SEC Info - JX Luxventure Ltd. - ‘20-F/A’ for 12/31/22

The Group measures financial assets at amortized cost if both of the following conditions are met:

2021

2020

OPERATING ACTIVITIES

Loss for the year

( i 73,492,431

)

( i 37,215,483

)

( i 5,667,417

)

Adjustments for:

Share-based compensation

i 53,245,233

i 4,407,853

i 700,250

Finance cost

i 58,726

i 62,383

Interest income

( i 22

)

( i 33,717

)

( i 54,544

)

Depreciation of property, plant and equipment & investment property

i 729,393

i 757,516

i 771,130

Amortization of intangible assets

i 7,477

i 14,958

i 13,980

Amortization of prepayments and premiums paid under operating leases

i 66,748

i 81,474

i 94,699

Provision/ (reversal) of inventory obsolescence

i 204,392

i 1,283

( i 42,884

)

Bad debt provision of trade receivables

i 4,991,808

i 6,076,620

i 2,334,410

Loss/(gain) on disposal of property, plant and equipment

i 402

i 97,378

i 45,807

Provision of impairment loss in property, plant and equipment & investment property

i 2,944,979

loss on disposal of subsidiary

i 9,193,736

( i 30,642

)

Operating cash flows before movements in working capital

( i 5,053,264

)

( i 22,839,055

)

( i 1,742,186

)

(Increase)/ decrease in trade and other receivables

( i 545,788

)

( i 3,284,084

)

( i 2,492,940

)

(Increase)/ decrease in inventories

i 438,849

i 547,593

( i 267,472

)

Prepayments and premiums paid under operating leases

( i 3,267

)

( i 3,411

)

i 210,901

Increase/ (decrease) in trade and other payables

i 262,510

i 515,003

( i 579,948

)

Increase/ (decrease) in income tax payable

( i 56,451

)

( i 175,469

)

( i 92,321

)

(Increase)/ decrease in deferred tax assets

i 17,463,604

( i 1,556,824

)

NET CASH USED IN OPERATING ACTIVITIES

( i 4,957,411

)

( i 7,775,819

)

( i 6,520,790

)

INVESTING ACTIVITIES

Interest received

i 21

i 33,717

i 54,544

Cash from acquisition of subsidiaries

i 561,424

Cash increase/ (decrease) due to disposal of a subsidiary

( i 9,442,759

)

i 6,612

Proceeds on disposal of property, plant and equipment

i 5,400

i 15,704

Purchase of property, plant and equipment

( i 1,008

)

( i 3,324,900

)

( i 24,198

)

NET CASH FROM INVESTING ACTIVITIES

( i 9,443,746

)

( i 3,279,171

)

i 607,474

FINANCING ACTIVITIES

Interest paid

( i 58,726

)

( i 62,383

)

New bank loans raised

i 2,173,882

Repayment of borrowings

( i 2,173,882

)

Advance from related party

i 2,220,098

i 117,697

i 909,237

Preferred stock subscription

i 6,900,000

NET CASH FROM FINANCING ACTIVITIES

i 2,220,098

i 6,958,971

i 846,854

NET DECREASE IN CASH AND CASH EQUIVALENTS

( i 12,181,059

)

( i 4,096,019

)

( i 5,066,462

)

Effects of currency translation

( i 212,939

)

i 389,643

i 1,067,274

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

i 12,914,914

i 16,621,290

i 20,620,478

CASH AND CASH EQUIVALENTS AT END OF YEAR

i 520,916

i 12,914,914

i 16,621,290

Cash flows of discontinued operation are presented in Note 17.

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

F-9

JX Luxventure limited

Notes to Financial Statements

GENERAL INFORMATION

On January 26, 2012, Acquisition Investments Corp (“Company”) was organized as a blank check company pursuant to the laws of the Republic of the Marshall Islands for the purpose of acquiring through a merger, capital stock exchange, asset acquisition, stock purchase, or similar acquisition transaction, one or more operating businesses or assets.

On March 24, 2014, the Company entered into a Share Exchange Agreement and Plan of Liquidation (the “Agreement”) among KBS International Holdings, Inc. (“KBS”), a Nevada corporation, Hongri International Holdings Ltd (“Hongri”), a company organized under the laws of the British Virgin Islands, and Cheung So Wa and Chan Sun Keung, the principal shareholders of KBS.

On August 1, 2014, the share exchange was completed. The acquisition was accounted for as a reverse merger and recapitalization where the Company, the legal acquirer is the accounting acquiree, and KBS, the legal acquiree, was the accounting acquirer.

Description of Subsidiaries:

Hongri International Holdings Limited (the “Hongri”), formerly known as Wah Ying International Investment Inc., was incorporated in the British Virgin Islands (the “BVI”) on July 8, 2008 as a limited liability company with authorized share capital of $ i 50,000, divided into i 50,000 common shares with $ i 1 par value. Up through December 31, 2010, i 10,000 common shares had been issued at par. On January 27, 2011, the Company issued an additional i 10,000 common shares for cash consideration at $ i 77 per share. The principal activity of the Company is investment holding. Hongri a directly wholly owned subsidiary of the Company.

France Cock (China) Limited (“France Cock”) was incorporated in Hong Kong on September 21, 2005 as a limited liability company with authorized capital of HK$ i 10,000, divided into i 10,000 common shares with par value of HK$ i 1. The capital has been fully paid up. The principal activity of France Cock is the holding of intellectual property rights such as trademarks. France Cock owns the Company’s trademarks, including “KBS” and “Kabiniao”. France Cock is a directly wholly owned subsidiary of Hongri.

Roller Rome Limited (“Roller Rome”) was incorporated in the BVI on March 28, 2006 as a limited liability company with authorized share capital of $ i 50,000, divided into i 50,000 common shares with par value of $ i 1. The principal activity of Roller Rome is the provision of design and development services for sports apparel. Roller Rome is a directly wholly owned subsidiary of Hongri.

Vast Billion Investment Limited (“Vast Billion”) was incorporated in Hong Kong on November 25, 2010 as a limited liability company with authorized share capital of HK$ i 10,000 divided into i 10,000 ordinary shares with HK$1par value. One ordinary share has been issued at par. Vast Billion is an investment holding company, and is a directly wholly owned subsidiary of Hongri.

Hongri (Fujian) Sports Goods Co. Ltd. (“Hongri Fujian”) was established in the People’s Republic of China (the “PRC”) on November 17, 2005 with a registered and paid up capital of RMB i 5,000,000. On March 24, 2011, Hongri Fujian increased registered capital from RMB i 70,000,000 to RMB i 75,000,000. As of September 30, 2011, the paid up capital was RMB i 39,551,860. Hongri Fujian is engaged in the design, manufacture, marketing, and sale of apparel in the PRC. Hongri Fujian is a directly wholly owned subsidiary of Vast Billion.

Anhui Kai Xin Apparel Company Limited (“Anhui Kai Xin”) was established in the PRC on March 16, 2011 with a registered and paid up capital of RMB i 1,000,000. Anhui Kai Xin is a wholly owned subsidiary of Hongri Fujian. Anhui Kai Xin provides contracting manufacturing services for companies in the sports apparel business.

On October 19, 2022, the Company sold Hongri International Holding Limited to third party and from thereon, Hongri, France Cock, Roller Rome, Vast Billion, Hongri Fujian, Anhui Kai Xin are no longer the subsidiaries of the Company.

