CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
(Currency expressed in United States Dollars (US$))
(Unaudited)
|
|
|
|
|
| |
|
|
Three months ended March 31,
|
|
|
2017
|
-
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(522,442)
|
|
$
|
(1,009,234)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
|
104,388
|
|
|
115,213
|
Amortization of prepaid mining right
|
|
|
-
|
|
|
802,817
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Deposits and prepayments
|
|
|
50,499
|
|
|
(1,498,319)
|
Accrued liabilities and other payable
|
|
|
14,930
|
|
|
(164,862)
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(352,625)
|
|
|
(1,754,385)
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Payments on leased mining rights
|
|
|
-
|
|
|
(298,189)
|
Purchase of plant and equipment
|
|
|
-
|
|
|
(3,178)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
(301,367)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
30,105
|
|
|
5,285,294
|
Repayment to loans payable
|
|
|
-
|
|
|
(2,978,494)
|
Proceeds from related party note
|
|
|
375,401
|
|
|
1,230,987
|
Repayment of related party note
|
|
|
-
|
|
|
(1,240,882)
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
405,506
|
|
|
2,296,905
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(4,109)
|
|
|
3,687
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
48,771
|
|
|
244,840
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
68,134
|
|
|
40,488
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
116,905
|
|
$
|
285,328
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
Cash paid for interest
|
|
$
|
110,154
|
|
$
|
84,291
|
Cash paid for income tax
|
|
$
|
-
|
|
$
|
-
|
See accompanying notes to condensed consolidated financial statements.
F-3
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Common stock
|
|
Additional paid-in capital
|
|
Subscription receivable
|
|
Statutory
reserve
|
|
Accumulated other comprehensive income
|
|
Accumulated
deficits
|
|
Total
stockholders
equity
|
No. of shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2017
|
|
115,000,000
|
|
$
|
11,500
|
|
$
|
8,899,597
|
|
$
|
(718,459)
|
|
$
|
308,898
|
|
$
|
23,123
|
|
$
|
(17,040,842)
|
|
$
|
(8,516,183)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse split shares
|
|
(86,250,000)
|
|
|
(8,625)
|
|
|
8,625
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(77,238)
|
|
|
-
|
|
|
(77,238)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(522,442)
|
|
|
(522,442)
|
Balance as of March 31, 2017
|
|
28,750,000
|
|
$
|
2,875
|
|
$
|
8,908,222
|
|
$
|
(718,459)
|
|
$
|
308,898
|
|
$
|
(54,115)
|
|
$
|
(17,563,284)
|
|
$
|
(9,115,863)
|
See accompanying notes to condensed consolidated financial statements.
F-4
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
NOTE 1
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (GAAP), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, the consolidated balance sheet as of December 31, 2016 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended March 31, 2017 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2017 or for any future period.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Managements Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016.
NOTE 2
ORGANIZATION AND BACKGROUND
China ShouGuan Investment Holding Group Corporation, previously known as China ShouGuan Mining Corporation, (CHSO or the Company) was incorporated in the State of Nevada on May 4, 2010.
On November 2, 2016, the Company authorized a one for four reverse stock split and this reverse split was accepted by and affected by FINRA on March 13, 2017. All shares and per share amount have been adjusted to reflect this reverse split.
The Company, through its subsidiaries and variable interest entities, is principally engaged in the project management of gold mining operations in China. In May 2009, the Company commenced its first project, the Cunli Ji Gold Mine which is located in Shandong Province, the People Republic of China (PRC). Following May 2011, the Company commenced its second project, the Dayuan Gold Mine which is located in Shandong Province, the PRC.
The details of the Companys subsidiaries and VIEs are described below:
|
|
|
|
|
|
|
| |
Name
|
|
Place of incorporation
and kind of
legal entity
|
|
Principal activities
and place of operation
|
|
Particulars of issued/
registered share
capital
|
|
Effective interest
Held
|
|
|
|
|
|
|
|
|
|
Bei Sheng Limited (BSL)
|
|
British Virgin Islands, a limited liability company
|
|
Investment holding in GWIL and provision of mining technical advice
|
|
50,000 issued shares of US$1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
Golden Wide International Limited (GWIL)
|
|
Hong Kong, a limited liability company
|
|
100%-investment holding in SBCL
|
|
10,000 issued shares of HK$1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
Shoujin Business Consulting (Shenzhen) Limited (SBCL)
|
|
The PRC, a limited liability company
|
|
Provision of consulting service in the PRC
|
|
RMB100,000
|
|
100%
|
|
|
|
|
|
|
|
|
|
Shenzhen Shouguan Investment Co., Ltd (SSIC) #
|
|
The PRC, a limited liability company
|
|
99%-investment holding in JinGuan
|
|
RMB18,100,000
|
|
N/A
|
F-5
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Yantai Jinguan Investment Limited (JinGuan) #
|
|
The PRC, a limited liability company
|
|
100%-investment holding in XinGuan
|
|
RMB5,000,000
|
|
N/A
|
|
|
|
|
|
|
|
|
|
DaxinganlingYiguanyuan Mining Investment Company Limited (DYM) #
|
|
The PRC, a limited liability company
|
|
Mine exploration in Daxinganling
|
|
RMB4,010,000
|
|
N/A
|
# represents variable interest entity (VIE)
The Company and its subsidiaries and VIEs are hereinafter collectively referred to as (the Company).
