Summary Of Significant Accounting Policies |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim
financial information and with the instructions to Regulation S-X. These interim unaudited consolidated financial statements do
not include all of the information required for full annual financial statements and should be read in conjunction with the Company’s
audited financial statements for the year ended December 31, 2016, thereto contained herein.
In the opinion of management, all adjustments
consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position;
(b) the result of operations; and (c) cash flows, have been made in order to make the consolidated financial statements presented
not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
Basis of Consolidation
These consolidated financial statements include
the accounts of Yingxi Industrial Chain Group Co., Ltd and its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.
Principal of subsidiaries
The details of the principal subsidiaries of
Yingxi are set out as follows:
Name of subsidiaries |
|
Place of incorporation |
|
Percentage of interest |
|
|
Principal activities |
Shares held directly |
|
|
|
|
|
|
|
Yingxi Industrial Chain Investment Co.,
Ltd (“YICI”) |
|
Hong Kong
China |
|
|
100 |
% |
|
Investment holdings |
Shares held indirectly |
|
|
|
|
|
|
|
|
Dongguan Heng Sheng Wei Garments Co., Ltd (“DHSW”) |
|
China |
|
|
100 |
% |
|
Garment manufacturing and business consultancy |
Qianhai Yingxi Textile and Garments Co., Ltd (“QYTG”) |
|
China |
|
|
100 |
% |
|
Investment holdings |
Shantou Chenghai Dai Tou Garments Co., Ltd
(“SCDT”) |
|
China |
|
|
100 |
% |
|
Garment manufacturing |
Shenzhen Hua Peng Fa Logistics Co., Ltd
(“SHPF”) |
|
China |
|
|
100 |
% |
|
Logistics and business consultancy |
Shenzhen Qianhai Yingxi Industrial Chain Service Co., Ltd
(“SQYI”) |
|
China |
|
|
100 |
% |
|
Investment holdings |
Shenzhen Xin Kuai Jie Transport Co., Ltd
(“SXKJ”) |
|
China |
|
|
100 |
% |
|
Logistics |
Use of Estimates
The preparation of the consolidated financial
statements are in conformity with the GAAP that requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities. It also requires the disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Foreign Currency Translation
The Company’s reporting currency is the
U.S. Dollars (“USD”). The functional currency of the Company and its subsidiaries is Chinese Yuan Renminbi (“RMB”).
All transactions initiated in RMB are translated into USD in accordance with ASC 830, “Foreign Currency Matters,”
as follows:
|
i) |
Assets and liabilities at the rate of exchange in effect at the balance sheet date. |
|
ii) |
Equities at historical rate |
|
iii) |
Revenue and expense items at the average rate of exchange prevailing during the period. |
Adjustments arising from such translations
are included in accumulated other comprehensive income in shareholders’ equity.
|
|
June 30, 2017 |
|
|
December 31, 2016 |
|
|
June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Spot CNY: USD exchange rate |
|
$ |
0.1475 |
|
|
$ |
0.1437 |
|
|
$ |
0.1504 |
|
Average CNY: USD exchange rate |
|
$ |
0.1452 - 0.1458 |
|
|
$ |
0.1505 |
|
|
$ |
0.1529 - 0.1531 |
|
Spot HKD: USD exchange rate |
|
$ |
0.1289 |
|
|
$ |
0.1289 |
|
|
$ |
0.1289 |
|
Average HKD: USD exchange rate |
|
$ |
0.1289 |
|
|
$ |
0.1289 |
|
|
$ |
0.1289 |
|
Accounts Receivable
The Company’s accounts receivable consists
of trade receivables from customers. The Company maintains an allowance for doubtful accounts based on the Company’s assessment
of collectability of the customer receivable. The Company analyzes past history with a customer, customer credit, collection history,
and financial condition when evaluating the collectability of customer accounts. Uncollectible accounts are charged off to the
allowance when it is deemed probable that the receivable will not be recovered.
|
|
June 30, 2017 |
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
Within 1 year |
|
$ |
3,411,587 |
|
|
$ |
3,985,638 |
|
1 - 2 year |
|
|
1,368,121 |
|
|
|
1,429,976 |
|
|
|
|
4,779,708 |
|
|
|
5,415,614 |
|
For the concentration risk disclosure, please
refer to Note 9.