F-10

i Flower Crown Holding is a company incorporated on August 7, 2020 in the Cayman Islands. It has 50,000 shares issued and outstanding with a par value of $1. It is wholly owned by KBSF Fashion Group Limited.

i Flower Crown (China) Holding Group Co., Limited (“Flower Crown HK”) was incorporated in Hong Kong on May 24, 2018. It has a total of 10,000 shares issued and outstanding with a par value of $1. It is wholly owned by Flower Crown Holding.

i Kim Hyun Technology (Tianjin) Co., Ltd. (“Kim Hyun Tianjin”) was incorporated on July 23, 2020 in the PRC, as a wholly foreign-owned enterprise. Kim Hyun Tianjin is 100% owned by Flower Crown HK. The total investment is RMB10,000,000, the registered capital is RMB10,000,000 and the present shareholder shall pay up the registered capital prior to July 21, 2050. Kim Hyun Tianjin provides consulting in connection with information technology.

Jin Xuan (Hainan) Holding Co., Ltd (“JX Hainan”) was incorporated in November 11, 2021. i It has a registered capital of USD30,000,000. It is 100% owned by Flower Crow HK. Its business scope ranges from import & export to manufacturing.

i Jin Xuan Luxury Tourism (Hainan) Digital Technology Co., Ltd. (“Jin Xuan Luxury Tourism”) was incorporated in the PRC on August 4, 2016. It is 100% owned by JX Hainan . It has a registered capital of RMB20,000,000 and present shareholder shall pay up the registered capital prior to August 4, 2046. It operates Luxventure social platform and on-line activities.

i Beijing Heyang International Travel Service Co., Ltd. (“Heyang Travel”) was incorporated in the PRC on March 29, 2018. It is 100% owned by Jin Xuan Luxury Tourism. It has a registered capital of RMB5,000,000 and the shareholder shall pay up the registered capital prior to August 1, 2060. Heyang Travel engages in tourism business and selling carrier services.

GROUP ORGANIZATION AND BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

Effective December 13, 2021, the Company reorganized its corporate subsidiary structure in the PRC under Flower Crown Holding. As a result of the Flower Crown Holding’s China subsidiaries restructuring, the Company no longer operated those entities through a VIE structure and became the indirect sole shareholder of JX Hainan Digital and Beijing Heyang.

The Group structure as at the reporting date is as follows:

F-11

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)

For the year ended December 31, 2022 the Company has consistently adopted all the new and revised standards, amendments and interpretations (collectively IFRSs) issued by the International Accounting Standards Board (“IASB”) and the IFRS Interpretations Committee (formerly known as “International Financial Reporting Interpretations Committee” (“IFRIC”)) of the IASB that are effective for financial year beginning on January 1, 2022 in the preparation of the consolidated financial statements throughout the year.

For the year ended December 31, 2022, the following new and revised standards, amendments or interpretations that have become effective during the reporting period.

●

IFRS Accounting Taxonomy 2021—Update 1 Disclosure of Accounting Policies and Definition of Accounting Estimates

	●	IFRS Accounting Taxonomy 2021—Update 2 Technology Update

	●	IFRS Accounting Taxonomy 2021—Update 3 Initial Application of IFRS 17 and IFRS 9—Comparative Information

The adoption of the above new and revised standards had no significant financial effect on these financial statements.

The following new standards and amendments to standards have not come into effect for the financial year beginning January 1, 2022, and have not been early adopted by the Company in preparing these consolidated financial statements. None of these new standards and amendments to standards is expected to have a significant effect on the consolidated financial statements of the Company.

●

Lease Liability in a Sale and Leaseback Amendments to IFRS 16

●

Non-current Liabilities with Covenants

SIGNIFCANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis and in accordance with IFRS as issued by the IASB. The principal accounting policies are set out below.

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

F-12

Foreign currencies

Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”).

The Group conducts its business predominately in the PRC and hence its functional currency is the Renminbi (RMB).

i Translation from RMB to USD found place at the following rates:

	Period end rates	Average rates
December 31, 2020	i USD 1.00= RMB 6.5277	i USD 1.00=RMB 6.9001
December 31, 2021	i USD 1.00= RMB 6.3524	i USD 1.00=RMB 6.4491
December 31, 2022	i USD 1.00= RMB 6.8987	i USD 1.00=RMB 6.7347

Translation from HKD to USD found place at the following rates:

	Period end rates	Average rates
December 31, 2020	i USD 1.00= HKD 7.7525	i USD 1.00=HKD 7.7558
December 31, 2021	i USD 1.00= HKD 7.7991	i USD 1.00=HKD 7.7731
December 31, 2022	i USD 1.00= HKD 7.7970	i USD 1.00=HKD 7.8305

The results and financial positions in functional currency are translated into the presentation currency, USD, of the Company as follows:

(1)

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(2)

Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions);

(3)

Share equity, share premium and dividends are translated at historical exchange rates; and

(4)

All resulting exchange differences are recognized in foreign currency translation reserve, a separate component of equity.

All financial information presented in USD has been rounded to the nearest dollar, except when otherwise indicated.

Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria. The Group’s i five segments are wholesale, retail, contract manufacturing, tourism service and cross-border e-commerce.

F-13

Revenue recognition

Revenue from contracts with customers

Nature and timing of satisfaction of performance obligations for each of the revenue streams are as follows:

Revenue from the sale of goods

Revenue from the sale of packaged group tour service

Performance obligation is satisfied when the tour service is completed, generally when the tour group successfully returned from the tour destination to the place of origination. The Company presents revenues from such transactions on a gross basis in the consolidated statements of comprehensive loss, as the Company acts as a principal to provide a package of tourism services and take a full obligation to provide such services even if the suppliers are not able to deliver service.

F-14

Revenue from reselling of air-ticket

The Company is a reseller of air-ticket, it provides value add services to its customers including guaranteed flight replacement and other financial benefits. The Company procured the tickets from different airline companies and resell them to the online air-ticket agency companies or other tourism companies. The air-ticket agency company will put an online bid inviting from its suppliers once it receives the demands from its online customers. The Company is one of the air-ticket suppliers. The Company procures the tickets in responding the air-ticket agency companies’ online bid inviting to ensure the seats are available to sell to the agency companies, or the Company procure the tickets based on its judgement of potential trend of certain airlines within certain period. Once the Company’s deposit, at the full or significant amount of the air-ticket, was deducted by the airline company and the Company agreed to secure the seats from the airline company, the purchase of air-tickets was recorded. The Company decided how much and how soon to resell the air-tickets. The inventory period is from 1 minute to few months. The air tickets are sold shortly after their purchase to lower the inventory risk. Sometimes, the Company hold the tickets longer to expect a higher margin, but if the tickets cannot be sold before flight time, the Company have to sold the tickets even lower than the purchase price to avoid further loss. Thus, the Company bears the inventory risks of the air-tickets and the Company has discretion in setting the price for the specified service. Once the air-tickets issued to passengers according to the client’s instruction, the revenue is recognized. In addition to the air-ticket of airline companies, the Company provided guaranteed flight replacement and cancellation to the air-ticket agency companies. The air-ticket agency companies can return the tickets to the Company without restriction, while the airline companies can accept some of the return on certain conditions. Thus, the Company offered additional service plus the standard airline tickets to its customer. As the Company (i) bears the inventory risks of the air-tickets, (ii) provides additional services on the services procured by the airline companies, and (iii) has discretion in setting the price for the specified service, the Company is considered as a principal and recognize the revenue in a gross basis.

Other income

Rental income is recognized on a time proportion basis over the lease terms.

Value added tax (VAT)

i Current standard Output VAT in effect is i 13% and i 6% of product sales and taxable services revenue, respectively, according to existing tax laws. The remaining balance of output VAT, after subtracting the deductible input VAT of the period, is VAT payable. /

Type of revenue	Standard VAT rate in effect for revenues
Product sales		i 13	%
Services rendered		i 6	%

Borrowing costs

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

F-15

Retirement benefit costs

Taxation

F-16

Store pre-opening cost

Store pre-opening cost was the start-up activity costs incurred prior to opening a new store, mainly including leasing, leasehold improvements, payroll and supplies. The accounting policies for leasing and leasehold improvements were as below. Other store pre-opening costs were directly charged to expenses when occurred.

