UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

   

[ X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

   

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                          to                        .


Commission file number: 000-53371

AMERITRUST CORPORATION

(Exact name of Registrant as specified in its charter)

Wyoming

(State or other jurisdiction of incorporation or organization)

 

26-2877927

 (I.R.S. Employer Identification Number)

 

 1712 Pioneer Ave., Suite 500

Cheyenne, WY

(Address of principal executive offices)

 

 

 

82001

(Zip code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[ X]  No[ ]

 

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No[ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  [x]

Smaller reporting company  [x]

 

Emerging growth company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes [ ] No [X]

 

Securities registered pursuant to Section 12(b) of the Act: None

 

The Registrant has 7,239,573,961,951 shares of common stock outstanding as of June 07, 2021.

-i-

AMERITRUST CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

INDEX

     

 

 

Page

PART I - Financial Information

 

 

 

Item 1:

Consolidated Financial Statements (unaudited)

1

 

Consolidated Balance Sheets as of March 31, 2021 (unaudited)

1

 

Consolidated Statements of Income and Comprehensive Income (unaudited) for the three and six months ended March 31, 2021

2

 

Consolidated Statements of Cash Flows (unaudited) for the three and six months ended March 31, 2021

3

 

Consolidated Statements of Stockholders' Equity (unaudited) for the three and six months ended December 31, 2020 and March 31, 2021

4

 

Notes to Consolidated Financial Statements

5

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4:

Controls and Procedures

34

 

 

34

PART II - Other Information

 

 

 

Item 1:

Legal Proceedings

34

Item 1A:

Risk Factors

34

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3:

Defaults Upon Senior Securities

34

Item 4:

Mine Safety Disclosures

34

Item 5:

Other Information

34

Item 6:

Exhibits

34

 

 

 

Signatures

 

34

 

NOTE ON FORWARD LOOKING STATEMENTS

 

You should keep in mind the following points as you read this Report on Form 10-Q:

 

The terms "we," "us," "our," or the "Company" refer to Ameritrust Corporation.

 

This Report on Form 10-Q contains statements which, to the extent they do not recite historical fact, constitute "forward looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements are used under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operation," and elsewhere in this Quarterly Report on Form 10-Q. You can identify these statements by the use of words like "may," "will," "could," "should," "project," "believe," "anticipate," "expect," "plan," "estimate," "forecast," "potential," "intend," "continue," and variations of these words or comparable words. Forward looking statements do not guarantee future performance and involve risks and uncertainties. Actual results may differ substantially from the results that the forward looking statements suggest for various reasons. These forward looking statements are made only as of the date of this Report on Form 10-Q. We do not undertake to update or revise the forward looking statements, whether as a result of new information, future events or otherwise.

 

-ii-

PART I - FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements


AMERITRUST CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

             

 

March 31, 2021

 

September 30, 2020

Assets

(Unaudited)

 

 

Current assets

 

 

 

Cash and cash equivalents

Note 3

 $

 8,743,735

 $

 4,006,230

Restricted cash

 

 12,606,926

 12,264,017

Net receivables and notes

 

 563,432

 238,914

Other receivables

 

 121,791,514

 261,489,496

Advance payment

 

 14,983,473

 23,163,808

Inventory

 

 19,686

 19,686

Real estate under development and completed

Note 4

 285,266,643

 279,327,231

Right to use assets

 

 50,715

 50,715

Net receivables from related parties

 

 178,385,320

 5,992

Other current assets

 65,000

 65,000

Total current assets

622,476,444

580,631,089

Noncurrent assets

Net estate

 

 29,526,151

 23,497,368

Equity in net assets of nonconsolidated related companies

Note 6

 1,532,591

 1,532,591

Net goodwill and intangible assets

Note 5

 6,543,809

 6,590,948

Total noncurrent assets

 

 37,602,551

 31,620,907

Total assets

 $

660,078,995

 $

612,251,996

 

Liabilities and equity

Current liabilities

Accounts and notes payable

 

 $

 67,602,455

 $

 77,328,377

Short-term debt

 

 196,486,245

 197,435,884

Customer deposits

 

 60,630,713

 54,495,369

Other accounts payable and accrued liabilities

 

 77,652,501

 244,208,921

Liability of right to use

 

 50,715

 50,715

Amounts due to related parties

 

 263,890,877

 53,735,244

Total current liabilities

666,313,506

627,254,510

Non-current liabilities

Long term debt

8,577,909

18,133,611

Total non- current liabilities

8,577,909

18,133,611

Total liabilities

674,891,415

645,388,121

Stock right

Common stock, $0.01 par value

 14,738,395

 14,738,395

Additional paid in capital

 11,782,993

 4,782,993

Retained earnings

 (41,333,808)

 (52,657,513)

Accumulated other comprehensive losses

              - 

                -

Total shareholders' equity

(14,812,420)

(33,136,125)

Foreign currency translation adjustment

-

                -

Total share capital

(14,812,420)

(33,136,125)

Total liabilities and equity

 $

660,078,995

 $

   612,251,996

 

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements

-1-

AMERITRUST CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(Unaudited)

 

   

Three Months Ended

Three Months Ended

 

Six Months

Ended

Six Months

Ended

   

March 31, 2021

March 31, 2020

 

March 31, 2021

March 31, 2020

Net sales and revenue

     

 $

   

Real estate sales

 $

6,102,395

2,407,543

22,334,093

3,281,037

Real estate rental income

 

850,224

-

2,271,349

-

Other sales revenue

 
-
-

 -

-

Net sales and total revenue

 

6,952,619

2,407,543

24,605,442

3,281,037

Fees and expenses

 

 -

-

 -

-

Cost of real estate sales

 

3,064,735

1,653,289

2,281,162

1,707,885

Rental cost of real estate

 

 -

-

101,771

-

Other cost of sales

 

 -

-

 -

-

Taxes and surcharges

 

377,912

210,131

1,388,473

384,403

Operating expenses

 

294,379

13,184

682,873

35,193

General and administrative expenses

 

777,919

592,596

1,963,283

1,893,143

Total cost

 

4,514,945

2,469,200

6,417,562

4,020,624

Net interest income

 

(3,699,628)

(2,609,852)

(6,693,661)

(7,159,030)

Net other non-operating income

 

284,965

21,719

344,372

65,594

Income from investment

 

 -

-

 -

-

Income before income tax

 

(976,989)

(2,649,790)

11,838,591

(7,833,023)

Income tax expense

 

Net income

 $

(976,989)

(2,649,790)

 $

11,838,591

(7,833,023)

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements

-2-

AMERITRUST CORPORATION AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENT

(Unaudited)

 

Six Months Ended

 

Six Months Ended

 

March 31, 2021

 

March 31, 2020

Cash flow from operating activities

       

Net income

 $

11,838,591

 $

(7,833,023)

Accounts receivable and bills

466,109

196,665

Other receivables

263,852,843

208,886,506

Inventory

19,686

-

Real estate developed and completed

272,178,890

58,744,683

Advance payment

5,292,602

18,048,717

Right to use assets

50,715

-

Due from Related parties

(2,001,214)

-

Other current assets

-
-

Due to related parties

55,466,413

67,264,295

Accounts and notes payable

79,447,042

10,852,880

Customer deposits

59,326,878

87,410,769

Other accounts payable and accrued liabilities

(85,507,660)

167,886,652

Debt relief benefits

 -   

-

Net cash provided by operating activities

 

660,430,895

 

611,458,143

Cash flow from investment activities

-
-

Purchase of property and equipment

-

        974,034

Joint control merger

-
-

Net cash used in investment activities

 

-

 

974,034

Cash flow from financing activities

-
-

Due to related parties

(861,551,982)

(684,301,876)

Repayment of the current portion of short-term and long-term bank loans

(73,162,385)

45,053,181

Income from current portion of short-term bank loans and long-term bank loans

272,298,886

40,329,857

Cash received from absorbing investment

7,000,000

-

Net cash provided (used in) by financing activities

 

(655,415,481)

 

(598,918,838)

Effects of exchange rate changes on cash, cash equivalents and restricted cash

-
-

Net increase (decrease) in cash, cash equivalents and restricted cash

5,015,414

13,513,339

Cash, cash equivalents and restricted cash at the beginning of the period

16,270,247

1,217,845

Cash, cash equivalents and restricted cash at the end of the period

 $

21,285,661

 $

14,731,184

 

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements

-3-

AMERITRUST CORPORATION AND SUBSIDIARIES

CONCISE CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

Three and Six Months Ended March 31, 2021

                   

 

Ordinary shareholders

 

Total share capital

Common

stock

 

Additional paid in

capital

 

Retained

earnings

 

Accumulated

other

comprehensive

losses

 

Balance as at September 30, 2020

14,738,395

 

4,782,993

 

(52,657,513)

 

-

 

(33,136,125)

Adjustment at the beginning of the period

-

 

-

 

79,820

 

-

 

79,820

Net income

-
 
-
 

12,815,580

 

-

 

12,815,580

Invested capital

-

 

7,000,000

     

-

 

7,000,000

Balance as at December 31, 2020

14,738,395

 

11,782,993

 

(39,762,113)

 

-

 

(13,240,725)

Adjustment at the beginning of the period

 -

 

-

 

 (594,706)

 

-

 

(594,706)

Net income

-

 

-

 

(976,989)

 

-

 

(976,989)

Invested capital

-

 
-
 
-
 
-
 
-

Balance as at March 31, 2021

14,738,395

 

11,782,993

 

(41,333,808)

 

-

 

(14,812,420)

 

Three and Six Months Ended March 31, 2021

                   

 

Ordinary shareholders

 

Total share capital

Common

stock

 

Additional paid in

capital

 

Retained

earnings

 

Accumulated

other

comprehensive

losses

 

Balance as at September 30, 2019

13,534,589

 

-

 

(33,931,550)

 

-

 

(20,396,961)

Adjustment at the beginning of the period

-

 

-

 

-

 

-

 

-

Net income

-
 
-
 

(5,183,233)

 

-

 

(5,183,233)

Invested capital

-

 

-

     

-

 

-

Balance as at December 31, 2019

13,534,589

 

-

 

(39,114,783)

 

-

 

(25,580,194)

Adjustment at the beginning of the period

 -

 

-

 

 (41,364)

 

-

 

(41,364)

Net income

-

 

-

 

(2,649,790)

 

-

 

(2,649,790)

Invested capital

-

 
-
 
-
 
-
 
-

Balance as at March 31, 2020

13,534,589

 

-

 

(41,805,937)

 

-

 

(28,271,348)

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements

-4-

AMERITRUST CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Basis of Presentation

Ameritrust Corporation is a real estate holding, development and operation company, and looking for real estate investment. The goal is to acquire, hold, develop and operate commercial real estate. The accompanying consolidated financial statements include the accounts of Ameritrust Corporation, Beespoke Capital Colorado, Inc. and four subsidiaries (entities), namely Liaoning Pacific Industrial Co., Ltd., Panjin Pacific Real Estate Co., Ltd., Shenyang Haojingxiang Real Estate Co., Ltd. and Fushun Fortune Plaza Real Estate Co., Ltd. All inter-company accounts, transactions and balances have been eliminated in the merger.

