NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (IN U.S. $)
For
The Three months ended MARCH 31, 2019 AND 2018
|
2.
|
ACCOUNTING
POLICIES (CONTINUED)
|
Basis
of Accounting and Presentation (Continued)
Accordingly,
they do not include all of the information and footnotes normally required by accounting principles generally accepted in the
United States of America for annual financial statements. In the opinion of management, such information contains all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The
interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the
Company’s Form 10-K filed with the SEC. The results of operations for the three months ended March 31, 2019 are not necessarily
indicative of the results to be expected for future quarters or for the year ending December 31, 2019.
All
financial statements and notes to the financial statements are presented in United States dollars (“US Dollar” or
“U.S.$” or $”).
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
As of March 31, 2019 and December 31, 2018, the Company does not have any cash equivalents.
Income
Taxes
The
Company accounts for income taxes in accordance with the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Section 740, “Income Taxes” (“ASC 740”), which requires the
recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income
tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either
be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are also recognized for
operating losses that are available to offset future taxable income. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized.
The
Company accounts for uncertain tax positions in accordance with ASC Section 740, which prescribes a recognition threshold and
measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. The guidance also prescribes direction on de-recognition, classification, interest and payables accounting in financial
statements and related disclosures. The Company classifies interest expense and any related penalties related to income tax uncertainties
as a component of income tax expense. No interest or penalties have been recognized as of March 31, 2019.
USA
Zhimingde International Group Corporation
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (IN U.S. $)
For
The Three months ended MARCH 31, 2019 AND 2018
|
2.
|
ACCOUNTING
POLICIES (CONTINUED)
|
Income
Taxes (Continued)
Management
has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial
statements as of March 31, 2019. The Company does not expect any significant changes in unrecognized tax benefits within twelve
months of the reporting date.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
period. Actual results could differ from these estimates.
Fair
Value of Financial Instruments
The
Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements
and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about
fair value measurements.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure
fair value are as follow:
|
●
|
Level
1 - quoted prices in active markets for identical assets or liabilities.
|
|
●
|
Level
2 - inputs other than quoted prices in level 1 that are observable either directly or
indirectly.
|
|
●
|
Level
3 - inputs based on prices or valuation techniques that are both unobservable and significant
to the fair value markets.
|
The
carrying amounts of the Company’s liabilities approximate fair value due to the short-term nature of these instruments.
USA
Zhimingde International Group Corporation
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (IN U.S. $)
For
The Three months ended MARCH 31, 2019 AND 2018
|
2.
|
ACCOUNTING
POLICIES (CONTINUED)
|
Net
Earnings (Loss) Per Share
Basic
earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding
during the period. Diluted earnings per common share is computed by dividing net earnings by the weighted average number of common
shares outstanding, plus common stock equivalents, if dilutive, resulting from convertible preferred stock, stock options and
warrants. There were no common stock equivalents outstanding for the three months ended March 31, 2019 and 2018.
|
3.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS
|
In
August 2017, the FASB issued ASU No. 2017-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement
of cash flows. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment
Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant
in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination;
(4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies,
including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests
in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments
are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective
transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues,
the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company adopted this ASU
during the year ending December 31, 2018. The adoption of this ASU did not have a material effect on the Company’s financial
statements.
USA
Zhimingde International Group Corporation
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (IN U.S. $)
For
The Three months ended MARCH 31, 2019 AND 2018
|
3.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS (CONTINUED)
|
In
October 2017, the FASB issued ASU No. 2017-17, Consolidation (Topic 810): Interests held through related parties that are under
common control. The amendments in this ASU require that the reporting entity, in determining whether it satisfies the second characteristic
of a primary beneficiary, to include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect
variable interests in a VIE held through related parties, including related parties that are under common control with the reporting
entity. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, including
interim periods within those fiscal years. For all other entities, the amendments in this ASU are effective for fiscal years beginning
after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted,
including adoption in an interim period. The Company adopted this ASU during the year ending December 31, 2018. The adoption of
this ASU did not have a material effect on the Company’s financial statements.
In
June 2018, the FASB issued ASU 2018-07 – Compensation – Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting, which to include share-based payment transactions for acquiring goods and
services from non-employees, which nonemployee share-based payment awards within the scope of Topic 718 are measured at
grant-date fair value of the equity instruments that an entity is obligated to issue when the goods have been delivered or
the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been
satisfied. The definition of the term grant date is amended to generally state the date at which a grantor and a grantee
reach a mutual understanding of the key terms and conditions of a share based payment award. The amendments are effective for
public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. For all other entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2019,
and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in
an interim period. Management plans to adopt this ASU during the quarter ending September 2019. Management does not believe
the adoption of this ASU would have a material effect on the Company’s financial statements.
USA
Zhimingde International Group Corporation
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (IN U.S. $)
For
The Three months ended MARCH 31, 2019 AND 2018
3.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS (CONTINUED)
|
The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a
material effect on the Company’s financial statements.
4.
|
RELATED
PARTY TRANSACTIONS
|
During
the three months ended March 31, 2019 and 2018, the Company received an additional capital contribution to support its operations
from its major stockholder or their affiliates of $5,000 and $5,000, respectively.
The
provision (benefit) for income taxes consisted of the following for the three months ended March 31:
|
|
2019
|
|
2018
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred
|
|
|
(2,352
|
)
|
|
|
(2,131
|
)
|
Change
in valuation allowance
|
|
|
2,352
|
|
|
|
2,131
|
|
|
|
|
|
|
|
|
|
|
Provision
(benefit) for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
The
Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences
of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
USA
Zhimingde International Group Corporation
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (IN U.S. $)
For
The Three months ended MARCH 31, 2019 AND 2018
5.
|
INCOME
TAXES (CONTINUED)
|
The
following table reconciles the effective income tax rates with the statutory rates for the three months ended March 31:
|
2019
|
|
2018
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
U.S. federal
statutory rate
|
|
21.0
|
%
|
|
21.0
|
%
|
Change
in valuation allowance
|
|
(21.0
|
)
|
|
(21.0
|
)
|
|
|
|
|
|
|
|
Effective
income tax rate
|
|
—
|
%
|
|
—
|
%
|
Deferred
tax assets are comprised of the following:
|
March 31,
2019
|
|
December 31,
2018
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
$
|
98,900
|
|
$
|
96,500
|
|
Valuation allowance
|
|
(98,900
|
)
|
|
(96,500
|
)
|
|
|
|
|
|
|
|
Net deferred tax assets
|
$
|
—
|
|
$
|
—
|
|
At
March 31, 2019, the Company had approximately $471,000 of Federal net operating losses that may be available to offset future
taxable income. The Federal net operating loss carryover, if not utilized, will expire beginning in 2027. The amount and availability
of any future net operating loss carry-forwards may be subject to limitations set forth by the Internal Revenue Code. Based upon
an analysis of the Company’s stock ownership activity through December 31, 2012, a change of ownership was deemed to have
occurred in 2012. This change of ownership created an annual limitation of substantially all of the Company’s net operating
losses which are available through 2031.
The
Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation
allowance is established. Based upon the Company’s losses since inception, management believes that it is more likely than
not that future benefits of deferred tax assets will not be realized principally due to the change of ownership limitations and
continued losses and has therefore established a full valuation allowance. The valuation allowance increased by $2,352 and $2,131
during the three months ended March 31, 2019 and 2018, respectively.
The
tax years ended December 31, 2015, 2016 and 2017 remain open to examination by the IRS.
USA
Zhimingde International Group Corporation
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (IN U.S. $)
For
The Three months ended MARCH 31, 2019 AND 2018
The
Company has not generated any revenue, and has had no significant operations during the three months ended March 31, 2019 and
2018. The Company does not have any assets as of March 31, 2019. As of March 31, 2019, the Company had a working capital deficiency
and stockholders’ deficiency of $938,000. The Company continues to incur losses from operations and has incurred a net loss
of $11,198 and $10,148 during the three months ended March 31, 2019 and 2018, respectively. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern.
Management’s
current business plan is to seek an acquisition or merger with a private operating company. However, there is no assurance that
the Company will be able to successfully consummate an acquisition or merger with a private operating company or, that the Company
will identify any debt or equity financing sources to finance a potential acquisition or merger. If unable to obtain financing,
the Company may be unable to complete its business plan, and would, instead, delay all cash intensive activities. The Company
will continue to be dependent on additional capital contributions from its major stockholder for cash flow, which may not be available.
Without necessary cash flow, the Company may become dormant during the next twelve months, or until such time as necessary funds
could be raised.
Accordingly,
the accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction
of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements
do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment
that might result from the outcome of this uncertainty.
The
Company’s management has performed subsequent events procedures through May 24, 2019, which is the date the financial statements
were available to be issued. There were no subsequent events requiring adjustment to the financial statements or disclosures as
stated herein.