Notes to the Condensed Consolidated Financial Statements
For the three months ended March 31, 2018
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, the consolidated balance sheet as of December 31, 2017 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended March 31, 2018 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2018 or for any future period.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2017.
NOTE 2 – ORGANIZATION AND BUSINESS BACKGROUND
ABV Consulting, Inc. (“we,” “us,” “our,” “ABVN” or the “Company”) was incorporated in the state of Nevada on October 15, 2013, for the purpose of providing merchandising and consulting services to craft beer brewers and distributors. On August 22, 2016, the Company’s founder and prior manager sold all of his shares in the Company, constituting approximately 90.4% of the issued and outstanding shares of the Company, and retired from his positions as executive officer and sole director of the Company (the “Change of Control Event”).
Subsequent to the Change of Control Event, our current management pursued a strategic acquisition strategy focused on acquisition target companies with operations located primarily in Southeast Asia, the Pacific Islands, the People’s Republic of China (including Hong Kong and Macau) (the “PRC”), Taiwan and other jurisdictions within Asia, and with operations complimentary to the PRC’s broad “One Belt, One Road” (“OBOR”) regional investment and cooperation initiative. In connection with this strategy, we moved our corporate headquarters from Pennsylvania to Hong Kong.
On June 19, 2017, APSL acquired 100% issued and outstanding equity of ABV Consulting Limited (“ABV HK”) incorporated in Hong Kong, China and ABV HK became our wholly owned subsidiary.
On December 19, 2017, the Company entered into a Rescission Agreement. The Rescission Agreement rescinded the share exchange agreement dated February 24, 2017 (the “Share Exchange Agreement”), between the equity interest owners of APSL.
NOTE 3 – GOING CONCERN UNCERTAINTIES
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As of March 31, 2018, the Company had an accumulated deficit of $357,548 and net loss of $12,193 and net cash used in operations of $17,574 for the three months ended March 31, 2018. Losses have principally occurred as a result of the substantial resources required for professional fees and general and administrative expenses associated with our operations. The continuation of the Company as a going concern through March 31, 2019 is dependent upon the continued financial support from its stockholders or external financing. Management believes the existing stockholders will provide the additional cash to meet with the Company’s obligations as they become due. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These condensed financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.
Basis of consolidation
The condensed consolidated financial statements include the financial statements of ABVN and its subsidiary. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
Foreign Currency Translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
The reporting currency of the Company is the United States Dollar (“USD”). The Company's subsidiary in Hong Kong maintain their books and records in their local currency, the Hong Kong Dollar (“HKD”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.
In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the USD are translated into USD, in accordance with ASC 830, “Translation of Financial Statements”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of March 31, 2018 and December 31, 2017, the Company had $4,539 and $299 in cash and cash equivalents, respectively.
Fair value of financial instruments
The carrying value of the Company’s financial instruments (excluding short-term bank borrowing and note payable): cash and cash equivalents, accounts receivable, accounts payable, amount due to a related party, other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
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Level 1 : Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;
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Level 2 : Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and
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Level 3 : Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.
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Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Commitments and contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue recognition
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company derives its revenues from the rendering of business advisory services, such as training, implementation, consulting, and other customer-specific services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
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identify the contract with a customer;
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identify the performance obligations in the contract;
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determine the transaction price;
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allocate the transaction price to performance obligations in the contract; and
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recognize revenue as the performance obligation is satisfied.
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Income taxes
Income taxes are determined in accordance with the provisions of ASC 740, “Income Taxes” (“
ASC 740
”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
For the three months ended March 31, 2018 and 2017, the Company did not have any interest and penalties associated with tax positions. As of March 31, 2018, the Company did not have any significant unrecognized uncertain tax positions.
The Company conducts major businesses in Hong Kong and is subject to tax in this jurisdiction. As a result of its business activities, the Company will file tax returns that are subject to examination by the foreign tax authority.
Net loss per share
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. As of March 31, 2018, the company has no dilutive securities.
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Reclassification
Certain amounts from prior periods have been reclassified to conform to the current period presentation.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update ("ASU") 2014-09, “Revenue from Contracts with Customers (Topic 606).” The FASB also issued a series of other ASUs, which update ASU 2014-09 (collectively, the “new revenue recognition standard”). This new standard replaces all previous U.S. GAAP guidance on this topic and eliminates all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The impact of the adoption of the new standard was not material to the Company’s condensed consolidated financial statements for the quarter ended March 31, 2018. The Company expects the impact to be immaterial on an ongoing basis.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The standard provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows. For public entities, ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those annual periods, and requires a retrospective approach. The Company adopted this standard effective January 1, 2018 and the adoption did not have a material effect on the Company’s consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASC 842”). The guidance requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. ASC 842 is effective for fiscal years beginning after December 15, 2018. The Company is evaluating the adoption of ASC 842, but has not determined the effects it may have on the Company’s consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The standard requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents (collectively, "restricted cash"). Therefore, restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for interim and annual periods beginning after December 15, 2017. The Company adopted this standard retrospectively effective January 1, 2018 and the adoption did not have a material effect on the Company’s consolidated financial statements.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 5 – RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2018, the Company received advances from a shareholder in the amount of $21,814 to pay for operating expenses.
As of March 31, 2018, and December 31, 2017, the Company owed to related parties $199,658 and $177,844, respectively. The amounts due to the related parties are unsecured, non-interest bearing and have no fixed terms of repayment.
NOTE 6 – INCOME TAXES
The Company generated an operating loss for the three months ended March 31, 2018 and 2017 and did not record income tax expense. The Company has operations in various countries and is subject to tax in the jurisdictions in which they operate, as follows:
United States of America
ABV Consulting, Inc. is registered in the State of Nevada and is subject to the tax laws of United States of America
As of March 31, 2018, the operation in the United States of America incurred approximately $260,000 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2038, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets of $54,600 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
Hong Kong
The Company’s subsidiary, ABV Consulting Limited, is incorporated in Hong Kong and is subject to the Inland Revenue Ordinance of Hong Kong. Hong Kong currently maintains a uniform tax rate of 16.5% for all enterprises.
As of March 31, 2018, the operation in Hong Kong incurred $90,768 of cumulative net operating losses which can be carried forward to offset future taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of $14,976 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
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Three months ended March 31,
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2018
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2017
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Loss before income taxes from Hong Kong operation
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$
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(12,193
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)
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$
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-
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Statutory income tax rate
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16.5
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%
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16.5
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%
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Income tax expense at statutory rate
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(2,011
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)
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-
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Tax losses carryforwards
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2,011
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-
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Income tax expense
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-
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-
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The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of March 31, 2018 and December 31, 2017:
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March
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December
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31,
2018
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31,
2017
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(Unaudited)
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(Audited)
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Deferred tax assets:
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Net operating loss carryforwards
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United States
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$
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54,600
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$
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54,600
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Hong Kong
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14,976
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12,965
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Total
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69,576
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67,565
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Less: valuation allowance
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(69,576
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)
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(67,565
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)
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Net deferred tax asset
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$
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-
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$
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-
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Management believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly, the Company provided for a full valuation allowance against its deferred tax assets of $69,576 as of March 31, 2018. During the three months ended 2018, the valuation allowance increased by $2,011, primarily relating to net operating loss carryforwards from the foreign tax regime.
NOTE 7 - DISCONTINUED OPERATIONS
On December 19, 2017, the Company entered into a Rescission Agreement. The Rescission Agreement rescinded the share exchange agreement dated February 24, 2017 between the equity interest owners of Allied Plus (Samoa) Limited (“APSL”).
On December 19, 2017, the Company recorded $32,873 as a gain on the disposal of a subsidiary. The Company has no continuing involvement in the operations of APSL. The disposal of APSL qualified as a discontinued operation of the Company and accordingly, the Company has presented the results of APSL operations from its statements of operations to present this business in discontinued operations.
The following table shows the results of operations of APSL for the three months ended March 31, 2017, which are included in the loss from discontinued operations:
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Three Months
Ended
March 31,
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2017
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Revenue, net
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$
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-
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Operating Expenses
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General and administrative
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32,873
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Professional fees
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-
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Loss from discontinued operations
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$
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(32,873
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)
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NOTE 8 – COMMITMENTS AND CONTINGENCIES
As of March 31, 2018, the Company had no material capital commitments or contingencies involved.
NOTE 9 – SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to the date these financial statements were issued, and has determined that it does not have any material events to disclose, except for the below:
On July 22, 2017, the Company entered into a Memorandum of Understanding with Zhejiang Zhongmeng United Enterprise Management Shareholdings Co., Ltd (“Zhongmeng UEM”) to undertake an acquisition project with Zhongmeng UEM. On April 6, 2018, the Company received notification that Zhongmeng UEM was postponing its expansion and acquisition project with the Company. On April 17, 2018, the Company approved the postponement.
