Notes to the
Consolidated Financial Statements
March 31
,
201
6
and
201
5
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Yinfu Gold Corporation (the "Company") is a Wyoming corporation incorporated on September 1, 2005 under the name Ace Lock and Security, Inc. with an established a fiscal year end of March 31. On March 5, 2007, we filed a Certificate of Amendment with the Wyoming Secretary of State to change our name to Element92 Resources Corp. and increased our authorized capital to 1,000,000,000 common shares. On August 16, 2010 the Company filed an amendment with the State of Wyoming changing its name from Element92 resources Corp. to Yinfu Gold Corporation and on November 18, 2010, the Company received a notification from the Financial Industry Regulatory Authority ("FINRA") that the Company's change of name to Yinfu Gold Corporation was posted as effective with FINRA. The Company was established as an exploration stage company engaged in the search for commercially viable minerals.
We no longer pursue opportunities related to the exploration of minerals. Our name change to Yinfu Gold Corporation, as filed with the State of Wyoming on November 18, 2010, signified that we have commenced working toward a major change in our business plan and business model.
Effective November 20, 2014, the Company executed a Sale and Purchase Agreement (the "Agreement") to acquire 100% of the shares and assets of China Enterprise Overseas Investment & Finance Group Limited ("CEI"), a British Virgin Islands corporation. Pursuant to the Agreement, the Company has agreed to issue 800 million restricted common shares of the Company to the owners of CEI.
Dahua Online Shopping Mall (http://www.dahuacheng.com) is an online shopping platform in the China market with two mainstream e-commerce models: business to business (B2B) and business to consumer (B2C). There are over 3,000 suppliers all over the China to provide an online listing of millions of commodities. The real-time payment system of Dahua is convenient, safe and fast.
Dahua Online Shopping Mall has registered 31 million members as of November 17, 2014.
Pursuant to the Agreement, on or before January 1, 2015, CEI was to deliver to the Company, duly authorized, properly and fully executed documents in English, evidencing and confirming the sale of 100% of the shares of CEI and its assets, specifically detailing the assets and an asset valuation by a third-party valuator. The valuation report was received by the Company on January 28, 2015.
Additionally, the Agreement stated that both parties agreed that all shares issued, pursuant to the terms and conditions of the agreement, were to be issued as soon as practicable following the signing of the agreement, but all shares so issued were to be held in escrow until all terms and conditions are met.
The various terms and conditions of the Agreement were fulfilled on January 28, 2015, therefore, the share certificates representing the shares have been issued in the names of the CEI shareholders and the Agreement between the Company and CEI was closed on January 28, 2015.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles ("GAAP") of the United States and presented in US dollars.
Principles of Consolidation
For March 31, 2016, the consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, Element Resources International Limited ("Element Resources") incorporated in Hong Kong and CEI. All significant intercompany balances and transactions have been eliminated in consolidation. Prior to January 28, 2015, the financial statements presented are those of CEI.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Discontinued Operations
The Company follows ASC 205-20, "Discontinued Operations," to report for disposed or discontinued operations.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.
Foreign Currency Translation and Re-measurement
In accordance with ASC 830, "Foreign Currency Matters", the Company's foreign operations whose functional currency is not the U.S. dollar, the assets and liabilities are
translated into U.S. dollars at current exchange rates. Resulting translation adjustments are reflected as other comprehensive income (loss) in stockholders' equity. Revenue and expenses are translated at average exchange rates for the period. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are charged to operations as incurred. The Company did not have any significant foreign currency translations for the years ended March 31, 201
6
and 201
5.
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables that it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company's management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Financial Instruments
The Company follows ASC 820, "Fair Value Measurements and Disclosures," which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 201
6
. The carrying values of our financial instruments, including, cash and cash equivalents; accounts payable and accrued expenses; and loans and notes payable approximate their fair values due to the short-term maturities of these financial instruments.
Business Combinations
In accordance with ASC 805-10, "Business Combinations", the Company accounts for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining noncontrolling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and noncontrolling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or noncontrolling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. Results of operations of the acquired entity are included in the Company's results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets.
Deferred Income Taxes and Valuation Allowance
The Company accounts for income taxes under ASC 740, "Income Taxes." Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as at March 31, 2016 and 2015.
Net Loss Per Share of Common Stock
The Company has adopted ASC Topic 260,
"Earnings per Share,"
("EPS") which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The following table sets forth the computation of basic earnings per share, for the years ended March 31, 2016 and 2015:
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Year Ended March 31,
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2016
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2015
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Net income (loss)
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$
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(62,367
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)
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$
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(48,433
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)
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Weighted average number of common shares outstanding - basic and diluted
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991,770,362
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833,100,090
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Net income (loss) per common share - basic and diluted
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$
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(0.00
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)
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$
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(0.00
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)
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Commitments and Contingencies
The Company follows ASC 450-20, "Loss Contingencies," to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of March 31, 2016 and 2015.
