NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Sinorama Corporation (the “Company”
or “Sinorama”) was incorporated on June 30, 2016, under the laws of the State of Florida. On the same date, Sinorama
issued 11,000,000 shares of its common stock in exchange for all of the outstanding shares of Sinorama Tours Co., Ltd., a Samoan
corporation organized in June 2015 ("Sinorama Tours"). Sinorama Tours is a holding company with two operating subsidiaries:
·
|
Vacances Sinorama Inc. (“Vacances Sinorama”), an integrated tour company incorporated in Quebec, Canada in December 2004. Vacances Sinorama provides Bus Tours, Asian Tours, Airline Tickets, Hotel Reservations, Cruises and other travel services to its customers worldwide. Vacances Sinorama facilitates travel commerce with online and offline travel businesses. Vacances Sinorama is servicing both business to customer (B2C) and business to business (“B2B”) in the travel marketplace.
|
·
|
Sinorama Voyages (“Sinorama Voyages”), an integrated tour company incorporated in France in February 2012. Sinorama Voyages also provides Bus Tours, Asian Tours, Airline Tickets and other travel services to its customers worldwide. Sinorama Voyages facilitates travel commerce with online and offline travel businesses. Sinorama Voyages services both business to customer (B2C) and business to business (“B2B”) in the travel marketplace.
|
Sinorama Tours owns 66⅔% of Vacances
Sinorama through Simon Qian Voyages, Inc., a wholly-owned subsidiary, and owns 51% of Sinorama Voyages directly. The other 33⅓%
of Vacances Sinorama is owned by Qian Hong, the Chairman of Sinorama. The other 49% of Sinorama Voyages is owned by Yang Ming (39%)
and Zhao Hongxi (10%). Zhao Hongxi is the Chief Financial Officer of Sinorama.
Basis of presentation
The accompanying financial data have been prepared
by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and are presented in conformity
with U.S. generally accepted accounting principles (U.S. GAAP). Our fiscal year end is December 31. Unless otherwise stated, all
years and dates refer to our fiscal year
.
Principles of consolidation
The consolidated financial statements include
the accounts of the Company and its subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.
Non-controlling interests represent the equity interest in Vacances Sinorama and Sinorama Voyages that are not attributable to
the Company. Non-controlling interest is reported in the consolidated financial position within equity, separately from the Company’s
equity, and net income or loss and comprehensive income or loss that are attributable to the Company and to the non-controlling
interest are separately reported on the Statement of Operations.
Use of estimates
The preparation of audited consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting periods. Management makes these estimates using the best information
available at the time the estimates are made; however actual results could differ from those estimates. Significant items subject
to such estimates and assumptions include valuation allowances for receivables and recoverability of carrying amount and the estimated
useful lives of long-lived assets. These estimates are often based on complex judgments and assumptions that management believes
to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates.
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES
Reclassification
The comparative figures have been reclassified
to conform to current year presentation.
Revenue recognition
The Company's revenues are primarily derived from sale of its self-developed
products, including Bus Tour Products and Asian Tour Products. The Company also sells Third Party Products (airline tickets, hotels,
etc.). Effective January 1, 2018, the Company adopted ASC 606, “Revenue from Contracts with Customers” using the modified
retrospective method. The adoption did not have a significant impact on the Company’s consolidated financial statements.
The Company recognizes revenue on sales in the period in which the Company satisfies its performance obligation.
Bus Tour Products Sales
Revenues from Bus Tours are recognized when
customers depart from the trips, where all the server within the tours are occupied, no significant obligations remain after the
departure of the trips.
Revenues from Bus Tour services are recognized
on a gross basis, which represent amounts charged to and received from customers. The Company is the primary obligor in the arrangement
and bear the risks and rewards, including the customers’ acceptance of products and services delivered.
Asian Tour Products Sales
The Company recognize Asian Tour services revenues
and other travel-related services such as visa processing services on the date that the tours or the flights depart, where all
the server within the tours are occupied, no significant obligations remain after the departure of the trips.
Revenues from Asian Tour services are recognized
on a gross basis, which represent amounts charged to and received from customers. The Company is the primary obligor in the arrangement
and bear the risks and rewards, including the customers’ acceptance of products and services delivered.
Third Party Products Sales
Revenue from sales of the Third-Party Products
reservations is recognized at the time of the booking of the reservation, where all the products are occupied, no significant obligations
remain after the departure of the trips.
Third-Party Products sales are non-refundable.
