Amended Annual and Transition Report (foreign Private Issuer) (20-f/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

(Amendment No. 2)

(Mark One)

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report:

Commission file number: 001-35715

KBS Fashion Group Limited

(Exact Name of Registrant as Specified in Its Charter)

Not Applicable

(Translation of Registrant’s Name Into English)

Republic of the Marshall Islands

(Jurisdiction of Incorporation or Organization)

Xin Fengge Building

Yupu Industrial Park

Shishi City, Fujian Province 362700

People’s Republic of China

(Address of Principal Executive Offices)

Mr. Keyan Yan, Chief Executive Officer

Xin Fengge Building

Yupu Industrial Park

Shishi City, Fujian Province 362700

People’s Republic of China

Tel: + (86) 595 8889 6198

Fax: (86) 595 8850 5328

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
Common Stock, $0.0001 par value	NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Units, Common Stock Purchase Warrants

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report (December 31, 2015): 25,417,329

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o

International Financial Reporting Standards as issued by the International Accounting Standards Board x

Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. o Item 17 o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Annual Report on Form 20-F

Year Ended December 31, 2015

TABLE OF CONTENTS

		Page
PART I
ITEM 8.	FINANCIAL INFORMATION	2
	A. Consolidated Statements and Other Financial Information	2
	B. Significant Changes	2
PART III
ITEM 17.	FINANCIAL STATEMENTS	3

EXPLANATORY NOTE

This Amendment No. 2 to annual report on Form 20-F (this “Amendment No.2”) amends our annual report on Form 20-F for the year ended December 31, 2015 that was filed with the Securities and Exchange Commission (the “Commission”) on May 2, 2016 and amended on May 16, 2016 (the “Form 20-F”). This Amendment No.2 is being filed in response to comments received from the staff of the Commission in order to amend the following sections of the Form 20-F:

Auditor Report: Due solely to a clerical error, the report of our former independent registered public accounting firm, BDO China Shu Lun Pan Certified Public Accountants LLP (“BDO”) for the fiscal years ended December 31, 2013 and 2014 was inadvertently omitted in the Form 20-F. We are filing this Amendment No.2 to submit this auditor report of BDO.

Note 6, note 22, and note 23 to the financial statements for the fiscal years ended December 31, 2013, 2014 and 2015 to disclose that the recoverable amount of these assets is the fair value less cost of disposal and provided the corresponding disclosures per IAS 36 paragraph 130.

As required by Rule 12b-15 under the Exchange Act of 1934, as amended, updated certifications of our principal executive officer and our principal financial officer are being filed as exhibits to this Amendment No. 2. Other than as described above, this Amendment No. 2 speaks as of the date of the initial filing of the Form 20-F and does not, and does not purport to, amend, update or restate the information in the Form 20-F or reflect any events that have occurred after the Form 20-F was originally filed on May 2, 2016.

PART I

ITEM 8.

FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

Financial Statements

We have appended consolidated financial statements filed as part of this report. See Item 18 “Financial Statements.”

Legal Proceedings

We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are currently not party to any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings and those involving any third party, which may have, or have had in the recent past, significant effects on our financial position or profitability.

Dividend Policy

As required by the Exchange Agreement, promptly following the consummation of the Share Exchange , the Board of Directors will adopt a dividend policy for the payment of an annual dividend for the first two fiscal years post-closing in an amount equal to at least twenty percent (20%) of our distributable profits after tax and after compulsory statutory reserves, which can be no less than 10% of after-tax income in China. After the first two years, the Board of Directors may elect to modify the dividend policy.

Significant Changes

No significant change has occurred since the date of our consolidated financial statements filed as part of this annual report.

PART II

ITEM 17.

FINANCIAL STATEMENTS

We have elected to provide financial statement pursuant to Item 18.

ITEM 18.

FINANCIAL STATEMENTS

The financial statements are filed as part of this annual report beginning on page F-1.

ITEM 19.

EXHIBITS

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this report on its behalf.

Date: November 30, 2016	KBS Fashion Group Limited

	/s/ Keyan Yan
	Keyan Yan
	Chief Executive Officer

KBS Fashion Group Limited

Consolidated Financial Statements

For the years ended December 31, 2015, 2014, and 2013

(Stated in US dollars)

CONTENTS		PAGES

Report of Independent Registered Public Accounting Firm		F-1 - F-2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)		F-3

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION		F-4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY		F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS		F-6 - F-7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS		F-8 - F-41

Independent Auditor’s Report

To: the Board of Directors and Shareholders of KBS Fashion Group Limited

We have audited the accompanying consolidated statements of financial position of KBS Fashion Group Limited and its subsidiaries (the “Company”), as of December 31, 2014 and 2013 and the related consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of KBS Fashion Group Limited and its subsidiaries at December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

October 27, 2015

/s/ BDO China Shu Lun Pan Certified Public Accountants LLP

Shanghai, China

F- 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To:

The Board of Directors and Shareholders

of KBS Fashion Group Limited

We have audited the accompanying consolidated statements of financial position of KBS Fashion Group Limited and its subsidiaries (the “Company”), as of December 31, 2015 and the related consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of KBS Fashion Group Limited and its subsidiaries at December 31, 2015, and the results of its operations and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We draw attention to Note 6 to the financial statements, which describes the recognition of impairment losses by the Company for prepayments for land use rights and related construction on such land. Our opinion is not qualified in respect of this matter.

San Mateo, California	/s/ WWC, P.C.
May 1, 2016	Certified Public Accountants

F- 2

KBS Fashion Group Limited

Consolidated statements of comprehensive income (loss)

For the years ended December 31, 2015, 2014, and 2013

(Stated in US dollars)

		Year ended December 31,
	Notes	2015			2014			2013
Revenue	8		61,343,681			58,832,481			99,559,814
Cost of sales	9		(46,511,274	)		(39,416,973	)		(57,363,839	)
Gross profit			14,832,407			19,415,508			42,195,975

Other income	10		302,145			252,748			367,896
Other gains and losses	11		(3,877,832	)		(2,036,508	)		96,806
Distribution and selling expenses	12		(6,621,256	)		(7,191,606	)		(6,238,995	)
Administrative expenses	13		(2,798,082	)		(4,649,229	)		(2,211,431	)
Profit from operations			1,837,381			5,790,913			34,210,251

Finance costs	14		-			(23,630	)		(116,421	)
Change in fair value of warrant liabilities	31		11,978			3,417,053			(45,442	)

Profit before tax			1,849,359			9,184,336			34,048,388
Income tax expense	15		(605,689	)		(2,307,354	)		(8,629,022	)
Profit for the year	16		1,243,670			6,876,982			25,419,366
Other comprehensive income
-currency translation differences			(6,044,772	)		(350,810	)		2,597,259
Total comprehensive income for the year			(4,801,102	)		6,526,172			28,016,625

Earnings per share of common stock attributable to the Company
-Basic	19		0.05			0.27			1.00
-Diluted	19		0.05			0.27			1.00

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

F- 3

KBS Fashion Group Limited

Consolidated statements of financial position

For the year ended December 31, 2015 and 2014

(Stated in US dollars)

		As of December 31,
	Notes	2015			2014
Non-current assets
Property, plant and equipment-net	20		30,536,721			33,315,513
Prepayments and premiums under operating leases	21		2,739,311			2,991,245
Prepayment for construction of new plant	22		7,160,523			8,988,397
Prepayment for acquisition of land use right	23		4,774,063			6,409,689
Prepaid lease payments	24		670,643			729,098
Deferred tax assets	15		1,340,268			495,444
			47,221,529			52,929,386
Current assets
Inventories	25		3,527,696			793,469
Trade and other receivables	26		36,743,402			39,516,503
Subsidies prepaid to distributors	27		516,231			534,859
Prepayments and premiums under operating leases	21		81,147			471,580
Prepaid lease payments	24		16,395			17,399
Cash and cash equivalents	28		21,214,080			20,604,582
			62,098,951			61,938,392
Total assets			109,320,480			114,867,778
Current liabilities
Trade and other payables	29		5,114,964			5,527,158
Related parties payables	30		983,391			651,078
Income tax payable			2,401,742			3,056,079
			8,500,097			9,234,315
Non-current liability
Warrant liabilities	31		3,409			15,387
			3,409			15,387

Total liabilities			8,503,506			9,249,702
Equity
Share capital	32		2,542			2,542
Share premium	32		5,624,875			5,624,875
Statutory surplus reserve	33		6,069,457			5,815,493
Retained profits	33		90,880,473			89,890,767
Foreign currency translation reserve	33		(1,760,373	)		4,284,399
			100,816,974			105,618,076

