Notes to Condensed Consolidated Financial Statements
1.
Organization and Principal Activities
Traqer Corp. (the “Company”) was originally organized in the State of Nevada on April 4, 2014. The Company’s primary business activities are to develop and provide contract processing of energy conserving and environmentally friendly building material to domestic markets with patents that the Company owns.
On November 2, 2017, the Company filed a Certificate of Amendment with the State of Nevada to increase its authorized shares to 2,000,000,000.
On September 24, 2018, the Company’s board of directors unanimously approved to modify the Company’s accounting fiscal year end from August 31 to June 30.
On November 27, 2017, the Company entered into share exchange agreement by and among Donggao International Group Shares Limited (“Donggao International”) and its shareholders: 1.) Yue Zhong, 2.) Zhongjian Overseas Investment Limited and 3.) Hongshan Holdings Investment Limited whereby the Company newly issued 300,000,000 shares of its common stock in exchange for all the outstanding shares in Donggao International. This transaction has been accounted for a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting acquiree, and Donggao International, the legal acquiree, is the accounting acquirer; accordingly, the Company historical statement of stockholders’ equity has been retroactively restated to the first period presented.
Donggao International Group Shares Limited (the “Donggao International” or “Company”) was incorporated as an international business company in the Republic of Seychelles on March 13, 2017. Donggao International’s wholly-owned subsidiary, Donggao Group Limited (“Donggao Group”) was incorporated as an international business company in the Republic of Seychelles on March 13, 2017. Donggao Group’s wholly-owned subsidiary, Donggao Group Holdings Limited (“Donggao Hong Kong”) was incorporated as a limited liability company in Hong Kong on March 22, 2017. Donggao Hong Kong’s wholly-owned subsidiary, Shenzhen Qianhai Donggao Technology Limited (“Shenzhen Donggao”) was incorporated as a limited liability company in Shenzhen City, Guangdong Province, People’s Republic of China on May 17, 2017. Shenzhen Donggao’s wholly-owned subsidiary, Guangzhou Donggao New Material Co. Limited (“Guangzhou Donggao”) was incorporated as a limited liability company in Guangzhou City, Guangdong Province, People’s Republic of China on January 9, 2018.
2.
Summary of Significant Accounting Policies
Method of accounting
Management has prepared the accompanying financial statements and these notes in accordance to generally accepted accounting principles in the United States of America; the Company maintains its general ledger and journals with the accrual method accounting.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries on a consolidated basis. The Company also includes subsidiaries over which a direct or indirect legal or effective control exists and for which the Company is deemed to direct the significant activities and has the obligation to absorb the losses or benefits of the entities. All intercompany accounts, balances and transactions with consolidated entities have been eliminated.
|
Name of Subsidiary
|
|
State or Jurisdiction of Organization of Entity
|
|
Attributable equity interest
|
|
|
Donggao Group Limited (“Donggao Group”)
|
|
Republic of Seychelles
|
|
|
100
|
%
|
|
Donggao Group Holdings Limited (“Donggao Hong Kong”)
|
|
Hong Kong
|
|
|
100
|
%
|
|
Shenzhen Qianhai Donggao Technology Limited (“Shenzhen Donggao”)
|
|
PRC
|
|
|
100
|
%
|
|
Guangzhou Donggao New Material Co. Limited (“Guangzhou Donggao”)
|
|
PRC
|
|
|
100
|
%
|
Traqer Corp.
Notes to Condensed Consolidated Financial Statements
Use of estimates
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues 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 materially from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less, and unencumbered bank deposits to be cash equivalents.
Plant and equipment
Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. The Company’s typically applies a salvage value of 0% to 10%. The estimated useful lives of the plant and equipment are as follows:
|
Leasehold improvements
|
|
2 years
|
|
|
Machinery and equipment
|
|
5 years
|
|
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss are included in the Company’s results of operations. The costs of maintenance and repairs are recognized to expenses as incurred; significant renewals and betterments are capitalized.
Intangible Asset
Intangible assets are carried at cost and amortized on a straight-line basis over a specified period. Amortization is provided using the straight-line method over 1-11 years.
Accounting for the impairment of long-lived assets
The Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may be the result of becoming obsolete from a change in the industry, introduction of new technologies, or if the Company has inadequate working capital to utilize the long-lived assets to generate the adequate profits. Impairment is present if the carrying amount of an asset is less than its expected future undiscounted cash flows.
If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed are reported at the lower of the carrying amount or fair value less costs to sell.
Statutory reserves
Statutory reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe that an enterprise operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10% of its profit. Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered capital.
Traqer Corp.