NOTE 3
GOING CONCERN UNCERTAINTIES
These condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As of March 31, 2017, the Company suffered from continuous losses with an accumulated deficits of $17,563,284 as of that date and experienced working capital deficit of $10,055,113. The continuation of the Company as a going concern is dependent upon the continuing financial support from its stockholders or external financing. Management believes the existing stockholders will provide the additional cash to meet with the Companys obligations as they become due. However, there can be no assurance that the Company will be able to obtain sufficient funds to meet its obligations.
These factors raise substantial doubt about the Companys ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
NOTE 4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
Use of estimates
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.
Basis of consolidation
The condensed consolidated financial statements include the financial statements of CHSO, its subsidiaries and VIEs. All inter-company balances and transactions between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.
The Company has adopted ASC Topic 810-10-5-8,
Variable Interest Entities
, which requires a variable interest entity or VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIEs or is entitled to receive a majority of the VIEs residual returns.
Variable interest entity
The Company's subsidiary, SBCL entered into a series of amended agreements ("VIE agreements") amongst SSIC, JinGuan,
F-6
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
DYM and the individual owners of SSIC, JinGuan and DYM and details of the VIE agreements are as follows:
1.
Exclusive Technical Service and Business Consulting Agreement, SBCL has the exclusive right to provide to SSIC, JinGuan and DYM consulting services, including operational management, human resources management, research and development of the technologies related to the operations of SSIC, JinGuan and DYM. SSIC, JinGuan and DYM pays to SBCL annually consulting service fees in an amount equals to all of their revenue for such year. These agreements run for 10 year terms and are subject to automatic renewal for an additional 10 year term provided that no objection is made by both parties on the renewal.;
2.
Exclusive Option Agreement, SBCL has the option to purchase SSIC, JinGuan and DYM all assets and ownership at any time.;
3.
Equity Pledge Agreement, SSIC, JinGuan and DYM agree to pledge their legal interest to SBCL as a security for the obligations under the Exclusive Technical Service and Business Consulting Agreement;
4.
Proxy Agreement, SSIC, JinGuan and DYM irrevocably grant and entrust SBCL the right to exercise its voting and other stockholders right.
5.
Operating Agreement, SBCL agrees to participate in the operations of SSIC, JinGuan and DYM in different aspects.
With the above agreements, SBCL demonstrates its ability to control SSIC and JinGuan as the primary beneficiaries and the operating results of the VIEs was included in the condensed consolidated financial statements for the three months ended March 31, 2017 and 2016.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
|
|
| |
|
Expected useful life
|
|
Residual value
|
Plant and machinery
|
5-10 years
|
|
5%
|
Motor vehicles
|
5 years
|
|
5%
|
Office equipment
|
3-5 years
|
|
5%
|
Expenditure for repairs and maintenance is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
Depreciation expense for the three months ended March 31, 2017 and 2016 were $104,388 and $115,213, respectively.
Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360-10-5,
Impairment or Disposal of Long-Lived Assets
, all long-lived assets held and used by the Company are annually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to estimated future undiscounted cash flows expected to be generated by the asset. Future cash flows are based on estimated quantities of gold and other recoverable metals, expected price of gold and other commodity (considering current and historical prices, price trends and related factors), production levels and cash costs of production, capital and reclamation costs, all based on detailed engineering life-of-mine plans. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
F-7
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
Numerous factors including, but not limited to, such things as unexpected grade changes, gold recovery problems, shortages of equipment and consumables, equipment failures, and collapse of pit walls, could impact our ability to achieve forecasted production schedules from proven and probable reserves. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions used in the cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically. There has been no impairment charge for the periods presented.