Advertising Costs
The Company follows ASC 720, "Advertising Costs," and expenses costs as incurred. No advertising costs were incurred for the years ended March 31, 2016 and 2015.
Related Parties
The Company follows ASC 850,
"Related Party Disclosures,"
for the identification of related parties and disclosure of related party transactions. See note
5
.
Revenue Recognition
The Company will recognize revenue from the sale of products and services in accordance with ASC 605,
"Revenue Recognition."
However, the Company will recognize revenue only when all of the following criteria have been met:
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i)
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Persuasive evidence for an agreement exists;
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ii)
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Service has been provided;
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iii)
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The fee is fixed or determinable; and,
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iv)
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Collection is reasonably assured.
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Recent Accounting Pronouncements
In May 2014 and again in August 2015, the Financial Accounting Standards Board issued amended accounting guidance on revenue recognition that will be applied to all contracts with customers. The objective of the new guidance is to improve comparability of revenue recognition practices across entities and to provide more useful information to users of financial statements through improved disclosure requirements. This guidance is effective for annual and interim periods beginning in 2019. Early adoption is permitted, but only beginning in 2018. The Company is currently assessing the impact of adoption on its consolidated financial statements.
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's financial statements.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established an ongoing source of revenues sufficient to cover its operating cost, and requires additional capital to commence its operating plan. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
4
– STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
Effective December 8, 2014, the Company increased the authorized capital from 1,000,000,000 common shares to 3,000,000,000 common shares. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
On February 6, 2015, the Company issued 1.2 billion restricted common shares of the Company to the owners of EFI for acquiring 100% ownership of EFI. The 1.2 billion restricted common shares were held in escrow, and were cancelled on September 22, 2015.
As of March 31, 2016, the Company has 991,770,362 shares of common stock issued and outstanding. As of March 31, 2015, the Company has 2,191,770,362 shares of common stock issued, of which the 1,200,000,000 restricted common shares were held in escrow.
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
NOTE
5
- RELATED PARTY TRANSACTIONS
During the year ended March 31, 2016, Mr. Jiang Libin, the President and a director of the Company, had advanced the Company $62,415 for operating expenses. These advances have been formalized by non-interest bearing demand notes.
During the year ended March 31, 2015, Mr. Jiang Libin had advanced the Company $16,507 for operating expenses. These advances have been formalized by non-interest bearing demand notes.
As of March 31, 2016, the Company owed $487,358 and $126,172 to Mr. Tsap Wai Ping, the former President of the Company (the "Former President", resigned on October 31, 2014) and Mr. Jiang Libin respectively.
As of March 31, 2015, the Company owed $487,358 and $63,757 to the Former President and Mr. Jiang Libin respectively.
During the year ended March 31, 2016, no shares were issued to related parties and no reverse acquisition occurred.
On January 28, 2015, the Company issued 800 million restricted common shares of the Company to the stockholders and related parties of CEI in exchange of 15,600 shares of CEI's common stock, representing 100% of its issued and outstanding common stock.
The first five persons in the above table were the only five stockholders of CEI prior to the reverse acquisition. Mr. Liu Jun and Mr. Chen Qiang were the consultants of CEI prior to the reverse acquisition.
Mr. Liu Jun is the former President and a former director of the Company who was appointed on November 12, 2014 and resigned on June 10, 2015. All other six persons were not related to the Company prior to the reverse acquisition. Mr. Chen Qiang is the Chief Administration Officer of the Company who was appointed on December 12, 2015 and resigned on May 31, 2016.
The Company originally intended to be involved in the exploration of minerals in the People's Republic of China (the "PRC"). Based on management's analysis of the current operations, expected growth, and opportunities in the sector, during the year ended March 31, 2015, the Company has determined to discontinue operations related to the Company's subsidiary Element Resources International Limited, based in Hong Kong.
The following presents the financial information of the discontinued subsidiary of the Company, Element Resources International Limited.
Effective November 20, 2014, the Company executed the Agreement to acquire 100% of the shares and assets of CEI. Pursuant to the Agreement, the Company has agreed to issue 800 million restricted common shares of the Company to the owners of CEI.
The various terms and conditions of the Agreement have been fulfilled on January 28, 2015. As a result, the shares as referred to in the Agreement made between the Company and CEI were delivered on January 28, 2015.
For financial reporting purposes, the Agreement represented a "reverse merger", and CEI is deemed to be the accounting acquirer in the transaction. The Agreement is being accounted for as a reverse merger and recapitalization. CEI is the acquirer for financial reporting purposes, and the Company is the acquired company. The consummation of this reverse acquisition resulted in a change of control. Accordingly, the historical financial statements prior to the acquisition are those of the accounting acquirer, CEI and have been prepared to give retroactive effect to the reverse acquisition completed on January 28, 2015, and represent the operations of CEI. The consolidated financial statements after the acquisition date, January 28, 2015 include the balance sheets of both companies at historical cost, the historical results of CEI and the results of the Company from the acquisition date. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization.