(1) The prior year comparative information has been retrospectively stated due to the common control acquisition on September 30, 2019.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Ando Holdings Ltd. (“Ando Holdings Ltd.” or the “Company”) was incorporated in the State of Nevada on August 22, 2015 and its fiscal year end is September 30. The primary business of the company was previously to offer mobile billboard display advertising. After thorough analysis, the Company terminated its advertising business. The Company is currently pursuing business opportunities in Hong Kong. The Company acquired 4 companies during this financial year, which were Ando Automobile Technology Limited, Ando Capital Investment Limited, Xian Ando Industrial Company Limited and Xian Ando Factoring Commercial Company Limited.
On November 29, 2018, the Company acquired Ando Automobile Technology Limited, a limited liability company incorporated in Hong Kong (“AATL”), from Lam Chi Kwong Leo with a cash consideration of $1,282. The Company intends this fully owned subsidiary to operate as an automobile trading company, trading in foreign-made automobiles to be shipped to Chinese buyers directly. As of December 31, 2019, this subsidiary had no operation.
On September 30, 2019, the Company and Ando Capital Investment Limited, a limited liability company incorporated in Hong Kong (“ACIL”) and Mr. Lam Chi Kwong Leo, a permanent Hong Kong resident, a major shareholder of the Company, our director and Chief Executive Officer and the sole shareholder of ACIL, entered into a set of agreements, collectively named as the “Variable Interest Entity or VIE Agreements,” pursuant to which the Company has contractual rights to control and operate the business of ACIL (the “VIE”). ACIL currently has insurance business and has been our VIE for our future business expansion and development in Hong Kong. ACIL has two wholly owned subsidiaries, namely Xian Ando Holdings Company Limited and Xian Ando Commercial Factoring Company Limited, and these two wholly owned subsidiaries have minimal operations.
Mr. Lam Chi Kwong Leo is the common director and major shareholder of the Company and ACIL. As a result of this common ownership and in accordance with the FASB Accounting Standards Codification Section 805 “Business Combination”, the transaction is being treated as a combination between entities under common control. The recognized assets and liabilities were transferred at their carrying amounts at the date of the transaction. The equity accounts of the combining entities are combined. Further, the companies will be combined retrospectively for prior year comparative information as if the transaction had occurred on October 1, 2017.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the period from inception on August 22, 2015 through December 31, 2019, the Company has had minimal operations, and has accumulated a deficit of $241,181. In view of this, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to continue operations and to achieve a level of profitability large enough to cover the Company’s expenses. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities, with some additional funding from other traditional financing sources, until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Management has evaluated these factors and has determined that they raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
The officers and directors have agreed to advance funds to the Company to meet its obligations.
8
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires us to establish accounting policies and make estimates and assumptions that affect our reported amounts of assets and liabilities at the date of the financial statements. These financial statements include some estimates and assumptions that are based on informed judgments and estimates of management. We evaluate our policies and estimates on an on-going basis and discuss the development, selection, and disclosure of critical accounting policies with the Board of Directors. Predicting future events is inherently an imprecise activity and as such requires the use of judgment. Our financial statements may differ based upon different estimates and assumptions
Basis of Presentation
The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances were eliminated in consolidation.
Below is the organization chart of the Group.
Use of Estimates and Assumptions
Preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
9
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Our deposit is currently deposit in DBS Bank (Hong Kong) Limited and Shanghai Commercial Bank Limited, and there is a Deposit Protection Scheme protects our eligible deposits held with bank in Hong Kong which is members of the Scheme. The scheme will pay us a compensation up to a limit of HKD500,000, which is equivalent to $64,102, if DBS Bank (Hong Kong) Limited or Shanghai Commercial Bank Limited fails.
Income taxes
The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company’s assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Consolidated Statements of Income.
Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods.
Cash Flow Reporting
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
Net Loss Per Share
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.
Related Parties
Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Transactions with related parties are disclosed in the financial statements.
10
Economic and Political Risks
Substantially all of the Company’s services are conducted in Hong Kong. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in Hong Kong and China in the future. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations in Hong Kong and China.