 

The consolidated financial statements are presented in accordance with the accounting principles related to jointly controlled transactions. ASC 805-50 manages transactions between jointly controlled entities. ASC 805, Business Combination, clearly defines the common control transaction scope of business combination (ASC 805-10-15-4). ASC 805-10-20 defines business combination as a transaction in which the acquirer gains control, which is different from the combination of two entities controlled by the same person, because neither entity can gain control of the other entity.

 

On August 28, 2020, Ameritrust and Gryphon, two entities under common control, merged. The transaction does not meet the definition of a business combination.

 

Our common stock trades on the OTC PINK Marketplace under the ticker symbol "ATCC" (formerly "GRYO").

 

The recording currency of the company is US dollar and the reporting currency is US dollar.

 

On August 28, 2020, Ameritrust and Gryphon, two entities under common control, merged. The transaction does not meet the definition of a business combination. 

 

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2020 Form 10-K.

 

Note 2. Significant Accounting Policies

 

Estimates

 

The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions, which will affect the reported amount of assets, liabilities and expenses during the reporting period. On an ongoing basis, the company evaluates its estimates. As more information becomes available, actual results may differ significantly from estimates.

 

Our estimates include the valuation of goodwill, the selection of the estimated useful life of real estate and the valuation of deferred income tax assets.

 

Fair value measurements

 

According to the input of asset or liability valuation model, FASB's authoritative guide to fair value measurement establishes a three-level structure. The first level input refers to the quoted price of the same asset in the active market; the second level input is the important observable input; the third level input is the important unobservable input.

 

If available, the company uses quoted prices from active markets to determine fair value. Non-financial assets measured at fair value on a non-recurring basis mainly include goodwill and real estate assets. When events and circumstances indicate that the book value cannot be recovered, the company will review the impairment indicators of these assets.

 

Due to the short-term nature and liquidity of these instruments, the book values of cash and accounts payable are close to their fair values. The management believes that the company has no significant interest or credit risk arising from these financial instruments.

-5-

Cash

 

Cash consists of highly liquid investments with an original maturity of three months or less. Sometimes, the company's deposits with financial institutions exceed the federal insurance limit.

 

Developing real estate

 

Real estate includes residential land under development. Real estate under construction is valued at the lower of cost and fair value.

 

Land development expenditure, including land use right cost, deed tax, early development cost, project cost, etc., excluding depreciation, is capitalized according to individual identification method and allocated to development projects.

 

When the book value exceeds the fair value, the real estate under development will be subject to valuation adjustment. Only when the book value of the asset is not recoverable and exceeds the fair value, the impairment loss is recognized. If the book value exceeds the sum of the undiscounted cash flows expected to be generated by the asset, the book value is not recoverable. The company reviews the future losses and impairments of all real estate projects by comparing the estimated future undiscounted cash flow of each project with the book value of the project.

 

Goodwill

 

Goodwill is reviewed for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Judgments regarding indicators of potential impairment are based on market conditions and operational performance of the business.

 

The Company may assess its goodwill for impairment initially using a qualitative approach to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If management concludes, based on its assessment of relevant events, facts and circumstances that it is more likely than not that a reporting unit's carrying value is greater than its fair value, then a goodwill impairment charge is recognized for the amount in excess, not to exceed the total amount of goodwill allocated to that reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and no further testing is required. If determined to be impaired, an impairment charge is recorded as a general and administrative expense within the Company's consolidated statement of operations.

 

Right of Use Assets and Lease Liabilities

 

The Company adopted ASU 2016-02 which amended the previous guidance for lease accounting and related disclosure requirements. The new guidance requires the recognition of right-of-use assets and lease liabilities on the balance sheet for leases with terms greater than 12 months or leases that contain a purchase option that is reasonably certain to be exercised. Lessees are required to classify leases as either financing or operating leases. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

 

The Company elected to utilize the package of practical expedients in ASC 842-10-65-1(f) that, upon adoption of ASU 2016-02, allows entities to (1) not reassess whether any expired or existing contracts contain leases, (2) retain the classification of leases (e.g., operation or finance lease) existing at the date of adoption and (3) not reassess initial direct costs for any existing leases.

 

The Company adopted ASU 2016-02 using the modified retrospective method, and accordingly, the new guidance was applied to leases that existed as of December 31, 2020. The adoption of ASU 2016-02 did not have a material impact on the Company's balance sheet, results of operations or cash flows. The Company leases a vehicle used for business. The lease expires in August 2023.

 

Distinguishing Liabilities from Equity

 

The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company determines a liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.

 

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, "Distinguishing Liabilities from Equity," and ASC 815.

-6-

Income Taxes

 

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.

 

When assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of sufficient taxable income in future periods and in the jurisdictions in which those temporary differences become deductible. The Company records a valuation allowance when it determines it is more likely than not that a portion of the deferred tax assets will not be realized.

 

The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company's consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company's deferred tax assets and liabilities.

 

Interest and penalties related to unrecognized tax benefits are recognized in the consolidated financial statements as a component of income tax expense. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a quarterly basis. The evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in increases or decreases in the Company's income tax expense in the period in which the change is made.

 

Earnings (Loss) Per Share

 

Basic and diluted earnings (loss) per common share is calculated using the weighted average number of common shares outstanding during the period. The Company's convertible notes are excluded from the computation of diluted earnings per share as they are anti-dilutive due to the Company's losses during those periods.

 

Business Combinations

 

The March 31, 2021 consolidated financial statements present the combined operations of Ameritrust and Gryphon beginning on March 25, 2020, which is the date a Change of Control effected a new beginning of period. 

 

Pending Accounting Standards

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 ("ASU 2018-13"), which amends disclosure requirements on fair value measurements in Topic 820. This amendment modifies the valuation process of fair value measurements by removing the disclosure requirements for the valuation processes for Level 3 fair value measurements, clarifying the timing of the measurement uncertainty disclosure, and including the changes in unrealized gains and losses for recurring Level 3 fair value measurements in other comprehensive income if held at the end of the reporting period. It also allows the disclosure of other quantitative information in lieu of the weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and should be applied prospectively for the most recent period presented in the initial fiscal year of adoption. The Company is currently evaluating the impact that this guidance will have on the Company's results of operations, financial position and cash flows.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which modifies ASC 740 to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 is effective for the Company for interim and annual reporting periods beginning after December 15, 2021. The Company is currently assessing the impact of ASU 2019-12, but it is not expected to have a material impact on the Company's consolidated financial statement.

-7-

Note 3. Cash and cash equivalents

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheet to the total amount shown in the consolidated cash flow statement:

 

           

 

March 31, 2021

 

December 31, 2020

Cash and cash equivalents

 

 

 

Cash and fixed deposits(a)

$

8,743,735

 

$

11,601,437

Limited cash

         

12,606,926

 

12,300,039

 

Note 4. Real estate under development and completed

 

 

March 31, 2021

 

December 31, 2020

Development completed:

 

 

 

Panjin Fortune Building

 

64,188,024

 

 

64,188,025

Jingbin Garden

 

2,291

 

 

2,292

Hunnan project

 

54,904

 

 

54,905

Jinzhaoyuan International Building - Intelligent choice hotel of Shenyang North Railway Station

 

2,086,731

 

 

2,086,732

North 2nd Road Project

 

1,442

 

 

1,443

Shopping malls connected with Jinzhaoyuan international building and world financial center phase I and II

 

185,055

 

 

185,056

Jinzhaoyuan International Building - Mulongquan bath

 

60,857

 

 

60,852

Total amount of real estate development completed

 

66,579,304

 

 

66,579,305

Real estate under development:

 

 

 

 

 

Jinzhaoyuan international building north station building phase I

 

4,428,761

 

 

4,428,762

World Financial Center - North Station building phase II

 

89,100,900

 

 

91,944,238

World Financial Center - Marriott Hotel

 

45,262,601

 

 

45,187,463

Financial Building (Holiday Inn)

 

-

 

 

5,814,858

Financial Building (Whole building)

 

5,814,858

 

 

19,232,527

Financial Building (Anshan Office)

 

19,234,824

 

 

418,625

Financial Building (Anshan Sales Office)

 

417,990

 

 

82,371

Financial Building (Stereo parking equipment)

 

82,370

 

 

577,921

Financial Building (Heat exchange station, fire pump)

 

577,920

 

 

340,546

Financial Building (Chaoshan kitchen)

 

340,546

 

 

391,924

Fushun Today Sunshine Real Estate(1-1 × plot)

 

391,923

 

 

49,278,651

Bedford land, New York

 

50,208,513

 

 

766,210

Prepaid taxes related to real estate

 

2,826,133

 

 

7,371,583

Total real estate under development

 

218,687,339

 

 

225,835,679

Total number of completed and developing real estate development projects

$

285,266,643

 

$

292,414,984

 

Note 5. Goodwill

 

When events and circumstances indicate that the book value cannot be recovered, the company measures goodwill at fair value on a non-recurring basis.

 

As of March 31, 2021, such assets or liabilities do not need to be regularly measured at fair value.

-8-

Note 6. Long term equity investment

 

 

 

 

March 31, 2021

 

Initial cost

Ownership

 

 

USD

 

USD

Shenyang Yuhong Yong'an Village Bank Co., Ltd

1,532,591

10%

1,532,591

Total

1,532,591

 

1,532,591

Note 7. Income tax

 

Deferred income tax assets and liabilities are determined based on the estimated future tax impact of net operating loss and credit carry forward, as well as the temporary differences between the tax base of assets and liabilities and their respective financial reporting amounts measured at the current promulgated tax rates. If the possibility of realization of the deferred income tax assets is not great, the company records the estimated valuation allowance of the deferred income tax assets.

 

When evaluating the variability of deferred income tax assets, the management considers whether some or all of the deferred income tax assets are more likely to be unrealized. The realization of deferred income tax assets depends on the generation of sufficient taxable income in the future period and in the jurisdiction where these temporary differences can be deducted. When the company determines that part of the deferred income tax assets are likely to be unrealized, the company records the valuation allowance.

 

The accounting of deferred income tax is based on the estimation of future results. The difference between the expected and actual results of these future results may have a significant impact on the company's comprehensive operating results or financial position. In addition, changes in current federal and state tax laws and rates may affect future tax results and the valuation of the company's deferred tax assets and liabilities.

 

Interest and penalties associated with unrecognized tax benefits are recognized as part of income tax expenses in the consolidated financial statements. Assessing an uncertain tax situation requires significant judgment. The company assesses its uncertain tax position on a quarterly basis. Assessment is based on many factors, including changes in facts or circumstances, changes in tax laws, correspondence with tax authorities during the audit process, and effective solutions to audit problems. Changes in the recognition or measurement of uncertain tax status may result in an increase or decrease in corporate income tax expenses during the change period.

 

-9-

AMERITRUST CORPORATION AND SUBSIDIARIES WITH DEVELOPING PROPERTIES

PROFORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Item 1. Proforma consolidated financial statements

TABLE OF CONTENTS

 

   

 

Pages

Consolidated Balance Sheets as of December 31, 2018, 2019, 2020 and March 31, 2021

F-2

Consolidated Statements of Comprehensive (Loss)/Income for the years ended December 31, 2018, 2019, 2020 and March 31, 2021

F-3

Consolidated Statements of Changes in Deficit for the years ended December 31, 2018, 2019, 2020 and March 31, 2021

F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2019, 2020 and March 31, 2021

F-5

Notes to Consolidated Financial Statements for the years ended December 31, 2018, 2019, 2020 and March 31, 2021

F-6 - F-18

 

 

 

 

-10-

 

AMERITRUST CORPORATION AND SUBSIDIARIES

PRO FORMA CONSOLIDATED BALANCE SHEETS

As of December 31, 2018, 2019, 2020 and March 31, 2021

(All amounts stated in US$, except for number of shares data)

 

 

December 31

December 31

December 31

March 31

Notes

2018

2019

2020

2021

 

US$

US$

US$

US$

Assets

       

 

 

 

 

 

Current assets

       

Cash and cash equivalents

1,295,126

1,934,243

2,122,260

8,743,735

Restricted cash

-

11,489,200

12,300,039

12,606,926

Accounts receivable

1,166,639

176,110

336,237

563,432

Other receivables

3

34,597,818

106,731,963

119,428,167

121,791,514

Inventory

18,674

18,447

19,686

19,686

Advance payment to suppliers

8,765,223

8,235,129

13,472,937

14,983,473

Real estate under development and completed

192,909,695

229,995,158

291,648,774

285,266,643

Right to use assets

       

50,715

Net receivables from related parties

 

70,835,674.00

94,931,588.00

180,386,535.00

178,385,320

Other current assets

 

 

 

 

65,000

Total current assets

309,588,849

453,511,838

619,714,635

622,476,444

 

 

 

 

 

Property and equipment, net

5

25,294,730

70,705,166,137

70,704,889,426

70,711,395,839

Long-term investment

6

88,489,301

1,436,150

1,532,590

1,532,591

Intangible assets

7

5,079,227

5,505,794

5,781,242

6,543,809

Total non-current assets

118,863,258

70,712,108,081

70,712,203,258

70,719,472,239

TOTAL ASSETS

428,452,107

71,165,619,919

71,331,917,893

71,341,948,683

         

LIABILITIES AND SHAREHOLDERS'DEFICIT

 

 

 

 

         

Current liabilities

 

 

 

 

Accounts payables and notes payables

66,183,126

72,288,604

65,459,035

67,602,455

Short-term bank loans

8

193,842,844

188,222,589

200,974,910

196,486,245

Customer deposits

9

28,574,029

21,586,723

53,191,534

60,630,713

Other payables and accrued liabilities

11

233,485,835

279,002,508

81,048,760

77,652,501

Liability of right to use

 

 

 

 

50,715

Amounts due to related parties

12

45,580,796

59,985,614

262,159,708

263,890,877

Total current liabilities

567,666,630

621,086,038

662,833,948

666,313,506

 Long-term bank loans

 -

 -

11,532,744

8,577,909

Total non-current liabilities

 -

 -

11,532,744

8,577,909

Total liabilities

567,666,630

621,086,038

674,366,692

674,891,415

 

 

 

 

 

Commitments and contingencies

13

       

 

 

 

 

 

Shareholders' deficit

       

Common shares

11,428,728

70,696,195,118

70,696,382,506

70,696,608,083

Additional paid in capital

 

 -

 -

 -

11,782,993

Retained earnings

(155,254,578)

(157,964,926)

(38,789,206)

(41,333,808)

Accumulated other comprehensive (loss)/gain

4,611,327

6,303,689

 -

 -

Foreign currency translation adjustments

 -

 -

(42,099)

 -

Total deficit

(139,214,523)

70,544,533,881

70,657,551,201

70,667,057,268

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

428,452,107

71,165,619,919

71,331,917,893

71,341,948,683

The accompanying notes are an integral part of the consolidated financial statements.

-11-

AMERITRUST CORPORATION AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS/INCOME

For the years ended December 31, 2018, 2019, 2020 and March 31, 2021

(ALL amounts stated in US$, except for number of shares data)

           

 

 

 

Notes

 

Year ended

December 31

Three months ended

March 31

 

 

2018

2019

2020

2021

 

 

US$

US$

US$

US$

Revenue:

 

 

 

 

 

Real estate sales

 

8,261,049

1,495,522

16,231,698

6,102,395

Real estate lease income

 

2,813,248

2,115,251

4,912,262

850,224

Other sales revenue

 

-

-

1,722,300

 -

Nonbusiness income

 

-

-

93,332

-

Total revenue

 

11,074,297

3,610,773

22,959,592

6,952,619

Costs of revenue:

 

       

Cost of real estate sales

 

(8,283,247)

(163,839)

783,573

(3,064,735)

Cost of real estate lease income

 

(781,964)

(845,255)

(314,838)

-

Other Operating Cost

 

-

-

(1,722,300)

-

Nonoperating outlay

 

-

-

(33,925)

-

Total costs of revenue

 

(9,065,211)

(1,009,064)

(1,287,490)

(3,064,735)

Gross profit

 

2,009,086

2,601,709

21,672,102

3,887,884

Taxes and Additional

 

-

-

(2,089,105)

(377,912)

Selling and distribution expenses

 

(107,664)

(92,645)

(701,414)

(294,379)

General and administrative expenses

 

(3,098,869)

(2,990,319)

(2,912,975)

(777,919)

Operating loss

 

(1,197,447)

(481,255)

15,968,608

2,437,674

 

 

     

 

Interest expense

 

(12,524,411)

(14,584,995)

(15,110,920)

(3,699,628)

Gain on long term investment

 

-

12,377,195

3,309,410

 

Gain on disposal of properties

 

7,696,041

-

-

284,965.00

Dividends income

 

-

-

-

 

Loss from operations before income

 

(6,025,817)

(2,689,055)

4,167,098

(976,989)

Income taxes

10

(193,068)

(21,293)

 

 

Net loss

 

(6,218,885)

(2,710,348)

4,167,098

(976,989)

Foreign currency translation adjustments

 

7,885,013

1,692,362

-

 

Total comprehensive (loss)/income

 

1,666,128

(1,017,986)

4,167,098

(976,989)

The accompanying notes are an integral part of the consolidated financial statements.

-12-

AMERITRUST CORPORATION AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2018, 2019, 2020 and March 31, 2021

(All amounts stated in US$, except for number of shares data)

 

Year

Ended

December 31,

Three Months

Ended

March 31

2018

2019

2020

2021

 

US$

US$

US$

US$

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net Loss

(6,218,885)

(2,710,348)

4,167,098

(976,989)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

2,016,079

1,820,673

1,901,997

-

Gain on disposal of properties

(7,696,041)

-

-

-

 

Changes in operating assets and liabilities:

Accounts receivable

(589,609)

984,628

(160,127)

563,432

Real estate properties development completed

(6,336,597)

(257,026)

(21,178,508)

285,266,643

Real estate properties under development

(41,906,027)

(39,537,610)

(33,103,524)

19,686

Inventory

-

-

(1,239)

14,983,473

Advances to suppliers

(294,305)

427,038

5,237,808

121,791,514

Other receivables

50,251,819

(73,171,515)

(12,696,204 )

50,715

Deposits for land use rights

-

-

-

178,385,322

Amounts due from related parties

-

-

(85,454,947 )

263,890,876

Accounts payable and notes payables

29,028,745

6,969,490

-

11,844,587

Customer deposits

3,880,688

(6,696,031)

(31,604,811)

60,630,713

Other payables and accrued liabilities

(9,226,749)

48,768,500

194,675,417

77,652,501

Net cash (used in) /provided by operating activities

12,909,118

(63,402,201)

15,713,865

1,014,102,473

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of properties held for lease and property and equipment

-

-

-

-

Purchase of property and equipment

-

-

276,711

Acquisition of land use right

-

(581,440)

-

-

Acquisition of long-term investment

-

-

-

-

Proceed from disposal of properties

9,159,837

-

-

-

Proceed from disposal of long-term investment

-

86,706,847

-

-

Amounts due from related parties

(64,696,993)

(25,169,857)

-

-

Net cash (used in)/provided by investing activities

(55,537,156)

60,955,550

276,711

-

 

CASH FLOWS FROM FINANCING ACTIVITIES

Amounts due to related parties

47,480,492

15,086,524

(28,321,013)

-1,009,209,789

Repayments of short-term bank loans and current portion of long-term bank loans

(237,751,030)

(195,608,470)

(194,798,738)

-9,742,385

Proceeds from short-term bank loans and current portion of long-term bank loans

233,009,070

192,319,142

205,862,931

2,298,886

Capital injection

669,378

2,896,702

-

-

Net cash provided by financing activities

43,407,911

14,693,898

(17,256,821)

-1,016,653,288

NET (DECREASE)/INCREASE IN CASH, CASH EQUIVALENTS AND

779,873

12,247,247

998,856

-2,550,815

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(62,478)

(118,930)

-

-

Cash, cash equivalents and restricted cash, at beginning of year

577,731

1,295,126

13,423,443

23,901,476

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF YEAR

1,295,126

13,423,443

14,422,299

21,350,661

 

SUPPLEMENTARY INFORMATION ON CASH FLOWS

Cash and cash equivalents

1,295,126

1,934,243

2,122,260

8,743,735

Restricted cash

-

11,489,200

12,300,039

12,606,926

The accompanying notes are an integral part of the consolidated financial statements.

-13-

AMERITRUST CORPORATION AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

For the years ended December 31, 2018, 2019, 2020 and March 31, 2021

(ALL amounts stated in US$, except for number of shares data)

 

 

 

Common

Shares

 

Retained Earnings

Other

Comprehensive

Income / (Loss)


Total

 

US$

US$

US$

US$

BALANCE AT DECEMBER 31, 2017

10,759,350

(149,035,693)

(3,273,686)

(141,550,029)

Capital injection

669,378

-

-

669,378

Foreign currency translation

-

-

7,885,013

7,885,013

Net loss

-

(6,218,885)

-

(6,218,885)

BALANCE AT DECEMBER 31, 2018

11,428,728

(155,254,57)

4,611,327

(139,214,523)

Capital injection

2,896,702

-

-

2,896,702

Proposed investment in twenty-nine properties

70,681,869,688

-

-

70,681,869,688

Foreign currency translation

-

-

1,692,362

1,692,362

Net loss

-

(2,710,348)

-

(2,710,348)

BALANCE AT DECEMBER 31, 2019

70,696,195,118

(157,964,926)

6,303,689

70,544,533,881

Adjustment of variances at the beginning of the period

187,388

115,008,622

(6,303,689)

108,892,321

Capital injection

(42,099)

-

-

(42,099)

Proposed investment in twenty-nine properties

-

-

-

-

Foreign currency translation

-

-

-

-

Net loss

-

4,167,098

-

4,167,098

BALANCE AT DECEMBER 31, 2020

70,696,340,407

(38,789,206)

-

70,657,551,201

Adjustment of variances at the beginning of the period

267,676

11,782,993

(972,907)

11,077,762

Capital injection

-

-

-

-

Proposed investment in twenty-nine properties

-

-

-

-

Foreign currency translation

-

-

-

-

Net loss

-

(976,989)

(594,706)

(1,571,695)

BALANCE AT March 31, 2021

70,696,608,083

(27,983,202)

(1,567,613)

70,667,057,268

 

The accompanying notes are an integral part of the consolidated financial statements.

