NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
Organization and Business Nature
On May 25, 2018, Western Lucrative Enterprises, Inc. (“WLUC”), an Iowa corporation, formed a wholly owned subsidiary, a Nevada corporation named Zhong Ya International Limited (“Zhong Ya”). On July 3, 2018, WLUC merged with and into Zhong Ya pursuant to an Agreement and Plan of Merger (“Merger Agreement”), with the surviving entity being Zhong Ya (such surviving entity referred to herein as the “Company”), for the purpose of changing domicile from Iowa to Nevada (“Merger”). Pursuant to the Merger Agreement, every one hundred outstanding shares of WLUC common stock were exchanged for one share of Zhong Ya common stock and the name of the Company was changed to Zhong Ya International Limited. The financial statements give retroactive effect to this Merger and the 1 for 100 stock exchange.
The Company has not generated any revenues from operations and can give no assurance of any future revenues. The Company will require substantial additional funding to initiate and develop its operations. 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 (see Note 8).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Presentation
The accompanying unaudited condensed financial statements have been prepared on the accrual basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and interim financial information pursuant to the rules of the Securities and Exchange Commission (the “SEC”) and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on April 1, 2019.
Cash and Cash Equivalents
The Company considers all liquid investments with an original maturity of three months or less that are readily convertible into cash to be cash equivalents.
Income Taxes
The Company has not generated any taxable income, and, therefore, no provision for income taxes has been provided.
The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. As of September 30, 2019 and December 31, 2018, the Company has established a full valuation allowance against its deferred tax assets, principally for operating losses, due to the uncertainty in realizing the benefits.
The Company follows the provisions of FASB ASC 740-10-25. The provisions prescribe a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns and require that uncertain tax positions are evaluated in a two-step process. The Company does not have any uncertain tax positions.
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurement, specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:
Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
7
ZHONG YA INTERNATIONAL LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments (continued)
Level 2 Inputs – Inputs, other than the quoted prices in Level 1, that are observable either directly or indirectly.
Level 3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.
FASB ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Non-derivative financial instruments include accounts payables, accrued expenses and due to related parties. As of September 30, 2019 and December 31, 2018, the carrying values of these financial instruments approximated their fair values due to their short-term nature.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Earnings (Loss) per Share
The Company computes net earnings (loss) per share of common stock in accordance with FASB ASC 260, Earnings Per Share and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of ASC 260 and SAB 98, basic net earnings (loss) per common share is computed by dividing the amount of net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. The Company’s common stock equivalents, if any, are excluded in the computation of diluted net (loss) per share since their inclusion would be anti-dilutive.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
As of the date of this quarterly report, there are no recently issued accounting pronouncements which adoption would have a material impact on the Company’s financial statements.
4. COMMON STOCK
Upon completion of the Merger on July 3, 2018, the surviving entity, Zhong Ya, had fifty million (50,000,000) shares of common stock authorized, par value $0.001 per share. As of September 30, 2019 and December 31, 2018, there were 1,805,001 shares of common stock issued and outstanding, respectively.
In May 2018, WLUC formed a wholly-owned Nevada corporation for the purposes of changing domicile from Iowa to Nevada and changing its name to Zhong Ya International Limited. The common stock of WLUC was exchanged on July 3, 2018 for the common stock of Zhong Ya, and the Iowa company was merged into Zhong Ya. Each one hundred (100) shares of common stock of WLUC issued and outstanding were cancelled and converted automatically into one (1) share of common stock of Zhong Ya. The transaction decreased the number of outstanding shares from 18,735,000 to 187,350. These financial statements have been retroactively adjusted to reflect this exchange.
In November 2018, the Company issued 1,617,650 shares of common stock valued at $0.31 per share for Wenjian Liu’s services as the Chief Executive Officer, Chief Financial Officer, secretary and director of the Company. Compensation expense for the issuance of common stock to Mr. Liu was $504,707.