Leasing

F-17

Leasehold improvements

Property, plant and equipment

Investment properties

Investment properties are land and buildings which are owned or held under a leasehold interest to earn rental income and/or for capital appreciation. These include land and buildings held for a currently undetermined future use. Such properties are stated at cost less accumulated depreciation and any impairment losses.

Any gains or losses on the retirement or disposal of an investment property are recognized in the income statement in the year of the retirement or disposal.

Depreciation is calculated on the straight-line basis to depreciate the cost of each item of investment properties over the estimated useful life of i 20 years.

The Group as lessor

Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease.

F-18

Land use rights

Land use rights are stated at cost less accumulated amortization and accumulated impairment losses. Cost represents consideration paid for the rights to use the land on which various plants and buildings are situated for periods varying from 20 to 50 years.

Amortization of land use rights is calculated on a straight-line basis over the period of the land use rights.

Inventories

Inventories, comprising of raw materials and merchandise inventories, are stated at the lower of cost and net realizable value. Costs of inventories are determined using the weighted average method. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Share-based compensation expenses

All share-based awards granted to employees, which are common shares, are measured at fair value on shares issuance date, and are recognized as an employee benefits expense, with a corresponding increase in equity. Share-based compensation expenses are recognized over the period during which the employees provide the relevant services.

Financial instruments – investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income, and fair value through profit or loss.

F-19

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortized cost (debt instruments)

●

The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows.

●

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through other comprehensive income (debt instruments)

The Group measures debt instruments at fair value through other comprehensive income if both of the following conditions are met:

●

The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling.

●

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through other comprehensive income (equity investments)

F-20

Financial assets at fair value through profit or loss

Financial instruments – impairment of financial assets

General approach

F-21

Stage 1 – Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs

Stage 2 – Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs

Stage 3 – Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

Simplified approach

Financial instruments – derecognition of financial assets

●

the rights to receive cash flows from the asset have expired; or

●

F-22

Financial instruments – financial liabilities

Initial recognition and measurement

Subsequent measurement

Financial instruments – derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled, or expires.

Financial instruments – offsetting financial instruments

Capital and Reserves

Share capital represents the nominal value of shares that have been issued by the Group. Share capital is determined using the nominal value of shares that have been issued.

Retained profits include all current and prior period results as determined in the combined statement of comprehensive income.

Foreign currency translation reserve arising on the translation are included in the currency translation reserve.

i In accordance with the relevant laws and regulations of PRC, the subsidiaries of the Group established in PRC are required to transfer 10% of its annual statutory net profit (after offsetting any prior years’ losses) to the statutory reserve. When the balance of such reserve reaches 50% of the subsidiary’s share capital, any further transfer of its annual statutory net profit is optional. Such reserve may be used to offset accumulated losses or to increase the registered capital of the subsidiary subject to the approval of the relevant authorities. However, except for offsetting prior years’ losses, such statutory reserve must be maintained at a minimum of 25% of the share capital after such usage. The statutory reserves are not available for dividend distribution to the shareholders.

All transactions with owners of the Group are recorded separately within equity.

Earnings/(loss) per share

Basic earnings per share (“EPS”) are computed by dividing income attributable to holders of common shares by the weighted average number of common shares outstanding during the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. Potential dilutive securities are excluded from the calculation of diluted EPS in loss periods as their effect would be anti-dilutive.

The preparation of financial statements in conformity with IFRS requires management to exercise judgment in the process of applying the Group’s accounting policies and requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and reported amount of revenue and expenses during the reporting period. The following estimates that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are disclosed below.

F-23

SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES

Allowance for Bad and Doubtful debts

Allowances for bad and doubtful debts are based on an assessment of the recoverability of trade and other receivables. Allowances are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of bad and doubtful debts requires the use of judgment and estimates, where the expected outcome is different from the original estimate, such difference will impact carrying value of trade and other receivables and doubtful debt expenses in the period in which such estimate has been charged.

Impairment Losses

Impairment losses are based on an assessment of the investment or long-lived assets’ ability to generate future cash flows when there is evidence that these assets may be impaired. The calculation of the amount of impairment loss are based on estimates made by management when applying broad accounting principles governing the accounting for these assets. The determination of these estimates requires judgment by management. The final outcome may differ from the original estimates made by management, which may impact the carrying value of the assets which management has determined to be impaired and charged to the Company’s profit loss during the period.

Provisions

Provisions for legal claims, service warranties and make good obligations are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.

Income Tax

The Group has exposure to income taxes in numerous jurisdictions. Significant judgment is involved in determining the Group’s provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognized, such differences will impact the income tax and differed tax provisions in the period in which such determination is made. The carrying amount of the Group’s income tax payable as at December 31, 2022 and 2021 amounted to $ i 212 and i zero respectively.

F-24

KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 4, management is required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year.

Depreciation of building, machinery and equipment

As described in Note 4, the Group reviews the estimated useful lives and residual values of property, plant and equipment at the end of each reporting period. The cost of building, machinery and equipment is depreciated on a straight-line basis over the assets’ estimated useful lives. i Management estimates the useful lives of these buildings, machinery and equipment to be within 5 to 20 years. These are the common life expectancies applied in the same industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

Impairment of non-financial assets

Property, plant and equipment are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.

For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the cash-generating-unit (“CGU”) to which the asset belongs.

If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.

The difference between the carrying amount and recoverable amount is recognized as an impairment loss in the income statement, unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease.

An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

A reversal of impairment loss for an asset other than goodwill is recognized in the income statement, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

During the years ended December 31, 2022, 2021, and 2020, the Company recognized impairment losses of $nil, $nil, and $nil, respectively, for its prepayments for acquisition of land use rights. During the years ended December 31, 2022, 2021, and 2020, the Company recognized impairment losses of $nil, $nil, and $nil, respectively, for its related prepayments for construction on such land. The impairment reflects the current reduction in the value of the investment as a result of the delay in time to complete the construction projects and delay in procurement of legal certificates that would lead to the assets being put into service that would give rise to expected future profitability which at December 31, 2020, has been temporarily postponed beyond the next operating period. The impairment losses charged to the prepayments has brought the carrying values to their respective recoverable amount in its fair value less costs to sell.

F-25

During the years ended December 31, 2022, 2021, and 2020, the Company recognized impairment losses of $nil, $ nil, and $nil, respectively, for a part of its factory plant in Anhui that is not currently in use. The impairment reflects the current reduction in the value of the carrying cost as a result of the company’s evaluation of the recoverability of its investment. The impairment losses charged to the factory plant has brought the carrying values to their respective recoverable amount in its fair value less costs to sell.

For the prepayment for acquisition of land use rights, the Company provided an estimate of its fair value based on the market value substitution rule. The estimated fair value belongs to Level 2 of the fair value hierarchy because the input is determined through quoted prices of similar assets without an actively quoted market. Using the market approach, the Company compares the price of the land use right that the Company intended to acquire with the price of similar land use rights in the same geographical area, adjusted by factors such as price index, frequency of actual transactions conducted, environmental conditions, etc. Significant assumptions used in this estimation include the ability to legally obtain such land use rights, the usage of land as industrial use, the date of transaction at year end, etc. As a result, the Company provided an estimate in the amount of $ i 5,154,034. Finally, the fair value is reduced by estimated costs to sell which include, but not limited to, legal costs, stamp duty, similar transaction tax, etc. in the amount of $ i 379,971. The net value is then compared to the carrying value, and the difference is recorded as impairment loss in the amount of $ i 1,317,295 in 2015. In 2016, since there was no progress in regards to the acquisition of land use rights, the Company provided further impairment to bring the carrying value down to $ i 0 as management is unable to assert the recoverability of such asset.