Revenue recognition
In accordance with the ASC Topic 605,
Revenue Recognition
, the Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectibility is reasonably assured.
(a)
Product sales
The Company derives revenues from the sales of non-refined gold concentrate to smelters, whereas the smelter usually takes 6 days for the production from non-refined gold concentrate to gold bullion. The Company generally recognizes its revenues, net of value-added taxes ("VAT") at the time of gold bullion is produced by the smelter and its selling price is determined by the market value of gold bullion quoted by the Shanghai Gold Exchange.
The Company is subject to VAT which is levied on the standard gold products at the standard rate of 17% on the invoiced value of sales. The Companys VIE, XinGuan is granted with a preferential tax treatment under the Chinese tax law of the
Notice from Ministry of Finance and State Tax Bureau in Relation to Exemption of Value Added Tax on Gold Production
and
Notice regarding issues on Tax Policy on Gold Transaction
, whereas gold produced and sold by gold mining and smelting enterprises are exempted from VAT.
(b)
Interest income
Interest income is recognized on a time apportionment basis, taking into account the principal amounts outstanding and the interest rates applicable.
Comprehensive income
ASC Topic 220,
Comprehensive Income,
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statement of stockholders equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Income taxes
The Company adopts ASC Topic 740,
Income Taxes
regarding accounting for uncertainty in income taxes which prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. In addition, the guidance requires the determination of whether the benefits of tax positions will be more likely than not sustained upon audit based upon the technical merits of the tax position. For tax positions that are determined to be more likely than not sustained upon audit, a company recognizes the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not determined to be more likely than not sustained upon audit, a company does not recognize any portion of the benefit in the financial statements. The guidance provides for de-recognition, classification, penalties and interest, accounting in interim periods and disclosure.
For the three months ended March 31, 2017 and 2016, the Company did not have any interest and penalties associated with tax positions. As of March 31, 2017, the Company did not have any significant unrecognized uncertain tax positions.
The Company conducts major businesses in the PRC and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the foreign tax authority.
F-8
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
Net loss income per share
The Company calculates net loss per share in accordance with ASC Topic 260,
Earnings per Share.
Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
The reporting currency of the Company is the United States Dollars ("US$"). The Company's subsidiary in the PRC maintain its books and records in its local currency, Renminbi Yuan ("RMB"), which is functional currency as being the primary currency of the economic environment in which the entity operates.
In general, for consolidation purposes, assets and liabilities of its subsidiaries and VIEs whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30,
Translation of Financial Statement
, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders equity.
Translation of amounts from RMB into US$1 has been made at the following exchange rates for the respective period:
|
|
|
|
| |
|
|
|
March 31, 2017
|
|
March 31, 2016
|
Period-end RMB:US$1 exchange rate
|
|
|
6.89053
|
|
6.44790
|
Period average RMB:US$1 exchange rate
|
|
|
6.88818
|
|
6.53947
|
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Segment reporting
ASC Topic 280,
Segment Reporting
establishes standards for reporting information about operating segments on a basis consistent with the Companys internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. For the three months ended March 31, 2017 and 2016, the Company operates in one reportable operating segment in the PRC.
Fair value of financial instruments
The carrying value of the Companys financial instruments include cash, accounts receivable, amounts due from (to) related parties, deposits and prepayments, accounts payable, amount due to a related party, income tax payable, accrued liabilities and other payable. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values. The carrying value of the Companys loans and note payable approximated its fair value based on the current market prices or interest rates for similar debt instruments.
F-9
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
The Company also follows the guidance of ASC Topic 820-10,
Fair Value Measurements and Disclosures
("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
|
| |
-
|
Level 1
: Observable inputs such as quoted prices in active markets;
|
-
|
Level 2
: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
-
|
Level 3
: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions
|
Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Recent accounting pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE 5
AMOUNT DUE FROM A RELATED PARTY
The amount is unsecured, interest-free and repayable on demand.