Third-Party Products revenue is normally derived from airline tickets, hotel reservations, cruises, insurance, etc. The revenue
from Third Party Products is recognized on a gross basis. The Company conducts a rigorous process in selecting travel products
and services before selling these products to customers and independently determines the prices charged to customers for Third
Party Products. The Company is the primary obligor in the arrangement and is responsible for the ultimate customer acceptance for
all products and services rendered. Such commitment is also made in the contracts entered into with customers. The Company is the
party retained and paid by customers. In situations of customer disputes, where the customer files a complaint or demands a refund,
the Company assumes risks and responsibilities for the delivery of products and is responsible for refunding the customers their
payments.
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
Cash and cash equivalents
Cash and cash equivalents consist of cash on
hand and bank deposits and other liquid investments, which are unrestricted as to withdrawal and use. All highly liquid investments
with original stated maturity of three months or less are classified as cash equivalents. Cash and cash equivalents approximates
or equals fair value due to their short term nature. The Group’s cash and cash equivalents consist of cash on hand and cash
in bank, including bank term deposits. As of March 31, 2018 and December 31, 2017, the cash on hand and cash in bank were $5,357,742
and $3,895,910, respectively. As of March 31, 2018 and December 31, 2017, the term deposits were $615,398 and $690,923, respectively,
the interest rate was between 0.2% and 0.95%, maturity was three months or less. Therefore, the total cash and cash equivalents,
as of March 31, 2018 and December 31, 2017, were $5,973,140 and $4,586,833, respectively.
Restricted cash
In accordance with the Quebec Consumer Protection
Act and the Travel Agents Act, the Company is required to deposit into trust certain customer deposits until suppliers are paid
for their services. The Company can access the trust account only to administer it as trustee, and cannot use funds from this account
for personal or corporate purposes until the suppliers are paid. As of March 31, 2018 and December 31, 2017, the restricted cash
in the trust account was $1,862,169 and $3,162,969, respectively.
Short term investments
Short-term investments are comprised of investments
in financial products issued by banks or other financial institutions, which contain a fixed or variable interest rate and a term
to maturity of greater than 3 months but less than 12 months. Such investments are generally not permitted to be redeemed early
or are subject to non interest for redemption prior to maturity. The Company classifies these investments as held-to-maturity as
it has both the positive intent and ability to hold them until maturity. These investments are classified as short-term investments
based on the maturity date. The short term investments maturities are exceeding three months. As of March 31, 2018 and December
31, 2017, the short term investments were $1,055,173 and $1,679,560, respectively, the interest rates were between 0.65% and 1.5%,
and the maturity was between three months and twelve months.
Fair Value Measurement
The Company applies the provisions of ASC Subtopic
820-10, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements
of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework
for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as the price that would
be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. In determining the fair value for the assets and liabilities required or permitted to be recorded, the Company
considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants
would use when pricing the asset or liability.
ASC 820 establishes a fair value hierarchy
that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority
to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
are as follows:
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
Fair Value Measurement(Continuing)
Level 1: Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets
that are not active, or inputs that is observable, either directly or indirectly, for substantially the full term of the asset
or liability;
Level 3: Prices or valuation techniques
that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market
activity).
There were no transfers between level 1, level
2 or level 3 measurements for three months ended March 31, 2018 and 2017.
Financial assets and liabilities of the Company
primarily comprise of cash and cash equivalents, restricted cash, short term investment, accounts receivable, amount due from related
parties, other receivable, accounts payable, payroll payable, amount due to related party. As at March 31, 2018 and December 31,
2017, the carrying values of these financial instruments approximated to their fair values due to the short-term maturity of these
instruments.
Accounts receivable
Accounts receivable are recognized and carried
at original invoiced amount less an allowance for any potential uncollectible amounts. An estimate for doubtful debts is made when
the collection of the full amount is no longer probable. Bad debts are written off as incurred.
The Company maintains allowances for doubtful
accounts for estimated losses resulting from the failure of customers to make payments on time. The Company reviews the accounts
receivable on a periodic basis and makes allowances when there is doubt as to the collectability of individual balances. In evaluating
the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the
customer’s historical payment history, its current credit-worthiness and current economic trends.
The Company had nil bad debts for both the three
months ended March 31, 2018 and for the years ended December 31, 2017.The balance of the allowance for doubtful account were nil
as of March 31, 2018 and December 31, 2017.
Property and equipment
Property and equipment are stated at cost.