For the prepayment for construction, the Company provided an estimate of its fair value based on the time value approach. The estimated fair value belongs to Level 3 of the fair value hierarchy because the input is not easily observable. Using this approach, the Company calculates the time value of money of the amount prepaid based on the Company’s weighted average cost of capital (“WACC”) in order to arrive at its fair value. The Company uses this approach to determine its recoverable amount because such prepayments are not readily resalable, and the ability to realize this amount is contingent upon the Company’s ability to successfully acquire the land use right as mentioned above. Significant assumptions used in this estimation include using the WACC, which is comprised of the Company’s metrics of return of equity, return of debt, the relevant weights of the returns of equity and debt, and tax rate, in determining the fair value. As a result, as at December 31, 2015, the Company provided an estimate in the amount of $ i 7,160,523. Since this asset is not resalable, the company estimated costs to sell for this asset in the amount of $ i 0. The net value is then compared to the carrying value, and the difference is recorded as impairment loss in the amount of $ i 1,248,039 in 2015. In 2017, since there was no progress in regards to the construction, the Company provided further impairment to bring the carrying value down to $ i 0 as management is unable to assert the recoverability of such asset.

For the factory plant, the Company provided an estimate of its fair value based on the time value approach. The estimated fair value belongs to Level 3 of the fair value hierarchy because the input is not easily observable. Using this approach, the Company calculates the time value of money of the amount recoverable based on the Company’s weighted average cost of capital (“WACC”) in order to arrive at its fair value. The Company uses this approach to determine its recoverable amount because a part of the factory plant is not readily resalable. Significant assumptions used in this estimation include using the WACC, which is comprised of the Company’s metrics of return of equity, return of debt, the relevant weights of the returns of equity and debt, and tax rate, in determining the fair value. As a result, as at December 31, 2018, the Company recorded as impairment loss in the amount of $ i 13,311,557 in 2018, which brings the carrying value of the part of the factory plant not in use down to $ i 0 as management is unable to assert the recoverability of such asset.

During the year ended December 31, 2021, the Company recognized impairment loss of $ i 2,673,131 and $ i 48,859 for Investment property and property, plants and buildings, respectively. The Company further recognized impairment loss of $ i 222,989 for the two land use rights which the two properties were built on. The impairment reflects the current reduction in the value of the carrying cost as a result of the company’s evaluation of the recoverability of its investment. The impairment losses charged to the two pieces of properties and land use rights has brought the carrying values to their respective recoverable amount in its fair value less costs to sell.

F-26

SEGMENT REPORTING

Management currently identifies the Group’s three sales models as operating segments, which are tourism products, technology and cross board merchandise. Apart from the above two business segments, two segments were discontinued in 2022, which are wholesale and retail of menswear and subcontracting of menswear. The segment presentation is in accordance with management’s expectation of future business developments. i These operating segments are monitored and strategic decisions are made on the basis of segmental gross margins.

	Tourism products						Technology						Cross- board merchandise						Consolidated
	For the year ended						For the year ended						For the year ended						For the year ended
	December 31,						December 31,						December 31,						December 31,
By business	2022		2021		2020		2022		2021		2020		2022		2021		2020		2022			2021			2020
Sales to external customers		i 79,092,342		i 51,818,166		i 991,929		i 782,302		-		-		i 83		i 2,222,782		i 343,445		i 79,874,727			i 54,040,948			i 1,335,374
Segment revenue		i 79,092,342		i 51,818,166		i 991,929		i 782,302		-		-		i 83		i 2,222,782		i 343,445		i 79,874,727			i 54,040,948			i 1,335,374
Segment gross margins		i 704,391		i 541,889		i 96,578		i 760,028		-		-		i 64		i 305,822		i 69,988		i 1,464,483			i 847,711			i 166,566
Reconciling items				-		-				-		-		-		-		-		( i 56,847,143	)		( i 8,194,585	)		( i 1,161,859	)
Loss before tax		-		-		-		-		-		-		-		-		-		( i 55,382,660	)		( i 7,346,874	)		( i 995,293	)
Income tax income/(expense)		-		-		-		-		-		-		-		-		-		( i 621	)		( i 5,495	)		-
Loss for the continuing business		-		-		-		-		-		-		-		-		-		( i 55,383,281	)		( i 7,352,369	)		( i 995,293	)
Discontinued operation		-		-		-		-		-		-		-		-		-		( i 18,109,150	)		( i 29,863,116	)		( i 4,672,124	)
Loss for the year		-		-		-		-		-		-		-		-		-		( i 73,492,431	)		( i 37,215,483	)		( i 5,667,417	)

As of December 31, 2022

Wholesale,
Retail and
Subcontracting

Technology

Tourism
products

cross-board
merchandise

Unallocated

Consolidated

Current assets

i 1,625

i 369,770

i 2,791,304

i 3,303,874

i 6,466,573

Non-current assets

i 1,310

i 2,788,394

i 7,000,000

i 9,789,704

Total assets

i 1,625

i 371,080

i 5,579,697

i 10,303,874

i 16,256,277

Current liabilities

i 32,772

i 711,992

i 866,358

i 2,319,263

i 3,930,385

Total liabilities

i 32,772

i 711,992

i 866,358

i 2,319,263

i 3,930,385

As of December 31, 2021

Wholesale and Retail

Subcontracting

Tourism
products

cross-board
merchandise

Unallocated

Consolidated

Current assets

i 18,640,119

i 2,610,448

i 450,129

i 2,809,431

( i 283,630

)

i 24,226,497

Non-current assets

i 2,410,407

i 8,111,375

i 674

i 3,345,469

i 13,867,925

Total assets

i 21,050,526

i 10,721,823

i 450,803

i 6,154,900

( i 283,630

)

i 38,094,422

Current liabilities

i 3,384,019

i 1,481,508

i 303,749

i 424,534

i 1,628,272

i 7,222,082

Total liabilities

i 3,384,019

i 1,481,508

i 303,749

i 424,534

i 1,628,272

i 7,222,082

F-27

Geographical information

The Group’s operations are located in the PRC and all of the Group’s revenue is derived from sales to customers in the PRC. Hence, no analysis by geographical area of operations is provided.

Information about major customers

i Major distributors that make up i 10% or more of revenue are as below: /

Year ended December 31,

2021

2020

Customer A

i 74,340,429

i 41,767,780

Customer B

i 9,439,831

Customer C

i 991,928

Total revenue

i 79,874,727

i 54,040,948

i 1,335,374

The revenue of this customer is not over i 10% of total revenue of the Company.

Information about major suppliers

i Major suppliers that make up i 10% or more of purchases are as below: /

	Year ended December 31,
	2022		2021		2020
Supplier A		-		-		i 354,710
Supplier B		-		-		i 483,879
Supplier C		-		i 9,586,155		-
Supplier D		i 10,562,686		i 15,551,014		-
Supplier E		i 15,496,731		-		-

Total purchase		i 78,902,955		i 53,168,205		i 1,430,207

i REVENUE

Year ended December 31,

2021

2020

Travel service

i 79,092,342

i 51,818,166

i 991,929

Technology

i 782,302

Cross-board products

i 83

i 2,222,782

i 343,445

Total

i 79,874,727

i 54,040,948

i 1,335,374

Revenues are recognized at a point in time and denominated only in USD. Included in the “travel service”, majority ( i 99.99%) of the revenue amount represents the revenue for reselling of air-tickets requests by airline ticket agencies. Revenue for tickets purchased based on our judgment of potential trends, and revenue recorded from sales of tourism packages are insignificant of total revenue of travel service.

F-28

COST OF REVENUE

Cost of revenue for our cross-board business comprise the cost of products purchased and surcharges on purchase cost. Cost of revenue for our travel services comprise the cost of air-tickets brought from airline or the cost of services provided from local travel firms or persons, the cost for outsourcing the travelling work to certain travel agencies and additional air-ticket return cost paid to customers.