The Company’s operations in the People’s Republic of China (“PRC” or “China”) are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
Recent Accounting Pronouncements
Other than as noted above the Company has not implemented any pronouncements that had material impact on the financial statements, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 4 - CAPITAL STOCK
On December 26, 2019, the Company filed with the State of Nevada, a Certificate of Designation for its Series A preferred stock (the “Certificate”). The Certificate was effective on December 26, 2019. The Certificate establishes all of the rights of the holders of the Series A Preferred Stock (the “Series A”), as related to the Series A, including, but not limited to the lack of Series A conversion rights and voting rights, the six percent (6%) interest rights, and the liquidation preference (collectively, the “Rights”). On the same day, the Company also filed with State of Nevada, a Certificate of Change for increasing its authorized shares by 10,000,000 so that they consisted of 75,000,000 common stocks and 10,000,000 preferred stocks.
The Company is authorized to issue an aggregate of 10,000,000 and 75,000,000 preferred stock and common shares respectively, with a par value of $0.001 per share. As of December 31, 2019 and 2018, no preferred stocks and 12,000,000 common shares were issued and outstanding respectively.
At December 31, 2019 and 2018, there are no warrants or options outstanding to acquire any additional shares of common stock of the Company.
NOTE 5 - RELATED PARTY TRANSACTIONS
On February 1, 2019, the Company entered into a Note Purchase Agreement with an accredited related investor Lin Su Hui, our 5% shareholder. Pursuant to this agreement, the Company issued a promissory note to Lin Su Hui for $50,000, at 10% interest per annum, with a maturity date of February 6, 2020. Per the agreement, the note began to accrue interest 5 days after the effective date February 1, 2019. The interest on the note is to be paid monthly. For the three months ended December 31, 2019, the Company has paid interest of $1,250 to Lin Su Hui in form of cash and has accrued interest of $417.
On December 9, December 16, 2019 and December 30, 2019, the Company entered into three loan agreements with Ando Credit Limited, a related party which the CEO of the Company, Mr. Lam, has significant influence on, amounted $738,000, $250,000 and $80,000 (the “Loan Amount”) respectively, with interest rate 12% per annum. The Company would receive monthly interest income from Ando Credit Limited. The Loan Amount will not be due unless there is any event of default occurrence. The Company will be in default if the Note holders ask for repayment and Ando Credit Limited does not pay back to the Company. As of December 31, 2019, the Company has an interest income receivable in the amount of $8,474 from Ando Credit Limited.
For the three months ended December 31, 2019 and 2018, a related party, that our CEO and director, Mr. Lam Chi Kwong Leo is the authorized representative, has paid expenses on behalf of the Company in the amount of $22,655 and $28,993, respectively. These loans are unsecured, payable on demand, and carry no interest.
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For the three months ended December 31, 2019, our CFO, Ms. Lee Hiu Lan paid expense on behalf of the Company in the amount of $325. This loan is unsecured, payable on demand, and carries no interest.
The Company does not own or rent any property. The office space is provided by a related party at no charge.
NOTE 6 - THIRD PARTY - NOTE PAYABLE
Balances of note payable as of December 31, 2019 and September 30, 2019 consisted of the following:
|
|
As of
December 31,
2019
(Unaudited)
|
|
As of
September 30,
2019
(Audited)
|
|
Tsai Ming Hsiu due on November 28, 2020 with 10% per annum
|
$
|
50,000
|
|
$
|
-
|
|
Chang Ruei Yu due on December 6, 2020 with 10% per annum
|
|
350,000
|
|
|
-
|
|
Liao Shu Hua due on December 9, 2020 with 10% per annum
|
|
50,000
|
|
|
-
|
|
Chen Hsuan Yi due on December 9, 2020 with 10% per annum
|
|
60,000
|
|
|
-
|
|
Jean Mei Ing due on December 10, 2020 with 10% per annum
|
|
50,000
|
|
|
-
|
|
Lin Po Chung due on December 10, 2020 with 10% per annum
|
|
240,000
|
|
|
-
|
|
Lee Hsiu Kung due on December 13, 2020 with 10% per annum
|
|
70,000
|
|
|
-
|
|
Wu Tai Lin due on December 16, 2020 with 10% per annum
|
|
50,000
|
|
|
-
|
|
Huang Yu due on December 16, 2020 with 10% per annum
|
|
100,000
|
|
|
-
|
|