Computer Equipment, Furniture & Fixtures and Office Equipment are depreciated using the declining balance depreciation method
basis reflective of the useful lives of the assets. Leasehold Improvement are stated at cost and are depreciated using the straight-line
method over the shorter of the estimated useful lives of the asset or the term of the related lease, as follows:
Computer Equipment
|
|
Declining Balance Method at rate 30% per year
|
Furniture & Fixtures
|
|
Declining Balance Method at rate 20% per year
|
Office Equipment
|
|
Declining Balance Method at rate 20% per year
|
Leasehold Improvement
|
|
10 years or more over the remaining lease term
|
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
Property and equipment(Continuing)
Repair and maintenance costs are charged to
expenses as incurred, whereas the cost of renewals and betterment that extends the useful lives of property and equipment is capitalized
as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated
depreciation from the assets and accumulated depreciation accounts with any resulting gain or loss reflected in the statements
of operations and comprehensive loss.
Functional currency and foreign currency
translation
As of March 31, 2018, and December 31, 2017,
and for three months ended March 31, 2018 and 2017, all foreign subsidiaries use the local currency of their respective countries
as their functional currency, which is the U.S. Dollars for Sinorama and Sinorama Tours, and the Canadian dollar (“CAD”)
for Simon Qian Voyages and Vacances Sinorama and the Euro (“€”) for Sinorama Voyages.
The Company’s reporting currency is U.S.
dollars. Assets and liabilities of Simon Qian Voyages, Vacances Sinorama and Sinorama Voyages are translated into U.S. dollars
at the exchange rates set forth in the Bank of Canada at the balance sheet dates, revenues and expenses are translated into U.S.
dollars at average exchange rates set forth in the Bank of Canada for the reporting periods, and shareholders' equity is translated
at historical exchange rates. Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive
income (loss).
Realized gains and losses from foreign currency
transactions are recognized as gain or loss on foreign currency in the consolidated statements of operations, unrealized gains
and losses from foreign currency transactions are recognized as foreign currency translation adjustment attributable to non-controlling
interests and foreign currency translation adjustment attributable to the company in the consolidated statements of operations.
The exchange rates used for foreign currency translation
are as follows:
|
|
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
|
|
|
|
(CAD
to USD/EUR to USD)
|
|
|
(CAD
to USD/EUR to USD)
|
|
Assets and liabilities
|
|
period end exchange rate
|
|
|
0.7756/1.2306
|
|
|
|
0.7519/1.0715
|
|
Revenue and expenses
|
|
period weighted average
|
|
|
0.7910/1.2295
|
|
|
|
0.7554/1.0660
|
|
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
Income taxes
The Company adopts FASB ASC Topic 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.
In July 2006, the FASB issued FIN 48(ASC 740-10),
Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109 (ASC 740), which requires income tax positions
to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under FIN 48(ASC 740-10), tax
positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial
reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not
threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.
The application of tax laws and regulations
is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change
as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the
actual liability may be materially different from our estimates, which could result in the need to record additional tax liabilities
or potentially reverse previously recorded tax liabilities or deferred tax asset valuation allowance.
The Company’s income tax expenses (recovery)
were $nil for the three months ended March 31, 2018 and 2017, respectively.
Earnings per share
The Company computes earnings per share (“EPS”)
in accordance with ASC 260, Earnings Per Share. ASC 260 requires companies with complex capital structures to present basic and
diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding during the period.
Diluted EPS is similar to basic EPS but presents
the dilutive effect on a per share basis of contracts to issue common shares (e.g., convertible securities, options and warrants)
as if they had been converted at the beginning of the periods presented, or issuance date, if later. The computation of diluted
EPS includes the estimated impact of the exercise of contracts to purchase common stock using the treasury stock method and the
potential shares of converted common stock associated with the convertible debt using the if-converted method. Potential common
shares that have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss per share) are excluded
from the calculation of diluted EPS.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of
net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains or losses
resulting from translating Simon Qian Voyages, Vacances Sinorama and Sinorama Voyages’ functional currency, the Canadian
dollar and the Euro, to its reporting currency, U.S. dollar
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
Segment Information and Geographic Data
The Company reports segment information based
on the “management” approach. The management approach designates the internal reporting used by management for making
decisions and assessing performance as the source of the Company’s reportable operating segments.