NOTE 6
LOANS PAYABLE, UNSECURED
As of March 31, 2017 and December 31, 2016, the Company held the following short-term loans payable to third parties:
|
|
|
|
| |
|
March 31, 2017
|
|
December 31, 2016
|
|
(unaudited)
|
|
(audited)
|
Loans payable to certain individuals and financial institution in the PRC, unsecured:
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent to RMB5,047,925 (2016: RMB5,235,037) with interest rate at 2.7% per annum, payable at its maturity, due in August 2019
|
$
|
732,589
|
|
$
|
753,926
|
|
|
|
|
|
|
Equivalent to RMB7,400,000 (2016: RMB 7,400,000) with interest rate at 2.7% per annum, payable at its maturity, due in May 2018
|
|
1,073,938
|
|
|
1,065,714
|
|
|
|
|
|
|
Equivalent to RMB5,800,000 (2016: RMB 5,800,000) with interest rate free, payable at its maturity, due June 30, 2017
|
|
841,735
|
|
|
835,289
|
|
|
|
|
|
|
Equivalent to RMB2,000,000 (2016: RMB 2,000,000) with interest rate free, payable at its maturity, due April 13, 2018
|
|
290,253
|
|
|
288,031
|
|
|
|
|
|
|
Equivalent to RMB1,000,000 (2016: RMB 1,000,000) with interest free, payable at its maturity, due March 11, 2017
|
|
-
|
|
|
144,015
|
|
|
|
|
|
|
Equivalent to RMB1,000,000 with interest free, payable at its maturity, due Feb 16, 2018
|
|
145,127
|
|
|
-
|
|
|
|
|
|
|
Equivalent to RMB500,000 (2016: RMB500,000) with interest free, payable at its maturity, due January 9, 2018
|
|
72,563
|
|
|
72,008
|
|
|
|
|
|
|
F-10
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
|
|
|
|
| |
Equivalent to RMB150,000 (2016: RMB150,000) with interest free, payable at its maturity, due June 30, 2017
|
|
21,769
|
|
|
21,602
|
|
|
|
|
|
|
Equivalent to RMB300,000 (2016: RMB300,000) with interest free, payable at its maturity, due March 11, 2018
|
|
43,538
|
|
|
43,206
|
|
|
|
|
|
|
Equivalent to RMB6,000,000 (2016: RMB6,000,000) with interest free, payable at its maturity, due December 31, 2017
|
|
870,760
|
|
|
864,093
|
.
|
|
|
|
|
|
Equivalent to RMB3,490,000 (2016: RMB3,490,000) with interest rate at the bank of China Benchmark Lending Rate, payable at its maturity, due July 26, 2017
|
|
506,492
|
|
|
502,614
|
|
|
|
|
|
|
Equivalent to RMB5,000,000 (2016: RMB5,000,000) with interest rate at the bank of China Benchmark Lending Rate, payable at its maturity, due May 13, 2018
|
|
725,634
|
|
|
720,078
|
|
|
|
|
|
|
Equivalent to RMB29,000,000 (2016: RMB29,000,000)with effective interest rate at 4.79% per annum, payable with monthly principal and interest payments, due December 15, 2017
|
|
4,208,675
|
|
|
4,176,448
|
|
|
|
|
|
|
Equivalent to RMB640,000 (2016: RMB640,000) with interest free, payable at its maturity, due March 7, 2018
|
|
92,881
|
|
|
92,170
|
|
|
|
|
|
|
Equivalent to RMB324,709 (2016: RMB324,709) with interest free, payable at its maturity, due March 7, 2018
|
|
47,124
|
|
|
46,761
|
|
|
|
|
|
|
Total
|
$
|
9,673,078
|
|
$
|
9,625,955
|
NOTE 7
NOTE PAYABLE, RELATED PARTY
As of March 31, 2017, the note due to Mr. Zhang, the director of the Company, which was unsecured, carried annual interest at Bank of China Benchmark Lending Rate and payable in a monthly installment. The interest expense to a related party amounted $18,869 and $12,343 for the three months ended March 31, 2017 and 2016, respectively.
NOTE 8
INCOME TAXES
For the three months ended March 31, 2017 and 2016, the local (United States) and foreign components of (loss) profit before income taxes were comprised of the following:
|
|
|
|
|
| |
|
|
Three months ended March 31,
|
|
|
2017
|
|
2016
|
Tax jurisdictions from:
|
|
|
|
|
|
|
Local
|
|
$
|
|
|
$
|
-
|
Foreign
|
|
|
(522,442)
|
|
|
(1,009,234)
|
Loss before income taxes
|
|
$
|
(522,442)
|
|
$
|
(1,009,234)
|
The provision for income taxes consisted of the following:
F-11
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
|
|
|
|
|
| |
|
|
Three months ended March 31,
|
|
|
2017
|
|
2016
|
Current:
|
|
|
|
|
|
|
Local
|
|
$
|
-
|
|
$
|
-
|
Foreign, representing by:
|
|
|
|
|
|
|
Hong Kong
|
|
|
-
|
|
|
-
|
The PRC
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
Local
|
|
|
-
|
|
|
-
|
Foreign
|
|
|
-
|
|
|
-
|
Income tax expense
|
|
$
|
-
|
|
$
|
-
|
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company has subsidiaries that operate in various countries: United States, BVI, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
The Company is registered in the State of Nevada and is subject to the tax laws of the United States of America.