Lin Cheng Yu due on December 17, 2020 with 10% per annum
|
|
100,000
|
|
|
-
|
|
Wu Chih Kao due on January 1, 2021 with 10% per annum
|
|
50,000
|
|
|
-
|
|
Lee Hsiu Kung due on January 3, 2021 with 10% per annum
|
|
30,000
|
|
|
-
|
|
Jao Tzu Yun due on January 7, 2021 with 10% per annum
|
|
60,000
|
|
|
-
|
|
Total Note Payable
|
$
|
1,260,000
|
|
$
|
-
|
|
Less: Current Portion
|
$
|
(1,120,000)
|
|
$
|
-
|
|
Long-Term Portion
|
$
|
140,000
|
|
$
|
-
|
Future maturities of long-term debt as at December 31, 2019 are as follows which does not include related party debt separately stated:
|
Years ending December 31,
|
|
|
2020
|
$
|
1,120,000
|
|
2021
|
|
140,000
|
|
Total
|
$
|
1,260,000
|
All the above notes carry a 10% per annum with monthly interest accrued to the aforementioned lenders. The principal is received by the Company seven days prior to the effective date of such promissory note, and as of December 31, 2019, the Company received an aggregate amount of $140,000 before the corresponding effective dates of the promissory notes.
NOTE 7 - RELATED PARTY - NOTE PAYABLE
On February 1, 2019, the Company entered into a Note Purchase Agreement with an accredited related investor Lin Su Hui, our 5% shareholder. Pursuant to this agreement, the Company issued a promissory note to Lin Su Hui for $50,000, at 10% interest per annum, with a maturity date of February 6, 2020. Per the agreement, the note began to accrue interest 5 days after the effective date February 1, 2019.
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NOTE 8 - PREPAID EXPENSES
OTCQB annual fees and prepaid transfer agent fee are included as prepaid expenses as of December 31, 2019. These expenses are stated at cost and are charged to expense over the periods the Company expects to benefit from them. As of December 31, 2019, the Company has prepaid expenses of $6,863, which is consisted of $6,000 OTCQB annual fees and $863 prepayment to transfer agent.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
On November 28, 2019, the Company entered into a securities purchase with an accredited investor, Tsai Ming Hsiu (the “Lender”), pursuant to which the Company issued promissory note for an aggregate of $50,000, with an interest rate of 10% per annum. The Note is to be paid within one year beginning from November 28, 2019. The Note mature on November 28, 2020 (“Maturity Date”) and contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date. A Form 8-K was filed on December 2, 2019.
In December 2019, the Company entered into several securities purchase agreements with a batch of accredited investors, pursuant to which the Company issued promissory notes for an aggregate of $1,070,000 (the “Outstanding Balance”), with an interest rate of 10% per annum (the “Note”). The Outstanding Balance of the Notes are to be paid within one year beginning from the effective dates of the notes (“Maturity Dates”). The Notes contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date. A Form 8-K was filed on December 11, 2019.
In December 2019, the Company received an aggregate amount of $140,000 from three accredited investors, for purchasing promissory notes with an interest rate of 10% per annum. These three promissory notes would be effective in January 2020 and started to accrued interest from the effective dates.
We foresee an aggregate monthly interest expense at approximately $11,000 since January 1, 2020.
NOTE 10 - SUBSEQUENT EVENT
In January 2020, the Company entered into several securities purchase agreements with a batch of accredited investors, pursuant to which the Company issued promissory notes for an aggregate of $260,000 (the “Outstanding Balance”), with an interest rate of 10% per annum (the “Note”). The Outstanding Balance of the Notes are to be paid within one year beginning from the effective dates of the notes (“Maturity Dates”). The Notes contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date. A Form 8-K was filed on January 23, 2020.
On January 6, 2020, the Company entered into a loan agreement with Ando Credit Limited, a related party which the CEO of the Company, Mr. Lam, has significant influence on, amounted $160,000, with interest rate 12% per annum. The Company would receive monthly interest income from Ando Credit Limited. The Loan Amount will not be due unless there is any event of default occurrence. The Company will be in default if the Note holders ask for repayment and Ando Credit Limited does not pay back to the Company.
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