The Company manages its business primarily
on a geographic basis. The Company’s reportable operating segments consist of Vacances Sinorama (Canada) and Sinorama Voyages
(France). Although each reportable operating segment provides similar travel products and similar services, they are managed separately
to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of
each geographic region. The accounting policies of the various segments are the same as those described in Note 2, “Summary
of Significant Accounting Policies” of the Notes to Condensed Interim Consolidated Financial Statements in this report.
The Company evaluates the performance of its
reportable operating segments based on net sales and operating income. Net sales for geographic segments are generally based on
the location of customers and sales through the Company’s office located in those geographic locations. Operating income
for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the
segment. Advertising expenses and salaries and employee benefits are generally included in the geographic segment in which the
expenditures are incurred. Operating income for each segment excludes other income and expense and certain expenses managed outside
the reportable operating segments. Costs excluded from segment operating income include income taxes and foreign currency translation
adjustment. The Company does not include intercompany transfers between segments for management reporting purposes.
Summarized financial information by segment
is as follows:
|
|
Vacances
Sinorama
(Canada)
|
|
|
Sinorama
Voyages
(France)
|
|
|
Sinorama
Corporation
(USA)
|
|
|
Total
|
|
March 31, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
14,610,293
|
|
|
$
|
1,381,172
|
|
|
$
|
-
|
|
|
$
|
15,991,465
|
|
Net loss
|
|
|
(2,102,365
|
)
|
|
|
(621,347
|
)
|
|
|
(49,911
|
)
|
|
|
(2,773,623
|
)
|
Total assets
|
|
|
29,433,755
|
|
|
|
6,058,483
|
|
|
|
3,888,835
|
|
|
|
39,381,073
|
|
March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
12,030,876
|
|
|
|
1,045,728
|
|
|
|
-
|
|
|
|
13,076,604
|
|
Net loss
|
|
|
(1,543,333
|
)
|
|
|
(250,648
|
)
|
|
|
(44,752
|
)
|
|
|
(1,838,733
|
)
|
Total assets
|
|
|
30,103,061
|
|
|
|
5,394,766
|
|
|
|
778,640
|
|
|
|
36,276,467
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
27,753,926
|
|
|
$
|
4,001,860
|
|
|
$
|
3,980,747
|
|
|
$
|
35,736,533
|
|
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
Segment Information and Geographic Data(Continuing)
A reconciliation of the Company’s segment
operating income to the Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017:
|
|
Three Months Ended March 31,
|
|
|
|
2018
(Unaudited)
|
|
|
2017
(Unaudited)
|
|
Segment operating loss
|
|
$
|
(2,773,623
|
)
|
|
$
|
(1,838,733
|
)
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
Foreign currency translation adjustment
|
|
|
(221,956
|
)
|
|
|
61,907
|
|
Total comprehensive loss
|
|
$
|
(2,995,579
|
)
|
|
$
|
(1,776,826
|
)
|
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk are cash and cash equivalents, restricted cash, short term investment, accounts receivable,
amount due from related parties, other receivables, long term deposits. The carrying amounts of these financial instruments represent
the maximum amount of loss due to credit risk. The deposits placed with financial institutions are not protected by statutory or
commercial insurance. In the event of bankruptcy of one of these financial institutions, the Company may be unlikely to claim its
deposits back in full. Management believes that these financial institutions are of high credit quality and continually monitors
the credit worthiness of these financial institutions. The Company places its cash in what it believes to be credit-worthy financial
institutions. The Company has a diversified customer base. The majority of sales are cash receipt in advance. For those credit
sales, the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk,
establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable
credit risk exposure beyond such allowance is limited.
Exchange Rate Risks
The Company operates in Canada and France,
which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates
between the US$ and the CAD, or Euro. For the three months end March 31, 2018 and 2017, foreign currency translation adjustment
attributable to non-controlling interests of $(111,359) and $28,171, foreign currency translation adjustment attributable to the
Company of $(110,597) and $33,736 is included in the consolidated statements of operations, respectively. As at March 31, 2018,
cash and cash equivalents of $2,409,801 (CAD3,107,197) is denominated in CAD and held in Canada (March 31, 2017 - $2,064,669 (CAD2,748,600)),
cash and cash equivalent of $4,381,588 (Euro3,560,530) is denominated in Euro and held in France (March 31, 2017 - $ 3,178,152
(Euro2,966,076)). As at December 31, 2017, cash and cash equivalents of $3,068,275 (CAD3,849,298) is denominated in CAD and are
held in Canada (December 31, 2016 - $2,111,443 (CAD2,834,912), cash and cash equivalent of $1,456,257 (Euro1,213,749) is denominated
in Euro and held in France (December 31, 2016 - $ 2,297,734 (Euro2,177,313)).