Total liabilities and equity			109,320,480			114,867,778

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

F- 4

KBS Fashion Group Limited

Consolidated statements of changes in equity

For the year ended December 31, 2015, 2014, and 2013

(Stated in US dollars)

						Statutory
						surplus		Retained			Foreign currency
	Share capital		Share premium			reserve		profits			translation reserve			Total
	(Note 32)		(Note 32)			(Note 33)		(Note 33)			(Note 33)
Balance at January 1, 2013		2,542		1,422,161			2,438,536		59,814,279			2,037,950			65,715,468
Profit for the year		-		(374,714	)		-		25,794,080			-			25,419,366
Other comprehensive income for the year		-		-			-		-			2,597,259			2,597,259
Appropriation to statutory surplus reserve		-		-			2,625,370		(2,625,370	)		-			-
Balance at December 31, 2013		2,542		1,047,447			5,063,906		82,982,989			4,635,209			93,732,093
Waiver of payable to ex-shareholder		-		5,359,811			-		-			-			5,359,811
Profit for the year		-		(782,383	)		-		7,659,365			-			6,876,982
Other comprehensive income for the year		-		-			-		-			(350,810	)		(350,810	)
Appropriation to statutory surplus reserve		-		-			751,587		(751,587	)		-			-
Balance at December 31, 2014		2,542		5,624,875			5,815,493		89,890,767			4,284,399			105,618,076
Profit for the year		-		-			-		1,243,670			-			1,243,670
Other comprehensive income for the year		-		-			-		-			(6,044,772	)		(6,044,772	)
Appropriation to statutory surplus reserve		-		-			253,964		(253,964	)		-			-
Balance at December 31, 2015		2,542		5,624,875			6,069,457		90,880,473			(1,760,373	)		100,816,974

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

F- 5

KBS Fashion Group Limited

Consolidated statements of cash flow

For the years ended December 31, 2015, 2014, and 2013

(Stated in US dollars)

	Year ended December 31,
	2015			2014			2013
OPERATING ACTIVITIES
Profit for the year		1,243,670			6,876,982			25,419,366
Adjustments for:
Finance cost		-			23,630			116,421
Change in fair value of warrant liabilities		(11,978	)		(3,417,053	)		45,442
Interest income		(92,747	)		(136,911	)		(142,239	)
Depreciation of property, plant and equipment		2,015,437			2,340,082			1,875,812
Amortization of prepaid lease payments and trademark		17,061			17,326			15,585
Amortization of subsidies prepaid to distributors		1,093,036			1,163,913			1,397,789
Amortization of prepayments and premiums under operating leases		728,996			659,442			1,892,254
Provision/ (Reversal) of inventory obsolescence		342			(1,848	)		1,994
Bad debt provision of trade receivables		1,028,439			1,973,459			-
Gain/(loss) on disposal of property, plant and equipment		11,412			-			(10,132	)
Provision of impairment loss in prepayments		2,565,334			-			-
Operating cash flows before movements in working capital		8,599,002			9,499,022			30,612,292

Increase in trade and other receivables		(345,348	)		(11,007,437	)		(16,252,778	)
Decrease in related parties receivables		-			-			414,052
(Increase)/ Decrease in inventories		(2,893,284	)		(126,523	)		1,170,209
Increase in trade and other payables		101,240			1,071,032			200,208
Increase in related parties payables
(excluding waiver of payables to ex-shareholder)		330,099			221,847			421,165
Increase/ (Decrease) in income tax payable		(775,117	)		(918,759	)		105,336
Increase in deferred tax assets		(908,889	)		(495,444	)		-
Prepayments and premiums paid under operating leases		(449,935	)		(515,038	)		(725,943	)
Withdraw the prepayments and premiums paid under operating leases		-			-			1,246,270
Subsidies prepaid to distributors		(1,093,036	)		(1,065,227	)		(1,253,461	)
NET CASH USED IN / FROM OPERATING ACTIVITIES		2,564,732			(3,336,527	)		15,937,350

INVESTING ACTIVITIES
Interest received		92,747			136,911			142,239
Prepayment for construction of new plant		-			(15,755,201	)		-
Purchase of property, plant and equipment		(1,020,623	)		(1,919,723	)		(11,288,129	)
NET CASH USED IN INVESTING ACTIVITIES		(927,876	)		(17,538,013	)		(11,145,890	)

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

F- 6

KBS Fashion Group Limited

Consolidated statements of cash flow (continued)

For the year ended December 31, 2015, 2014 and 2013

(Stated in US dollars)

	Year ended December 31,
	2015			2014			2013
FINANCING ACTIVITIES
Interest paid		-			(23,630	)		(116,421	)
New bank loans raised		-			-			1,968,213
Repayment of borrowings		-			(1,968,213	)		(807,809	)
Repayment of loan payable-related party		-			-			(35,650	)
Advance from related party		-			-			50,650
Payment of offering costs		-			-			(72,105	)
NET CASH USED IN / PROVIDED BY FINANCING ACTIVITIES		-			(1,991,843	)		986,878

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS		1,636,856			(22,866,383	)		5,778,338
Effects of currency translation		(1,027,358	)		(229,122	)		1,591,835
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		20,604,582			43,700,087			36,329,914
CASH AND CASH EQUIVALENTS AT END OF YEAR - represented by cash and bank balances		21,214,080			20,604,582			43,700,087

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

F- 7

KBS Fashion Group Limited

Notes to consolidated financial statements

GENERAL INFORMATION

(1)

Hongri International Holdings Limited (the "Company") 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 $50,000, divided into 50,000 common shares of $1 per value each of which 10,000 common shares were issued at par as of December 31, 2010. On January 27, 2011, the Company issued additional 10,000 common shares at a cash consideration of $77 per share. The principal activity of the Company is investment holding. Yan Keyan, is the sole director of Hongri International. Before the acquisition by KBS International Holding Inc. (“KBS International”), the 20,000 common shares were held as to 30% by Cheung So Wa and 70% by Chan Sun Keung. On November 16, 2009, Yan Keyan entered into an option agreement with Cheung So Wa and Chan Sun Keung of which Yan Keyan is entitled an exclusive right to purchase the 100% equity interest in the Company at a cash consideration equivalent to the nominal value of issued share capital. Before the execution of the exclusive right by Yan Keyan, the rights and obligations as a stockholder of the 100% equity interest in the Company are still vested in Yan Keyan and the appointment of the board of directors and management is controlled by Yan Keyan. This option agreement was replaced by a new option agreement on March 9, 2011.

(2)

France Cock (China) Limited ("France Cock") was incorporated in Hong Kong on September 21, 2005 as a limited liability company with authorized issued and paid up capital of HK$10,000, divided into 10,000 common shares of HK$1 par value each. The principal activity of France Cock is trademark holding. The director of France Cock is Yan Keyan. Before the acquisition by the Company, the 10,000 common shares were held by Yan Keyan.

Pursuant to a trademark transfer agreement dated October 4, 2009, Hongri Fujian agreed to transfer a trademark "KBS" to France Cock for a consideration of RMB100,000 (approximately $15,250). The trademark transfer procedure has been completed on October 20, 2010 and the Trademark Authority in the People's Republic of China (the "PRC") issued a trademark registration certificate to France Cock on March 21, 2011.

Pursuant to a trademark licensing agreement dated December 1, 2005, France Cock agreed to license a trademark "Kabiniao" to Hongri Fujian for 10 years commencing from January 1, 2006 at a fee of RMB1,000,000 (approximately $152,500) per annum.

Pursuant to a trademark licensing agreement executed in 2009, France Cock agreed to license a trademark "KBS" to Hongri Fujian for 5 years commencing from January 1, 2009 at a fee of RMB40,000,000 (approximately $6.1 million) per annum. The trademark licensing agreement was updated on August 1, 2012. In the new agreement, France Cock agreed to waive the license fee from January 1, 2012.

(3)

Roller Rome Limited ("Roller Rome") was incorporated in the BVI on March 28, 2006 as a limited liability company with authorized share capital of $50,000, divided into 50,000 common shares of $1 par value each of which 1 share was issued at par. The principal activity of Roller Rome is the provision of design and development services for sports apparel. The director of Roller Rome is Yan Keyan. Before the acquisition by the Company, the only one issued common share was held by Chen Bizhen.

F- 8

KBS Fashion Group Limited

Notes to consolidated financial statements

GENERAL INFORMATION – continued

(4)

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$10,000 divided into 10,000 ordinary share of HK$1 each of which 1 ordinary share was issued at par. Vast Billion was a dormant company until the completion of acquisition of 100% equity interest in Hongri Fujian on February 15, 2011. The director of Vast Billion is Yan Keyan,. Before the acquisition by Hongri International, 1 ordinary share was held by Chan Sun Keung, the father of Chen Bizhen.