-14-

Description of the Pro Forma Financial Statements

For The Years Ended December 2018, 2019, 2020 and March, 2021

 

 

1. Background information of business and organization

 

Liaoning Pacific Industrial Co., Ltd (“LPIC”) was incorporated on January 16, 1996 located at No. 1998, Zhonghua Road, Heping District, Shenyang City. LPIC is engaged in the field of real estate development and sale of commercial housing, design and construction of security technology and hotel management. On April 22, 2020, Ameritrust Corporation, a Georgia Corporation, has signed share exchange agreement with LPIC by issuing 169,971,671 shares of common stock in exchange of LPIC’s all outstanding shares.

 

Panjin Pacific Real Estate Co., Ltd., (“PPRE”) was incorporated on July 31, 2014 located at No. 36 Shifu Street, Xinglongtai District, Panjin City. PPRE is engaged in the field of real estate development; sales of commercial houses; interior and exterior decoration design and construction. On April 22, 2020, Ameritrust Corporation, a Georgia Corporation, has signed share exchange agreement with PPRE by issuing 141,643,059 shares of common stock in exchange of PPRE’s all outstanding shares.

 

Shenyang Haojingxiang Real Estate Co., Ltd. (“SHRE”) was incorporated on 23, 2016 located at No. 644, Minglian Road, Huanggu District, Shenyang City. SHRE is engaged in the field of power engineering construction, highway engineering, bridge engineering, indoor and outdoor decoration engineering design and construction. On April 22, 2020, Ameritrust Corporation, a Georgis Corporation, has signed share exchange agreement with SHRE by issuing 118,035,883 shares of common stock in exchange of SHRE’s all outstanding shares.

 

Fushun Fortune Plaza Real Estate Co., Ltd. (“FFPRE”) was established on September 11, 2018 located at No. 4 store, Building 100, Gaoshan Road, Shuncheng District, Fushun City, Liaoning Province. FFPRE is engaged in the field of real estate development, sales, property management, real estate development, commercial housing sales and house rental. On April 22, 2020, Ameritrust Corporation, a Georgis Corporation, has signed share exchange agreement with FFPRE by issuing 141,643,059 shares of common stock in exchange of FFPRE’s all outstanding shares.

 

2.Summary of significant accounting policies

 

(a) The Group and basis of presentation and consolidation

 

The four entities (collectively, the “Group”) are principally engaged in residential real estate development and the Group's operations are conducted in the PRC. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). All inter-company transactions and balances between the companies have been eliminated upon consolidation.

 

The accompanying financial statements are presented on the basis that the Group is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Group incurred net loss of US$976,989 (December 31, 2020: US$4,167,098; December 31, 2019: 2,710,348; December 31, 2018: US$6,218,885) and net cash used in operating activities of US$1,014,102,473(December 31, 2020: 998,856; December 31, 2019: US$63,402,201; December 31, 2018: US$12,909,118) during the year ended March 31, 2021. As of March 31, 2021, the Group had net current liability of US$666,313,506(December 31, 2020: 662,833,948; December 31, 2019: US$167,574,200; December 31, 2018: US$258,077,781) and equity of US$70,667,057,268 (December 31, 2020: 70,657,551,201; December 31, 2019: US$70,544,533,881; December 31, 2018: US$-139,214,523).

 

The ability to continue as a going concern is dependent upon the Group’s profit generating operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. Therefore, there is substantial doubt about the ability of the entity to continue as a going concern within one year after the date that the financial statements are issued. In light of management’s efforts, there are no assurances that the Group will be successful in this or any of its endeavors or become financially viable and continue as a going concern. The Group expects to finance operations primarily through capital contributions from the shareholders. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Group be unable to continue as a going concern.

-15-

(b )Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the selection of the useful lives of property and equipment and finance lease, allowance for doubtful amount associated with accounts receivables, other receivables, contract assets and advances to suppliers,  fair values of the purchase  price allocation with respect to business combinations, progress towards the completion  of the performance obligation, accounting for the impairment of real estate properties under development, real estate properties held  for lease and long-term investments and provision necessary for contingent liabilities. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates.

 

(c) Fair value of financial instruments

 

Financial instruments include cash and cash equivalents, restricted cash, accounts receivable, other deposits and prepayments, due from related parties, other receivables, long-term investments, accounts payable, customer deposits, other payables and accrued liabilities, short- term bank borrowings and due to related parties. The carrying amounts of the aforementioned financial instruments, mainly long-term investments. Long-term investment has no quoted market prices and it is not practicable to estimate their fair value without incurring excessive costs. The Group reviews the investments for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable.

 

For long-term investments other than those accounted for under the equity method or those that result in consolidation of the investee, the Group measures equity investments at fair value and recognizes any changes in fair value in net income. However, for equity investments that do not have readily determinable fair values and do not qualify for the existing practical expedient in ASC 820 to estimate fair value using the net asset value per share (or its equivalent) of the investment, the Group chose to measure those investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. At each reporting date, the Group is required to make a qualitative assessment as to whether equity investments without a readily determinable fair value for which the measurement alternative is elected is impaired. In the event that a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than the carrying value, the carrying value is written down to its fair value. A variety of factors are considered when determining if a decline in fair value is below carrying value, including, among others, the financial condition and prospects of the investee.

 

Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:

 

Level 1-Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2-Includes other inputs that are directly or indirectly observable in the market place

Level 3-Unobservable inputs which are supported by little or no market activity.

 

ASC 820 describes three main approaches for measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

 

In accordance with ASC 820, investment in marketable equity securities and investment in real estate investment trusts ("REITs") classified as is within Level 1 as the Group measures the fair value using quoted trading prices that are published on a regular basis, and investment in equity securities in unlisted companies categorized as Level 3 is measured at fair value using alternative method, less any impairment, plus or minus changes resulting from observable price in orderly transactions.

-16-

(d) Foreign currency translation

 

The Group's financial information is presented in U.S. dollars. The functional currency of the entities of the Group located in the PRC is Renminbi ("RMB"), the currency of the PRC. The consolidated financial statements of the Group have been translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. The PRC entities’ financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

 

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.

 

(e) Cash and cash equivalents

 

The Group considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Group maintains bank accounts mainly in the PRC. The vast majority of the PRC bank balances are denominated in RMB.

 

Cash includes cash on hand and demand deposits in accounts maintained with various state-owned and private banks within the PRC. Total cash in banks (excluding restricted cash), of which the vast majority of deposits are not covered by insurance.

 

(f) Restricted cash

 

The Group is required to maintain certain deposits with banks that provide banking facilities.

 

As of March 31, 2021, the Group held US$12,606,926 (December 31, 2019: US$ 11,489,200, December 31, 2018: nil) in its bank accounts with withdrawal restriction for its Note Payables.

 

(g) Real estate properties development completed and under development

 

Real estate properties completed and under development consist of residential unit sites and commercial offices. The Group leases the land for the residential unit sites under land use right leases with various terms from the PRC government. Real estate properties development completed and under development are stated at the lower of carrying amounts or fair value less selling costs.

 

Expenditures for land development, including cost of land use rights, deed tax, pre-development costs and engineering costs, are capitalized and allocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales value of units to the estimated total sales value times the total project costs.

 

Costs of amenities transferred to buyers are allocated as common costs of the project that are allocated to specific units as a component of total construction costs. For amenities retained by the Group, costs in excess of the related fair value of the amenities are also treated as common costs. Results of operations of amenities retained by the Group are included in the current operating results.

 

In accordance with ASC 360, Property, Plant and Equipment ("ASC 360"), real estate property development completed and under development are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value.  The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets.

 

When the profitability of a current project deteriorates due to a slowdown in the sales pace, reduction of pricing or some other factor, this indicates that there may be a possible future loss on delivery and possible impairment in the recoverability of the assets. Accordingly, the assets of such project are subsequently reviewed for future losses and impairment by comparing the estimated future undiscounted cash flows for the project to the carrying value of such project. If the estimated future undiscounted cash flows are less than the asset's carrying value, such deficit will be charged as a future loss and the asset will then be written down to its estimated fair value.

 

The Group determines estimated fair value primarily by discounting the estimated future cash flows relating to the asset. In estimating the cash flows for a project, the Group uses various factors including (a) the expected pace at which the planned number of units will be sold, based on competitive market conditions, historical trends in sales pace and actual average selling prices of similar product offerings and any other long or short-term economic conditions which may impact the market in which the project is located; (b) the estimated net sales prices expected to be attained based on the current market conditions and historical price trends, as well as any estimated increases in future sales prices based upon the projected rate of unit sales, the estimated time gap between presale and expected delivery, the impact of government policies, the local and regional competitive environment, and certain external factors such as the opening of a subway line, school or factory; and (c) the expected costs to be incurred in the future by the Group, including, but not limited to, construction cost, construction overhead, sales and marketing, sales taxes and interest costs.

 

The Group's determination of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risk associated with the assets and related estimated cash flows. The discount rate used in determining each project's fair value depends on the stage of development, location and other specific factors that increase or decrease the risk associated with the estimated cash flows.

 

For the periods presented, the Group did not recognize any impairment for real estate properties completed and under development.

-17-

(h) Revenue recognition

 

Revenue is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group also elected to exclude sales taxes and other similar taxes from the measurement of the transaction price. Therefore, revenues are recognized net of business tax, value added taxes ("VAT").

 

Real estate sales

 

Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. Depending on the terms of the contract and the laws that apply to the contract, control of the asset may transfer over time or at a point in time.

 

For real estate sales contracts for which the Group has an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains the physical possession, the legal title, or the significant risks and rewards of ownership of the assets and the Group has present right to payment and the collection of the consideration is probable. The progress towards complete satisfaction of the performance obligation is measured based on the Group's efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract.

 

Generally, the Group receives short-term advances from its customers for real estate sales. Using the practical expedient, the Group does    not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less. The Group also receives long-term advances from customers for real estate sales. The transaction price for such contracts   is adjusted for the effects of a financing component, if long-term advances from customers is assessed as significant at the individual contract level.

 

Real estate management lease income

 

Real estate lease income is generally recognized on a straight-line basis over the terms of the tenancy agreements. For real estate leases, these contracts are treated as leases for accounting purposes, rather than contracts with customers subject to ASC 606.

 

Contract liabilities

 

A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). The Group's contract liabilities are comprised of customer deposits, which are recognized as revenue when the Group performs under the contract.

 

The following table presents the Group's contract balances as of December 31, 2018, 2019, 2020 and March 31, 2021:

 

 

December 31, 2018

December 31, 2019

December 31, 2020

March 31, 2021

Customer deposits

28,574,029

21,586,723

53,191,534

60,630,713

-18-

(i) Accounts receivable

 

Accounts receivable represents the Group's right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration is due). The Group's account receivable consists of balances due from customers for the sale of residential units and lease income in the PRC. These balances are unsecured, bear no interest and are due within a year.

 

Accounts receivable are reviewed periodically as to whether their carrying value has become impaired. The Group considers the assets to be impaired if the collectability of the balances become doubtful. As of March 31, 2021, there was no allowance for doubtful accounts (nil, December 31, 2020; December 31, 2019: nil, December 31, 2018: nil).