British Virgin Island
Under the current BVI law, Bei Sheng is not subject to tax on its income or profits.
Hong Kong
Golden Wide is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of 16.5% on assessable income. For the three months ended March 31, 2017 and 2016, Golden Wide suffered from an operating loss of $177 and $0, respectively.
The PRC
The Company generated its income from its subsidiaries and VIEs operating in the PRC for the three months ended March 31, 2017 and 2016, which are subject to the Corporate Income Tax Law of the Peoples Republic of China (the New CIT Law) at a unified income tax rate of 25%. A reconciliation of income tax rate to the effective income tax rate for the three months ended March 31, 2017 and 2016 is as follows:
|
|
|
|
|
|
| |
|
|
Three months ended March 31,
|
2017
|
|
2016
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(501,180)
|
|
$
|
(1,008,459)
|
Statutory income tax rate
|
|
|
25%
|
|
|
25%
|
|
|
|
|
|
|
|
Income tax expense at the statutory rate
|
|
|
(125,295)
|
|
|
(252,114)
|
Net operating loss not recognized as deferred tax asset
|
|
|
99,198
|
|
|
(252,114)
|
Non-deductible items
|
|
|
26,097
|
|
|
504,228
|
Income tax expense
|
|
$
|
-
|
|
$
|
-
|
F-12
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
As of March 31, 2017, the Company incurred $2,743,893 of aggregate net operating loss carryforwards available to offset its taxable income for income tax purposes. The Company has provided for a full valuation allowance against the deferred tax assets of $2,743,893 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
NOTE 9
CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Interest rate risk
As the Company has no significant interest-bearing assets, the Companys income and operating cash flows are substantially independent of changes in market interest rates.
The Companys interest-rate risk arises from loans payable and short-term bank borrowings. The Company manages interest rate risk by varying the issuance and maturity dates variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates. As of December 31, 2017, loans payable and short-term bank borrowings were at fixed rates.
(b)
Exchange rate risk
The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in RMB and a significant portion of the assets and liabilities are denominated in RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates against US$, the value of RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.
(c)
Economic and political risks
The Company's operations are conducted in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.
The Company's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company'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, remittances abroad, and rates and methods of taxation.
(d)
Mining industry risks
The Company's mining operations are subject to extensive national and local governmental regulations in China, which regulations may be revised or expanded at any time. Generally, compliance with these regulations requires the Company to obtain permits issued by government regulatory agencies. Certain permits require periodic renewal or review of their conditions. The Company cannot predict whether it will be able to obtain or renew such permits or whether material changes in permit conditions will be imposed. The inability to obtain or renew permits or the imposition of additional conditions could have a material adverse effect on the Company's ability to develop and operate its mines.
(e)
Risk on changing price in gold
At present, the price of gold in the PRC is generally in line with the price of gold in the international market. There are many factors influencing the price of gold in the international market, including the international economic situation (in particular the economic situation in the US), petroleum prices, fluctuations in the exchange rates of the US$, fluctuations in the stock and other financial investment markets and various political, military, social and economic contingencies. These
F-13
CHINA SHOUGUAN INVESTMENT HOLDING GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
(Currency expressed in United States Dollars (US$), except for number of shares)
(Unaudited)
factors are beyond the control of the Company. Changes in the prices of the gold in the PRC and in the exchange rate of Renminbi as a result of these may adversely affect the operating results of the Company. Under the relevant PRC laws and regulations, hedging activities presently are not permitted in gold tracing in the PRC market. The Company has not been involved in hedging transactions or any alternative measures to manager the potential price risk.
NOTE 10
COMMITMENTS AND CONTINGENCIES
The Company is committed under several non-cancelable operating leases for office premises with the term for one year, with fixed monthly rentals or scheduled payments. Total rent expenses for the three months ended March 31, 2017 and 2016 was $27,817 and $42,205, respectively.
As of March 31, 2017, the Company has the aggregate future minimum rental payments due under these non-cancelable operating leases in the next twelve months:
|
|
| |
Period ending March 31,
|
|
|
|
2018
|
|
$
|
62,692
|
NOTE 11
SUBSEQUENT EVENTS
The company evaluated subsequent events through the date the financial statements were issued and filed with this Form10-Q. There were no subsequent events that required recognition or disclosure.
F-14