(5)

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 5,000,000 (which are not divided into shares). On March 24, 2011, Hongri Fujian increased registered capital from RMB 70,000,000 to RMB75,000,000. As of September 30, 2011, the paid up capital was RMB 39,551,860. Hongri Fujian is engaged in the design manufacture marketing and sale of apparel in the PRC. On August 10, 2011, Chen Bizhen replaced Wang Feiya as legal representative of Hongri Fujian. Before the acquisition by Vast Billion, the paid up capital of RMB 5,000,000 was held as to 50% by Yan Keyan and 50% by Chen Bizhen. On December 18, 2006, Roller Rome entered into a buy back agreement with Yan Keyan and his wife Chen Bizhen of which Roller Rome is entitled the exclusive right to acquire all of Yan Keyan's and Chen Bizhen's 100% equity interest in Hongri Fujian at a consideration equivalent to the paid up capital of Hongri Fujian. Before the execution of the exclusive right by Roller Rome, i) 100% equity interest in Hongri Fujian is pledged to Roller Rome as collateral for the annual fee due to Roller Rome; ii) Roller Rome is entitled the exclusive right to receive all of dividend declared by Hongri Fujian; and iii) the appointment of the board of directors and management of Hongri Fujian are controlled by Roller Rome. This buy back agreement was mutually terminated upon the completion of acquisition of Hongri Fujian by Vast Billion.

(6)

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 1,000,000. Anhui Kai Xin is a wholly owned subsidiary of Hongri Fujian. Anhui Kai Xin provides sub-contracting service for the manufacture of sports apparel to Hongri Fujian and other brand name owners in the PRC. Yan Keyan is the director and legal representative of Anhui Kai Xin.

(7)

Shishi Hongri Brand Management Company Limited ("Brand Management”) was established in the PRC on October 17, 2011 with a registered and paid up capital of RMB 100,000, Brand Management is a wholly owned subsidiary of Hongri Fujian and a dormant company in the PRC. Chen Bizhen is the director and legal representative of Brand Management. Brand Management was dissolved on November 24, 2014.

(8)

According to a Design and Development Agreement entered into between Roller Rome and Hongri Fujian on December 18, 2006, Roller Rome provides design and development services, including market research, product development, design technical consulting and staff training to Hongri Fujian for an annual fee ranging from 90% to 99% of Hongri Fujian's net income before tax. The Design and Development Agreement expired on December 31, 2011.

(9)

On March 24, 2014, Aquasition Investments Corp. (“Company”) entered into a Share Exchange Agreement and Plan of Liquidation (the “Agreement”), with KBS International Holdings, Inc., a Nevada corporation (“KBS”), Hongri International Holdings Ltd., a company organized and existing under the laws of the British Virgin Islands and wholly owned subsidiary of KBS (“Hongri” or the “Target”); and Cheung So Wa and Chan Sun Keung, each an individual and shareholder of KBS (each, a “Principal Stockholder”). The acquisition was accounted for as a reverse merger and recapitalization where KBS will was the acquirer and the Company will be the acquired company. On August 1, 2014, upon completion of the acquisition, Aquasition Investments Corp. was changed to KBS Fashion Group Limited. The Company also changed its trading symbol from "AQU" to "KBSF".

F- 9

KBS Fashion Group Limited

Notes to consolidated financial statements

GROUP REORGANISATION AND BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

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

The consolidated financial statements have been prepared in accordance with international financial reporting standards ("IFRS") as issued by the International Accounting Standards Board.

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs")

Except as described below, for the year ended December 31, 2015 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, 2015 in the preparation of the consolidated financial statements throughout the year.

For the year ended December 31, 2015, there was no new and revised standards, amendments or interpretations that have become effective during the reporting period.

At the date these consolidated financial statements are authorized for issuance, the IASB has issued the following new and revised International Accounting Standards ("IASs"), IFRSs, amendments and IFRICs which are not yet effective in respect of the years. The Company has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective:

Annual improvements to IFRSs 2012–2014s, which is effective for annual periods beginning on or after January 1, 2016.

F- 10

KBS Fashion Group Limited

Notes to consolidated financial statements

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs") – continued

IFRS 9 ‘Financial Instruments’ will supersede IAS 39 ‘Financial Instruments: Recognition and Measurement’ and is effective for annual periods beginning on or after January 1, 2018. IFRS 9 covers classification and measurement of financial assets and financial liabilities, impairment methodology and hedge accounting.

IFRS 15 ‘Revenue from Contracts with Customers’ provides a single model for accounting for revenue arising from contracts with customers and is effective for annual periods beginning on or after January 1, 2018. IFRS 15 will supersede IAS 18 ‘Revenue’.

The IASB has issued IFRS 16 ‘Leases’ which provides a new model for lease accounting in which all leases, other than short-term and small-ticket-item leases, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability, and the subsequent amortization of the right-to-use asset over the lease term. IFRS 16 will be effective for annual periods beginning on or after January 1, 2019 and is expected to have a significant effect on the group’s financial statements, significantly increasing the group’s recognized assets and liabilities and potentially affecting the presentation and timing of recognition of charges in the income statement. Information on the group’s leases currently classified as operating leases, which are not recognized on the balance sheet, is provided in Note 27.

Amendments to IFRS 10 and IAS 28 (December 2015) —defers the effective date of Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) until a future date to be determined by the IASB. Early application of the amendments to IFRS 10 and IAS 28 is permitted. Paragraph C1C of IFRS10; Paragraph 45C of IAS 28.

Amendments to IAS 12 - Recognition of Deferred Tax Assets for Unrealised Losses (January 2016, effective for annual periods beginning on or after January 1, 2017. Early application is permitted. Application is retrospective, with certain optional transition relief available.) — Paragraph 98G.

Amendments to IAS 7, Disclosure Initiative (January 2016, effective for annual periods beginning on or after January 1, 2017. Early application is permitted. Application is prospective and comparative information is not required for preceding periods when first applied.) —Paragraphs 44A through 44E.

The Company does not expect to adopt IFRS 9, IFRS 15, or any of the above amendments/annual improvements before their respective effective dates and has not yet determined its date of adoption for IFRS 16. The Company has not yet completed its evaluation of the effect of adoption of these standards.

There are no other standards and interpretations in issue but not yet adopted that the directors anticipate will have a material effect on the consolidated financial statements of the Company.

SIGNIFICANT 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.

First-time adoption of IFRS

The financial statements for the year ended December 31, 2014 are the first time the Company has prepared in accordance with IFRS. For periods up to and including the year ended 31 December 2013, the Company prepared its financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Accordingly, the Company has prepared financial statements which comply with IFRS applicable for periods ending on or after December 31, 2014, together with the comparative period data as at and for the year ended December 31, 2013, as described in the accounting policies. In preparing these financial statements, the Company’s opening statement of financial position was prepared as at January 1, 2013 the Company’s date of transition to IFRS.

F- 11

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

The Company’s main business activity was investment and only some administrative expenses and distribution and selling expenses incurred in the Company. There were no substantial differences between the amounts under U.S. GAAP and IFRS. Therefore, no principal adjustments made by the Company in restating its U.S. GAAP statement of financial position as at January 1, 2013 and its previously published U.S. GAAP financial statements as at and for the year ended December 31, 2013.

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.

Basis of consolidation

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.

Foreign currencies

The Company’s presentational currency is the United States Dollar.

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).

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

	Period end rates	Average rates

December 31, 2013	USD 1.00= RMB 6.0969	USD 1.00=RMB 6.1896

December 31, 2014	USD 1.00= RMB 6.1190	USD 1.00=RMB 6.1448

December 31, 2015	USD 1.00= RMB 6.4936	USD 1.00=RMB 6.2401

The results and financial positions in functional currency are translated into the presentation currency of its intended ultimate legal parent 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);

F- 12

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

(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.

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 three segments are wholesale, retail and subcontracting.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

The Group’s revenue originates (i) from corporate owned stores, (ii) distributors and (iii) the services performed as an original design manufacturer. Revenue from all above categories is recognized when all the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Specifically, revenue from sale of goods is recognized when the goods are delivered and title has passed.

Value added tax (VAT)

Output VAT is 17% of product sales and taxable services revenue, according to tax laws. The remaining balance of output VAT, after subtracting the deductible input VAT of the period, is VAT payable.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

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

F- 13

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

Retirement benefit costs

Pursuant to the relevant regulations of the PRC government, the Group participates in a local municipal government retirement benefits scheme (the "Scheme"), whereby the subsidiaries located in the PRC are required to contribute a certain percentage of the basic salaries of its employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of the subsidiaries located in the PRC. The only obligation of the Group with respect to the Scheme is to pay the on-going required contributions under the Scheme mentioned above. Contributions under the Scheme are charged to the profit or loss as incurred. There are no provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions. These plans are considered defined contribution plans. The Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contributions into the national pension schemes. Contributions to national pension schemes are recognized as an expense in the period in which the related service is performed.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statements of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

F- 14

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

Taxation – continued

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

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

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Leasehold improvements

Leasehold improvements, principally comprising costs of office buildings and shops renovation, are held for administrative and selling purposes. Leasehold improvements are initially measured at cost and amortized systematically over its useful life.