Cost of sales for our retail and wholesale of garment business comprises of purchasing materials, labor costs for personnel employed in production, depreciation of non-current assets used for production purpose, outsourced manufacturing cost, taxes and surcharges, and water and electricity.

i The following table shows a breakdown of cost of sales of all business for the periods presented for each category:

Year ended December 31,

2021

2020

Changes in inventories of finished goods and work in progress

( i 494,357

)

i 83,112

( i 261,691

)

Materials consumed in production

Purchases of finished goods

i 201,734

i 1,808,963

i 1,430,208

Outsourced service cost

i 77,736,052

i 50,359,452

Additional air-ticket return cost **

i 965,169

i 916,678

Taxes and surcharges *

i 1,646

i 25,032

i 291

i 78,410,244

i 53,193,237

i 1,168,808

	*	i Tax and surcharges are mainly Urban Maintenance and Construction Tax (7% of Valued Added Tax payment amount), Extra Charges of Education Fund (3% of Valued Added Tax payment amount) and Local Surcharge for Education Fund (2% of Valued Added Tax payment amount).
	**	Additional air-ticket return cost is the net loss of the return payments paid to customers offset by the return proceeds received from airline companies. The following table shows the gross amount of the return payment and proceeds;

	Year ended December 31,
	2022			2021			2020
Return paid to customers		i 23,003,679			i 8,268,369			-
Return received from airline companies		( i 22,038,510	)		( i 7,351,691	)		-
Additional air-ticket return cost		i 965,169			i 916,678			-

10.

OTHER INCOME

Year ended December 31,

2021

2020

Government grant

i 1,592

Interest income on bank deposits

i 21

i 4

i 199

Other

i 15,023

i 34,789

i 2,923

i 16,636

i 34,793

i 3,122

/ /

11.

OTHER LOSSES

	Year ended December 31,
	2022			2021			2020
Bad debt provision of trade receivables		( i 53,991	)		-			-
Impairment of long-lived assets		( i 39,778	)		( i 12,500	)		-
Others		( i 4,881	)		( i 4,825	)		-
		( i 98,650	)		( i 17,325	)		-

/ /

F-29

12.

DISTRIBUTION AND SELLING EXPENSES

	Year ended December 31,
	2022		2021		2020
Outsourced service fee		i 403,458		i 1,212,403		-
Advertisement		-		i 140,704		-
Others		i 317,930		i 736		-
		i 721,388		i 1,353,843		-

/ /

13.

ADMINISTRATIVE EXPENSE

Year ended December 31,

2021

2020

Labor

i 53,550,086

i 3,155,246

i 832,534

Audit fee

i 247,782

i 200,000

i 114,400

Professional and other service fee

i 969,072

i 2,666,804

i 74,252

Design fee

i 2,039

Depreciation and amortization charges

i 299,547

i 21,603

Decoration

i 133,502

i 155,665

i 30,275

Rental

i 4,661

i 65,724

Travelling and entertainment

i 89,272

i 203,634

i 22,242

Others

i 749,819

i 389,534

i 89,239

i 56,043,741

i 6,858,210

i 1,164,981

/ /

14.

FINANCE COSTS

	Year ended December 31,
	2022		2021		2020
Interest expenses on bank borrowings
wholly repayable within one year		-		-		-

As the bank loans were disposed along with the discontinued operation in 2022, the interest expenses in connection with the bank loans are reclassified as discontinued operations.

15.

INCOME TAX (INCOME)/ EXPENSE

	Year ended December 31,
	2022		2021		2020
PRC enterprises income tax:
Current tax		i 621		i 5,495		-
Deferred tax		-		-		-
		i 621		i 5,495		-

Jin Xuan Luxury Tourism, Flower Crown China and Heyang Travel are located in PRC and subject to the applicable enterprise income tax rate of i 25%.

KBS Fashion Group Limited was incorporated in the Marshall Island, and, under the current laws of the Marshall Island, is not subject to income taxes.

F-30

Flower Crown Holding was incorporated in the Cayman Islands, and, under the current laws of the Cayman Islands, is not subject to income taxes.

The tax charge for the Company can be divided into non-PRC entities and PRC entities. As for the non-PRC entities, all the entities are expense center and not subject to any tax and also no deferred tax assets are considered. The loss for the non-PRC for the year ended December 31, 2022 is $ i 4,386,002. PRC entities are operating entities and may be subject to income tax and deferred tax are considered. In 2022, menswear business was disposed and the temporary difference and deferred tax were reversed accordingly.

i The following is the analysis of the deferred tax balances for financial reporting purposes:

2022

2021

2020

Temporary difference

Deferred tax assets

Temporary difference

Deferred tax assets

Temporary difference

Deferred tax assets

Beginning of the year

i 78,622,365

i 63,509,644

i 16,960,839

i 59,616,758

i 14,330,463

Bad Debt provisions charged to profit or loss

i 6,064,120

i 1,516,030

( i 2,334,410

)

i 583,603

Inventory provision charged to profit or loss

i 1,283

i 321

Impairment charged to profit or loss

i 2,944,979

i 736,245

Tax loss carried forward

i 1,687,686

i 421,922

i 6,102,339

i 1,529,706

i 6,227,296

i 1,556,824

Allowance

( i 421,922

)

( i 21,245,906

)

Reverse

( i 75,924,049

)

Effect of translation

i 502,765

i 489,949

End of the year

i 4,386,002

i 78,622,365

i 63,509,644

i 16,960,839

16.

(LOSS)/PROFIT FOR THE YEAR (continuing business)

i Profit for the year has been arrived at after charging:

	Year ended December 31,
	2022		2021		2020
Cost of inventories recognized as expenses		i 78,408,598		i 53,168,205		i 1,168,517
Taxes and surcharges		i 1,646		i 25,032		i 291
		i 78,410,244		i 53,193,237		i 1,168,808

Depreciation of property, plant and equipment		i 299,547		i 21,932		-
Amortization of land use rights and trademarks		-		-		-
Amortization of prepayments and premiums under operating leases		-		-		-
Provision (Reversal) of inventory obsolescence		i 39,778		-		-
Provision of bad debt allowance		i 53,991		-		-
Provision of impairment loss in property		-		-		-
		i 393,316		i 21,932		-

F-31

17.

DISCONTINUED OPERATIONS

On October 19, 2022, the Company entered into a stock purchase agreement with a Purchaser and closed the transaction pursuant to the terms of the Stock Purchase Agreement, resulting in the Company’s sale of i 20,000 shares of common stock (the “Shares”) in Hongri International Holding Limited (“Hongri”), constituting all of the issued and outstanding capital stock in Hongri, in consideration for $ i 10,000,000.

The subsidiary was sold on October 19, 2022 with effect from November 1, 2022 and is reported in the current period as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of disposal is set out below.

i Financial performance and cash flow information

	Year ended December 31,
	2022			2021			2020
Revenue		i 1,887,410			i 4,960,693			i 9,540,775
Cost of revenue		( i 2,183,080	)		( i 4,228,577	)		( i 7,208,923	)
Expenses		( i 3,486,626	)		( i 4,353,466	)		( i 6,533,339	)
Other income/expenses - net		( i 5,133,118	)		( i 8,778,160	)		( i 2,027,461	)
Profit before tax		( i 8,915,414	)		( i 12,399,510	)		( i 6,228,948	)
Income tax		-			( i 17,463,604	)		i 1,556,824
Profit after tax		( i 8,915,414	)		( i 29,863,114	)		( i 4,672,124	)
								-
Net cash from operating activities		( i 2,733,104	)		( i 3,872,380	)		( i 5,901,544	)
Net cash from investing activities		-			( i 1,926	)		( i 8,494	)
Net cash from financing activities		-			-			-

Net cash decrease of disposed subsidiaries		( i 2,733,104	)		( i 3,874,306	)		( i 5,910,038	)

i Details of sale of the subsidiary

Fair value of the consideration	i 10,000,000
Net asset of the disposed asset	( i 15,166,042	)
Loss on sale before reclassification of foreign currency translation reserve	( i 5,166,042	)
Reclassification of foreign currency translation reserve	( i 4,027,694	)
Loss on disposal of discontinued operations	( i 9,193,736	)

i Carrying amount of the investment cost of the disposed assets:

Cash	i 8,695,890
Trade receivables	i 2,335,650
Other current assets	i 97,966
Investment property-net	i 6,390,022
Other long-term assets	i 2,890,967
Total assets	i 20,410,495

Short-term loan	( i 1,087,154	)
Tax payables	( i 2,775,363	)
Other liabilities	( i 1,381,936	)
Total liabilities	( i 5,244,453	)

Net assets	i 15,166,042

F-32

18.

