1. ORGANIZATION AND BUSINESS BACKGROUND
Ajia Innogroup Holdings, Ltd., formerly “Wigi4you, Inc.” (the “Company” or “AJIA”) was incorporated in the State of Nevada on March 19, 2014. The Company had intended to provide a website and mobile app to assist event planners in locating performers, bands and speakers, booking locations and planning events in areas around the United States and Canada. However, The Company changed its business plan in 2017 and is currently planning to pursue the business in having self-help photo kiosks to be implemented at major convenient locations, such as shopping mall, buildings near subway stations, etc. to attract customers to use the service. In addition, the Company provides system development consulting and training services. The main revenue for these businesses will be generated from the self-help photo kiosks at which one can do photo printing, Wechat printing, game commemorative photos, copying documents, etc., as well as from consulting contracts.
On November 24, 2017 the Board of Directors (the “Board”) accepted the resignation of Ms. Elaine Wan as Chief Executive and Chief Financial Officer of the Company. At the same time, the Board elected the following individuals to the following positions: Mr. Chi Qiang Liang was elected as President, Chief Executive Officer and Director of the Company; Mr. Wai Hing Samuel Lai was elected as Chief Financial Officer of the Company; Shun Ching (Dickson) Wong was elected as a Director and a Member of the Audit Committee of the Company; Ms. Sin Kei Stella Hui was elected as a Director and a Member of the Audit Committee; Ms. Kiu Chung Jacqueline Tang was elected as Chief Operating Officer of the Company; Mr. Jeffrey Firestone was elected as Director and Vice President of Investor Relations of the Company; Dr. Kwai Lam Terence Wong was elected as Vice President of Investor Relations and Elaine Wan was elected as Director, Secretary and Treasurer.
On December 1, 2017, the Company acquired a ten percent (10%) ownership interest in a collection code project ("Project"), the purpose of which is to improve the marketability and market penetration of Alipay Network Technology Co., Ltd. ("Alipay") collection code system. As a part of the agreement, the Company will share 10% of expenses and profit on the Project (See Note 4).
Effective February 9, 2018, the Board accepted the resignation of Jeffrey S. Firestone from his position as Vice President and director of the Company.
On April 25, 2018, the Company announced that its wholly owned subsidiary, Guangzhou Shengjia Trading Co., Ltd. of Guangzhou, China (“Shengjia”) has entered into an agreement with Guangzhou Renhai Network Technology Co., Ltd. (“Renhai”) in which Shengjia would replace its 10% interest in the Alipay payment code business development project (“Alipay Project”) (See Note 4), with a 30% interest of Renhai’s new China Mobile project. Renhai has recently reached an agreement with China Mobile Communications Corporation (“China Mobile”) whereby Renhai and China Mobile are to sign an agreement appointing Renhai as one of China Mobile’s marketers in promoting China Mobile’s business products for the period from April 1, 2018 to September 30, 2018. Renhai’s China Mobile agreement will be extended once certain business targets are fulfilled.
The Company’s activities are subject to significant risks and uncertainties including failing to secure additional funding to operationalize the Company’s website and apps before another company develops similar websites or apps.
The details of the Company’s subsidiaries are described below:
Name
|
|
Place of incorporation and kind of
legal entity
|
|
Principal activities
and place of operation
|
|
Particulars of issued/ registered share
capital
|
|
Effective interest
Held
|
Splendor Radiant Limited
|
|
British Virgin
Islands, a limited liability company
|
|
Investment holding
|
|
1 issued shares of US$1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
A Jia Creative Holdings Limited
|
|
Hong Kong, a limited liability company
|
|
Provision of system setup and maintenance services, investment holding
|
|
100 issued shares of HK$1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
Guangzhou Shengjia Trading Co., Ltd
|
|
The PRC, a limited liability company
|
|
Trading business
|
|
HK$1,000,000
|
|
100%
|
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
AJIA and its subsidiaries are hereinafter referred to as (the “Company”).
2. GOING CONCERN UNCERTAINTIES
The accompanying consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company experienced a net loss of $266,097 and negative cash flows from operations during the year and incurred an accumulated deficit of $333,302 as of June 30, 2018. The continuation of the Company as a going concern through June 30, 2019 is dependent upon the continued financial support from its stockholders. Management believes the Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.
The consolidated financial statements include the financial statements of AJIA and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
·
|
Cash and cash equivalents
|
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
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 lives
|
Computer equipment
|
5 years
|
Expenditures for repairs and maintenance are expensed as incurred. When assets have been 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 years ended June 30, 2018 and 2017 were $81 and $0, 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 plant and equipment and intangible assets 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 years presented.
