, shares of common stock authorized.
In
April, 2014, the Company issued 6,000,000 shares of common stock to a director for cash proceeds of $6,000. The shares were issued
at $0.001 per share.
In
July, 2015, the Company issued 1,000,000 shares of common stock for cash proceeds of $10,000. The shares were issued at $0.01
per share.
In
July, 2015, the Company issued 310,000 shares of common stock for cash proceeds of $3,100. The shares were issued at $0.01 per
share.
In
July, 2015, the Company issued 470,000 shares of common stock for cash proceeds of $4,700. The shares were issued at $0.01 per
share.
In
July, 2015, the Company issued 160,000 shares of common stock for cash proceeds of $1,600. The shares were issued at $0.01 per
share.
In
July, 2015, the Company issued 160,000 shares of common stock for cash proceeds of $1,600. The shares were issued at $0.01 per
share.
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7.
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COMMITMENTS
AND CONTINGENCIES
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The
Company neither owns nor leases any real or personal property. An officer has provided offices without charge. There is no obligation
for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected
herein. The officers and directors are involved in other business activities and most likely will become involved in other business
activities in the future.
In
accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to May 31, 2017 through December
7, 2017. The OTC Markets denied the Company’s application, and the Company received a refund of $5,000 (service fee)
from OTC Markets on October 13, 2017. Therefor the service fee is no longer applicable.