DIRECTORS’ EMOLUMENTS

i The emoluments paid or payable to the directors of the Company were as follows:

	Year ended December 31,
	2022		2021		2020
Salaries
Yan Keyan		-		i 597,669		i 306,466
Sun Lei		i 1,470,000		i 772,000		-
Li Huidan		i 228,000		i 772,000		-
Mu Ruifeng		i 228,000		-		-
Jin Yan		i 228,000		-		-
Lixia Tu		-		-		i 237,880
John Sano		-		-		i 10,350
Themis Kalapotharakos		-		-		i 82,800
Matthew Los		-		-		i 82,800
Zhongmin Zhang		-		-		i 10,350
Yuet Mei Chan		-		-		i 10,350
		i 2,154,000		i 2,141,669		i 740,996
Social Welfare
Yan Keyan		-		i 1,242		i 432
		-		i 1,242		i 432

19.

LOSS PER SHARE

For the years ended December 31,

2021

2020

Basic Loss Per Share Numerator

Profit for the year attributable to owners of the Company

( i 73,492,431

)

( i 37,215,483

)

( i 5,667,417

)

Diluted Loss Per Share Numerator

Profit for the year attributable to owners of the Company

( i 73,492,431

)

( i 37,215,483

)

( i 5,667,417

)

Basic Loss Per Share Denominator

Original shares:

i 589,989

i 340,865

i 259,130

Additions from actual events:

- Issuance of common stock, weighted

i 1,091,558

i 111,570

i 12,123

Basic weighted average shares outstanding

i 1,681,547

i 452,435

i 271,253

Diluted Loss Per Share Denominator

Basic weighted average shares outstanding

i 1,681,547

i 452,435

i 271,253

Dilutive shares: Potential additions from dilutive events:

- Exercise of investor warrants*

Diluted Weighted Average Shares Outstanding:

i 1,681,547

i 452,435

i 271,253

Loss Per Share**

- Basic

( i 43.7

)

( i 82.3

)

( i 20.9

)

- Diluted

( i 43.7

)

( i 82.3

)

( i 20.9

)

Weighted Average Shares Outstanding**

- Basic

i 1,681,547

i 452,345

i 271,253

- Diluted

i 1,681,547

i 452,345

i 271,253

There were no potential dilutive additions to diluted weighted shares outstanding as a result of the loss during the periods presented.

**	The Company effected a 1:10 reverse stock split on April 26, 2023, as a result, the basic and diluted shares and per share number for all years presented here are adjusted retrospectively.

F-33

20.

PROPERTY, PLANT AND EQUIPMENT

i Owner-occupied Property

Plant

Machinery

Office
equipment

Motor
vehicles

Furniture
and
fixtures

Leasehold
improvements-
factories and
offices

Leasehold
improvements-
shops

Total

COST

At December 31, 2020

i 7,191,993

i 45,324

i 137,150

i 33,800

i 160,979

i 896,680

i 269,029

i 8,734,955

Additions

i 2,311,212

i 11,332

i 999,829

i 2,526

i 3,324,899

Disposals

( i 45,876

)

( i 20,638

)

( i 34,211

)

( i 1,591

)

( i 907,602

)

( i 272,306

)

( i 1,282,224

)

Reclassification to investment property

( i 5,487,395

)

( i 5,487,395

)

Translation adjustment

i 150,063

i 552

i 3,642

i 15,632

i 4,455

i 10,922

i 3,277

i 188,543

i 4,165,873

i 131,486

i 1,015,050

i 166,369

i 5,478,778

Additions

i 1,008

Disposals

( i 1,716,185

)

( i 118,285

)

( i 156,406

)

( i 1,990,876

)

Translation adjustment

( i 289,116

)

( i 7,601

)

( i 80,387

)

( i 9,481

)

( i 386,585

)

i 2,160,573

i 5,600

i 934,663

i 1,489

i 3,102,326

DEPRECIATION AND IMPAIRMENT

At December 31, 2020

( i 4,459,340

)

( i 45,324

)

( i 135,065

)

( i 30,609

)

( i 159,973

)

( i 798,006

)

( i 269,029

)

( i 5,897,346

)

Provided for the year

( i 186,439

)

( i 773

)

( i 20,856

)

( i 57

)

( i 9,118

)

( i 217,243

)

Eliminated upon disposal of assets

i 45,876

i 18,171

i 30,982

i 1,263

i 816,842

i 272,305

i 1,185,439

Depreciation reclassified to investment property

i 1,602,628

Impairment reclassified to investment property

i 1,792,237

Impairment

( i 48,859

)

( i 48,859

)

Translation adjustment

( i 74,928

)

( i 552

)

( i 3,462

)

( i 691

)

( i 4,395

)

( i 9,718

)

( i 3,276

)

( i 97,022

)

( i 1,374,701

)

( i 121,129

)

( i 21,174

)

( i 163,162

)

( i 1,680,166

)

Provided for the year

( i 70,084

)

( i 1,817

)

( i 227,388

)

( i 258

)

( i 299,547

)

Disposal of subsidiaries

i 1,296,658

i 113,591

i 153,845

i 1,564,095

Translation adjustment

i 79,710

i 6,935

i 7,083

i 9,270

i 102,998

( i 68,418

)

( i 2,419

)

( i 241,479

)

( i 304

)

( i 312,622

)

CARRYING AMOUNT

i 2,791,172

i 10,357

i 993,876

i 3,207

i 3,798,612

i 2,092,155

i 3,181

i 693,184

i 1,185

i 2,789,704

F-34

i Depreciation is provided on straight-line basis for all property, plant and equipment over their estimated useful lives of the assets as follows:

	Useful life	Residual Value
Plant	i 30 years	i 5%
Machinery	i 5 years	i 10%
Office equipment	i 3 years	i 5%
Motor vehicles	i 4 years	i 5%
Furniture and fixtures	i 3 years	i 5%
Leasehold improvements-factories and offices	i Shorter of estimated useful life of 5 years or lease term	i 10%
Leasehold improvements-shops	i Shorter of estimated useful life of 5 years or lease term	Nil
Distributor shops’ furniture and fixtures	i 1.5 years	Nil

i Plant and building include buildings owned by the Company are set out below:

Location	Description	Gross area (m²)
Jinxi Town, Longshan Road, Taihu City, Anhui Province, the PRC	i Dormitory		i 8,573
Jinxi Town, Longshan Road, Taihu City, Anhui Province, the PRC	i Factory		i 22,292
8-101 Bojingwan Beiyuan, Hexi District, Tianjing, the PRC	i Office		i 242

The first two buildings were disposed along with the menswear business in 2022.

Investment Properties

i As at December 31, 2021, fair value approximated carry amounts, being the initial cost to acquire these investment properties.