Recently accounting pronouncements
In February 2016, the FASB issued ASU 2016-02
Leases (Topic 842). ASU 2016-02 establishes new guidance for the recording and disclosure of assets and liabilities that arise
from leasing activity. ASU 2016-02 will require most lessees to record lease assets and lease liabilities that arise from leases
on the statement of financial condition and disclose qualitative and quantitative information related to lease transactions such
as variable lease payments and options to renew and terminate leases. ASU 2016-02 is effective for years beginning after December
18, 2018 and early adoption is permitted. The Company is evaluating ASU 2016-02 to determine its impact, if any, on the consolidated
financial statements.
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
Recently accounting pronouncements(Continuing)
In March 2017, the FASB issued ASU No.
2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt
Securities. Under current GAAP, entities normally amortize the premium as an adjustment of yield over the contractual life of the
instrument. This guidance shortens the amortization period for certain callable debt securities held at a premium to the earliest
call date. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2018. The adoption of ASU No. 2017-08 is not expected to have a material impact on the Company’s consolidated financial statements.
In February 2018, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-02, “Income Statement - Reporting
Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU
2018-02 was issued as a result of the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”) on December 22, 2017.
Accounting guidance required deferred tax items to be revalued based on the new tax laws (the most significant of which reduced
the corporate tax rate to 21% percent from 34% percent) and to include the change in income from continuing operations. ASU 2018-02
is effective for annual and interim reporting periods beginning after December 15, 2018.
As of the date of filing of this report, 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.
Recently adopted accounting standards
In January 2016, the FASB issued ASU 2016-01
Financial Instruments Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Liabilities. ASU 2016-01 amends
the guidance in US GAAP on classification, measurement and disclosure of financial instruments. It revises an entity’s accounting
related to: 1) classification and measurement of investments in equity securities; 2) presenta tion of certain fair value changes
for financial liabilities measured at fair value; and, 3) amends disclosure requirements associated with the fair value of financial
instruments. ASU 2016-01 is effective for years beginning after December 15, 2017 and early adoption is permitted. The adoption
of ASU 2016-01 is not expected to have a material effect on the Company's consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).
The amendment in this update affect entities with transactions included within the scope of Topic 606, The scope of that Topic
includes entities that enter into contracts with customers to transfer goods or services (that are an output of the entity’s
ordinary activities) in exchange for consideration. The amendments are intended to improve the operability and understandability
of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, the amendments
in ASU 2016-10 provide more detailed guidance, including additional implementation guidance and examples in the following key areas:
1) identifying performance obligations and 2) licenses of intellectual property. In May 2016, the FASB issued ASU No. 2016-12 a
proposed Update, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments
do not change the core principles of the standard, but clarify the guidance on assessing collectability, presenting sales taxes,
measuring noncash consideration and certain transition matters. This update becomes effective concurrently with ASU No. 2014-09.
The Company adopted ASU 2016-12 effective January 1, 2018. The impact on our consolidated financial statements and related disclosures
was not material.
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUING)
In October 2016, the FASB issued Accounting
Standards Update No. 2016-16, Income Taxes – Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16). The standard
is intended to address diversity in practice and complexity in financial reporting, particularly for intra-entity transfers of
intellectual property. ASU 2016-16 will be effective for the Company beginning with the interim periods of fiscal 2018 and requires
the modified retrospective method of adoption. Early adoption is permitted. The Company is in the process of determining timing
of adoption and assessing the impact of ASU 2016-16 on its consolidated financial statements.The adoption of ASU 2016-16 is not
expected to have a material effect on the Company's consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement
of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash
equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling
the beginning of period and end of period total amounts shown on the statement of cash flows. ASU No. 2016-18 is effective for
annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company elected to early
adopt ASU No. 2016-18 for the reporting period ending December 31, 2017. As a result of adoption of ASU No. 2016-18, the Company
no longer presents the changes within restricted cash in the consolidated statements of cash flows.
In January 2017, the FASB issued Accounting
Standards Board Update No. 2017-01: Business Combinations (Topic 805) - Clarifying the Definition of a Business (“ASU
2017-01”). The ASU clarifies the definition of business with the objective of adding guidance to assist entities with evaluating
whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 will be effective
for the Company’s fiscal year beginning January 1, 2018 and subsequent interim periods with prospective application with
impacts on the Company’s consolidated financial statements that may vary depending on each specific acquisition. Early adoption
is conditionally permitted. The adoption of ASU 2017-01 is not expected to have a material effect on the Company's consolidated
financial statements.