Financial Instruments
The Company’s consolidated financial
instruments consist primarily of cash, accounts receivable, prepaid expenses, inventory and other assets, accounts payable and
accrued expenses and other payables. The carrying amounts of such financial instruments approximate their respective estimated
fair value due to their short-term maturities.
Concentrations of Credit Risks
The Company’s exposure to concentrations
of credit risk primarily related to its cash and cash equivalents. The Company places its cash and cash equivalents with financial
institutions of high credit worthiness. The Company’s management assess the financial strength and credit worthiness of any
parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Inventory
Inventory is stated at the lower of cost (weighted
average) or net realizable value. The Company’s inventory is constantly monitored for obsolescence. This is based on the
management’s estimates and they have taken into considerations factors such as turnover, technical obsolescence, right of
return status to suppliers and price protection offered by suppliers. These estimates are necessarily subject to a degree of measurement
uncertainty. Reserves for slow-moving and obsolete inventory at June 30, 2017 were $0 and at December 31, 2016 were $0.
Related Parties
The Company follows
ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party
transactions see Note 8.
Property and Equipment
Property and equipment
are carried at cost less accumulated depreciation. Cost includes all direct costs necessary to acquire and prepare assets for use.
The costs of repairs
and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized. When assets are retired or sold, the asset’s cost
and related accumulated depreciation are eliminated with any remaining gain or loss recognized in net earnings.
Depreciation of plant
and equipment, is recorded on the straight-line method over estimated useful lives, generally as follows:
|
|
|
Years |
|
Production equipment |
|
|
5 - 10 |
|
Vehicles |
|
|
3 - 15 |
|
Office equipment |
|
|
5 - 10 |
|
Impairment of long-lived assets
We evaluate carrying value of long-lived assets
whenever events or changes in circumstances would indicate that it is more likely than not their carrying values may exceed their
realizable values, and records impairment charges when considered necessary.
When circumstances indicate that impairment
may have occurred, the Company tests such assets for recoverability by comparing the estimated undiscounted future cash flows expected
to result from the use of such assets and their eventual disposition to their carrying amount. In estimating these future cash
flows, assets and liabilities are grouped at a lowest level for which there are identifiable cash flows that are largely independent
of the cash flows generated by other such groups. If the undiscounted future cash flows are less than the carrying amount of the
asset, an impairment loss, measured as the excess of the carrying value of the asset over its estimated fair value, is recognized.
Fair values are determined based on discounted cash flows, quoted market values or external appraisals as applicable.
Deferred Revenue
Deferred revenue are services billed to customers
for which the services have not been fully performed. As of June 30, 2017 and December 31, 2016, deferred revenue were $225,423
and $363,818, respectively.
Income Taxes
The Company accounts for income taxes using
the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes.” The asset and liability
method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred
tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed
more likely than not to be realized.
Uncertain Tax Positions
The Company follows guidance issued by the
FASB regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing
the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements
and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first
made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon
examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit
recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate
settlement.
The Company records income tax related interest
and penalties as a component of the provision for income tax expense. As of June 30, 2017 and December 31, 2016, the Company determined
there were no uncertain tax provisions.
Earnings (Loss) Per Share
The Company has adopted ASC 260, “Earnings
Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation. In the accompanying consolidated statements of operations
and comprehensive loss, basic loss per share is computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period.
The Company had no potentially dilutive securities,
such as convertible debt, options or warrants, issued and outstanding during the six months ended June 30, 2017 and 2016.