COST	2022			2021
Opening balance at 1 January		i 30,354,968			i 24,118,655
Disposed by disposal of subsidiaries		( i 27,951,015	)		-
Transfer (to)/from inventories and owner-occupied property		-			i 5,487,395
Translation adjustment		( i 2,403,953	)		i 748,918
Closing balance at 31 December		-			i 30,354,968

DEPRECIATION AND IMPAIRMENT	2022			2021
Opening balance at 1 January		( i 22,990,440	)		( i 15,844,460	)
Provided for the year		( i 400,802	)		( i 540,273	)
Disposed by disposal of subsidiaries		i 21,560,993			-
Impairment for the year		-			( i 2,673,131	)
Transfer to/(from) inventories and owner-occupied property		-			( i 3,394,864	)
Translation adjustment		i 1,830,249			( i 537,712	)
Closing balance at 31 December		-			( i 22,990,440	)

CARRYING AMOUNT		2022				2021
Closing balance at 31 December			-				i 7,364,527

F-35

CARRYING AMOUNT		2021
Closing balance at 31 December			i 7,364,527

21.

PREPAYMENTS AND PREMIUMS UNDER OPERATING LEASES

	Amount
At January 1, 2021		i 2,419,900
additions for the year		i 3,411
charge for the year		( i 81,474	)
translation adjustment		i 65,572
At December 31, 2021		i 2,407,409
additions for the year		-
charge for the year		-
disposed		i 2,407,409
At December 31, 2022		-

i Analyzed for reporting purposes as:

	As at December 31,
	2022		2021
Current asset		-		i 82,714
Non-current asset		-		i 2,324,695
		-		i 2,407,409

22.

LONG TERM RECEIVABLE

The Purchaser issued to the Company a i 5% promissory note in the principal amount of $ i 10,000,000, in payment of the Purchase Price (the “Note”). i The Note is payable in four installments, on the following dates and in the following amounts: (a) $1,000,000, together with an accrued interest, is payable on or before November 19, 2022; (b) $2,000,000, together with an accrued interest, is payable on or before April 19, 2023; (c) $3,000,000, together with an accrued interest, is payable on or before April 19, 2024, and (d) the remaining $4,000,000, together with an accrued interest, is payable on or before October 19, 2024. As the 5% interest rate is very close to the market rate, the management assessed the fair value of the note receivable is $10 million as of December 31, 2022.

i Analyzed for reporting purposes as:

	As at December 31,
	2022		2021
Current portion		i 3,000,000		-
Non-current portion		i 7,000,000		-
Total receivable		i 10,000,000		-

As of April 24, 2023, the first two instalments of the principal amount $ i 3,000,000 have been collected. i The $1 million payment and $2 million instalment were received within few days by April 24, 2023. As these payments were received, we did not make impairment on the receivable balance.

23.

PREPAYMENT FOR ACQUISITION OF LAND USE RIGHT

On September 2, 2010, Hongri Fujian entered into an agreement with a third party, Taihu Weiqi Sports Apparel Co., Ltd., to acquire a land use right in relation to the development of factories in Anhui Kaixin for a total consideration of $ i 6,340,456. As of December 31, 2015, the transaction has not been completed yet due to disputes between the original owner of the land and the government regarding the compensation for vacating the premises. In relation to this dispute, the Company expected that the project would be delayed or, in the worst case, be terminated. Accordingly, the Company provided a provision of impairment loss against the carrying value for such prepayment. The detail estimation of such provision is explained in note 6.

The assets were disposed along with the menswear business in 2022, no more assets as of December 31, 2022.

F-36

24.

LAND USE RIGHTS

	Amount
COST
At January 1, 2021		i 734,990
additions for the year		-
translation adjustment		i 20,277
At December 31, 2021		i 755,267
additions for the year		-
Disposed due to discontinued operation		( i 755,267	)
At December 31, 2022		-

AMORTIZATION
At January 1, 2021		( i 130,020	)
charge for the year		( i 14,958	)
impairment		( i 222,989	)
translation adjustment		( i 7,209	)
At December 31, 2021		( i 375,176	)
charge for the year		-
Disposed due to discontinued operation		i 375,176
At December 31, 2022		-

CARRYING AMOUNTS
At December 31, 2021		i 380,091
At December 31, 2022		-

The amounts represent the prepayment of rentals for land use right (industrial use) situated in the PRC. The land use rights have the term of i 50 years.

25.

INVENTORIES

	As at December 31,
	2022			2021
Raw materials		-			i 773,180
Merchandised goods		i 483,384			i 392,018
Provision for obsolete inventories		( i 38,833	)		( i 1,302	)
		i 444,551			i 1,163,896

/ /

26.

TRADE RECEIVABLES, OTHER RECEIVABLES AND PREPAYMENTS

	As at December 31,
	2022			2021
Trade receivables		i 37,487			i 18,952,763
Bad debt provision for trade receivables		( i 37,487	)		( i 11,215,912	)
		-			i 7,736,851

	As at December 31,
	2022		2021
Other receivables		i 318,643		i 344,437
Long-term receivable to be collected within 1 year		i 3,000,000		-
Prepayments		i 2,182,463		i 1,983,685
		i 5,501,106		i 2,328,122

The fair value of trade and other receivables have not been disclosed as, due to their short duration, management considers the carrying amounts recognized in the consolidated statements of financial position to be reasonable approximation of their fair values.

Prepayments include advances to suppliers, prepaid expenses and prepaid income tax.

F-37

Before accepting any new customer, the Group assesses the potential customer’s credit quality and defined credit limits by customer. i Limits attributed to customers are reviewed once a year. The aging analysis of trade receivables is as follows:

	As at December 31,
	2022		2021
Current		-		i 2,629,433
Past due for less than 4 months		-		i 1,411,252
Past due for more than 4 months		i 37,487		i 14,912,078
		i 37,487		i 18,952,763

The provision for doubtful debts is recorded using a provision account unless the Group is satisfied that recovery is remote, in which case the unrecovered loss is written off against trade receivables and the provision for doubtful debts directly. The Group does not hold any collateral over these balances.

i The movement in the provision for doubtful debts during the year is as follows:

	2022			2021
As at January 1		i 11,215,912			i 4,923,646
Provision provided in the year		i 37,487			i 6,076,620
Reverse due to disposal of subsidiaries		( i 11,215,912	)
Translation adjustment		-			i 215,646
As at December 31		i 37,487			i 11,215,912

27.

CASH AND CASH EQUIVALENTS

	As at December 31,
	2022		2021
Cash on hand		-		i 9,470
Bank deposits		i 243,530		i 12,905,444
Other monetary funds		i 277,386		-
		i 520,916		i 12,914,914

	As at December 31,
	2022		2021
Renminbi		i 520,883		i 12,914,834
Hong Kong Dollars		i 33		i 80
United States Dollars		-		-
		i 520,916		i 12,914,914

Cash and cash equivalents comprise cash held by the Group and short-term deposits with an original maturity of three months or less. Bank deposits as at December 31, 2022 carry interest at market rates which ranged from i 0.30% to i 0.40% (2020: i 0.30%- i 0.40%) per annum. Majority of our cash is deposited with financial institution in the PRC. Remittance of funds out of the PRC is subject to the exchange restrictions imposed by the PRC government.

F-38

28.

TRADE AND OTHER PAYABLES

	As at December 31,
	2022		2021
Trade payables		i 670,965		i 297,033
Employee benefits payable		i 15,925		i 148,232
Accrual and other payables		i 632,186		i 1,811,262
Subtotal financial liabilities		i 1,319,076		i 2,256,527
Other taxes payable		-		i 3,098,596
		i 1,319,076		i 5,355,123

The fair value of trade and other payables have not been disclosed as, due to their short duration, management considers the carrying amounts recognized in the consolidated statements of financial position to be reasonable approximation of their fair values.

i Trade payables comprise amounts outstanding for trade purchase. The average credit period is 30 days from the time when the services are rendered by or goods received from suppliers. The aging analysis of trade payables is as follows:

	As at December 31,
	2022		2021
Current		-		i 294,938
Past due for less than 4 months		i 431,202		i 2,046
Past due for over 4 months		i 239,763		i 49
		i 670,965		i 297,033

The Company was granted a credit term of 30 days. The balances past due were mainly for the Company’s high bargaining power.