The Company’s revenue recognition policies are in compliance with FASB ASC 605-35 “Revenue Recognition”. Revenue is recognized when a formal arrangement exists, the price is fixed or determinable, all obligations have been performed pursuant to the terms of the formal arrangement and collectability is reasonably assured.
For the Company’s self-serve kiosks, revenue is recognized when each kiosk satisfies the performance obligation by transferring control of the promised goods or services to the customer.
For the Company’s business in catering system development and training, monthly revenue is recognized when the Company satisfies its obligation by transferring control of the promised goods or performance of services to the customer.
The Company recognizes revenues on sales of its services, based on the terms of the customer agreement. The customer agreement takes the form of either a contract or a customer purchase order and each provides information with respect to the service being sold and the sales price. If the customer agreement does not have specific delivery or customer acceptance terms, revenue is recognized at the time the service is provided to the customer.
·
|
Comprehensive income or loss
|
ASC Topic 220,
“Comprehensive Income”
establishes standards for reporting and display of comprehensive income or loss, its components and accumulated balances. Comprehensive income or loss as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income or loss, as presented in the accompanying consolidated statement of stockholders’ deficit consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income or loss is not included in the computation of income tax expense or benefit.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The provision for income taxes is 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.
The Company did not have any unrecognized tax positions or benefits and there was no effect on the financial condition or results of operations for the years ended June 30, 2018 and 2017. The Company and its subsidiaries are subject to local and various foreign tax jurisdictions. The Company’s tax returns remain open subject to examination by major tax jurisdictions.
The Company calculates net loss per share in accordance with ASC Topic 260 “
Earnings per Share
”. Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss 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 United States Dollars ("US$"). The Company’s subsidiaries operating in Hong Kong and the PRC maintained their books and records in their local currency, Hong Kong Dollars ("HK$") and Renminbi Yuan (“RMB”), which are functional currencies 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$, in accordance with ASC Topic 830-30, “
Translation of Financial Statement”,
using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.
Translation of amounts from its reporting currencies into US$ has been made at the following exchange rates for the respective year:
|
|
2018
|
|
|
2017
|
|
Year-end HK$:US$1 exchange rate
|
|
|
7.8464
|
|
|
|
-
|
|
Annual average HK$:US$1 exchange rate
|
|
|
7.8000
|
|
|
|
-
|
|
Year-end RMB:US$1 exchange rate
|
|
|
6.6210
|
|
|
|
-
|
|
Annual average RMB:US$1 exchange rate
|
|
|
6.5047
|
|
|
|
-
|
|
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Contributions to retirement schemes (which are defined contribution plans) are charged to general and administrative expenses in the statements of operation and comprehensive income as and when the related employee service is provided.
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 operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
·
|
Concentration of credit risk
|
The Company is subject to credit risk through its accounts receivable consisting primarily of amounts due from franchisees for royalty income, and other products. The financial condition of these franchisees is largely dependent upon the underlying business trends of our brands and market conditions within the vending industry. This concentration of credit risk is mitigated, in part, by the large number of franchisees spread over a large geographical area and the short-term nature of the receivables.
·
|
Fair value of financial instruments
|
The carrying value of the Company’s financial instruments: cash and cash equivalents, prepayments and other receivables, accounts 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.
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
: 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
|
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
|
In July 2015, FASB issued ASU 2015-11, “Inventory (Topic 330) Related to Simplifying the Measurement of Inventory,” which applies to all inventory except that which is measured using last-in, first-out (“LIFO”) or the retail inventory method. Inventory measured using first-in, first-out (“FIFO”) or average cost is within the scope of the new guidance and should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The new guidance is applied prospectively, and earlier application is permitted as of the beginning of an interim or annual reporting period. The Company adopted ASU 2015-11 effective July 1, 2017, which had no material impact on its consolidated financial statements or financial statement disclosures.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
In January 2017, the Financial Accounting Standards Board (the “FASB”) issued new guidance for goodwill impairment which requires only a single-step quantitative test to identify and measure impairment and record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The option to perform a qualitative assessment first for a reporting unit to determine if a quantitative impairment test is necessary does not change under the new guidance. This guidance is effective for the Company beginning in fiscal year 2020 with early adoption permitted. The Company adopted this guidance in fiscal year 2017. The adoption of this guidance will had no impact 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 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. 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, and transfers between cash and cash equivalents and restricted cash are no longer presented within the statement of cash flows. ASU 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 2016-18 for the reporting period ended December 31, 2017 and the standard was applied retrospectively for all periods presented which had no material impact on prior years. As a result of the adoption of ASU 2016-18, the Company no longer presents the change within restricted cash in the consolidated statement of cash flows.