 

(j) Other receivables

 

Other receivables consist of various cash advances to unrelated companies and individuals with which the Group has business relationships.

 

Other receivables are reviewed periodically as to whether their carrying value has become impaired. The Group considers the assets to be impaired if the collectability of the balances becomes doubtful. As of March 31, 2021, there was no allowance for doubtful accounts (nil, December 31, 2020; December 31, 2019: nil, December 31, 2018: nil)

 

(k) Deposits for land use rights

 

Deposits for land use rights consist of upfront cash payments made to local land bureaus to secure land use rights under executed short-term or long-term land framework cooperation agreements or land use rights agreements.

 

Deposits for land use rights are reviewed periodically as to whether their carrying value has become impaired. The Group considers the assets to be impaired if the collectability of the balances become doubtful. There were no impairment losses for any periods presented.

 

(l) Advances to suppliers

 

Advances to suppliers consist of amounts paid to contractors and vendors for services and materials that have not been provided or received and generally relate to the development and construction of residential or commercial units in the PRC. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. The Group considers the assets to be impaired if it is doubtful that the services and materials can be provided. As of December 31, 2018, 2019, 2020 and March 31, 2021, there was no allowance provided.

 

(m) Customer deposits

 

Customer deposits consist of sales proceeds received from customers from the sale of residential or commercial units in the PRC. In the PRC, customers will generally obtain financing for the purchase of their residential or commercial unit prior to the completion of the project. The Group receives these funds and recognizes them as a customer deposit current liability until the revenue can be recognized.

 

(n) Notes payable and other payables

 

Notes payable represents short-term bank acceptance notes issued by financial institutions that entitle the holder to receive the stated amount from the financial institutions at the maturity date of the notes. The Group has utilized notes payable to settle amounts owed to suppliers and contractors. The notes payable is non-interest bearing and is normally settled within six months. Notes payable was US$356,643, US$22,978,400 and US$24,521,449, US$24,521,448.60 as of December 31, 2018, 2019, 2020 and March 31, 2021, respectively.

 

(o) Property and equipment, net

 

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

 

Office buildings

5-20 years

Vehicles

5-10 years

Equipment

5-10 years

Furniture and fixtures

3-10 years

 

Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are capitalized.

-19-

(p) Income taxes

 

The Group accounts for income tax using the balance sheet method. 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, as well as unutilized net operating losses. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Group is able to realize their benefits, or that future utilization is uncertain.

Late payment interests and penalties arising from underpayment of income taxes is recognized according to the relevant tax law. The amount of interest expense to be recognized is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to be taken in a tax return. Interest recognized in accordance with ASC 740-10, Income Tax ("ASC 740-10") is classified in the consolidated financial statements as interest expense, while penalties recognized in accordance with this interpretation are classified in the consolidated financial statements as other expenses.

 

In accordance with the provisions of ASC 740-10, the Group recognizes in its consolidated financial statements the impact of a tax position if a tax return's position or future tax position is "more likely than not" to prevail (defined as a likelihood of more than fifty percent of being sustained upon audit, based on the technical merits of the tax position). Tax positions that meet the "more likely than not" threshold are measured (using a probability weighted approach) at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. The Group's estimated liability for unrecognized tax benefits is periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, certain changes and/or developments with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of     the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from the Group's estimates. As each audit is concluded, adjustments, if any, are appropriately recorded in the Group's consolidated financial statements. Additionally, in future periods, changes in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regards to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur.

 

(q) Land Appreciation Tax ("LAT")

 

In accordance with the relevant taxation laws for real estate companies of the provinces in which the entities operate in the PRC, the local tax authorities levy LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures, generally including borrowing costs and relevant property development expenditures. LAT is generally prepaid based on a fixed percentage (varying by local tax jurisdiction) of customer deposits and is expensed when the related revenue is recognized.

 

(r) Comprehensive income

 

Comprehensive income is defined as the changes in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group's comprehensive income includes net income and foreign currency translation adjustments and is presented in the consolidated statements of comprehensive income.

 

(s) Leases

 

The Group adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) from January 1, 2019.

 

As a lessor, the Group’s leases are classified as operating leases under ASC 842, and thus the pattern of recognition of real estate lease income remains unchanged from previous lease accounting guidance. Leases, in which the Group is the lessor, are substantially all accounted for as operating leases and the lease components and non-lease components are accounted for separately.

-20-

(t) Segment Reporting

 

In accordance with ASC 280, Segment Reporting, segment reporting is determined based on how the Group's chief operating decision maker reviews operating results to make decisions about allocating resources and assessing performance for the Group. However all four entities of the Group are operating in the Liaoning Province, which the property developments have similar expected economic characteristics, type of properties offering, customers and market and regulatory environment. Hence there is no segment report disclosed.

 

(u) Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses ("ASU 2016-13"). The amendments in ASU 2016- 13 update guidance on reporting credit losses for financial assets. This ASU requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses rather than incurred losses. For available-for-sale debt securities with unrealized losses, entities will be required to recognize credit losses through an allowance for credit losses. These amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. For public business entities that are U.S. SEC filers, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Group is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

 

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The update is effective in fiscal years beginning after December 15, 2019, and interim periods therein, and early adoption is permitted for entities that have adopted ASC 606. This guidance should be applied retrospectively to the date of initial application of Topic 606. The Group does not believe the adoption of ASU 2018-18 will have a material impact on its consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This update simplifies the accounting for income taxes as part of the FASB's overall initiative to reduce complexity in accounting standards. The amendments include removal of certain exceptions to the general principles of ASC 740, Income taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. The update is effective in fiscal years beginning after December 15, 2020, and interim periods therein, and early adoption is permitted. Certain amendments in this update should be applied retrospectively or modified retrospectively, all other amendments should be applied prospectively. The Group is currently evaluating the impact on its financial statements of adopting this guidance.

-21-

3. Other receivables

 

The following summarizes the details of other receivables:

 

 

December 31,

2018

December 31,

2019

December 31,

2020

March 31,

2021

 

US$

US$

US$

US$

Fushun Land Acquisition Reserve Trading Center

-

24,183,876

-

-

Shenyang Pacific Xin Tiandi Real Estate Co., Ltd.

8,001,410

9,582,818

-

-

Liaoning Pacific Real Estate Co., Ltd.

-

8,658,402

-

-

Liaoning Li De Wu Trading Co., Ltd.

8,137,950

7,383,842

-

-

Shenyang Xilun Textile Industry Co., Ltd.

-

7,209,473

7,693,604

7,693,604

Shenyang Huixiang Yidong Trading Co., Ltd.

7,269,200

7,180,750

-

-

Liaoning Zhucheng Real Estate Co., Ltd.

-

7,180,750

7,662,953

7,662,953

Liaoning Yudong Trading Co., Ltd.

-

7,028,462

-

-

Shengbo, Li

3,289,633

3,249,605

-

-

Fushun Shuncheng District Land Reserve Integration Center

-

2,982,941

3,517,432

3,517,432

Liaoning Zangyuan Investment Co., Ltd.

4,256,160

2,312,296

-

-

Shenyang Hongda Technology Co., Ltd.

1,859,408

1,836,783

1,960,127

1,960,127

Minghui Financial Leasing Co., Ltd.

2,548,830

-

3,852,101

3,858,667

Huizhou Shunzhan Trading Co., Ltd.

-

-

1,879,411

1,879,411

Dalian Baichuan Golden Sun Culture Shenyang Branch

-

-

1,304,089

1,304,089

Yan, Xing

-

-

1,180,554

1,180,554

Jilin Jiuying Investment Management Group Co., Ltd.

-

-

1,217,759

1,217,759

Liying, Huang

-

-

1,145,228

1,145,228

Zhejiang Baide Guangzhen Film and Television Culture Co., Ltd.

-

-

1,097,335

1,097,335

Dongmei, Ren

-

-

1,072,813

1,072,813

Yongan

-

-

10,357,610

10,357,610

Shen He Xia Wei Yi

-

-

1,831,867

1,831,867

Beijing Yangxin Yang Consulting Co., Ltd

-

-

198,769

198,769

Light Industry Plant II (Wang Zhongxuan)

-

-

8,429,248

8,582,507

Shenyang Chengda Refrigeration Co., Ltd

-

-

6,216,359

6,216,359

Panjin Wanxin Hui Trading Co., Ltd

-

-

6,206,992

6,206,992

Liaoning Amelit Environmental Materials Technology Co. Ltd

-

-

5,534,868

5,534,868

Tiexi and Shengyuan Board Distribution

-

-

4,597,772

4,597,772

Shenyang Qizhi Trading Co., Ltd

-

-

4,367,883

4,367,883

Hanji Shun

-

-

3,065,181

3,065,181

Shenyang Hongda Technology Co. Ltd

-

-

1,960,127

-

Shenyang Chengjun Haifu Trading Co., Ltd

-

-

1,924,134

1,924,134

Dalian Mingshang Trading Co., Ltd

-

-

1,685,850

1,685,850

Shenyang Tiexi Xinsheng and Hardware Building Materials Distribution Department

-

-

1,532,591

1,532,591

Shenyang Jiuli Building Materials Co. Ltd

-

-

1,532,591

1,532,591

Huludao Longgang District Wanxiang Microloan Company

-

-

1,532,591

1,532,591

Zhao Zhijia

-

-

1,494,276

1,494,276

Hu Qi

-

-

1,380,328

1,380,328

Xu He-nan

-

-

1,226,072

1,226,072

Beijing Business Hotel

-

-

1,067,975

1,067,975

Delin Zhu (Dandong property)

-

-

1,019,173

1,019,173

Rendong Yu

-

-

996,184

996,184

Yin Baoli

-

-

995,310

995,310

Jiang Shaowei (Knitting Factory 2)

-

-

841,014

841,014

-22-

Ruifeng Huayang Investment Company

-

-

766,295

766,295

Dalian Bowen Hotel Management Co., Ltd

-

-

766,295

766,295

Jie Chen

-

-

766,295

766,295

Shenyang Boyi Heng Decoration Engineering Co. Ltd

-

-

756,607

-

Li Dongfei

-

-

742,157

742,157

Hong Lei

-

-

674,263

674,263

Xu Bin

-

-

552,177

558,330

Su Wenbo

-

-

505,755

505,755

Xue Peihua

-

-

505,755

505,755

Sun Liang

-

-

503,808

503,808

Lee Siu-sen

-

-

488,127

488,127

Jingcheng Business Hotel, Shenhe District, Shenyang

-

-

475,299

475,299

Li Chen Huludao Dongsheng Carbon Plant

-

-

459,777

459,777

Panjin He Chong Real Estate Marketing Planning Co. Ltd

-

-

433,178

-

Zhang Yu

-

-

409,048

409,048

Zhang Qi

-

-

387,745

387,745

Chifeng Tongyuan Gold Mine Co., Ltd

-

-

382,381

382,381

Fuxin Bank

-

-

319,577

319,577

Zhao Ling

-

-

306,518

306,518

He Wan Jun

-

-

306,518

306,518

Bi Wenping

-

-

295,024

295,024

China Well-off Construction Association

-

-

265,068

279,759

Song Jinghai

-

-

229,889

229,889

Du Peng

-

-

227,945

227,945

Tiedong Chaoshan Hotel

-

-

218,754

218,754

KIM CHUL RAK( Kim Chollo)