Property, plant and equipment

Property, plant and equipment ("PPE") including buildings held for use in the production or supply of goods or services, or for administrative purposes other than construction in progress are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment other than construction in progress over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognized impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is de-recognized.

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- 15

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

Leasehold land

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as "prepaid lease payments" in the consolidated statement of financial position and is amortized over the lease term on a straight-line basis.

Inventories

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.

Financial instruments

Financial assets and financial liabilities are recognized on the consolidated statements of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Group's financial assets are classified as receivables.

Effective interest method

The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognized on an effective interest basis for debt instruments.

Receivables

Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables (including trade and other receivables, related parties receivables, and cash and cash equivalents) are measured at amortized cost using the effective interest method, less any impairment (see accounting policy on impairment loss on receivables below).

F- 16

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

Financial instruments – continued

Financial assets – continued

Impairments of receivables

Receivables are assessed for indicators of impairment at the end of the reporting period. Receivables are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the receivables, the estimated future cash flows of the receivables have been affected.

Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;

default or delinquency in interest or principal payments;

it becoming probable that the borrower will enter bankruptcy or financial reorganization.

For certain categories of financial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, and increase in the number of delayed payments in the portfolio past the average credit period, observable changes in national or local economic conditions that correlate with default on receivables.

An impairment loss is recognized in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

The carrying amount of the receivables is reduced by the impairment loss directly for all financial assets with exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in carrying amount of the allowance account are recognized in profit or loss. When a trade and other receivable are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition

F- 17

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

Financial instruments – continued

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Effective interest method

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognized on an effective interest basis.

Financial liabilities

Financial liabilities including trade and other payables, related parties payables and short-term loans are subsequently measured at amortized cost, using the effective interest method.

Equity instruments

Equity instruments issued by the group entities are recorded at the proceeds received, net of direct issue costs.

De-recognition

Financial assets are derecognized when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On de-recognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

Financial liabilities are derecognized when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Subsidies prepaid to distributors

Subsidies were paid to major distributors for compensating their rental expenses. Such subsidies would vest to distributors when they met the sales targets predetermined by the Company. Subsidies prepaid to distributors were recognized when payments were made and amortized over the agreement term on a straight-line basis in selling expenses.

F- 18

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT ACCOUNTING POLICIES – continued

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.

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 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- 19

KBS Fashion Group Limited

Notes to consolidated financial statements

SIGNIFICANT MANAGEMENT JUDGMENT 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.

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, 2015 and 2014 amounted to $2,401,742 and $3,056,079 respectively.

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. 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.

F- 20

KBS Fashion Group Limited

Notes to consolidated financial statements

KEY SOURCES OF ESTIMATION UNCERTAINTY – continued

Fair value of warrants

The fair value of warrants was determined using a binomial-lattice 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 warrants 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.

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 year ended December 31, 2015, the Company recognized impairment losses of $1,317,295 and $1,248,039 for its prepayments for acquisition of land use rights and the related prepayments for construction on such land, respectively. 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, 2015, 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.

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 $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 $379,971. The net value is then compared to the carrying value, and the difference is recorded as impairment loss in the amount of $1,317,295.

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 assumption 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, the Company provided an estimate in the amount of $7,160,523. Since this asset is not resalable, the company estimated costs to sell for this asset in the amount of $0. The net value is then compared to the carrying value, and the difference is recorded as impairment loss in the amount of $1,248,039.

F- 21

KBS Fashion Group Limited

Notes to consolidated financial statements

SEGMENT REPORTING

Management currently identifies the Group’s three sales models as operating segments, which are wholesale, retail and subcontracting. The segment presentation is in accordance with management’s expectation of future business developments. These operating segments are monitored and strategic decisions are made on the basis of segmental gross margins.

By business	Wholesale						Retail						Subcontracting						Consolidated
	For the year ended December 31,						For the year ended December 31,						For the year ended December 31,						For the year ended December 31,
	2015		2014		2013		2015		2014		2013		2015		2014		2013		2015			2014			2013
Sales to external customers		40,815,528		40,654,657		78,111,563		18,091,585		16,134,537		19,093,669		2,436,568		2,043,287		2,354,582		61,343,681			58,832,481			99,559,814
Segment revenue		40,815,528		40,654,657		78,111,563		18,091,585		16,134,537		19,093,669		2,436,568		2,043,287		2,354,582		61,343,681			58,832,481			99,559,814
Segment gross margins		9,668,518		12,382,562		28,162,776		4,239,168		6,327,728		13,277,404		924,721		705,218		755,795		14,832,407			19,415,508			42,195,975
Reconciling items																				(12,983,049	)		(10,231,172	)		(8,147,587	)
Profit before tax																				1,849,359			9,184,336			34,048,388
Income tax expense																				(605,689	)		(2,307,354	)		(8,629,022	)
Profit for the year																				1,243,670			6,876,982			25,419,366

The Group does not allocate the assets because they are shared by the three segments and cannot be split.

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.

F- 22

KBS Fashion Group Limited

Notes to consolidated financial statements

SEGMENT REPORTING – continued

Information about major customers

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

	Year ended December 31,
	2015		2014		2013
Distributor A		6,625,797		8,384,369		11,438,514
Distributor B		2,905,842		4,698,008		2,605,818
Distributor C		2,768,317		3,144,781		2,371,725
Other distributors		12,519,226		24,427,499		61,695,507
		24,819,182		40,654,657		78,111,564

REVENUE

	Year ended December 31,
	2015		2014		2013
Apparel
-Wholesale		40,815,527		40,654,657		78,111,563
-Retail		18,112,019		16,134,537		19,093,669
Subtotal		58,927,546		56,789,194		97,205,232
Subcontracting		2,416,135		2,043,287		2,354,582
		61,343,681		58,832,481		99,559,814

Revenue is denominated only in USD.

COST OF SALES

Cost of sales 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. The following table shows a breakdown of cost of sales for the period under review for each category:

	Year ended December 31,
	2015			2014			2013
Changes in inventories of finished goods and work in progress		64,814			126,523			1,168,215
Materials consumed in production		183,831			107,349			63,541
Purchases of finished goods		44,786,912			37,757,707			53,846,922
Labor		787,472			581,849			934,457
Depreciation		252,055			250,042			252,759
Rental		23,184			141,258			145,082
Outsourced manufacturing cost		-			60,630			26,679
Taxes and surcharges *		212,516			353,522			754,593
Water and electricity		55,522			57,963			79,850
Inventory provision		342			(1,848	)		1,994
Others		197,778			97,496			17,039
Foreign currency translation difference		(53,152	)		(115,518	)		72,708
		46,511,274			39,416,973			57,363,839

* 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).

F- 23

KBS Fashion Group Limited

Notes to consolidated financial statements

10.

OTHER INCOME

	Year ended December 31,
	2015		2014		2013

Sales of raw material		-		1,819		9,875
Government grant		209,398		114,018		215,782
Interest income on bank deposits		92,747		136,911		142,239
		302,145		252,748		367,896

11.

OTHER GAINS AND LOSSES

	Year ended December 31,
	2015			2014			2013
Gain on disposals of property, plant and equipment		11,412			-			10,132
Foreign exchange gain		(233,532	)		(64,820	)		79,968
Provision / reversal of inventory obsolescence		(342	)		1,848			(1,994	)
Bad debt provision of trade receivables		(1,070,563	)		(1,973,459	)		-
Impairment of prepayments in land purchase and related construction		(2,565,334	)
Others		(19,473	)		(77	)		8,700
		(3,877,832	)		(2,036,508	)		96,806

12.

DISTRIBUTION AND SELLING EXPENSES

	Year ended December 31,
	2015		2014		2013
Rental		508,039		583,737		1,665,836
Depreciation		1,239,644		1,605,955		1,178,209
Labor		739,789		926,504		603,013
Subsidy to distributors		1,061,685		1,163,913		1,397,789
Promotion		899,664		1,126,349		1,092,238
Advertisement		1,702,863		1,628,127		-
Others		469,572		157,021		301,910
		6,621,256		7,191,606		6,238,995

13.

ADMINISTRATIVE EXPENSES

	Year ended December 31,
	2015		2014		2013
Labor		757,639		1,071,820		742,797
Audit fee		175,859		189,673		182,620
Professional fee		136,499		725,359		-
Design fee		529,141		488,218		-
Depreciation and amortization charges		540,799		501,411		460,429
Bank charges		35,179		44,571		69,146
Rental		80,677		293,444		81,336
Travelling and entertainment		59,516		175,539		78,366
Others		482,774		1,159,194		596,737
		2,798,083		4,649,229		2,211,431

F- 24

KBS Fashion Group Limited

Notes to consolidated financial statements

14.

FINANCE COSTS

	Year ended December 31,
	2015		2014		2013
Interest expenses on bank borrowings wholly repayable within one year		-		23,630		116,421

Bank borrowings interests are charged at a rate of 6.60% per annum. The bank loan was fully repaid in 2014.

15.

INCOME TAX EXPENSE

	Year ended December 31,
	2015			2014			2013
PRC enterprises income tax:
Current tax		1,514,577			2,802,798			8,629,022
Deferred tax		(908,888	)		(495,444	)		-
		605,689			2,307,354			8,629,022

Hongri Fujian and Anhui Kai Xin subject to the applicable enterprise income tax rate of 25%. As of December 31, 2015, 2014, and 2013, the Company had no unrecognized tax benefits.

France Cock and Vast Billion were incorporated in Hong Kong and subject to Hong Kong profits tax at a tax rate of 16.5%. No provision for Hong Kong profits tax has been made as France Cock and Vast Billion has no taxable income during the reporting period.

Hongri International Holding Limited and Roller Rome were incorporated in the BVI and, under the current laws of the BVI, are not subject to income taxes.

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.

The tax charge for the year can be reconciled to the profit per the consolidated statements of comprehensive income as follows:

	Year ended December 31,
	2015			2014		2013
Profit before tax		1,849,359			9,184,336		34,048,388
Tax calculated at domestic tax rates applicable to profits in PRC (2015, 2014, and 2013: 25%)		462,340			2,296,084		8,512,097
Tax effect of expenses not deductible for tax purpose		908,974			3,842		6,133
Tax effect of tax loss of tax empty entities		(765,625	)		7,428		110,792
Tax charge for the year		605,689			2,307,354		8,629,022

F- 25

KBS Fashion Group Limited

Notes to consolidated financial statements

15.

INCOME TAX EXPENSE – Continued

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

	2015					2014				2013
	Temporary difference		Deferred tax assets			Temporary difference		Deferred tax assets		Temporary difference		Deferred tax assets
Beginning of the year		1,981,777		495,444			-		-		-		-
Bad Debt provisions charged to profit or loss for the year		1,070,563		267,641			1,981,777		495,444		-		-
Impairment charged to profit or loss for the year		2,565,334		641,333			-		-		-		-
Effect of translation		-		(64,150	)		-		-		-		-
End of the year		5,617,674		1,340,268			1,981,777		495,444		-		-

16.

PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging:

	Year ended December 31,
	2015		2014			2013
Cost of inventories recognized as expenses		46,298,758		39,063,451			56,609,246
Taxes and surcharges		212,516		353,522			754,593
		46,511,274		39,416,973			57,363,839

Depreciation of property, plant and equipment		2,015,437		2,340,082			1,875,812
Amortization of prepaid lease payments		17,061		17,326			15,585
Amortization of subsidies prepaid to distributors		1,093,036		1,163,913			1,397,789
Amortization of prepayments and premiums under operating leases		728,996		659,442			1,892,254
Provision (Reversal) of inventory obsolescence		342		(1,848	)		1,944
Provision of bad debt allowance		1,028,439		1,973,459			-
Provision of impairment loss in prepayments		2,565,334
		7,448,645		6,152,374			5,183,384

17.

EMPLOYEES' EMOLUMENTS

	Year ended December 31,
	2015		2014		2013

Salaries and other short-term benefits		1,878,963		2,203,626		2,187,866
Defined contribution benefit schemes		1,888,828		376,547		92,401
Total employee benefits expense (including directors’ emoluments)		3,767,791		2,580,173		2,280,267

The employees of the Group’s PRC subsidiaries are members of state-managed retirement benefit schemes operated by the local government. The subsidiaries are required to contribute a specified percentage of its payroll costs to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefit schemes is to make the specified contributions.

F- 26

KBS Fashion Group Limited

Notes to consolidated financial statements

18.

DIRECTORS' EMOLUMENTS

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

	Year ended December 31,
	2015		2014		2013
Salaries
Yan Keyan		105,000		105,000		105,015
Chen Bizhen		105,000		-		105,015
Lixia, Tu		62,371		-		-
Stanley Wong		-		126,000		126,018
Stylianos Stergios Sougioultzoglou		-		100,000		-
Yuyun Tristan Kuo		-		25,000		-
John Sano		20,000		20,000		-
Andrew Gaw				20,000		-
Zhou Meng		-		20,000		-
Chi Gaw		-		20,000		-
		292,371		436,000		336,048
Social Welfare
Yan Keyan		758		758		758
Chen Bizhen		-		-		758
		758		758		1,516

19.

EARNINGS PER SHARE

	For the years ended December 31,
	2015		2014		2013
Basic Earnings Per Share Numerator
Profit for the year
attributable to owners of the Company	$	1,243,670	$	6,876,982	$	25,419,366

Diluted Earnings Per Share Numerator
Profit for the year
attributable to owners of the Company	$	1,243,670	$	6,876,982	$	25,419,366

Basic Earnings Per Share Denominator
Original shares:		25,417,329		25,417,329		25,417,329
Additions from actual events:
- Issuance of common stock		-		-		-
Basic weighted average shares outstanding		25,417,329		25,417,329		25,417,329

Diluted Earnings Per Share Denominator
Basic weighted average shares outstanding		25,417,329		25,417,329		25,417,329
Dilutive shares:
Potential additions from dilutive events:
- Exercise of investor warrants*		-		-		-
Diluted Weighted Average Shares Outstanding:		25,417,329		25,417,329		25,417,329

Earnings Per Share
- Basic	$	0.05	$	0.27	$	1.00
- Diluted	$	0.05	$	0.27	$	1.00
Weighted Average Shares Outstanding
- Basic		25,417,329		25,417,329		25,417,329
- Diluted		25,417,329		25,417,329		25,417,329

The were no potential dilutive additions to diluted weighted shares outstanding, as a result of the outstanding warrants being out-of-the-money during the periods presented.

F- 27

KBS Fashion Group Limited

Notes to consolidated financial statements

20.

PROPERTY, PLANT AND EQUIPMENT

	Plant			Machinery			Office equipment			Motor vehicles			Furniture and fixtures			Leasehold improvements -factories and offices			Leasehold improvements -shops			Distributor shops' furniture and fixtures			Construction in progress			Total

COST
At January 1, 2014		8,963,510			1,053,975			166,343			139,643			49,056			276,733			2,661,208			2,771,971			16,456,792			32,539,231
Additions		-			-			3,173			-			116,359			518,488			1,281,703			-			6,766,804			8,686,527
Disposals		-			-			-			-			-			-			-			-			-			-
Translation adjustment		(32,374	)		(3,806	)		(587	)		(504	)		313			1,186			(4,209	)		(10,012	)		(30,914	)		(80,907	)
At December 31, 2014		8,931,136			1,050,169			168,929			139,139			165,728			796,407			3,938,702			2,761,959			23,192,682			41,144,851
Additions		22,960,220			52,937			25,822			-			2,365			-			217,321			625,266			-			23,883,931
Disposals		-			-			(55,176	)		(449	)		(2,176	)		-			-			-			-			(57,801	)
Transferred to Plant		-			-			-			-			-			-			-			-			(22,960,220	)		(22,960,220	)
Translation adjustment		(1,411,606	)		(62,648	)		(8,600	)		(8,009	)		(9,568	)		(45,943	)		(235,698	)		(183,742	)		(232,462	)		(2,198,276	)
At December 31, 2015		30,479,750			1,040,458			130,975			130,681			156,349			750,464			3,920,325			3,203,483			-			39,812,485

DEPRECIATION
At January 1, 2014		(470,584	)		(321,384	)		(60,059	)		(84,929	)		(17,331	)		(241,609	)		(2,461,328	)		(1,842,030	)		-			(5,499,254	)
Provided for the year		(400,214	)		(241,904	)		(30,843	)		(16,796	)		(41,083	)		(46,280	)		(711,246	)		(851,716	)		-			(2,340,082	)
Eliminated upon disposal of assets		-			-			-			-			-			-			-			-			-			-
Translation adjustment		13			141			87			236			(111	)		678			5,891			3,063			-			9,998
At December 31, 2014		(870,785	)		(563,147	)		(90,815	)		(101,489	)		(58,525	)		(287,211	)		(3,166,683	)		(2,690,683	)		-			(7,829,338	)
Provided for the year		(394,103	)		(244,380	)		(35,712	)		(16,526	)		(84,832	)		(91,903	)		(974,363	)		(181,862	)		-			(2,023,681	)
Eliminated upon disposal of assets		-			-			46,123			404			1,959			-			-			-			-			48,486
Translation adjustment		65,620			42,027			4,831			6,484			6,612			20,156			220,721			162,318			-			528,769
At December 31, 2015		(1,199,268	)		(765,500	)		(75,573	)		(111,127	)		(134,786	)		(358,958	)		(3,920,325	)		(2,710,227	)		-			(9,275,764	)

CARRYING AMOUNT
At December 31, 2014		8,060,351			487,022			78,114			37,650			107,203			509,196			772,019			71,276			23,192,682			33,315,513
At December 31, 2015		29,280,482			274,958			55,402			19,554			21,563			391,506			-			493,256			-			30,536,721

F- 28

KBS Fashion Group Limited

Notes to consolidated financial statements

20.

