NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
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
balance sheet as of September 30, 2018 which has been derived from both audited and unaudited 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, 2018 are not necessarily
indicative of the results to be expected for the entire fiscal year ending December 31, 2018 or for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s
Discussion and the audited financial statements and notes thereto included in the Form 10-K for the year ended December 31, 2017.
2.
|
DESCRIPTION
OF BUSINESS AND ORGANIZATION
|
United
Royale Holdings Corp., formerly known as Bosy Holdings Corp. (“the Company”, “we”, “us” or
“our”) was incorporated in the State of Nevada on June 23, 2015. We intend to offer planting and cultivation services
to land owners in regards to the planting and cultivation of Aquilaria Subintegra & Aquilaria Sinensis trees. We also intend
to provide services relating to the extraction of Agarwood from such trees through a process known as “inoculation.”
On
September 30, 2018, the Company and Mr. CHEN Zheru, representing the sole shareholder of IV Enterprises Development Limited, a
Seychelles corporation (“IVED”), entered into a Sale and Purchase Agreement, pursuant to which the Company acquired
100% (one hundred percent) of the shareholding of IVED. IVED provides tree nurseries, including planting, cultivation and inoculation
services through its wholly-owned subsidiary, Oudh Tech Sdn Bhd, in Malaysia. The acquisition is completed on September 30, 2018.
Mr.
CHEN Zheru is the common director and major shareholder of the Company and IVED. As a result of this common ownership and in accordance
with the FASB Accounting Standards Codification Section 805
“Business Combination”
, the transaction is being
treated as a combination between entities under common control. The recognized assets and liabilities were transferred at their
carrying amounts at the date of the transaction. The equity accounts of the combining entities are combined. Further, the companies
will be combined retrospectively for prior year comparative information as if the transaction had occurred on January 1, 2017.
3.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of presentation
The
accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States
of America (“US GAAP”).
The
accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions
and balances were eliminated in consolidation.
Below
is the organization chart of the Group.
Use
of estimates
Management
uses estimates and assumptions in preparing these financial statements in accordance with US GAAP. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities in the balance sheet,
and the reported revenue and expenses during the periods reported. Actual results may differ from these estimates.
Cash
and cash equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Our
deposit is currently deposit in HSBC Hong Kong, and there is a Deposit Protection Scheme protects our eligible deposits held with
bank in Hong Kong which is members of the Scheme. The scheme will pay us a compensation up to a limit of HKD500,000, which is
equivalent to $64,102, if HSBC Hong Kong fails.
Plant
and equipment
Plant
and equipment are stated at cost less accumulated depreciation and impairment. Depreciation of plant, equipment and software are
calculated on the straight-line method over their estimated useful lives or lease terms generally as follows:
Classification
|
|
Useful
Life
|
Computer
and Software
|
|
3
years
|
Equipment
|
|
10
years
|
The
Company purchased 2 computers at the end of June 2017, and the computers has been subject to depreciation since the utilization
in July 2017. Expenditures for maintenance and repairs will be expensed as incurred.
Biological
Assets
Biological
Assets of the Company comprise of agarwood sapling and plantation cost of agarwood.
Bearer
plants of agarwood are measured at cost. Cost of bearer plants consists of accumulated planation development costs incurred from
commencement of planting of seedlings up to maturity of the crop cultivated. Capitalization of planation development and other
operating costs ceases upon commencement of commercial harvesting, which range from 7 to 9 years.
When
a bearer crop has harvested and is replanted, the carry amount of the old bearer crop is derecognized, the new bearer crop is
treated as a replacement of the old bearer crop and capitalized.
Biological Assets is measured using average cost,
and is measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of biological
Assets is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That
loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes.
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 Dollars (“US$”) and the accompanying financial statements have
been expressed in US$. Hong Kong Dollars (“HK$”), which is the respective functional currencies for the Company as
the deposit is currently kept in HSBC Hong Kong. In addition, the Company’s subsidiaries maintain their books and records
in their respective local currency, which consists of the Hong Kong Dollars (“HK$”) and Malaysian Ringgit (“MYR”),
which is also the respective functional currency of the subsidiaries.
Translation
of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective
periods:
|
|
As
of and for the nine months ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Period-end
MYR : US$1 exchange rate
|
|
|
4.14
|
|
|
|
4.22
|
|
Period-average
MYR : US$1 exchange rate
|
|
|
3.99
|
|
|
|
4.33
|
|
Period-end
/ average HK$ : US$1 exchange rate
|
|
|
7.75
|
|
|
|
7.75
|
|
Revenue
recognition
In
accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 606, “Revenue From Contracts With Customers”, the Company recognizes revenue from sales of goods and services
when the following five following steps are carried out: (1) Identify the contract; (2) Identify the performance obligations;
(3) Determine the transaction price; (4) Allocate the transaction price; (5) Recognize revenue. For the nine months ended September
30, 2018, the Company had no revenue recorded, as a result, there was no effect on revenue by adopting ASC 606 starting from January
1, 2018.
Income
taxes
The
Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of
deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between
tax bases and financial reporting bases of the Company’s assets and liabilities. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are
expected to be recovered or settled. The 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. A valuation allowance is provided on deferred taxes if it is determined
that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related
to income tax liabilities in the provision for income taxes in its Consolidated Statements of Income.
Significant
management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position.
The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more
likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize
in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts
ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may
materially impact the financial statements of the Company in future periods.
Fair
value of financial instruments
The
carrying value of the Company’s financial instruments: cash and cash equivalents, prepayments, amount due to a director
and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.