-

-

199,237

199,237

Chao Lou Hotel, Longgang District

-

-

199,237

199,237

Fuxin Bank Shenyang Branch Business Department (Lu Jingqiang)

-

-

199,236

199,236

Li Xiaobai

-

-

180,802

180,802

Ai Jiang Shan

-

-

168,585

168,585

Zhang Jun

-

-

154,216

154,216

Qi Yingming

-

-

153,597

153,597

Yujunge Entertainment Club, Zhongshan District, Dalian

-

-

153,259

153,259

Li Jinhua

-

-

153,259

153,259

Shenyang Yixing Aerospace Equipment Manufacturing Group Co. Ltd

-

-

153,259

153,259

Li Weiyi

-

-

153,259

153,259

Liaoning Construction and Installation Group Co., Ltd. Rongpan Branch

-

-

153,259

153,259

Shenyang Yongsheng Leisure Shopping Plaza Co., Ltd

-

-

153,259

153,259

Gao Xing

-

-

153,259

153,259

Dalian jinhongda Trade Co., Ltd

-

-

-

153,259

Guo Bing

-

-

-

252,082

Hu Liyuan

-

-

-

1,174,814

Jia Chengguo

-

-

-

128,478

Liu Li na

-

-

-

116,508

Liaoning Suisi Construction Engineering Group Co., Ltd

-

-

-

469,169

Ningyuan sub branch of Fushun bank

-

-

-

243,723

Shenyang Peninsula Blue Bay Hotel Management Co., Ltd

-

-

-

107,281

Shenyang boyiheng Decoration Engineering Co., Ltd

-

-

-

721,694

Shenyang Deyi Culture Development Co., Ltd

-

-

-

160,615

Shenyang Fubang Meiya furniture decoration Co., Ltd

-

-

-

113,436

Sun Shiwei

-

-

-

107,281

Wang Jun

-

-

-

188,332

Wang Shuping

-

-

-

137,933

Xiuyan Manchu Autonomous County Rural Credit Cooperative Association

-

-

-

107,281

Yichun Yongfeng Paper Co., Ltd

-

-

-

122,607

Yu Yang

-

-

-

110,347

Zang Hongxi

-

-

-

104,676

Zhang Feng

-

-

-

122,607

Zhao Bing

-

-

-

119,542

Others

1,784,057

16,763,433

1,778,018

2,348,939

 

34,597,818

106,731,963

119,428,167

121,791,514

 

Other receivables primarily represent various cash advances to unrelated companies and individuals with which the Group has business relationships and they are unsecured, non-interest bearing and due on demand.

 

4. Real estate properties development completed and under development

 

The following summarizes the components of real estate properties development completed and under development at December 31, 2018, 2019 and 2020:

-23-

         

 

 

December 31,

 

March 31,

 

2018

2019

2020

2021

 

US$

US$

US$

US$

Development completed:

 

 

 

 

Panjin Fortune Building

43,666,894

43,227,664

64,188,025

64,188,024

Jing Bin Yuan

2,174

2,148

2,292

2,291

Hunnan Project

52,084

51,450

54,905

54,904

Jinzhaoyuan International Building - Shenyang North Station Zhixuan Holiday-Inn

1,979,507

1,955,421

2,086,732

2,086,731

Beier Road Project

1,368

1,352

1,443

1,442

Connection of Phase I and phase II Shopping Malls

-

108,049

185,056

185,055

Jinzhaoyuan International Building - Mulongquan Spa

-

54,712

60,852

60,857

Real estate properties development completed

45,702,027

45,400,796

66,579,304

66,579,304

 

       

Jinzhaoyuan International Building - North Station Building Phase I

4,095,064

4,045,236

4,428,762

4,428,761

Global Financial Center - North Station Building Phase II

85,756,748

85,502,606

91,944,238

89,100,900

Jinzhaoyuan International Building - Shenyang North Station Zhixuan Holiday-Inn

-

-

-

 -

Global Financial Center - Marriott Hotel

30,933,093

40,267,662

45,187,463

45,262,601

Connection of Phase I and phase II Shopping Malls

52,843

-

-

-

Financial Building (Holiday Inn)

5,424,533

5,440,132

5,814,858

5,814,858

Financial Building (Building as a whole)

18,120,810

17,959,414

19,232,527

19,234,824

Financial Building (Anshan Office)

36,346

67,671

418,625

417,990

Financial Building (Anshan Sales Office)

14,506

14,330

82,371

82,370

Financial Building (Three-dimensional Parking Equipment)

141,150

225,601

577,921

577,920

Financial Building (Heat Exchange Station, Fire Pump)

182,578

319,117

340,546

340,546

Financial Building (Chaoshan Kitchen)

-

143,615

391,924

391,923

Fushun Jin Ri Yang Guang (Site 1-1#)

-

28,211,006

49,278,651

50,208,513

Prepaid tax relating to real estate properties

4,473,261

4,437,055

-

 -

 

149,230,932

186,633,445

217,697,886

215,861,206

Prepaid taxes related to real estate

-
-

1,903,526

2,826,133

(Loss)/profit recognized

(1,830,158)

(1,844,825)

-

 -

Less: progress billings (Note 9)

(193,106)

(194,258)

-

 -

Real estate properties under development:

147,207,668

184,594,362

219,601,412

218,687,339

 

       

Total real estate properties development completed and under development

192,909,695

229,995,158

286,180,716

285,266,643

-24-

5. Property and equipment, net

 

Property and equipment consisted of the following:

 

 

December 31,

2018

December 31,

2019

December 31,

2020

March 31,

2021

 

US$

US$

US$

US$

Vehicles

11,826

11,682

725,378

621,309

Equipment

730,189

687,723

12,467

12,467

Furniture and fixtures

266,102

290,665

273,017

273,017

Office buildings

35,191,142

34,762,945

37,097,350

37,097,350

Proposed investment in twenty-nine properties(1)

-

70,681,869,688

70,681,869,688

70,681,869,688

Total

36,199,260

70,717,622,703

70,719,977,900

70,719,873,831

Accumulated depreciation

(10,904,530)

(12,456,566)

(15,088,474)

(15,423,359)

Property and equipment, net

25,294,730

70,705,166,137

70,704,889,426

70,704,450,472

 

(1) The details of the twenty-nine properties are listed below:

           

 

 

Appraisal Value

RMB

 

Estimated appraisal

Value (USD:$)

(RATIO 1:7.06)

 

 

Estimated Total Investment

RMB

 

Estimated Total Investment(USD:$) (RATIO 1:7.06)

USD

TOTAL NUMBER

OF

SHARES

SUBSCRIBED

($3 PER SHARE)

1. Hai Wan Cheng Project

4,100,000,000

580,736,544

40,600,000,000

5,750,708,215

1,916,902,738

2. Changchun Meixin Fortune Plaza Project

3,533,333,333

500,472,143

10,600,000,000

1,501,416,431

500,472,144

3. Beijing Meixin Fortune Plaza Project

11,366,666,667

1,610,009,443

34,100,000,000

4,830,028,329

1,610,009,443

4. Shanghai Meixin Fortune Plaza Project

11,233,333,333

1,591,123,702

33,700,000,000

4,773,371,105

1,591,123,702

5. Sanya Meixin Fortune Plaza Project

5,266,666,667

745,986,780

15,800,000,000

2,237,960,340

745,986,780

6. Harbin Meixin Fortune Plaza Project

3,600,000,000

509,915,014

10,800,000,000

1,529,745,042

509,915,014

7. Shenyang Meixin Fortune PlazaProject

7,333,333,333

1,038,715,770

22,000,000,000

3,116,147,309

1,038,715,770

8. Hangzhou Meixin Fortune Plaza Project

9,600,000,000

1,359,773,371

28,800,000,000

4,079,320,113

1,359,773,371

9. Fuzhou Meixin Fortune Plaza Project

4,600,000,000

651,558,074

13,800,000,000

1,954,674,221

651,558,074

10. Jinan Meixin Fortune Plaza Project

3,600,000,000

509,915,014

10,800,000,000

1,529,745,042

509,915,014

11. Guangzhou Meixin Fortune Plaza Project

9,733,333,333

1,378,659,112

29,200,000,000

4,135,977,337

1,378,659,112

12. Wuhan Meixin Fortune Plaza Project

4,600,000,000

651,558,074

13,800,000,000

1,954,674,221

651,558,074

13. Chengdu Meixin Fortune Plaza Project

5,933,333,333

840,415,486

17,800,000,000

2,521,246,459

840,415,486

14. Kunming Meixin Fortune Plaza Project

4,100,000,000

580,736,544

12,300,000,000

1,742,209,632

580,736,544

15. Lanzhou Meixin Fortune Plaza Project

3,533,333,333

500,472,143

10,600,000,000

1,501,416,431

500,472,144

16. Nanning Meixin Fortune Plaza Project

3,333,333,333

472,143,532

10,000,000,000

1,416,430,595

472,143,532

17. Yinchuan Meixin Fortune Plaza Project

3,033,333,333

429,650,614

9,100,000,000

1,288,951,841

429,650,614

18. Taiyuan Meixin Fortune Plaza Project

3,600,000,000

509,915,014

10,800,000,000

1,529,745,042

509,915,014

19. Nanjing Meixin Fortune Plaza Project

5,400,000,000

764,872,521

16,200,000,000

2,294,617,564

764,872,521

20. Hefei Meixin Fortune Plaza Project

3,600,000,000

509,915,014

10,800,000,000

1,529,745,042

509,915,014

21. Zhengzhou Meixin Fortune Plaza Project

3,600,000,000

509,915,014

10,800,000,000

1,529,745,042

509,915,014

22. Changsha Meixin Fortune Plaza Project

4,100,000,000

580,736,544

12,300,000,000

1,742,209,632

580,736,544

23. Guiyang Meixin Fortune Plaza Project

3,600,000,000

509,915,014

10,800,000,000

1,529,745,042

509,915,014

24. Xi'an Meixin Fortune Plaza Project

5,266,666,667

745,986,780

15,800,000,000

2,237,960,340

745,986,780

25. Chongqing Meixin Fortune Plaza Project

7,266,666,667

1,029,272,899

21,800,000,000

3,087,818,697

1,029,272,899

26. Tianjin Meixin Fortune Plaza Project

7,266,666,667

1,029,272,899

21,800,000,000

3,087,818,697

1,029,272,899

27. Shenzhen Meixin Fortune Plaza Project

11,366,666,667

1,610,009,443

34,100,000,000

4,830,028,329

1,610,009,443

28. Fushun Bank

10,000,000,000

1,416,430,595

10,000,000,000

1,416,430,595

472,143,532

29. Dalian Plastic Surgery Hospital Project

14,000,000

1,983,003

14,000,000

1,983,003

661,001

Total

163,580,666,666

23,170,066,100

499,014,000,000

70,681,869,688

23,560,623,229

-25-

As of December 31, 2018, 2019, 2020 and March 31, 2021, the long-term investment consisted of the following:

 

 

 

December 31,

 

Initial Cost

Ownership

2018

 

US$

%

US$

    Nonmarketable equity securities

 

 

 

Fuxin Bank Co., Ltd.