PROPERTY, PLANT AND EQUIPMENT – continued

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	20 years		10	%
Machinery	5 years		10	%
Office equipment	5 years		10	%
Motor vehicles	5 years		10	%
Furniture and fixtures	5 years		10	%
Leasehold improvements-factories and offices	Shorter of estimated useful life of 5 years or lease term		10	%
Leasehold improvements-shops	Shorter of estimated useful life of 1.5 years or lease term		Nil
Distributor shops' furniture and fixtures	1.5 years		Nil

All the plant mentioned above were owned by Anhui Kaixin.

Buildings on leasehold land are comprised of the following:

Location	Description	Gross area (m ² )
Jinxi Town, Longshan Road, Taihu City, Anhui Province, the PRC	Dormitory		8,573
Jinxi Town, Longshan Road, Taihu City, Anhui Province, the PRC	Factory		22,292

The gross carrying amount of the fully depreciated property, plant and equipment that is still in use is $38,198 and $38,270 as at December 31, 2015 and 2014, respectively.

21.

PREPAYMENTS AND PREMIUMS UNDER OPERATING LEASES

	Amount
At January 1, 2014		3,620,916
additions for the year		515,038
charge for the year		(659,442	)
translation adjustment		(13,687	)
At December 31, 2014		3,462,825
additions for the year		107,178
charge for the year		(491,895	)
translation adjustment		(257,650	)
At December 31, 2015		2,820,458

Analyzed for reporting purposes as:

	As at December 31,
	2015		2014
Current asset		81,147		471,580
Non-current asset		2,739,311		2,991,245
		2,820,458		3,462,825

F- 29

KBS Fashion Group Limited

Notes to consolidated financial statements

22.

PREPAYMENT FOR CONSTRUCTION OF NEW PLANT

On November 20, 2010, Hongri Fujian entered into an agreement with a third party, Anqing Zhongfang Construction and Installation Co., Ltd., for the construction of the new plant in Anhui at a consideration of $17,826,251. In 2012, Kaixin Anhui made a prepayment of $6,363,853 for the second phase of the project. In 2013, Kaixin Anhui made another prepayment of $9,747,897 for the second phase of the project. The amount of $16,401,778 was recognized in Construction in progress.

In 2014, Kaixin Anhui made another prepayment of $15,525,413 for the second and third phase of the project, and an amount of $6,537,016 was recognized in construction in progress.

In 2015, an amount of $110,041 was recognized in construction in progress, which was subsequently recognized as fixed asset along with the completion of the second phase of the project. The total amount transferred to fixed assets from construction in progress amounted to $22,960,220.

The third phase of the project is related to the construction of a building. The construction site is located on a piece of land whose land use right was to be acquired by the Company. Due to reasons as set forth in note 23, the anticipated completion date of the project is expected to be delayed and, in the worst case, may be terminated. Accordingly, management provided a provision of impairment loss against the carrying value of such prepayment. The net carrying amount represents the fair value less cost to sell. The detail of estimation of such provision is explained in note 6.

As at December 31, 2015, the carrying amount of the prepayment for construction of new plant is as follows:

	As at December 31, 2015
Prepaid in 2015		8,469,878
Recognized as construction in progress		(110,041	)
		8,359,837
Impairment loss:		(1,199,314	)
		7,160,523

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 $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 net carrying amount represents the fair value less cost to sell. The detail estimation of such provision is explained in note 6.

As at December 31, 2015, the carrying amount of the prepayment for acquisition of land use right is as follows:

	As at December 31, 2015
Prepaid in 2010		6,039,930
Impairment loss:		(1,265,867	)
		4,774,063

F- 30

KBS Fashion Group Limited

Notes to consolidated financial statements

24.

PREPAID LEASE PAYMENTS

	Amount
COST
At January 1, 2014		819,721
additions for the year		-
translation adjustment		(2,961	)
At December 31, 2014		816,760
additions for the year		-
translation adjustment		(47,117	)
At December 31, 2015		769,643

AMORTIZATION
At January 1, 2014		(53,056	)
charge for the year		(17,326	)
translation adjustment		119
At December 31, 2014		(70,263	)
charge for the year		(17,061	)
translation adjustment		4,719
At December 31, 2015		(82,605	)

CARRYING AMOUNTS
At December 31, 2014		746,497
At December 31, 2015		687,038

Analyzed for reporting purposes as:

	As at December 31,
	2015		2014
Current asset		16,395		17,399
Non-current asset		670,643		729,098
		687,038		746,497

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

All the leasehold lands mentioned above were owned by Anhui Kaixin.

The leasehold land is comprised of the following:

Location	Expiry date of tenure	Land area (m ² )
Longshan Road, Economic development District, Taihu County	2062-05-23		2,440
Longshan Road, Economic development District, Taihu County	2061-11-06		7,405

F- 31

KBS Fashion Group Limited

Notes to consolidated financial statements

25.

INVENTORIES

	As at December 31,
	2015			2014			2013

Raw materials		2,718,044			-			-
Work in progress		33,841			57,459			42,658
Finished goods		776,263			736,141			624,419
Provision for obsolete inventories		(452	)		(131	)		(1,994	)
		3,527,696			793,469			665,083

26.

TRADE AND OTHER RECEIVABLES

	As at December 31,
	2015			2014			2013

Trade receivables		33,896,430			37,537,401			30,401,177
Bad debt provision for trade receivables		(1,028,439	)		(1,981,777	)		-
Other receivables		4,753			26,169			89,666
Subtotal financial assets		32,872,744			35,581,793			30,490,843
Prepayments		3,870,658			3,934,710			-
		36,743,402			39,516,503			30,490,843

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.

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

	As at December 31,
	2015		2014		2013

Current		6,865,179		17,722,534		20,436,960
Past due for less than 4 months		27,031,251		19,814,867		9,964,217
		33,896,430		37,537,401		30,401,177

The Group allows an average credit period of 90 -120 days to its trade customers. For the overdue trade receivable, the Company provided a bad debt allowance amounting $1,028,439 during the year ended December 31, 2015.

Among the amounts of trade receivables, $4,925,122 and $5,454,152 Output VAT was included as of December 31, 2015 and 2014, respectively.

F- 32

KBS Fashion Group Limited

Notes to consolidated financial statements

27.

SUBSIDIES PREPAID TO DISTRIBUTORS

	Amount

At January 1, 2013		759,293
additions for the year		1,253,461
charge for the year		(1,397,789	)
translation adjustment		21,293
At December 31, 2013		636,258
additions for the year		1,065,227
charge for the year		(1,163,913	)
translation adjustment		(2,713	)
At December 31, 2014		534,859
additions for the year		1,074,409
charge for the year		(1,061,685	)
translation adjustment		(31,352	)
At December 31, 2015		516,231

28.

CASH AND CASH EQUIVALENTS

	As at December 31,
	2015		2014		2013

Cash on hand		20,127		20,648		16,519
Bank deposits		21,193,953		20,583,934		43,683,568
		21,214,080		20,604,582		43,700,087

	As at December 31,
	2015		2014		2013

Renminbi		21,205,383		20,582,709		39,798,525
Hong Kong Dollars		7,879		328		19,457
United States Dollars		818		21,545		3,882,105
		21,214,080		20,604,582		43,700,087

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, 2015 carry interest at market rates which ranged from 0.35% to 0.50% (2014: 0.35%-0.50%) per annum.

F- 33

KBS Fashion Group Limited

Notes to consolidated financial statements

29.