29.

RELATED PARTIES PAYABLE

(1)

i Nature of relationship with related parties

Name		Relationship with the Group
Yan, Keyan		i EX-chairman of the Board of Directors and interim Chief Financial Officer
Sun, Lei		i Chief Executive Officer and Co-chairman of the Board of Directors
Li Huidan		i Co-Chairman of the Board of Directors
Mu Ruifeng		i Director
Jin Yan		i Director

(2)

i Significant balances between the Group and the above related parties:

As at December 31,

Name

Nature

2022

2021

Yan, Keyan

Borrowing of funds

i 36,697

Li, Huidan

i 2,122,697

Sun, Lei

Borrowing of funds

i 488,400

i 430,871

i 2,611,097

i 467,568

F-39

Related parties payables were unsecured, non-interest bearing and repayment on demand.

(3) Significant related parties transactions between the Group and the above related parties:

During 2022, the Company issued i 1,000,000 shares to Sun Lei for her compensation.

i During 2022, the Company issued i 300,000 shares to 3 Directors for their compensation as below: /

Name	Shares issued		Value
Mu Ruifeng		i 100,000	$	i 228,000
Jin Yan		i 100,000		i 228,000
Li Huidan		i 100,000		i 228,000
		i 300,000	$	i 684,000

30.

SHORT-TERM BANK LOANS

	As at December 31,
	2022		2021
Secured bank borrowings		-		i 1,180,656
Carrying amount repayable within 1 year		-		i 1,180,656

/ /

31.

RIGHTS

On March 12, 2021, the Company announced the authorization and declaration of a dividend distribution of one right for each outstanding share of common stock, par value $ i 0.0001 per share, of the Company to stockholders of record as of the close of business on March 31, 2021. Each Right will entitle the holder to purchase, for the Exercise Price of $ i 50, i 0.00667 of a share of Preferred Stock having economic and other terms similar to that of one share of Common Stock. This portion of a share of Preferred Stock is intended to give the stockholder approximately the same dividend, voting and liquidation rights as would one share of Common Stock, and should approximate the value of one share of Common Stock.

If an Acquiring Person obtains beneficial ownership of i 15 percent or more of the Common Stock, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of shares of Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a then-current market value of twice the Exercise Price. All Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be void.

In general, if anyone acquires i 15% or more of the common stock of the Company, the Rights will give rights holders, other than the Acquiring Person, to buy common stock at lower price to significantly dilute the Acquiring Person. The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15 percent or more of the shares of Common Stock without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board.

As of December 31, 2022, there are i i 4,233,272 / rights issued and outstanding. The number of the rights since issued has not been changed.

F-40

The Company classified the Rights as permanent equity in the consolidated balance sheets because they are convertible to preferred B share which are further convertible to common stock of the Company. The Preferred Shares are recorded initially at fair value, net of issuance costs.

The fair value of the rights was determined using a Black-Scholes model. This model requires the input of highly subjective assumptions, including price volatility of the underlying stock. Changes in the subjective input assumptions can materially affect the estimate of fair value of the rights and the Company’s results of operations could be impacted. This model is dependent upon several variables such as the instrument’s expected term, expected strike price, expected risk-free interest rate over the expected instrument term, the expected dividend yield rate over the expected instrument term, and the expected volatility of the Company’s stock price over the expected term. The expected term represents the period of time that the instruments granted are expected to be outstanding. The expected strike price is based upon a weighted average probability analysis of the strike price changes expected during the term as a result of the down round protection. The risk-free rates are based on U.S. Treasury securities with similar maturities as the expected terms of the options at the date of valuation. Expected dividend yield is based on historical trends. The Company measures volatility using the volatility rates of market index.

i The inputs to the model were as follows:

	December 31, 2021
Exercise price		i 50
Dividend yield		-
Risk-free rate		i 1.54	%
Expected term (in years)		i 10
Expected volatility		i 79.68	%

32.

SHARE CAPITAL AND SHARE PREMIUM

The number of shares in this Note 32 reflects the i 1: i 10 reverse stock split of common stock of the Company, effective on April 26, 2023.

i The details of the Group’s share capital are as follows:

Number of
shares

Share
capital

Share
premium

Shares outstanding as December 31, 2020

i 340,865

i 341

i 11,312,643

Issuance of shares

i 249,125

i 249

i 6,257,155

Issuance of rights

i 7,149,995

Shares outstanding as December 31, 2021

i 589,990

i 590

i 24,719,793

Issuance of shares

i 5,473,344

i 5,473

i 53,239,760

Shares outstanding as December 31, 2022

i 6,063,334

i 6,063

i 72,959,554

Number of
shares

Share
capital

Share
premium

Authorized Common shares of US$ i 0.0001 as at December 31, 2022

i 150,000,000

i 15,000

Issue and fully paid common shares of US$ i 0.0001 as at December 31, 2020

i 340,865

i 341

i 11,312,643

Issue and fully paid common shares of US$ i 0.0001 as at December 31, 2021

i 589,990

i 590

i 24,719,794

Issue and fully paid common shares of US$ i 0.0001 as at December 31, 2022

i 6,063,334

i 6,063

i 72,959,554

Preferred Stock

The Company is authorized to issue i 5,000,000 preferred shares with a par value of $ i 0.0001 per share with such designation, rights and preferences as may be determined by the Company’s board of directors.

On April 8, 2021, the Company issued i 1,500,000 shares of our newly-designated Series A Convertible Preferred Stock to a single investor for total subscription proceeds of $ i 1,500,000. Each Series A Convertible Preferred Stock features a stated value of $ i 1.00 and is convertible to 0.1 share of our common stock at any time after 6 months from the date of issue. All shares of common stock issuable upon conversion of the Series A Preferred Stock are subject to a two-year lock-up agreement running from the initial closing of the financing.

F-41

On September 1, 2021, the Company issued i 150,000 shares of our newly-designated Series C Convertible Preferred Stock to Sun Lei, our Chief Executive Officer for total subscription proceeds of $ i 1,500,000 of a private offering. A Series C Convertible Preferred Stock features a stated value of $ i 10.00 and is convertible to shares of our common stock on a 1 to 0.5 basis at any time after 6 months from the date of issue. Series C Convertible Preferred Stock votes together without common stock on an as-if-converted basis, which is not exercisable for one year, has no special dividend rights, and ranks equally to our common stock with respect to rights upon liquidation. All shares of common stock issuable upon conversion of the Series C Preferred Stock are subject to a one-year lock-up agreement running from the initial closing of the financing.

On November 1, 2021, the “Company closed the private placement offering (the “Offering”) of its newly-designated Series D Convertible Preferred Stock, par value $ i 0.0001 per share (“Series D Convertible Preferred Stock”), in which the Company issued i 100,000 shares of Series D Convertible Preferred Stock (the “Shares”) for the total gross proceeds of $ i 3,900,000. As stated in the Certificate of Designation, shares of Series D Convertible Preferred Stock vote together with holders of shares of common stock, par value $ i 0.0001 per share (the “Common Stock”) of the Company on an as-if-converted basis; have no special dividend right, ranks equal to the Common Stock with respect to rights upon liquidation and are convertible into shares of Common Stock on a 1 to 1.3 basis at any time following the issuance.

i Holders of Series A, C and D Convertible Preferred Stock converted certain preferred stock to common stock during 2021. Following table shows the changes of the preferred stock during 2021:

Preferred A

Preferred C

Preferred D

Total

Amount $

At December 31, 2020

New issued during the year

i 1,500,000

i 150,000

i 1,500,000

i 100,000

i 3,900,000

i 6,900,000

Converted to common stock

( i 260,000

)

( i 260,000

)

( i 20,000

)

( i 780,000

)

( i 1,040,000

)

i 1,240,000

i 150,000

i 1,500,000

i 80,000

i 3,120,000

i 5,860,000

Changes