92,016,904

5%

87,035,461

Shenyang Yuhong Yongan Village Bank Co., Ltd.

1,537,050

10%

1,453,840

Total

93,553,954

15%

88,489,301

       
 

 

 

December 31,

 

Initial Cost

Ownership

2019

 

US$

%

US$

    Nonmarketable equity securities

 

 

 

Shenyang Yuhong Yongan Village Bank Co., Ltd.

1,537,050

10%

1,448,351

Total

1,537,050

10%

1,448,351

       
 

 

 

December 31,

 

Initial Cost

Ownership

2020

 

US$

%

US$

Shenyang Yuhong Yongan Village Bank Co., Ltd.

1,532,591

10%

1,532,591

Total

1,532,591

 

1,532,591

       
     

March 31,

 

Initial Cost

Ownership

2021

 

US$

%

US$

Shenyang Yuhong Yongan Village Bank Co., Ltd.

1,532,591

10%

1,532,591

Total

1,532,591

 

1,532,591

 

7. Intangible Assets

         

 

December 31,

2018

December 31,

2019

December 31,

2020

March 31,

2021

 

US$

US$

US$

US$

Land use right

5,230,123

5,743,026

6,583,696

6,583,696

Land use right Accumulated depreciation at December 31,

(150,896)

(237,232)

(803,380 )

(826,764)

Land use right, net

5,079,227

5,505,794

5,780,316

5,756,932

Others

-

-

2,222

2,222

Others Accumulated depreciation at December 31,

-

-

(1,296)

(1,481)

Others use right, net

-

-

926

741

Goodwill

-
-
-

786,136

 

Amortization expense for Land use right for the year ended March 31, 2021 amounted to US$-826,764 (2018: US$58,606; 2019: US$88,921).

 

Amortization is computed using the straight-line method over the estimated useful lives of the land use rights. Estimated useful lives of the land use rights are between 20-32 years.

-26-

8. Short-term bank loans and other debt

 

Short-term bank loans and other debt represent amounts due to various banks and financial institutions that are due on the dates indicated below. Short-term bank loans and other debt at December 31, 2018, 2019, 2020 and March 31, 2021 consisted of the following:

 

December 31, 2018

December 31 , 2019

December 31, 2020

 

US$

US$

US$

Loan from The Bank of Fuxin Shengyang Branch:

 

 

 

Due October 17, 2019, at 5.0025% per annum

98,497,660

-

-

Due September 19, 2020, at 8.00% per annum

-

79,778,133

-

Due September 27, 2021, at 8.00% per annum

-

-

85,135,404

 

Loan from The Bank of Hu Lu Dao Shengyang Branch:

     

Due April 19, 2019, at 7.80% per annum

26,109,513

-

-

Due May 14, 2020, at 6.67% per annum

-

32,887,835

-

Due January 10, 2021, at 7% per annum

-

-

7,662,953

Due  June 5, 2021, at 6.50% per annum

-

-

7,662,953

Due June 17,2021, at 6.50% per annum

-

-

19,770,418

 

Loan from The Bank of Fushun Beizhan Branch:

     

Due May 13, 2019, at 6.10% per annum

26,169,120

-

-

Due May 12, 2020, at 6.67% per annum

-

34,467,600

-

Due May 10, 2021, at 8% per annum

-

-

36,782,172

 

Loan from The Bank of Rural Commercial Dadong Branch:

     

Due June 27, 2019, at 8.19% per annum

8,455,533

-

-

Due June 15, 2020, at 8.19% per annum

-

7,180,750

-

Due June7, 2021, at 8.19% per annum

-

-

7,662,953

 

Personal loan:

     

Due July 19, 2019, at 8.57% per annum

2,180,760

-

-

Due July 19, 2020, at 8.57% per annum

-

1,872,618

-

Due 2021, at 8.61% ,8.56per annum

-

-

5,829,851

 

Loan from The Bank of Fuxin Panjin Branch:

     

Due March 7, 2019, at 5.0025% per annum

32,430,258

-

-

Due March 7, 2020, at 5.0025% per annum

-

32,035,653

-

Due March 9, 2021, at 8.00% per annum

-

-

30,468,206

Total short-term bank loans and other debt

193,842,844

188,222,589

200,974,910

-27-

9. Customer deposits

 

Advances for real estate properties comprise of amounts received from customers for the pre-sale of residential or commercial units in the PRC.

 

 

December 31,

2018

December 31,

2019

December 31,

2020

March 31,

2021

 

US$

US$

US$

US$

Advances for real estate properties

28,767,135

21,780,981

53,191,534

60,630,713

Less: recognized as progress billings (Note 4)

(193,106)

(194,258)

-
-

Customer deposits (Note 2(h))

28,574,029

21,586,723

53,191,534

60,630,713

 

10. Income taxes

 

Corporate income tax ("CIT")

 

The Group's PRC entities are subject to income tax at the statutory rate of 25% in accordance to the PRC corporate income tax laws and regulations.

 

The Group’s entities incorporated in the PRC have unused net operating losses (“NOLs”) available for carry forward to future years for PRC income tax reporting purposes up to five years. The Group did not record deferred tax asset at December 31, 2018, 2019, 2020 and March 31, 2021.

 

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 Group is able to realize their benefits, or that future deductibility is uncertain.

 

 

Year ended December

Year ended December

 

2018

2019

2020

2021

 

US$

US$

US$

US$

Current tax:

 

 

 

 

Income tax expense

193,068

21,293

-

 

 

The Group's income tax expense differs from the tax expense computed by applying the PRC statutory CIT rate of 25% for the years ended December 31, 2018, 2019, 2020 and March 31, 2021, are as follows:

 

 

Year ended

December

2018

Year ended December

2019

Year ended December

2020

Year ended March

2021

 

US$

US$

US$

US$

CIT at rate of 25%

(1,506,454)

(672,264)

1,041,775

-

Changes in valuation allowance

1,699,522

693,557

(1,041,775)

-

Income tax expense

193,068

21,293

-
-

 

11. Other payables and accrued liabilities

 

         

 

December 31, 2018

December 31, 2019

December 31, 2020

March 31, 2021

 

US$

US$

US$

US$

Other tax payables

708,942

1,021,686

1,096,675

(264,720)

Salary payables

122

885

332

332

Other payables (1)

232,776,771

277,979,937

79,951,753

77,916,889

Total

233,485,835

279,002,508

81,048,760

77,652,501

(1) Other payables primarily represent various cash advances from unrelated companies and individuals with which the Group has business relationships and they are unsecured, non-interest bearing and due on demand.

-28-

12. Related party transactions

 

 

December 31, 2018

December 31, 2019

December 31, 2020

March 31, 2021

Amount due from related parties

US$

US$

US$

US$

Shengyang Ruibo Hotel Management Co., Ltd

1,508,436

16,110,101

8,115,289

      7,847,396

Liaoning Tongfei Investment Co., Ltd.

37,285,981

45,904,686

50,116,592

     50,060,918

Liaoning Tongfei General Aviation Co., Ltd.

12,459,463

15,368,388

24,732,733

     24,192,878

Xu Bai

-

-

 

            -   

Jun Li

5,169,893

798,537

852,160

        852,160

Changgang Bai

14,411,901

16,749,876

-

            -   

Beijing woze handing corporation management co., ltd.

-

-

3,831,476

      3,831,476

Chaoshan Kitchen (Yueshan Kitchen)

-

-

81,718

         81,718

Donglizhi

-

-

1,748,702

      1,770,683

Gaoyuting

-

-

8,735,766

      8,735,766

Lishengbo

-

-

1,579,229

      1,977,703

Liaoning cangyuan investment co., ltd

-

-

2,769,191

      2,845,904

Liaoning hualang electronic equipment co., ltd

-

-

592,750

        615,733

Liaoning lide Wu trading co., ltd

-

-

7,911,890

      6,209,137

Liaoning Pacific ocean real estate company

-

-

9,239,832

      9,239,832

Liaoning Pacific chain network science and technology information co., ltd

-

-

185,975

        186,741

Liaoning Pacific ocean investment co., ltd

-

-

45,274,817

     44,012,130

Shenyang Baiji Real Estate Development Co., Ltd. (Shenbei Project)

-

-

3,164,244

      2,924,559

Shenyang hongjian aviation technology co., ltd

-

-

288,094

355,286

Shenyang lidiwu corporation management co., ltd

-

-

176,122

-

Shenyang Pacific ocean new world real estate real estate co., ltd

-

-

10,160,465

10,228,052

Shenyang general aviation

-

-

249,901

194,831

Shenyang xindini trading co., ltd

-

-

257,475

-

Shenyang yuegangshan catering co., ltd

-

-

321,055

434,926

Supplier: Liaoning Suisi Construction Engineering Group Co., Ltd. (Section 2)

-

-

107

857,234

Shenyang ruibai hotel management co., ltd

-

-

952

135,513

Panjin hechuang real estate marketing planning Co., Ltd

-

-

-

788,752

Seong Yeol Lee

-

-

-

 5,992

 

70,835,674

94,931,588

180,386,535

 178,385,322

 

       

Amount due to related parties

       

Shenyang Ruiyin Investment CO., Ltd.

1,725,774

-

2,094,883

      2,171,480

Liaoning United Airlines Shenyan Aircraft Co., Ltd.

19,738,786

19,497,890

28,700,057

     28,700,057

Xu Bai

171,235

152,854

303,117

        303,117

Changgang Bai

3,591,241

4,150,648

5,102,064

      4,915,088

Liaoning Tongfei General Club Co., Ltd.

20,353,760

20,106,100

-

-

Liaoning Suisi Construction Engineering Group Co., Ltd.

-

11,396,273

113,216

-

Liaoning Pacific Investment Co., Ltd.

-

4,681,849

-

-

Anshan guanghai property management co., ltd

-

-

45,813

-

Bailiyan

-

-

10,728,134

-

Beijing Ming he ju feng investment management co., ltd

-

-

383,148

-        383,148

Dalian sanxing building development co., ltd

-

-

8,238,390

      8,238,390

Northeast international auction co., ltd

-

-

854,344

        834,256

Guomei

-

-

697,329

        697,329

Langwan decoration engineering co., ltd

-

-

20,082,623

     20,070,689

Liaoning lide Wu trading co., ltd

-

-

1,878,874

 

Liaoning tongfei general aviation club co., ltd

-

-

21,456,268

     21,456,268

Liaoning Yudong trading co., ltd

-

-

49,959,793

     49,958,129

Panjin guanghai property management co., ltd

-

-

776,607

        776,607

Shenyang cheng da Guo ao management company

-

-

25,155,441

     25,464,684

Shenyang Chunjiang real estate co., ltd

-

-

3,242,812

      3,242,812

Shenyang guanghai property management co., ltd

-

-

3,935,344

      3,920,631

Shenyang hui Xiang yi dong trading co., ltd

-

-

34,138,249

     34,138,249

Shenyang jinsheng housing development co., ltd

-

-

25,554,778

     25,628,523

Shenyang langwan decoration engineering co., ltd

-

-

12,033,893

     12,090,365

Shenyang lide Wu corporation management co., ltd

-

-

8,584

 

Shenyang qinjian culture media co., ltd

-

-

323,804

        320,400

Shenyang xindini trading co., ltd

-

-

3,639,872

      3,382,397

Shenyang Heart Information Testing Center of China Medical University

-

-

941,896

        957,222

Shenyang China medical university medical equipment research and development center co., ltd

-

-

1,770,377

      1,770,377

Shenyang leitu floor material Co., Ltd

-

-

-

 6,651

Anshan Guanghai Property Management Co., Ltd

-

-

-

 36,608

Bai Liyan

-

-

-

 10,728,134

Panjin Pacific Real Estate Co., Ltd

-

-

-

   3,699,266

 

45,580,796

59,985,614

262,159,710

 263,890,877

-29-

13. Commitments and contingencies

 

Shenyang Guanghai Property Management Co., Ltd. sued Fuxin Bank Co., Ltd. for the rent dispute over house leasing (19th floor, 20th floor and 21st floor of Phase II), and Liaoning Pacific Industrial Co., Ltd. was the third person in the case. The first trial has ruled that Fuxin Bank will pay Shenyang Guanghai Property Management Co., Ltd. US$2,800,656; Fuxin Bank has appealed to the Intermediate People's Court. In the second trial, Fuxin Bank changed Liaoning Pacific Industrial Co., Ltd. from the third party to the appellee. As of March 31, 2021, the second trial had not been held.