Revenue Recognition
The Company recognizes
revenue only when all of the following criteria have been met:
|
i) |
Persuasive evidence for an agreement exists; |
|
ii) |
Service has been provided; |
|
iii) |
The fee is fixed or determinable; and, |
|
iv) |
Collection is reasonably assured. |
Recent Accounting
Pronouncements
The Company has reviewed
all other 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 our consolidated financial statements.
|
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The consolidated financial statements have
been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”)
of the United States.
Basis of Consolidation
The consolidated financial statements include
the accounts of Yingxi Industrial Chain Group., Ltd. and its wholly-owned subsidiaries. Intercompany balance and transactions between
consolidated entities are eliminated.
Principal subsidiaries
The details of the principal subsidiaries of
Yingxi are set out as follows:
Name of subsidiaries |
|
Place of incorporation |
|
Percentage of interest |
|
|
Principal activities |
Shares held directly |
|
|
|
|
|
|
|
|
Yingxi Industrial Chain Investment Co., Ltd (“YICI”) |
|
Hong Kong China |
|
|
100 |
% |
|
Investment holdings |
Shares held indirectly |
|
|
|
|
|
|
|
|
Dongguan Heng Sheng Wei Garments Co., Ltd (“DHSW”) |
|
China |
|
|
100 |
% |
|
Garment manufacturing and business consultancy |
Qianhai Yingxi Textile and Garments Co., Ltd (“QYTG”) |
|
China |
|
|
100 |
% |
|
Investment holdings |
Shantou Chenghai Dai Tou Garments Co., Ltd (“SCDT”) |
|
China |
|
|
100 |
% |
|
Garment manufacturing |
Shenzhen Hua Peng Fa Logistics Co., Ltd (“SHPF”) |
|
China |
|
|
100 |
% |
|
Logistics and business consultancy |
Shenzhen Qianhai Yingxi Industrial Chain Service Co., Ltd (“SQYI”) |
|
China |
|
|
100 |
% |
|
Investment holdings |
Shenzhen Xin Kuai Jie Transport Co., Ltd (“SXKJ”) |
|
China |
|
|
100 |
% |
|
Logistics |
Use of Estimates
The preparation of the consolidated financial
statements in conformity with the GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities. It also requires the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Foreign Currency Translation
The Company’s reporting currency is the
U.S. Dollars (“USD”). The functional currency of the Company and its subsidiaries is Chinese Yuan Renminbi (“RMB”).
All transactions initiated in RMB are translated into USD in accordance with ASC 830, “Foreign Currency Matters,”
as follows:
|
i) |
Assets and liabilities at the rate of exchange in effect at the balance sheet date. |
|
ii) |
Equities at historical rate |
|
iii) |
Revenue and expense items at the average rate of exchange prevailing during the period. |
Adjustments arising from such translations
are included in accumulated other comprehensive income in shareholders’ equity.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks,
money market funds, and certificates of term deposits with original maturities of three months or less, which are readily convertible
to known amounts of cash.
Accounts Receivable
The Company’s accounts receivable consists
of trade receivables from customers. The Company maintains an allowance for doubtful accounts based on the Company’s assessment
of collectability of the customer receivable. The Company analyzes past history with a customer, customer credit, collection history,
and financial condition when evaluating the collectability of customer accounts. Uncollectible accounts are charged off to the
allowance when it is deemed probable that the receivable will not be recovered.
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
Within 1 year |
|
$ |
3,985,638 |
|
|
$ |
3,209,461 |
|
1 - 2 years |
|
|
1,429,976 |
|
|
|
- |
|
|
|
|
5,415,614 |
|
|
|
3,209,461 |
|
For the concentration risk disclosure, please
refer to Note 9.
Financial Instruments
The Company’s consolidated financial
instruments consist primarily of cash, accounts receivable, prepaid expenses, inventory and other assets, accounts payable and
accrued expenses and other payables. The carrying amounts of such financial instruments approximate their respective estimated
fair value due to their short-term maturities.
Concentrations of Credit Risks
The Company’s exposure to concentrations
of credit risk primarily related to its cash and cash equivalents. The Company places its cash and cash equivalents with financial
institutions of high credit worthiness. The Company’s management assess the financial strength and credit worthiness of any
parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Inventory
Inventory is stated at the lower of cost (weighted
average) or net realizable value. The company’s inventory is constantly monitored for obsolescence. This is based on the
management’s estimates and they have taken into considerations factors such as turnover, technical obsolescence, right of
return status to suppliers and price protection offered by suppliers. These estimates are necessarily subject to a degree of measurement
uncertainty. Reserves for slow-moving and obsolete inventory at December 31, 2016 were $0 (2015 - $0).
Related Parties
The Company follows
ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party
transactions see Note 8.
Property and Equipment
Property and equipment
are carried at cost less accumulated depreciation. Cost includes all direct costs necessary to acquire and prepare assets for use.
The costs of repairs
and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized. When assets are retired or sold, the asset’s cost
and related accumulated depreciation are eliminated with any remaining gain or loss recognized in net earnings.
Depreciation of plant
and equipment, is recorded on the straight-line method over estimated useful lives, generally as follows:
|
|
|
Years |
|
Production equipment |
|
|
5 - 10 |
|
Vehicles |
|
|
3 - 15 |
|
Office equipment |
|
|
5 - 10 |
|
Impairment of long-lived assets
We evaluate carrying value of long-lived assets
whenever events or changes in circumstances would indicate that it is more likely than not their carrying values may exceed their
realizable values, and records impairment charges when considered necessary.
When circumstances indicate that impairment
may have occurred, the Company tests such assets for recoverability by comparing the estimated undiscounted future cash flows expected
to result from the use of such assets and their eventual disposition to their carrying amount. In estimating these future cash
flows, assets and liabilities are grouped at a lowest level for which there are identifiable cash flows that are largely independent
of the cash flows generated by other such groups. If the undiscounted future cash flows are less than the carrying amount of the
asset, an impairment loss, measured as the excess of the carrying value of the asset over its estimated fair value, is recognized.
Fair values are determined based on discounted cash flows, quoted market values or external appraisals as applicable.
Deferred Revenue
Deferred revenue are services billed to customers
for which the services have not been fully performed. At December 31, 2016 and 2015, deferred revenue was $363,818 and $92,984,
respectively.
Income Taxes
The Company accounts for income taxes using
the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes.” The asset and liability
method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred
tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed
more likely than not to be realized. As at December 31, 2016 and 2015, the Company did not have any amounts recorded pertaining
to uncertain tax positions.
Uncertain Tax Positions
The Company follows guidance issued by the
FASB regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing
the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements
and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first
made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon
examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit
recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate
settlement.
The Company records income tax related interest
and penalties as a component of the provision for income tax expense. As of December 31, 2016 and 2015, the Company determined
there were no uncertain tax provisions.
Earnings (Loss) Per Share
The Company has adopted ASC 260, “Earnings
Per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation. In the accompanying consolidated statements of operations
and comprehensive loss, basic loss per share is computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period.
The Company had no potentially dilutive securities,
such as convertible debt, options or warrants, issued and outstanding during years ended December 31, 2016 and 2015.
Revenue Recognition
The Company recognizes
revenue only when all of the following criteria have been met:
|
i) |
Persuasive evidence for an agreement exists; |
|
|
|
|
ii) |
Service has been provided; |
|
|
|
|
iii) |
The fee is fixed or determinable; and, |
|
|
|
|
iv) |
Collection is reasonably assured. |
Recent Accounting
Pronouncements
The FASB has issued
Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business,
clarifying the definition of a business. The amendments affect all companies and other reporting organizations that must determine
whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions,
disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether
transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust
framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying
the guidance, reduce the costs of application, and make the definition of a business more operable. For public companies, the
amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods.
The Company does not anticipate the adoption of ASU 2017-01 will have a material impact on its consolidated financial statements.
|