NOTE 3. PREPAYMENTS & DEFERRED EXPENSES
Our travel suppliers require prepayments for
reserving tour availabilities. The prepayment is recorded in prepayments and deferred expenses on the consolidated balance sheets.
Deferred expenses include prepaid insurance, advertising fee. The Company’s prepayments and deferred expenses for reserving
tour availabilities were $20,820,412 and $13,728,133 as of March 31, 2018 and December 31, 2017, respectively.
|
|
March 31
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
Prepayments for tour products
|
|
$
|
20,818,402
|
|
|
$
|
13,718,946
|
|
Prepaid expense
|
|
|
2,010
|
|
|
|
9,187
|
|
Total Prepayments and deferred expenses
|
|
$
|
20,820,412
|
|
|
$
|
13,728,133
|
|
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 4. OTHER RECEIVABLE
At March 31, 2018 and December 31, 2017, other
receivable consists of the following:
|
|
March
31,
2018
|
|
|
December
31,
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
Tax on Value Added (TVA) (France)
|
|
$
|
164,233
|
|
|
$
|
246,522
|
|
Income tax receivable (France)
|
|
|
41,100
|
|
|
|
-
|
|
GST/QST (Canada)
|
|
|
214,182
|
|
|
|
393,857
|
|
Income tax receivable (Canada)
|
|
|
33,229
|
|
|
|
69,769
|
|
Air Canada
|
|
|
45,547
|
|
|
|
46,812
|
|
Eva Airway Cor.
|
|
|
15,511
|
|
|
|
15,942
|
|
China Eastern Airlines
|
|
|
76,880
|
|
|
|
69,200
|
|
United Airline
|
|
|
9,060
|
|
|
|
1,734
|
|
Air China Ltd
|
|
|
23,267
|
|
|
|
23,913
|
|
JL Travel Marketing
|
|
|
11,944
|
|
|
|
12,275
|
|
Chase
|
|
|
59,260
|
|
|
|
-
|
|
Alipay Limited
|
|
|
31,798
|
|
|
|
-
|
|
Others
|
|
|
71,737
|
|
|
|
86,284
|
|
Total other receivable
|
|
$
|
797,748
|
|
|
$
|
966,308
|
|
The amount from Air Canada, Eva Airway Cor,
China Eastern Airlines, United, Air China Ltd, JL Travel Marketing and others is pre-authorization holds for air tickets.
NOTE 5. LONG TERM DEPOSITS
Long term deposits are the deposits made by
the Company held at third institutions for operation purposes. As of March 31, 2018 and December 31, 2017, the Company had $1,230,600
and $1,199,800, respectively, in air ticket security deposit with CAGEP SARL, which is a member of the International Air Transport
Association (IATA) and has the license to sale the air ticket to Sinorama Voyages. As of March 31, 2018 and December 31, 2017,
the Company had $174,500 and $179,348 in deposit with OPC (Office of Consumer Protection) as travel company bankruptcy guarantee.
The deposit does not bear any interest.
|
|
March
31,
2018
|
|
|
December
31,
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
CAGEP SARL
|
|
$
|
1,230,600
|
|
|
$
|
1,199,800
|
|
Pivotal Escrow Fund
|
|
|
211,726
|
|
|
|
-
|
|
OPC
|
|
|
174,500
|
|
|
|
179,348
|
|
Swatow Development Inc.
|
|
|
93,033
|
|
|
|
95,618
|
|
Other deposit
|
|
|
125,781
|
|
|
|
81,080
|
|
Total Long term deposits
|
|
$
|
1,835,640
|
|
|
$
|
1,555,846
|
|
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 6. PROPERTY AND EQUIPMENT
At March 31, 2018 and December 31, 2017, property
and equipment, at cost, consist of:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
Computer equipment
|
|
$
|
134,454
|
|
|
$
|
119,797
|
|
Furniture & Fixture
|
|
|
20,535
|
|
|
|
21,106
|
|
Office equipment
|
|
|
93,389
|
|
|
|
94,229
|
|
Leasehold Improvement
|
|
|
381,650
|
|
|
|
395,942
|
|
Total property and equipment at cost
|
|
|
630,028
|
|
|
|
631,074
|
|
Accumulated depreciation
|
|
|
314,121
|
|
|
|
302,061
|
|
Total property and equipment, net
|
|
$
|
315,907
|
|
|
$
|
329,013
|
|
Depreciation expense were $19,709 and $13,558
for the three months ended March 31, 2018 and 2017, respectively.