The
Company 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 : Observable inputs such as quoted prices in active markets;
●
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
●
Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions
Recent
accounting pronouncements
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts
with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015,
the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays
the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the
original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers
(Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation
guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether
it controls a specified good or service before it is transferred to the customers. The new standard further requires new disclosures
about contracts with customers, including the significant judgments the company has made when applying the guidance. We adopted
the new standard effective January 1, 2018, using the modified retrospective transition method. We finalized our analysis and
the adoption of this guidance will not have a material impact on our consolidated financial statements and our internal controls
over financial reporting.
In
June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic
915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in
Topic 810, Consolidation,” (“ASU 2014-10”). ASU 2014-10 removes the definition of a development stage entity
from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities
from GAAP. In addition, ASU 2014-10 eliminates the requirements for development stage entities to (1) present inception-to-date
information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as
those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged,
and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been
in the development stage. ASU 2014-10 is effective for annual reporting periods beginning after December 15, 2014, and interim
periods therein. Early adoption is permitted. The Company has elected to adopt ASU 2014-10 effective with this registration statement
on Form S-1 and its adoption resulted in the removal of previously required development stage disclosures.
In
October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers Other
than Inventory (ASU 2016-16), which requires companies to recognize the income-tax consequences of an intra-entity transfer of
an asset other than inventory. This guidance will be effective for us in the first quarter of 2018, with the option to adopt it
in the first quarter of 2017. We adopted the new standard effective January 1, 2018, and do not expect the standard to have a
material impact on our financial statements.
In
November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU
2016-18), which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in
cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash
flows. We adopted the new standard effective January 1, 2018, and do not expect the standard to have a material impact on our
financial statements.
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.
The
prepaid expenses as of September 30, 2018 included OTCQB annual fee of $2,500, and deposit of $725, while the prepaid expenses
as of December 31, 2017 only included the retainer of $425 kept in the transfer agent’s account, prepaid services fee of
$ 900, and deposit of $741.
5.
|
PLANT
AND EQUIPMENT, NET
|
|
|
As
of
September 30, 2018
|
|
|
As
of
December 31, 2017
|
|
Computer
and Software
|
|
$
|
3,878
|
|
|
$
|
3,878
|
|
Equipment
|
|
|
1,812
|
|
|
|
1,852
|
|
|
|
|
5,690
|
|
|
|
5,730
|
|
Less:
Accumulated Depreciation
|
|
|
(1,858
|
)
|
|
|
(754
|
)
|
Plant
and equipment, net
|
|
$
|
3,832
|
|
|
$
|
4,976
|
|
The
Company acquired computers and a software at $3,731 and $147 respectively in 2017, and the accumulated depreciations as of September
30, 2018 and December 31, 2017 were $1,616 and $646 respectively.
The
Company acquired Engine Pump at MYR7,500 (approximately $1,852) in 2017. The accumulated depreciations as of September 30, 2018
and December 31, 2017 were $242 and $108 respectively.
Biological
Assets of the Company comprise of agarwood sapling and plantation cost of agarwood.
The Company acquired the agarwood
sapling at MYR98,800 (approximately $24,395) in 2017. The accumulated planation development costs incurred from commencement of
planting of seedlings up to September 30, 2018 and December 31, 2017 were $18,886 and $9,328 respectively.
7.
|
AMOUNT
DUE TO DIRECTOR
|
As of September 30, 2018, and December
31, 2017, our directors has loaned to the Company $82,957 and $66,039 as working capital, respectively. This loan
is unsecured, non-interest bearing and due on demand.
On
December 12, 2017, a related company which is controlled by Mr. Chen Zheru cancelled its 60,000,000 shares of common stock.
As
of September 30, 2018, and December 31, 2017, there are 141,965,520 and 141,965,520 shares of common stock issued and outstanding
respectively.
There
were no stock options, warrants or other potentially dilutive securities outstanding as of September 30, 2018.
9.
|
CONCENTRATIONS
OF RISK
|
The
Company is exposed to the following concentrations of risk:
(a)
Major customers
For
three months ended September 30, 2018 and 2017, the customers who accounted for 10% or more of the Company’s purchases and
its outstanding payable balance at period-end are presented as follows:
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Accounts
receivable, trade
|
|
Customer
A
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
$
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
$
|
-
|
|
|
|
-
|
|
For
nine months ended September 30, 2018 and 2017, the customers who accounted for 10% or more of the Company’s purchases and
its outstanding payable balance at period-end are presented as follows:
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
Accounts
receivable, trade
|
|
Customer
A
|
|
$
|
-
|
|
|
|
12,500
|
|
|
|
-
|
|
|
|
100
|
%
|
|
$
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
|
12,500
|
|
|
|
-
|
|
|
|
100
|
%
|
|
$
|
-
|
|
|
|
-
|
|
(b)
Major vendors
For
three months ended September 30, 2018 and 2017, the vendors who accounted for 10% or more of the Company’s purchases and
its outstanding payable balance at period-end are presented as follows:
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
Purchase
|
|
|
Percentage
of purchases
|
|
|
Accounts
payable, trade
|
|
Vendor
A
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
$
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
|
$
|
-
|
|
|
|
-
|
|
For
nine months ended September 30, 2018 and 2017, the vendors who accounted for 10% or more of the Company’s purchases and
its outstanding payable balance at period-end are presented as follows:
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
Purchase
|
|
|
Percentage
of purchases
|
|
|
Accounts
payable, trade
|
|
Vendor
A
|
|
$
|
-
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
100
|
%
|
|
$
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
100
|
%
|
|
$
|
-
|
|
|
|
-
|
|
Our
CEO, Mr. Teoh, was the director of Vendor A previously. He resigned from Vendor A on January 25, 2017, while the sale was generated
in June 2017.