In March 2016, the Financial Accounting Standards Board (the “FASB”) issued new guidance for employee share-based compensation which simplifies several aspects of accounting for share-based payment transactions, including excess tax benefits, forfeiture estimates, statutory tax withholding requirements, and classification in the statements of cash flows. This guidance was effective for the Company in fiscal year 2017. Under the new guidance any future excess tax benefits or deficiencies are recorded to the provision for income taxes in the consolidated statements of operations, instead of additional paid-in capital in the consolidated balance sheets. During the years ended June 30, 2018 and 2017, no excess tax benefits were recorded to additional paid-in capital that would have been recorded as a reduction to the provision for income taxes.
In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases (Topic 842) , which supersedes existing guidance on accounting for leases in Leases (Topic 840) and generally requires all leases, including operating leases, to be recognized in the statement of financial position as right-of-use assets and lease liabilities by lessees. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach and are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. In July 2018, the FASB issued ASU 2018-10 “Codification Improvements of Topic 842, Leases ” and ASU No. 2018-11,“ Leases (Topic 842 ): Targeted Improvements.” ASU 2018-11 provides companies another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The consideration in the contract is allocated to the lease and nonlease components on a relative standalone price basis (for lessees) or in accordance with the allocation guidance in the new revenue standard (for lessors). ASU 2018-11 also provides lessees with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component. If a lessee makes that accounting policy election, it is required to account for the nonlease components together with the associated lease component as a single lease component and to provide certain disclosures. Lessors are not afforded a similar practical expedient. The Company is evaluating the effect ASU 2016-02, 2018-10 and 2018-11 will have on its consolidated financial statements and disclosures and has not yet determined the effect of the standard on its ongoing financial reporting at this time.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 supersedes the revenue requirements in
Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. The New Revenue Standard provides for a single comprehensive principles-based standard for the recognition of revenue across all industries through the application of the following five-step process:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
This five-step process will require significant management judgment in addition to changing the way many companies recognize revenue in their financial statements. Additionally, and among other provisions, the New Revenue Standard requires expanded quantitative and qualitative disclosures, including disclosure about the nature, amount, timing and uncertainty of revenue.
In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year. Early adoption is permitted but not before the original effective date. The Company’s adoption of ASU 2014-09 will change the timing of the recognition of initial franchise fees. ASU 2014-09 requires these fees to be recognized over the term of the related franchise license for the respective robot, which had a material impact to revenue recognized for initial franchise fees and renewal franchise fees. ASU 2014-09, allows for non-cancellable franchise contract agreements for the Company recognize revenue under the provisions of ASC 606-10-25, Revenue Recognition – Revenue from Contracts with Customers.
In March 2016, FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this update change the accounting for certain stock-based compensation transactions, including the income tax consequences and cash flow classification for applicable transactions. The amendments in this update are effective for annual periods beginning after December 31, 2016 and interim periods within those annual periods. The Company is currently evaluating the impact that this amendment will have on its consolidated financial statements.
In February 2016, FASB issued ASU 2016-02, “Leases.” This standard requires the recognition of all lease transactions with terms in excess of 12 months on the balance sheet as a lease liability and a right-of-use asset (as defined in the standard). ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. ASU 2016-02 is not expected to have a material impact on the Company’s consolidated financial statements or consolidated financial statement disclosures upon adoption based on current facts and circumstances.
Effective January 2017, FASB issued ASU No. 2016-15 “Statement of Cash Flows” (Topic 230). This guidance clarifies diversity in practice on where in the Statement of Cash Flows to recognize certain transactions, including the classification of payment of contingent consideration for acquisitions between Financing and Operating activities. We are currently evaluating the impact that this amendment will have on our consolidated financial statements.
On January 5, 2017, the FASB issued ASU No. 2017-01, “Clarifying the Definition of a Business” (Topic ASC 805), guidance to clarify the definition of a 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. The amendments in this ASU provide a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and remove the evaluation of whether a market participant could replace the missing elements.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
This ASU is effective for public business entities in annual periods beginning after December 15, 2017, including interim periods therein. We are currently evaluating the impact that this amendment will have on our consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation” (Topic 718) - Scope of Modification Accounting. This ASU clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This ASU is effective prospectively for the annual period ending December 31, 2018 and interim periods within that annual period. We are currently evaluating the impact that this amendment will have on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “ Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ”, which adds disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company is evaluating the provisions of this ASU and plans to adopt this ASU effective July 1, 2020.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does 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.
4. COLLABORATIVE AGREEMENT
As part of the arrangement with Renhai, the Company exchanged 3,000,000 shares representing 30% of the Company’s common stock at the time of issuance for a ten percent (10%) ownership interest in the Project for a fair value of $128,700 estimated using a discounted future cash flow valuation model. The significant assumptions are the discount rate of 24% and a term of 4 years. The assumptions represent managements best estimate based on the information available.
The total value of common shares of $128,700 is being amortized over the expected measurement period through December 1, 2020. As of June 30, 2018, $10,725 of amortization has been recorded and the unamortized fair value has been recorded as an intangible asset, which was fully impaired.
This arrangement has been superseded by the agreement with Guangzhou Renhai Network Technology Co., Ltd. subsequent to the end of the period.
On April 25, 2018, the Company announced that its wholly owned subsidiary, Guangzhou Shengjia Trading Co., Ltd. of Guangzhou, China (“Shengjia”) has entered into an agreement with Guangzhou Renhai Network Technology Co., Ltd., in which Shengjia would replace its 10% interest in the Alipay payment code business development project (“Alipay Project”), with a 30% interest of Renhai’s new China Mobile project. Renhai has recently reached an agreement with China Mobile Communications Corporation (“China Mobile”) whereby Renhai and China Mobile are to sign an agreement appointing Renhai as one of China Mobile’s marketers in promoting China Mobile’s business products for the period from April 1, 2018 to September 30, 2018. Renhai’s China Mobile agreement will be extended once certain business targets are fulfilled. The reason for the replacement is primarily due to significant changes in China’s regulations and practices and these changes have negatively impacted the financial performance of the Alipay Project.
Renhai will maintain a 70% interest of the China Mobile project and will be responsible for the management and overall supervision of the project, and Shengjia will carry out various support functions.
Subsequently on December 28, 2018, both parties agreed to sign a termination agreement as the estimated revenue of China mobile project within two years is much lower than the expectation. Based on the terms is the agreement, all transactions in relation to the projects are all rescinded and become voided. Renhai shall return the Company’s 3,000,000 shares to the Company for cancellation and the Company shall return all the incomes previously received from Renhai.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The Company cancelled these 3,000,000 shares of common stock on December 28, 2018
5. AMOUNT DUE TO A RELATED PARTY
As of June 30, 2018 and 2017, amount due to a related party represented temporary advances made by a director of the Company, Ms. WAN Yin Ling, which was unsecured, interest-free with no fixed repayment term.
6. INCOME TAXES
The Company operates in various countries: United States, British Virgin Island, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
The Company is registered in the State of Nevada and is subject to United States current tax law.
British Virgin Island
Under the current BVI law, the Company is not subject to tax on income.
Hong Kong
For the years ended June 30, 2018 and 2017, no provision for Hong Kong Profits Tax is provided for, since the Company’s income neither arises in, nor is derived from Hong Kong under its applicable tax law. The reconciliation of income tax rate to the effective income tax rate based on loss before income taxes from foreign operation for the years ended June 30, 2018 and 2017 are as follows:
|
|
Years ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(18,787
|
)
|
|
$
|
-
|
|
Statutory income tax rate
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
Income tax impact at the statutory rate
|
|
|
(3,099
|
)
|
|
|
-
|
|
Non-deductible items
|
|
|
50
|
|
|
|
-
|
|
Deductible items
|
|
|
(109
|
)
|
|
|
-
|
|
Tax loss not recognized as deferred tax
|
|
|
3,158
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
As of June 30, 2018, Hong Kong operation generated approximately $3,158 of net operating loss carryforwards for Hong Kong tax purpose at no expiration.
The PRC
For the years ended June 30, 2018 and 2017, the Company generated no operating result and accordingly, no provision for income tax has been recorded.
As of June 30, 2018, the PRC operation incurred $1,241 of net operating losses carryforward available for income tax purposes that may be used to offset future taxable income and will begin to expire in 5 years from the year of incurrence, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The following table sets forth the significant components of the aggregate net deferred tax assets of the Company as of June 30, 2018 and 2017:
|
|
|
As of June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Net operating loss carryforward from:
|
|
|
|
|
|
|
|
– United States of America
|
|
|
$
|
89,776
|
|
|
$
|
22,850
|
|
– Hong Kong
|
|
|
|
3,158
|
|
|
|
-
|
|
– The PRC
|
|
|
|
310
|
|
|
|
-
|
|
Total deferred tax assets
|
|
|
|
93,244
|
|
|
|
22,850
|
|
Less: valuation allowance
|
|
|
|
(93,244
|
)
|
|
|
(22,850
|
)
|
Net deferred tax assets
|
|
|
$
|
-
|
|
|
$
|
-
|
|
As of June 30, 2018, the Company incurred $266,097 the aggregate net operating loss carryforwards available to offset its taxable income for income tax purposes. The Company has provided for a full valuation allowance against the deferred tax assets of $93,244 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. For the year ended June 30, 2018, the valuation allowance increased by $93,244, primarily relating to net operating loss carryforwards.