NOTE 7. CUSTOMER DEPOSITS
Customer deposits are the deposits made by
all customers for reservation or the full payment must be paid by either check, debit card, credit card or cash before it can be
confirmed. Customers must settle the total of all sums. Otherwise, the Company reserves the right to cancel the reservation and
retain the full amount of the initial deposit. Cancellation of a reservation can only be made through the Company and the following
conditions will apply: more than 90 days prior to the departure date: 50% refund of the balance per-person, including taxes and
service charge. If the tour is marked “Final Sale”, it is not refundable, nor changeable, nor transferable, whenever
the purchase is made. Customer deposits are recognized as revenue on departure date when services are provided to the customers.
Customer deposits from all customers were $38,388,443 and $30,129,523 at March 31, 2018 and December 31, 2017, respectively, and
were recorded as a current liability on the consolidated balance sheets.
NOTE 8. NON-CONTROLLING INTERESTS
Vacances Sinorama and Sinorama Voyages are
the Company’s majority-owned subsidiaries and are consolidated in the Company’s financial statements with a non-controlling
interest recognized.
The 33.33% of Vacances Sinorama interest held
by Qian Hong is a non-controlling interest. ASC810-10-45 provides that the ownership interest in the subsidiary that are held by
owners other than the parent is a non-controlling interest. 66.67% of Vacances Sinorama is owned by Simon Qian Voyages Inc., a
wholly-owned subsidiary of Sinorama Tours.
The 39% of Sinorama Voyages equity held by
YANG Ming and the 10% of Sinorama Voyages interest held by ZHAO Hongxi are also non-controlling interest, 51% of Sinorama Voyages
is held by Sinorama Tours.
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
ASC 810-10-50 requires that the company separately
disclosed amounts attributable to shareholders’ equity and non-controlling interests(NCIs) in the financial statements. For
three months ended March 31, 2018, the comprehensive loss attributable to shareholders’ equity and NCIs is $ (2,073,683)
and $ (921,896), respectively. For three months ended March 31, 2017, the comprehensive income attributable to shareholders’
equity and non-controlling interest is $(1,183,163) and $(593,663), respectively. As of March 31, 2018, and December 31, 2017 the
NCIs were $(4,414,070) and $(3,492,174), respectively.
NOTE 9. RELATED PARTY TRANSACTIONS
Amount due from related parties
Amount due from related parties consisted of the
following as of the periods indicated:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Name of related parties
|
|
(Unaudited)
|
|
|
|
|
Sinorama Reisen GmbH
|
|
$
|
4,013,908
|
|
|
$
|
4,243,746
|
|
Sinorama Holiday Inc.
|
|
|
16,726
|
|
|
|
2,790,843
|
|
Sinorama Holiday Limited
|
|
|
2,280,318
|
|
|
|
2,388,881
|
|
Sinorama Travel Vancouver Inc.
|
|
|
408,503
|
|
|
|
302,835
|
|
Total
|
|
$
|
6,719,455
|
|
|
$
|
9,726,305
|
|
The balance due from Sinorama Reisen GmbH,
which is 65% owned by Jing Wenjia, Chief Executive Officer of the Company, was paid to suppliers on behalf of Sinorama Reisen GmbH
to get favorable price in group-buying, in order to reserve tour availabilities. The balance was non-interest bearing, payable
on demand.
The balance due from Sinorama Holiday Inc.,
which is 40% owned by Qian Hong, Chairman of the Company and 20% owned by Jing Wenjia, Chief Executive Officer of the Company,
arose from the purchase by Sinorama Holiday Inc. of travel products from Vacances Sinorama Inc., is non-interest bearing and due
on demand.
The balance due from Sinorama Holiday Limited,
which is 51% owned by Qian Hong, Chairman of the Company, arose from the purchase by Sinorama Holiday Limited of travel products
from Vacances Sinorama Inc, is non-interest bearing and due on demand.
The balance due from Sinorama Travel Vancouver
Inc., which is 51% owned by Qian Hong, Chairman of the Company, arose from the purchase by Sinorama Travel Vancouver Inc. of travel
products from Vacances Sinorama Inc, is non-interest bearing and due on demand.