8
ZHONG YA INTERNATIONAL LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
5. INCOME TAXES
The Company is subject to United States tax laws which provides for a flat rate of 21% for 2019 and 2018. No provision for United States federal taxes has been made as the Company had taxable losses of approximately $6,000 and $9,000 for the three months, and approximately $25,000 and $25,000 for the nine months ended September 30, 2019 and 2018, respectively.
The provision for income taxes for the three and nine months ended September 30, 2019 and 2018 are summarized as follows:
|
|
For the three months ended
September 30,
|
|
For the nine months ended September 30,
|
|
|
2019
(Unaudited)
|
|
2018
(Unaudited)
|
|
2019
(Unaudited)
|
|
2018
(Unaudited)
|
Current
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Deferred
|
|
1,209
|
|
1,865
|
|
5,352
|
|
5,169
|
(Increase) in valuation allowance
|
|
(1,209)
|
|
(1,865)
|
|
(5,352)
|
|
(5,169)
|
Total
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
The primary components that give rise to deferred income taxes at September 30, 2019 and December 31, 2018 are as follows:
|
|
September 30, 2019
(Unaudited)
|
|
December 31, 2018
(Unaudited)
|
Deferred tax assets (liabilities):
|
|
|
|
|
Net operating loss carry forwards
|
$
|
38,374
|
$
|
33,022
|
Less: valuation allowance
|
|
(38,374)
|
|
(33,022)
|
Total deferred tax assets (liabilities)
|
$
|
-
|
$
|
-
|
The Company reviews the valuation allowance to determine whether there is sufficient positive or negative evidence to support a change in judgment about the realization of the deferred tax asset. The Company has established 100% valuation allowances as of September 30, 2019 and December 31, 2018. The valuation allowance increased by $5,352 and $5,169 during the nine months ended September 30, 2019 and 2018, respectively.
The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three and nine months ended September 30, 2019 and 2018:
|
For the three months ended
September 30,
|
|
For the nine months ended
September 30,
|
|
2019
(Unaudited)
|
|
2018
(Unaudited)
|
|
2019
(Unaudited)
|
|
2018
(Unaudited)
|
Federal statutory tax rate
|
21.0%
|
|
21.0%
|
|
21.0%
|
|
21.0%
|
Valuation allowance
|
(21.0)
|
|
(21.0)
|
|
(21.0)
|
|
(21.0)
|
Effective tax rate
|
0.0%
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
6. DUE TO RELATED PARTY
As of September 30, 2019, and December 31, 2018, the Company had a non-interest-bearing payable of $53,167 and $27,201, respectively, due to funds advanced by the principal stockholder, who also serves as sole director, Chief Executive Officer, Chief Financial Officer and secretary of the Company, for the Company’s operations.
9
ZHONG YA INTERNATIONAL LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
7. CONTINGENCIES
The Company could become a party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters.
As of the date of this report, there are no material pending legal proceedings to which the Company is a party or of which any of its property is the subject, nor are there any such proceedings known to be contemplated.
8. GOING CONCERN
The Company’s financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure. The Company has not generated any revenues since inception. While the Company is attempting to commence operations and generate revenues, the Company continues to be reliant upon its principal stockholder to support its operations. This raises substantial doubt about the Company’s ability to continue as a going concern.
The Company plans to raise additional funds through the issuance of additional equity or debt securities.
While the Company believes in its ability to raise additional funds and the viability of its strategy, there can be no assurances that they will be successful. The Company’s ability to continue as a going concern is dependent upon the continued financial support from its principal stockholder and its ability to obtain the necessary equity or debt financing and eventually commence and attain profitable operations.
The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
9. SUBSEQUENT EVENTS
The Company’s management has performed subsequent events procedures through November 14, 2019, which is the date the financial statements were available to be issued, and determined there were no subsequent events that would require recognition or disclosure in the financial statements.
10