7. PENSION COSTS
Contributions to retirement schemes (which are defined contribution plans) are charged to general and administrative expenses in the statements of operation and comprehensive income as and when the related employee service is provided.
The Company is required to make contribution under a defined contribution pension scheme for all of its eligible employees in Hong Kong. The Company is required to contribute a specified percentage of the participants' relevant income based on their ages and wages level. The total contributions made were $1,768 and $0 for the years ended June 30, 2018 and 2017, respectively
8. STOCKHOLDERS’ EQUITY
(a) Preferred stock
The company was authorized to issue one hundred million (100,000,000) shares of preferred stock, par value $0.001 per share. On June 30, 2018, none of the preferred shares have been issued.
(b) Common stock
Shares authorized
Upon formation, the total number of shares of all classes of stock which the Company was authorized to issue seventy-five million (75,000,000) shares of common stock, par value $0.001 per share. On December 15, 2017, the Company increased its authorized common shares to 500,000,000 shares at par value $0.001 per share.
Common stock issued
On August 23, 2016, the Company has received $50,000 from investors for 2,000,000 shares of common stock to be issued. The shares were subscribed as per a Registration Statement filed with the SEC to register and sell 2,000,000 shares of newly issued common stock at an offering price of $0.025 per share. The Company issued the shares on September 20, 2016.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
On July 10, 2017, Company issued 20,000 share of Common Stock at $0.50 per share for cash proceeds of $10,000.
On December 1, 2017, the Company exchanged 3,000,000 shares of its common stock at a value of $128,700 to acquire 10% ownership of the Project (See Note 4). This amount has been recorded as an intangible asset.
As of June 30, 2018 and 2017, the Company had a total of 10,270,000 and 7,250,000 shares of its common stock issued and outstanding.
Subsequently, 3,000,000 shares of common stocks were cancelled upon the termination of the agreements.
9. RELATED PARTY TRANSACTIONS
Advances from Director
From time to time, a director of the Company advance 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 director was not significant.
Free Office Space from its Majority Stockholder
The Company has been provided office space by its majority stockholder at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statements.
10. CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the year ended June 30, 2018, two customers represented more than 10% of the Company’s revenues. These customers accounted for 89% (58% and 30%) of the Company’s revenues amounting to $90,000 ($60,000 and $30,000 respectively) with $0 of accounts receivable.
For the year ended June 30, 2017, there was no customer represented more than 10% of the Company’s revenues.
(b) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
AJIA INNOGROUP HOLDINGS, LTD.
(Formerly Wigi4You, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(c) Exchange rate risk
The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in HK$ and a significant portion of the assets and liabilities are denominated in HK$. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and HK$.. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.
11. COMMITMENTS AND CONTINGENCIES
As of June 30, 2018 and 2017, there were no commitments and contingencies involved.
12. 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 June 30, 2018 up through the date the Company issued the audited consolidated financial statements. During the period, the Company did not have any material recognizable subsequent events.
On December 28, 2018, the Company’s subsidiary, Guangzhou Shengjia Trading Co., Ltd. of Guangzhou, China (“Shengjia”), has entered into with Guangzhou Renhai Network Technology Co., Ltd. (“Renhai”) whereby the Company shall share 10% interest in Renhai’s Alipay payment code business development project (“Alipay Project”) with the consideration of the Company’s 3,000,000 shares.
Due to the change in the PRC regulations, the Company subsequently announced on December 28, 2018 that the said 10% interest in Alipay Project was replaced by 30% interest in Renhai’s project with China Mobile Communications Corporation (“China Mobile”).
Nevertheless, even with the above remedies, the returns from the projects are still not satisfied by the Company’s management and are far below the estimations made from Renhai to the Company. In this regard, both parties agree that the agreements between Shengia and Renhai are rescinded and voided. Renhai shall return the Company’s 3,000,000 shares to the Company for cancellation and the Company shall return all the incomes previously received from Renhai.