NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD MARCH 31, 2019 and DECEMBER
31, 2018
(Un-audited)
Note 1 – Organization and basis
of accounting
Basis
of Presentation and Organization
This summary of significant
accounting policies of Melt Inc. and its Subsidiaries is presented to assist in understanding the Company’s financial statements.
The financial statements and notes are representations of the Company’s management, which is responsible for their integrity
and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America
and have been consistently applied in the preparation of the financial statements.
Melt Inc. (hereinafter referred
to as the Company) was organized on July 18, 2003, under the laws of the State of Nevada. The Company operates as a holding company
for operating subsidiaries.
Melt (California), Inc. is a
wholly owned subsidiary (hereinafter referred to as Melt (CA)) of Melt Inc. and was organized on August 6, 2003, under the laws
of the State of California. Melt (CA) was in the business of owning and operating corporate owned stores of which none were in
existence during the year ended December 31, 2009, managing the construction process for both corporate and franchisee owned stores,
securing retail space for either corporate or franchise stores to operate from, as well as the sale and distribution of product
to franchise owned stores until October 2007. Melt (CA) ceased managing the construction of stores during September 2007. All assets,
liabilities and operating results related to store construction and retail leases are therefore included in discontinued operations
as of December 31, 2009 and 2008 (see note 6).
Melt Franchising LLC (hereinafter
referred to as Melt (FA)) a wholly owned subsidiary was organized on February 2, 2005 under the laws of the State of Nevada. Melt
(FA) is responsible for selling franchises to allow franchisee’s to own and operate stores trading under the name of Melt
– gelato italiano, Melt – café & gelato bar and Melt – gelato & crepe café as well as the
sale and distribution of product to franchisees, marketing and the collection of royalties. To date, Melt (FA) has sold forty-nine
franchises of which nineteen are operating, seventeen agreements have been terminated by the Company as a result of the franchisee’s
not securing retail space or other reasons, and thirteen have closed their operations.
On June 27, 2018, the eight judicial District
Court of Nevada appointed Custodian Ventures, LLC as custodian for Melt Inc., proper notice having been given to the officers and
directors of Melt, Inc. There was no opposition.
On June 28, 2018, the Company
filed a certificate of revival with the state of Nevada, appointing David Lazar as, President, Secretary, Treasurer and Director.
On February 27, 2019, Custodian
Ventures LLC (the “
Seller
”) entered into a Stock Purchase Agreement (the “
Agreement
”) with
Zhicheng RAO ( (the
“Buyer”
or “
Purchaser
”). Pursuant to the Agreement, the Seller
sold to the Buyer, and the Buyer agreed to purchase from the Seller, 2,185,710,000 shares of common stock, par value $0.00001 per
share (the “
Common Stock
”) of Melt, Inc. (the “
Company
”), constituting approximately 99%
of the issued and outstanding Common Stock, for an aggregate purchase price of $325,000. The closing of the transactions (the “
Closing
”)
contemplated by the Agreement occurred and consummated on March 7, 2019. The foregoing description of the Agreement does not purport
to describe all of the terms and provisions thereof and is qualified in its entirety by reference to the Agreement, which is filed
as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
As a condition precedent to
closing, the Seller agree to acquire from the Company 2,107,710,000 of newly issued shares of Common Stock from the Company. The
Company filed Amended and Restated Articles of Incorporation with Nevada Secretary of State on February 26, 2019 to increase the
company’s authorized shares of common stock from 100,000,000 to 10,000,000,000 with a par value of $0.00001 per share. The
amended and restated Articles also authorized 10,000,000 shares of Preferred Stock with a par value of $0.001 per share. The Company
issued 2,107,710,000 shares of restricted common stock to the Seller in a private sale exempt from registration pursuant to Section
4(2) of 1933 Act on February 28, 2019, and thus increased Seller’s shareholding interest in the Company from 78,000,000 shares
of common stock to 2,185,710,000 shares of common stock prior to Closing.
The accompanying financial statements
are prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The
Company is a development stage enterprise devoting substantial efforts to establishing a new business, financial planning, raising
capital, and research into products which may become part of the Company’s product portfolio. The Company has not realized
significant sales through since inception. A development stage company is defined as one in which all efforts are devoted substantially
to establishing a new business and, even if planned principal operations have commenced, revenues are insignificant.
The accompanying financial statements
have been prepared assuming the continuation of the Company as a going concern. The Company has not yet established an ongoing
source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations.
Management of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding
facility is in effect. While management of the Company believes that it will be successful in its capital formation and planned
operating activities, there can be no assurance that the Company will be able to raise additional equity capital, or be successful
in the development and commercialization of the products it develops or initiates collaboration agreements thereon. The accompanying
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue
as a going concern.
Note 2 – Going Concern
The accompanying financial statements have
been prepared assuming the continuation of the Company as a going concern. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management
of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility
is in effect. While management of the Company believes that it will be successful in its capital formation and planned operating
activities, there can be no assurance that the Company will be able to raise additional equity capital or be successful in the
development and commercialization of the products it develops or initiates collaboration agreements thereon. The accompanying financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going
concern.
Note 3 – Summary of significant accounting policies
Cash and Cash Equivalents
For purposes of reporting within the statements of cash
flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly
liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Revenue Recognition
The Company recognize revenues when delivery of goods
or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its
customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related
receivable is probable.
Property and equipment
Property and equipment are stated at historical cost less accumulated
depreciation and impairment. The historical cost of acquiring an item of property and equipment includes the costs necessarily
incurred to bring it to the condition and location necessary for its intended use.
Fair Value Measurement
The Company values its amounts due to related partings
and short term loans payable under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements.
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit
price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including
assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those
inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs 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 measurement) and
the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active
markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset
or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists
of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Valuations for assets and liabilities that
can be obtained from readily available pricing sources via independent providers for market transactions involving similar assets
or liabilities. The Company’s principal markets for these securities are the secondary institutional markets, and valuations
are based on observable market data in those markets.
Level 3 – Pricing inputs include significant
inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies
that result in management’s best estimate of fair value. The Company uses Level 3 to value its derivative instruments.
Employee Stock-Based Compensation
The Company accounts for stock-based compensation
in accordance with ASC 718 Compensation - Stock Compensation (“ASC 718”). ASC 718 addresses all forms of share-based
payment (“SBP”) awards including shares issued under employee stock purchase plans and stock incentive shares. Under
ASC 718 awards result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of
awards that are expected to vest and will result in a charge to operations.
Subsequent Event
The Company evaluated subsequent events through the date when
financial statements are issued for disclosure consideration.
Adoption of Recent Accounting Pronouncements
As of December 31, 2015, the Company adopted guidance
codified in ASU 2015-03,
Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance
Costs.
The guidance simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as
a deduction from the corresponding liability, consistent with debt discounts. The recognition and measurement guidance for debt
issuance costs is not affected. Therefore, these costs will continue to be amortized as interest expense using the effective interest
method pursuant to ASC 835-30-35-2 through 35-3. The adoption of this standard did not have an impact on our financial statements.
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements
that have been issued that might have a material impact on its financial position or results of operations.
Recent Accounting Pronouncements
In February 2016, the FASB issued an accounting standards
update for leases. The ASU introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns
many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB's new
revenue recognition standard. However, the ASU eliminates the use of bright-line tests in determining lease classification as required
in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures
to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.
The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal
years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early adoption is permitted.
The adoption of this standard did not have an impact on our financial statements.
In March 2016, the FASB issued an accounting standards
update that provides a new requirement to record all of the tax effects related to share-based payments at settlement (or expiration)
through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and
interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The adoption of this standard did
not have an impact on our financial statements.
In August 2016, the FASB issued an accounting standards
update addressing the classification and presentation of eight specific cash flow issues that currently result in diverse practices.
The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement
of cash flows including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration
payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned
life insurance policies, and distributions received from equity method investees. This pronouncement is effective for annual reporting
periods beginning after December 15, 2018, and interim periods within fiscal years beginning after
December 15, 2019, for nonpublic entities. The amendments
in this ASU should be applied using a retrospective approach. The adoption of this standard did not have an impact on our financial
statements.