Notes to Condensed Consolidated Financial Statements
Foreign currency translation
The accompanying financial statements are presented in United States dollars. The functional currencies of the Company are in Renminbi (RMB). The Company’s assets and liabilities are translated into United States dollars from RMB at year-end exchange rates, and its revenues and expenses are translated at the average exchange rate during the year. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
|
|
|
12/31/2018
|
|
|
6/30/2018
|
|
|
12/31/2017
|
|
|
Period/year end RMB: US$ exchange rate
|
|
|
6.8764
|
|
|
|
6.6191
|
|
|
|
6.5064
|
|
|
Period/annual average RMB: US$ exchange rate
|
|
|
6.8587
|
|
|
|
6.5052
|
|
|
|
6.6416
|
|
The RMB is not freely convertible into foreign currencies and all foreign exchange transactions must be conducted through authorized financial institutions.
Revenue recognition
The Company recognizes revenue when all the following criteria have been met: it has negotiated the terms of the transaction with the customer which includes setting a fixed sales price, it has transferred of possession of the product to the customer, the customer does not have the right to return the product, the customer is able to further sell or transfer the product onto others for economic benefit without any other obligation to be fulfilled by the Company, and the Company is reasonably assured that funds have been or will be collected from the customer. The Company's the amount of revenue recognized to the books reflects the value of goods invoiced, net of any value-added tax (VAT) or excise tax.
Advertising
All advertising costs are expensed as incurred. The Company incurred $0 and $0 in advertising expenses for the three-month and six-month periods ended December 31, 2018 and 2017.
Research and development
All research and development costs are expensed as incurred. The Company incurred $0 and $0 in research and development costs for three-month and six-month periods ended December 31, 2018 and 2017.
Income taxes
The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.
Comprehensive income
The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders.
Loss per share
The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis from the potential conversion of convertible securities or the exercise of options and or warrants; the dilutive effects of potentially convertible securities are calculated using the as-if method; the potentially dilutive effect of options or warrants are calculated using the treasury stock method. Securities that are potentially an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Traqer Corp.
Notes to Condensed Consolidated Financial Statements
Financial instruments
The Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, have carrying amounts that approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
|
|
·
|
Level 1 - inputs to the valuation methodology used quoted prices for identical assets or liabilities in active markets.
|
|
|
|
|
|
|
·
|
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
|
|
|
|
|
|
·
|
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Recent accounting pronouncements
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
3.
Going Concern
The Company had an accumulated deficit of $419,178 as of December 31, 2018, and cash used in operations of $101,474 for the six-month period ended December 31, 2018. Losses have principally occurred as a result of the lack of a source of recurring revenues and the substantial resources required for research and development and marketing of the Company’s products which included the general and administrative expenses associated with its organization. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management plans to obtain additional funding and implement its strategic plan to allow the opportunity for the Company to continue as a going concern, but there is no guarantee the Company will be successful.
4.
Plant and Equipment
|
|
|
12/31/2018
|
|
|
6/30/2018
|
|
|
At Cost:
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
$
|
7,171
|
|
|
$
|
7,450
|
|
|
Leasehold Improvements
|
|
|
4,115
|
|
|
|
4,275
|
|
|
|
|
$
|
11,286
|
|
|
$
|
11,725
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
: Accumulated depreciation
|
|
|
(3,835
|
)
|
|
|
(1,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,451
|
|
|
$
|
10,030
|
|
Depreciation expense for the three-months periods ended December 31, 2018 and 2017 was $1,099 and $0, respectively. Depreciation expense for the six-months periods ended December 31, 2018 and 2017 was $2,141 and $0, respectively.
Traqer Corp.
Notes to Condensed Consolidated Financial Statements
5.
Intangible Asset
The Company acquired 22 patents from their director, Mr. Zhong, Yue, to develop and contract process energy conserving and environmentally friendly building material.
|
|
|
12/31/2018
|
|
|
6/30/2018
|
|
|
At Cost:
|
|
|
|
|
|
|
|
Patents
|
|
$
|
20,134
|
|
|
$
|
20,918
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
: Accumulated amortization
|
|
|
(5,102
|
)
|
|
|
(2,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,032
|
|
|
$
|
18,797
|
|
Amortization expense for the three-months periods ended December 31, 2018 and 2017 was $1,525 and $0, respectively. Amortization expense for the six-months periods ended December 31, 2018 and 2017 was $2,982 and $0, respectively.
6.
Related Party transactions
Related party receivable consisted of the following:
|
|
|
12/31/2018
|
|
|
6/30/2018
|
|
|
|
|
|
|
|
|
|
|
Jiang, Lijuan, director
|
|
$
|
-
|
|
|
$
|
39,215
|
|
|
|
|
$
|
-
|
|
|
$
|
39,215
|
|
Related party receivables represented advances issued to management for job or travel disbursement in the normal course of business. The amounts are unsecured, interest-free and due on demand.