Amount due to related parties
Amount due to related parties consisted of the
following as of the periods indicated:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Name of related parties
|
|
(Unaudited)
|
|
|
|
|
Qian Hong & Jing Wenjia
|
|
$
|
7,327
|
|
|
$
|
7,576
|
|
|
|
$
|
7,327
|
|
|
$
|
7,576
|
|
Qian Hong is the Chairman of the Company, and
Jing Wenjia is the Chief Executive Officer, director and shareholder of the Company. It is temporary borrowings between the Company
and management. The debt was non-interest bearing and due on demand.
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 9. RELATED PARTY TRANSACTIONS(CONTINUING)
Related parties’ transactions
Sales of travel product to related parties
consisted of the following for the periods indicated:
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Name of related parties
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Sinorama Reisen GmbH
|
|
$
|
405,950
|
|
|
$
|
42,062
|
|
Sinorama Holiday Limited
|
|
|
368,711
|
|
|
|
740,063
|
|
Sinorama Holiday Inc.
|
|
|
1,774,174
|
|
|
|
2,404,056
|
|
Sinorama Travel Vancouver Inc.
|
|
|
264
|
|
|
|
293,136
|
|
Total
|
|
$
|
2,549,099
|
|
|
$
|
3,479,317
|
|
NOTE 10. CONTINGENCIES AND COMMITMENT
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 and legal counsel assess such contingent liabilities,
and such assessment inherently involves an exercise of judgment. There was no contingency of this type as of March 31, 2018 and
December 31, 2017.
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 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. There was no
contingency of this type as of March 31, 2018 and December 31, 2018.
Loss contingencies considered to be remote
by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
In June, 2016 Vacances Sinorama leased office
space under non-cancellable operating lease agreements, which space is used for the Company’s Information Technology Department,
Electronic Commerce Department and Market Department and other departments. Under the terms of the lease, Vacances Sinorama paid
approximately $61,669 in lease deposits, and made lease payments of approximately $290,734 per year and is committed to lease payments
for 120 months.
Vacances Sinorama leases office space under
non-cancellable operating lease agreements, to be used for the Airline Ticket Department, Asia Tour Department and others departments.
The initial leases expired on various dates through 2016. Under the terms of those leases, Vacances Sinorama paid approximately
$22,061 in lease deposits and committed to lease and management fee payments of approximately $12,080 per month for 60 months.
In March 2016, Vacances Sinorama entered into a renewed lease agreement, which replaced its expired operating lease agreements.
Under the current terms of the lease, Vacances Sinorama is committed to lease and management fee payments of approximately $15,515
per month for 60 months.
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 10. CONTINGENCIES AND COMMITMENT(CONTINUING)
In July 2015, Vacances Sinorama entered into
a new lease agreement for the Bus Tour Department office. Under the terms of the lease, Vacances Sinorama paid approximately $15,194
in lease deposits, and is committed to lease and management fee payments of approximately $5,134 per month for 60 months.
In February, 2015, Sinorama Voyages leased
office space under a non-cancellable operating lease agreement. Under the terms of the lease, Sinorama Voyages paid approximately
$13,894 in lease deposits, and lease expense payments of approximately $4,869 per month. Under the terms of the lease agreement,
from February, 2016, Sinorama Voyages was committed to lease expense payments of approximately $4,857 per month for 96 months.
Future annual minimum lease payments, for non-cancellable
operating leases are as follows:
Year ending December 31
|
|
Amount $
|
|
2018
|
|
|
400,937
|
|
2019
|
|
|
534,582
|
|
2020
|
|
|
534,582
|
|
2021
|
|
|
471,685
|
|
2022
|
|
|
313,285
|
|
NOTE 11. Basic and Diluted Earnings Per Share
Basic net income per share is computed using
the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the
weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common
shares comprise shares issuable upon the exercise of share based awards, using the treasury stock method. The reconciliation of
the numerators and denominators of the basic and diluted earnings per share computations for income from continuing operations
is shown as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
(1,963,086
|
)
|
|
$
|
(1,216,899
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Basic and diluted weighted-average number of shares outstanding
|
|
|
15,186,000
|
|
|
|
14,700,000
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.13
|
)
|
|
$
|
(0.08
|
)
|
SINORAMA CORPORATION
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
(EXPRESSED IN US DOLLARS)
NOTE 12. SUBSEQUENT EVENT
The Management of the Company evaluated subsequent
events through the date these financial statements are available for issuance and determined that there were no other reportable
subsequent events to be disclosed.