TRADE AND OTHER PAYABLES

	As at December 31,
	2015		2014		2013

Trade payables		77,647		37,385		166,049
Employee benefits payable		204,495		275,542		1,178,682
Other payables		2,869,372		2,847,429		1,070,329
Subtotal financial liabilities		3,151,514		3,160,356		2,415,060
Other taxes payable		1,963,450		2,366,802		2,041,066
		5,114,964		5,527,158		4,456,126

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.

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,
	2015		2014		2013

Current		15,220		29,710		166,049
Past due for less than 4 months		46,328		7,675		-
Past due for over 4 months		16,099		-		-
		77,647		37,385		166,049

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

30.

RELATED PARTIES PAYABLES

(1) Nature of relationship with related parties:

Name		Relationship with the Group
Yan Keyan		Chairman, Director and Chief Executive Officer
Chen Bizhen		Wife of Yan Keyan
KBS International		Ex-shareholder of Hongri
Shishi City Lingxiu Hongri Knitwear Factory*		Company owned by Chen Bizhen

(2) Significant balances between the Group and the above related parties:

		As at December 31,
Name	Nature	2015		2014
Yan Keyan	Borrowing of funds		958,961		626,666
Chen Bizhen	Borrowing of funds		24,430		24,412
			983,391		651,078

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

*The Company entered into a lease arrangement for office space with this related party in 2010. The breakdown of the commitment to the lease is disclosed in note 35.

F- 34

KBS Fashion Group Limited

Notes to consolidated financial statements

31.

WARRANT LIABILITIES

On November 1, 2012, the Company sold 5,000,000 Units at an offering price of $10.00 per Unit generating gross proceeds of $50,000,000 in the Public Offering. Each Unit consisted of one share of common stock of the Company and one warrant to purchase one share of common stock of the Company (“Redeemable Warrants”). Each Redeemable Warrant entitled the holder to purchase one share of common stock at a price of $11.50 which would commence on the later of either the completion of an initial Acquisition Transaction or October 24, 2013, and would expire five years from the completion date of an initial Acquisition Transaction, provided that there is an effective registration statement covering the shares of common stock underlying the Redeemable Warrants. The Company is entitled to redeem the Redeemable Warrants at a price of $0.01 per Redeemable Warrant upon providing 30 days’ notice, subject to the last sale price of the common stock was at a minimum of $17.50 per share for any 20 trading days within a 30-trading day period (“30-Day Trading Period”) that ended on the third day prior to the date on which notice of redemption is given, provided that there is a current registration statement in effect with respect to the shares of common stock underlying such Redeemable Warrants commencing ten days prior to the 30-Day Trading Period and continuing each day thereafter until the date of redemption. The Company is required to use its best efforts to maintain the effectiveness of the registration statement covering the Redeemable Warrants. However, there are no contractual penalties for failure to deliver securities if a registration statement is not effective at the time of exercise. Additionally, in the event that a registration statement is not effective at the time of exercise, the holder of such Redeemable Warrant shall not be entitled to exercise such Redeemable Warrant for cash and in no event (whether in the case of a registration statement not being effective or otherwise) will the Company be required to net cash settle the Redeemable Warrant exercise.

Simultaneously with the consummation of the Public Offering, the Company consummated a Private Placement for the sale of 337,750 Placement Units to its Founders at a price of $10.00 per share, generating total proceeds of $3,377,500. The Placement Units are identical to the Units sold in the Public Offering except that the warrants included in the Placement Units (i) were not redeemable by the Company and (ii) may be exercised for cash, or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees. Additionally, the Placement Units have been placed in escrow and the purchasers have agreed not to transfer, assign or sell any of the Placement Units, including the underlying securities (except to certain permitted transferees) until 30 days following the completion of an initial Acquisition Transaction. The securities held in the escrow account will only be released prior to the end of the escrow period if following the initial Acquisition Transaction, the Company consummates a subsequent transaction that results in all stockholders having a right to exchange their shares for cash or other consideration.

The Company granted the underwriter in the Public Offering a 45-day option to purchase up to an additional 750,000 Units solely to cover over-allotments, if any. On November 7, 2012, the underwriters exercised a portion of their option and the Company sold an additional 550,000 Units at a price of $10.00 per Unit generating gross proceeds of $5,500,000. In addition, the Company sold an additional 30,250 Private Placement Units generating gross proceeds of $302,500.

The table below provides a reconciliation of the beginning and ending balances for the liabilities measured using fair significant unobservable inputs:

F- 35

KBS Fashion Group Limited

Notes to consolidated financial statements

31.

WARRANT LIABILITIES – continued

Balance – January 26, 2012 (inception)	-
Correction of an error	3,200,223
Issuance of warrants as part of Units on November 7, 2012	322,884
Change in fair value	(45,225	)
Balance – December 31, 2012	3,477,882
Change in fair value	(45,442	)
Balance – December 31, 2013	3,432,440
Change in fair value	(3,417,053	)
Balance – December 31, 2014	15,387
Change in fair value	(11,978	)
Balance – December 31, 2015	3,409

The inputs to the model were as follows:

	As at December 31,
	2015			2014			2013
Stock price	$	2.80		$	4.25		$	10.20
Dividend yield		N/A			N/A			N/A
Risk-free rate		1.57	%		1.54	%		1.75	%
Expected term (in years)		3.58			4.58			5.0
Expected volatility		24.7	%		16.5	%		20.5	%

At December 31, 2015, there were 5,918,000 unexpired warrants outstanding.

F- 36

KBS Fashion Group Limited

Notes to consolidated financial statements

32.

SHARE CAPITAL AND SHARE PREMIUM

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

	Number of shares			Share capital		Share premium
Issue of shares at December 31, 2013		7,305,500		$	731	$	5,621,277
Adjustments during merger
Redemption		(4,981,736	)
Issue to advisor		178,110
Shares cancelled		(42,000	)
New issue to acquiree		22,957,455
		18,111,829			1,811		(4,573,830	)
Shares outstanding after adjustments of merger		25,417,329		$	2,542	$	1,047,447
Reverse acquisition							(782,383	)
Waiver of payable to ex-shareholder							5,359,811
Shares outstanding as December 31, 2014		25,417,329		$	2,542	$	5,624,875
Shares outstanding as December 31, 2015		25,417,329		$	2,542	$	5,624,875

Authorized Common shares of US$0.0001 as at December 31, 2014		150,000,000		$	15,000	$	-
Issue and fully paid common shares of US$0.0001 as at December 31, 2014		25,417,329		$	2,542	$	5,624,875
Issue and fully paid common shares of US$0.0001 as at December 31, 2015		25,417,329		$	2,542	$	5,624,875

Preferred Stock

The Company is authorized to issue 5,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may be determined by the Company’s board of directors. No preferred shares are currently issued or outstanding.

Common Stock

The Company is authorized to issue 150,000,000 shares of common stock with a par value of $0.0001 per share.

On August 1, 2014, the Company issued 22,957,455 of common stock in exchange of 100% equity interest of Hongri International Holding Limited.

33.

RESERVES

Statutory surplus reserve

As stipulated by the relevant laws and regulations applicable to China’s foreign investment enterprises, the Company’s PRC subsidiaries are required to maintain a statutory surplus reserve which is non-distributable. Appropriations to such reserve are made out of net profit after tax of the statutory financial statements of the PRC subsidiaries at the amounts determined by their respective boards of directors annually up to 50% of authorized capital, but must not be less than 10% of the net profit after tax.

The statutory surplus reserve can be used for making up losses of the group entities in Mainland China, if any. The statutory surplus reserve may also be used to increase capital or to meet unexpected or future losses. The statutory surplus reserve is non-distributable other than upon liquidation.

F- 37

KBS Fashion Group Limited

Notes to consolidated financial statements

33.

RESERVES – continued

The statutory surplus reserve of the Group amounts to $6,069,457 and $5,815,493 at December 31, 2015 and 2014, respectively. The statutory surplus reserve of the Group is related to Hongri Fujian and Anhui Kaixin.

Retained profits

The retained profits comprise the cumulative net gains and losses recognized in the Company's income statement.

Foreign currency translation reserve (other comprehensive income)

Foreign currency translation reserve represents the foreign currency translation difference arising from the translation of the financial statements of companies within the Group from their functional currency to the Group's presentation currency.

34.

RISK MANAGEMENT

Capital risk

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to owners through the optimization of the debt and equity balance. The Group's overall strategy remains unchanged during the year.

The capital structure of the Group consisted of borrowings net of bank balances and cash, and equity attributable to owners of the Company comprising issued share capital and various reserves.

The directors of the Company review the capital structure regularly. As part of this review, the Group considers the cost of capital and the risks associated with each class of capital, and will balance its overall capital through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

The Group monitors capital using the Gearing Ratio, which is net debt divided by total equity. Net debt represents borrowings less cash and cash equivalents.