Related party payable consisted of the following:
|
|
|
12/31/2018
|
|
|
6/30/2018
|
|
|
Jiang, Lijuan, director
|
|
$
|
14,106
|
|
|
$
|
-
|
|
|
Zhong, Yue, director
|
|
|
21,857
|
|
|
|
21,857
|
|
|
Jiang, Limei, director
|
|
|
109,069
|
|
|
|
66,993
|
|
|
|
|
$
|
145,032
|
|
|
$
|
88,850
|
|
The amounts are unsecured, interest-free and due on demand.
7.
Equity
For the year ended June 30, 2018, the Company issued 600,000,000 common shares for $30,000 and there was an adjustment of $270,000 to common stock as a result of the recapitalization and share exchanges agreement.
8.
Income Taxes
The Company and its subsidiaries formed in the Republic of Seychelles is not subject to tax on its income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no withholding tax is imposed.
The Company’s subsidiary formed in Hong Kong is subject to the profits tax rate at 16.5% for income generated and operation in the special administrative region.
The Company’s subsidiaries incorporated in the PRC are subject to profits tax rate at 25% for income generated and operation in the country.
Traqer Corp.
Notes to Condensed Consolidated Financial Statements
The full realization of the tax benefit associated with the carry forward depends predominantly upon the Company’s ability to generate taxable income during the carry forward period.
The Company’s subsidiaries incorporated in the PRC has unused net operating losses (“NOLs”) available for carry forward to future years for PRC income tax reporting purposes up to five years. The Company recorded a deferred tax asset in the amount of $0 and $0 at December 31, 2018 and 2017, respectively.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
The following table reconciles the statutory rates to the Company’s effective tax rate:
|
|
|
12/31/2018
|
|
|
12/31/2017
|
|
|
Statutory rates in the Republic of Seychelles
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Statutory rates in Hong Kong
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
|
Statutory rates in PRC
|
|
|
25.0
|
%
|
|
|
25.0
|
%
|
|
Foreign earned income not subject to taxes in the Republic of Seychelles
|
|
|
(41.5
|
)%
|
|
|
(41.5
|
)%
|
|
Effective income tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before taxes:
|
|
|
|
|
|
|
|
|
|
Republic of Seychelles
|
|
$
|
45
|
|
|
$
|
(5,391
|
)
|
|
Hong Kong
|
|
|
(4,554
|
)
|
|
|
(825
|
)
|
|
PRC
|
|
|
(36,425
|
)
|
|
|
-
|
|
|
|
|
$
|
(40,934
|
)
|
|
$
|
(6,216
|
)
|
9.
Lease Commitments
As of September 30, 2018, the Company entered into a two-year operating lease agreement which commenced on January 7, 2018 and expires on January 7, 2020. The monthly lease expense is RMB 4,500 (USD $ 692).
The minimum future lease payments for the office at December 31, 2018 are as follows:
|
Period
|
|
Lease Payable
|
|
|
Year 1
|
|
$
|
7,853
|
|
|
|
|
$
|
7,853
|
|
The outstanding lease commitments for the leases listed above as of December 31, 2018 was $7,853.
10.
Risks
|
|
A.
|
Credit risk
|
|
|
|
|
|
|
|
The Company’s deposits are made with banks located in the PRC. They do not carry federal deposit insurance and may be subject to loss of the banks become insolvent.
Since the Company’s inception, the age of account receivables has been less than one year indicating that the Company is subject to minimal risk borne from credit extended to customers.
|
|
|
|
|
|
|
B.
|
Economic and political risks
|
|
|
|
|
|
|
|
The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC.
|
Traqer Corp.
Notes to Condensed Consolidated Financial Statements
|
|
|
The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.
|
|
|
|
|
|
|
C.
|
Environmental risks
|
|
|
|
|
|
|
|
The Company has procured environmental licenses required by the PRC government. The Company has both a water treatment facility for water used in its production process and secure transportation to remove waste off site. In the event of an accident, the Company has purchased insurance to cover potential damage to employees, equipment, and local environment.
|
|
|
|
|
|
|
D.
|
Inflation Risk
|
|
|
|
|
|
|
|
Management monitors changes in prices levels. Historically inflation has not materially impacted the company’s financial statements; however, significant increases in the price of raw materials and labor that cannot be passed to the Company’s customers could adversely impact the Company’s results of operations.
|
11.
S
ubsequent Events
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. The Company has evaluated subsequent events from December 31, 2018 through the date the financial statements were available to be issued. There was no subsequent event at the report date.