 

Panjin Pacific Real Estate Co., Ltd. has one pending lawsuit, and the litigant is Liaoning Zhongda Engineering Cost Consulting Co., Ltd., with the lawsuit amount of US$ 15,326. As of March 31, 2021, there is no final judgment yet.

 

Shenyang Haojingxiang Real Estate Co., Ltd. expects to pay for the purchase of the financial building (construction in progress) in 2021, and the estimated unpaid amount is US$15,325,905 (as the two parties have not signed a contract, the amount is estimated).

 

14. Concentration of risk

 

The Group's operations are conducted in the PRC. Accordingly, the Group's business, financial condition and results of operations is primarily influenced by the political, economic and legal environments in the PRC and by the general state of the PRC economy.

 

The Group's operations in the PRC are subject to special considerations and significant risks. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Group'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 and remittance abroad, and rates and methods of taxation, among other things.

 

The Group transacts all of its business in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers' invoices, shipping documents and signed contracts.

 

On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the US$. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies.

To the extent that the Group needs to convert US$ into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against US$ would have an adverse effect on the RMB amount the Group would receive from the conversion. Conversely, if the Group decides to convert RMB into US$ for the purpose of making payments for dividends on ordinary shares, strategic acquisitions or investments or other business purposes, appreciation of US$ against RMB would have a negative effect on the US$ amount available to the Group. In addition, a significant depreciation of the RMB against the US$ may significantly reduce the US$ equivalent of the Group’s earnings or losses.

 

In addition, no single customer accounted for more than 10% of revenue for the years ended December 31, 2018, 2019 ,2020 and March 31, 2021.

 

15. Subsequent events

 

Since January 2021, the coronavirus pandemic (“the COVID-19”) has spread across China and other countries, governments have implemented a series of measures including travel restrictions and quarantines to contain COVID-19, which adversely affected the real estate industry where the Group operates. We currently believe our first quarter results of operations will be negatively impacted by these developments. The development and evolution of the COVID-19 in China and globally still has great uncertainty in the duration and severity, which may further amplify and delay the impact on the recovery of the real estate industry. Given the uncertainty about the situation, the Group currently cannot estimate the impact to the 2021 financial performance and cash flows.

 

-30-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Certain information included herein contains forward-looking statements that involve risks and uncertainties within the meaning of Sections 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934. These sections provide that the safe harbor for forward looking statements does not apply to statements made in initial public offerings. The words, such as 'may,' 'would,' 'could,' 'anticipate,' 'estimate,' 'plans,' 'potential,' 'projects,' 'continuing,' 'ongoing,' 'expects,' 'believe,' 'intend' and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this Form 10-K and include all statements that are not statements of historical fact regarding intent, belief or current expectations of the Company, our directors or our officers, with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans; (iii) continued development of business opportunities; (iv) market and other trends affecting our future financial condition; (v) our growth and operating strategy. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) we have incurred significant losses since our inception; (ii) any material inability to successfully develop our business plans; (iii) any adverse effect or limitations caused by government regulations; (iv) any adverse effect on our ability to obtain acceptable financing; (v) competitive factors; and (vi) other risks including those identified in our other filings with the Securities and Exchange Commission.

 

Overview

 

The following discussion and analysis of our financial condition and results of operations ('MD&A') should be read in conjunction with our consolidated financial statements and the accompanying notes to the consolidated financial statements included in this Form 10Q. 

 

The MD&A is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Three Months Ended March 31, 2021 and 2020

 

We generated revenues of $6,102,395 from sales of real estate during the three months ended March 31, 2021, compared to 2,407,543 for the three months ended March 31, 2020. This is due to the fact that the sales of new real estate increased the sales revenue in 2021. For similar reasons, real estate rental income for the period ended March 31, 2021 was $850,224, while there was no real estate rental income for the corresponding period in 2020. Costs associated with real estate sales were $3,064,735 during the three months ended March 31, 2021, compared to 1,653,289 for the three months ended March 31, 2020.

 

General and administrative expenses for the three months ended March 31, 2021 were $777,919, compared to $592,596 during the corresponding period in 2020. This increase is due to significantly increased activity. Interest expense for the three months ended March 31, 2021 was $3,699,628, compared to $2,609,852 for the three months ended March 31, 2020. The increased interest expense related to properties acquired during 2021.  

 

Six Months Ended March 31, 2021 and 2020

 

We generated revenues of $22,334,093 from sales of real estate during the six months ended March 31, 2021, compared to3,281,037 for the six months ended March 31, 2020. This is due to the fact that the sales of new real estate increased the sales revenue in 2021. For similar reasons, real estate rental income for the period ended March 31, 2021 was $2,271,349, while there was no real estate rental income for the corresponding period in 2020. Costs associated with real estate sales were $2,281,162 during the six months ended March 31, 2021, compared to 1,707,885 for the six months ended March 31, 2020.

 

General and administrative expenses for the six months ended March 31, 2021 were $1,963,283, compared to $1,893,143 during the corresponding period in 2020. This increase is due to significantly increased activity. Interest expense for the six months ended March 31, 2021 was $6,693,661, compared to $7,159,030 for the six months ended March 31, 2020. The reduced interest expense in 2021 is related to the repayment of loans in 2020.

 

Liquidity and Capital Resources 

 

In assessing its liquidity, management monitors and analyzes the Company's cash on-hand, its ability to generate sufficient revenue sources in the future, and its operating and capital expenditure commitments. The Company, as of the date of this filing, had approximately $8,743,735 in unrestricted available cash, which can be used to finance operations over the next 12 months. However, the Company had not generated any revenues from operations during the six months ended March 31, 2021, other than revenues from the sale of real estate properties. For the six months ended March 31, 2021, our total expenses were $6,417,562, consisting primarily of costs of rental real estate, taxes, legal and accounting fees, administrative expenses and filing fees. Net cash provided by operating activities was $660,430,895 for the six months ended March 31, 2021, compared to net cash used in operating activities of $ 611,458,143during the corresponding period of 2020. 

 

The effects of COVID-19 could impact the Company's ability to operate as a going concern and maintain sufficient liquidity to continue operations. The impact of COVID-19 on companies is evolving rapidly and its future effects are uncertain. There are material uncertainties from COVID-19. There are a wide range of factors to consider, including travel bans, restrictions on activity, government assistance and potential sources of replacement financing, financial health of vendors and customers and their effect on expected profitability and other key financial performance ratios, including information that shows whether there will be sufficient liquidity to continue to meet obligations when they come due.  

 

At March 31, 2021, we had an accumulated deficit of $14,812,420 and cash and cash equivalents (other than restricted cash) of $8,743,735. At March 31, 2020 we had an accumulated deficit of $28,271,348 and cash and cash equivalents (other than restricted cash) of $ 1,217,845.

 

At December 31, 2020, we had an accumulated deficit of $13,240,725 and cash and cash equivalents (other than restricted cash) of$11,601,437. At December 31, 2019, we had an accumulated deficit of $755,900 and cash of $0.

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COVID-19 Pandemic Update

 

The ongoing outbreak of Coronavirus (COVID-19) has caused significant disruptions to national and global economies and government activities.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a "smaller reporting company," the Company is not required to respond to this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. 

 

Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

 

Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. 

 

Based on our evaluation, our management concluded that there is a material weakness in our internal control over financial reporting. The material weakness relates to the fact that our management is relying on external consultants for purposes of preparing its financial reporting package; however, the officers may not be able to identify errors and irregularities in the financial reporting package before its release as a continuous disclosure

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 and as a result of adopting Topic 842) during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

Since January 2020, the coronavirus pandemic ("the COVID-19") has spread across China and other countries, governments have implemented a series of measures including travel restrictions and quarantines to contain COVID-19, which adversely affected the real estate industry where the Company operates. We currently believe our fourth quarter results of operations will be negatively impacted by these developments. The development and evolution of the COVID-19 in China and globally still has great uncertainty in the duration and severity, which may further amplify and delay the impact on the recovery of the real estate industry. Given the uncertainty about the situation, the Company currently cannot estimate the impact to the 2021financial performance and cash flows.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

31.1

Section 302 Certification by the Corporation's Principal Executive Officer *

31.2

Section 302 Certification by the Corporation's Principal Financial Officer *

32.1

Section 906 Certification by the Corporation's Principal Executive Officer and Principal Financial Officer *

32.2

Section 906 Certification by the Corporation's Principal Executive Officer and Principal Financial Officer *

101

XBRL Interactive Exhibit Tables*

 

Filed herewith.*

 

SIGNATURE


In accordance with Section 13 of 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

     

 

 

 

 

Ameritrust Corporation

 

 

 

 

By:

 /s/Seong Y. Lee

 

 

Seong Y. Lee

 

 

President

(Principal Executive Officer)

 

 

Dated: June 08, 2021

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 Exhibit 31.1 

CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Seong Y. Lee , certify that:

    1. I have reviewed this quarterly report on Form 10-Q of Ameritrust Corporation (the "registrant");

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

As the registrant’s certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

     

 

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

5.

As the registrant's certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: June 08, 2021

/s/Seong Y. Lee

 

Seong Y. Lee

 

President

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 Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Seong Y. Lee , certify that:

 

    1. I have reviewed this quarterly report on Form 10-Q of Ameritrust Corporation (the "registrant");

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

As the registrant’s certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

5.

As the registrant's certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: June 08, 2021

/s/Seong Y. Lee

 

Seong Y. Lee

 

Acting Chief Financial Officer

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 Exhibit 32.1 

CERTIFICATION PURSUANT TO 18 U.S.C. 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Ameritrust Corporation (the "Company") on Form 10-Q for the six months ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Seong Y. Lee, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

   

Date:  June 08, 2021

/s/Seong Y. Lee

 

Seong Y. Lee

 

President

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Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Ameritrust Corporation (the "Company") on Form 10-Q for the six months ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Seong Y. Lee, Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date:  June 08, 2021

/s/Seong Y. Lee

 

Seong Y. Lee

 

 Acting Chief Financial Officer

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