The Company and its subsidiaries are not subject to externally imposed capital requirements.

	December 31, 2015			December 31, 2014
Total borrowing		-			-
Less: cash and cash equivalents		(21,214,080	)		(20,604,582	)
Net debt		(21,214,080	)		(20,604,582	)
Total equity		100,816,974			105,618,076
Total capital		79,602,894			85,013,494
Gearing ratio		(21	%)		(20	%)

F- 38

KBS Fashion Group Limited

Notes to consolidated financial statements

34.

RISK MANAGEMENT – continued

Financial risk

Financial risk management objectives and policies

The Group's major financial instruments include trade and other receivables, related parties receivables, cash and cash equivalents, trade and other payables, related parties payables and short-term loans. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments include credit risk, market risk (interest rate risk and currency risk) and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

(i) Foreign currency risk

While our reporting currency is the U.S. dollar, substantially all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. Substantially all of our assets are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive income, a component of equity. An average appreciation (depreciation) of the RMB against the U.S. dollar of (6)% would increase (decrease) our comprehensive income by $(6.0) million based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of December 31, 2015. As of December 31, 2015, our accumulated other comprehensive loss was $(1.8) million. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

(ii) Interest rate risk

We deposit surplus funds with Chinese banks earning daily interest. We do not invest in any instruments for trading purposes. Most of our outstanding debt instruments carry fixed rates of interest. Our operations generally are not directly sensitive to fluctuations in interest rates and we currently do not have any long-term debt outstanding. Management monitors the banks’ prime rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

Credit risk

As at December 31, 2015, the Group's maximum exposure to credit risk which will cause a financial loss to the Group due to failure to perform an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

In order to minimize the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Group consider that the Group’s credit risk is significantly reduced.

F- 39

KBS Fashion Group Limited

Notes to consolidated financial statements

34.

RISK MANAGEMENT – continued

The Group has concentration of credit risk on the Group’s trade receivables. The outstanding balance of the five largest customers represented approximately 40% of the trade receivables of the Group at December 31, 2014 (2014: 68%). In order to minimize the credit risk, management continuously monitors the level of exposure to ensure that follow-up actions and/or corrective actions are taken promptly to lower the risk exposure or to recover overdue balances.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and bank balances deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank borrowings and ensures compliance with loan covenants.

Liquidity tables

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities as at December 31, 2015 based on agreed repayment terms. The tables have been drawn up based on undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.

As at December 31, 2015

	Within 1 year		Over 1 year		Total
Trade and other payables		5,114,964		-		5,114,964
Related parties payables		983,391		-		983,391
Total		6,098,355		-		6,098,355

As at December 31, 2014

	Within 1 year		Over 1 year		Total
Trade and other payables		3,160,356		-		3,160,356
Related parties payables		651,078		-		651,078
Total		3,811,434		-		3,811,434

Fair value

The fair value of financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortized cost approximate their fair values.

F- 40

KBS Fashion Group Limited

Notes to consolidated financial statements

35.

COMMITMENTS AND CONTINGENCIES

(1)

The Company had the following capital commitments in respect of the construction of plant and equipment which were contracted but not provided for in the financial statements:

	As at December 31,
	2015		2014
Contracted and authorized		67,735,983		71,798,392

(2)

As at December 31, 2015, the Company had lease commitments as follows:

	As at December 31,
	2015		2014
Within 1 year		102,783		509,206
2-5 years		323,407		307,297
Thereafter		2,429,200		2,660,188
		2,855,030		3,476,691

The amount of $2,855,030 as of December 31, 2015 represents leases of two offices and one warehouse. One of these two offices is leased by a related party as disclosed in note 30. The commitment pertains to this particular lease is as follows:

	As at December 31,
	2015		2014
Within 1 year		77,528		82,274
2-5 years		310,111		329,095
Thereafter		2,429,200		2,660,188
		2,816,839		3,071,557

The Company has prepaid this lease in the full amount.

* * * * *

F- 41

EXHIBIT INDEX

Exhibit No.	Description

1.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.3 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).

1.2	Articles of Amendment, filed with the Office of the Registrar of Corporations of Republic of the Marshall Islands on October 31, 2014 (incorporated by reference to Exhibit 1.2 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)

1.3	By-laws as amended on September 22, 2014 (incorporated by reference to Exhibit 1.3 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)

2.1	Specimen of Unit Certificate (incorporated by reference to Exhibit 2.1 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)

2.2	Specimen of Common Stock Certificate (incorporated by reference to Exhibit 2.2 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)

2.3	Specimen of Public Redeemable Warrant Certificate (incorporated by reference to Exhibit 2.3 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)

2.4	Specimen Placement Unit Certificate (incorporated by reference to Exhibit 4.4 to the Amendment No. 3 to the registrant’s Registration Statement on Form F-1 filed on October 15, 2012 (Commission File No. 333-180571)).

2.5	Specimen Placement Warrant Certificate (incorporated by reference to Exhibit 4.5 to the Amendment No. 1 to the registrant’s Registration Statement on Form F-1 filed on June 5, 2012 (Commission File No. 333-180571)).

2.6	Form of Warrant Agreement (incorporated by reference to Exhibit 4.6 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).

2.7	Form of Unit Purchase Option (incorporated by reference to Exhibit 4.7 to the Amendment No. 3 to the registrant’s Registration Statement on Form F-1 filed on October 15, 2012 (Commission File No. 333-180571)).

4.1	Form of Letter Agreement by and among the registrant, Lazard Capital Markets LLC and the founders (incorporated by reference to Exhibit 10.1 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).

4.2	Form of Investment Management Trust Agreement between American Stock Transfer & Trust Company and the registrant (incorporated by reference to Exhibit 10.2 to the Amendment No. 4 to the registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).

4.3	Form of Securities Escrow Agreement between the registrant, American Stock Transfer & Trust Company and the Founders (incorporated by reference to Exhibit 10.2 to the Amendment No. 2 to the registrant’s Registration Statement on Form F-1 filed on August 31, 2012 (Commission File No. 333-180571)).

4.4	Form of Services Agreement between the registrant and Seacrest Shipping Co. Ltd. (incorporated by reference to Exhibit 10.4 to the Amendment No. 1 to the registrant’s Registration Statement on Form F-1 filed on June 5, 2012 (Commission File No. 333-180571)).

Exhibit No.	Description

4.5	Form of Registration Rights Agreement among the Registrant and the founders (incorporated by reference to Exhibit 10.5 to the Amendment No. 1 to the registrant’s Registration Statement on Form F-1 filed on June 5, 2012 (Commission File No. 333-180571)).

4.6	Form of Placement Unit Purchase Agreement between the registrant and the founders (incorporated by reference to Exhibit 10.6 to the Amendment No. 4 to the Registrant’s Registration Statement on Form F-1 filed on October 24, 2012 (Commission File No. 333-180571)).

4.7	Share Exchange Agreement and Plan of Liquidation, dated March 24, 2014, by and among Aquasition Corp., KBS International Holdings, Inc., Hongri International Holdings Limited, Cheung So Wa and Chan Sun Keung (incorporated by reference to Exhibit 10.1 to the Registration Report on Form 6-K filed by the registrant on April 4, 2014)

4.8	Frist Amendment to Share Exchange Agreement and Plan of Liquidation, dated June 21, 2014 by and among Aquasition Corp., KBS International Holdings, Inc., Hongri International Holdings Limited, Cheung So Wa and Chan Sun Keung (incorporated by reference to Exhibit (D)(3) to Amendment No.4 to the Schedule TO filed by the registrant on July 9, 2014)

4.9	Voting Agreement , dated August 1, 2014, by and among Aquasition Corp., Aquasition Investments Corp., Cheung So Wa and Chan Sun Keung (incorporated by reference to Exhibit 4.11 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)

4.10	Form of Resale Lock-Up Agreement, dated August 1, 2014, by and among Aquasition Corp., Aquasition Investments Corp., Cheung So Wa, Chan Sun Keung and other named parties(incorporated by reference to Exhibit 4.12 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)

4.11	Employee Agreement with Keyan Yan, dated August 1, 2014 (incorporated by reference to Exhibit 4.13 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)

4.12	Employee Agreement with Lixia Tu, dated June 25, 2015 (incorporated by reference to Exhibit 4.12 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)

8.1	List of the registrant’s subsidiaries (incorporated by reference to Exhibit 8.1 to Shell Company Report on Form 20-F filed by the registrant on August 7, 2014)

11.1	Code of Ethics, adopted on October 25, 2014 (incorporated by reference to Exhibit 11.1 to the Annual Report on Form 20-F filed by the registrant on October 27, 2015)

12.1*	Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)

12.2*	Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)

13.1*	Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2*	Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

______________________

*Filed herewith.

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