Note 4 – Discontinued Operations
The Company has fully impaired
all assets since the shutdown of its operations in 2010 and has recorded the effects of this impairment as part of its discontinued
operations. With the absence of a substantial amount of the old records and the passage of the statute of limitations the company
has recorded a discontinued operations expense in 2010 the most current year since operations shutdown based on the accumulated
records obtained to date through the first quarter 2019.
Note 5 – Related party transactions
On July 03, 2018, the Company obtained
a promissory note in amount of $68,305 from its custodian, Custodian Ventures, LLC, the managing member being David Lazar. The
note bears an interest of 3% and matures in 180 days from the date of issuance.
On July 03, 2018, the Company issued 78,000,000
shares of common stock to Custodian Ventures, LLC at par for shares valued at $78,000 in exchange for settlement of a portion of
a related party loan for amounts advanced to the Company in the amount of $9,695, and the promissory note issued to the Company
in the amount $68,305.
As of March 31, 2018, a total of $70,158 which consists of principle of $68,305
and accrued interest of $1,853, is due to the Company.
On March 07, 2019, there was a change of
control and Mr. Zhicheng Rao became the majority shareholder and Co Chairman of the Board of Directors. During the three months
ended March 31, 2019, Custodian Ventures, LLC advanced a total of $1,000 to the Company for payment of accounting fees and Mr.
Mrz Zhicheng Rao advanced a total of $10,750. As of March 31, 2019, the company had a loan payable remaining of $32,393 to Custodian
Ventures, LLC and $10,750 to Zhicheng Rao.
Both loans are unsecured, non-interest bearing, and have
no specific terms for repayment.
Note 6 – Common Stock
On July 03, 2018, the Company issued 78,000,000
shares of common stock to Custodian Ventures, LLC at par for shares valued at $78,000 in exchange for settlement of a portion of
the related party loan in the amount of $9,695 and a promissory note issued to the Company in the amount $68,305.
On February 27, 2019, Custodian Ventures
LLC (the “
Seller
”) entered into a Stock Purchase Agreement (the “
Agreement
”) with Zhicheng
RAO ( (the
“Buyer”
or “
Purchaser
”). Pursuant to the Agreement, the Seller sold
to the Buyer, and the Buyer agreed to purchase from the Seller, 2,185,710,000 shares of common stock, par value $0.00001 per share
(the “
Common Stock
”) of Melt, Inc. (the “
Company
”), constituting approximately 99% of the
issued and outstanding Common Stock, for an aggregate purchase price of $325,000. The closing of the transactions (the “
Closing
”)
contemplated by the Agreement occurred and consummated on March 7, 2019. The foregoing description of the Agreement does not purport
to describe all of the terms and provisions thereof and is qualified in its entirety by reference to the Agreement, which is filed
as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
As a condition precedent to closing, the
Seller agree to acquire from the Company 2,107,710,000 of newly issued shares of Common Stock from the Company. The Company filed
Amended and Restated Articles of Incorporation with Nevada Secretary of State on February 26, 2019 to increase the company’s
authorized shares of common stock from 100,000,000 to 10,000,000,000 with a par value of $0.00001 per share. The amended and restated
Articles also authorized 10,000,000 shares of Preferred Stock with a par value of $0.001 per share. The Company issued 2,107,710,000
shares of restricted common stock to the Seller in a private sale exempt from registration pursuant to Section 4(2) of 1933 Act
on February 28, 2019, and thus increased Seller’s shareholding interest in the Company from 78,000,000 shares of common stock
to 2,185,710,000 shares of common stock prior to Closing. As of March 31, 2019, at total of 2,207,000,000 shares of common stock
are outstanding.
Note 7 – Subsequent Events
The Company evaluates events that occur after the year-end date
through the date the financial statements are available to be issued. Accordingly, management has evaluated subsequent events through
May 09, 2018, and has determined that there were no subsequent events, requiring adjustment to, or disclosure in, the financial
statements