NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Green Vision Biotechnology Corp. (formerly known as Vibe Wireless Corp., originally known as Any Translation Corp.), (the “Company”, “GVBT”), was incorporated under the laws of the State of Nevada on July 5, 2012. The Company was founded to be in the business of translation and interpretation. On November 12, 2015, the Company changed its name from Any Translation Corp. to Vibe Wireless Corp. On September 30, 2016, we changed our name from Vibe Wireless Corp. to Green Vision Biotechnology Corp.
On September 30, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the “Nevada SOS”) whereby it amended its Articles of Incorporation to increase the Company’s authorized number of shares of common stock from 75 million to 750 million and forward stock split all of its issued and outstanding shares of common stock at a ratio of ten (10) shares for every one (1) share held. The Company’s Board of Directors approved this amendment on September 30, 2016. This stock split has been retroactively applied to the financial statements.
On the same date, September 30, 2016, the Company filed Articles of Merger with the Nevada SOS whereby it entered into a statutory merger with its wholly-owned subsidiary, Green Vision Biotechnology Corp. pursuant to Nevada Revised Statutes 92A.200 et. seq. The effect of such merger is that the Company is the sole surviving entity and changed its name to “Green Vision Biotechnology Corp.”
The investment transaction under the share exchange agreements and contractual agreements as described below (collectively the “Transaction Agreements”) was entered into, between each of the Shareholders of Lutu International Biotechnology Limited (“Lutu International”), a company incorporated under the laws of Cayman Islands and GVBT (the “Investment Transaction”) on May 12, 2017. As a result of closing the Investment Transaction, GVBT acquired part of the shares of Lutu International and assumed management of Lutu International and all its direct and indirect subsidiaries (“the Lutu Group”).
On May 12, 2017, GVBT entered into a share exchange agreement with Harcourt Capital Limited (“Harcourt”), a limited company incorporated in the British Virgin Islands, which holds 6% of the issued and outstanding shares of Lutu International; and Woodhead Investments Limited (“Woodhead”), a limited company incorporated in the British Virgin Islands, which holds 5% of the issued and outstanding shares of Lutu International (the “Minority Interest Exchange Agreement”). Under the Minority Interest Exchange Agreement, Woodhead agreed to transfer GVBT a total of 5% of the issued and outstanding shares of Lutu International. In consideration, GVBT agreed to grant Woodhead, or persons designated by Woodhead, a right to receive a total of 5 million shares of GVBT’s common stock. Under the Minority Interest Exchange Agreement, Harcourt agreed to transfer to GVBT a total of 6% of the issued and outstanding shares of Lutu International. In consideration, GVBT agreed to grant Harcourt, or persons designated by Harcourt, a right to receive a total of 6 million shares of GVBT’s common stock. The transactions under the Minority Interest Exchange Agreement were completed on May 12, 2017.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
Pursuant to an escrow agreement (the “Escrow Agreement”) entered into between Booth Udall Fuller, PLC (the “Escrow Agent”) and GVBT on May 12, 2017, the Escrow Shares shall be held by Booth Udall Fuller, PLC for a year following the execution of the Majority Interest Exchange Agreement. The Escrow Shares shall not be subject to any lien, attachment, or any other judicial process of any creditor of GVBT, and shall be held and disbursed solely for the purposes and in accordance with the terms of the Majority Interest Exchange Agreement.
On May 12, 2017, GVBT entered into the Contractual Agreements with Lutu International and/or Able Lead. Upon execution of the Contractual Arrangements, GVBT assumed management of Lutu International and its subsidiaries (the “Lutu Group”) and received economic benefits which includes the right to receive the expected residual returns and and/or obligation to absorb expected loss from the Lutu Group. Each agreement in the Contractual Arrangements constitutes valid and binding obligations of the parties of such agreements and is enforceable and valid in accordance with the laws of Cayman Islands. All agreements executed by Lutu International were duly approved by its board of directors and the Shareholders of Lutu International.
Consulting Services Agreement
Pursuant to the exclusive consulting services agreement entered into between GVBT and Lutu International on May 12, 2017, GVBT has the exclusive right to provide to the Lutu Group general business operation services, including advice and strategic planning, as well as consulting services related to the technological research and development of bio-fertilizers. Further, GVBT owns the intellectual property rights developed or discovered through research and development, in the course of providing the consulting services, or derived from the provision of the consulting services. In consideration, Lutu International pays an annual consulting service fees to GVBT in the amount equivalent to all of Lutu International’s net profits for the relevant financial year. The term of this consulting service agreement is five (5) years from its effective date and may be terminated upon GVBT’s written confirmation prior to the expiration of this agreement.
Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Consulting Services Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements or the Majority Interest Exchange Agreement.
Operating Agreement
Pursuant to the operating agreement entered into between GVBT, Lutu International and Able Lead on May 12, 2017, GVBT agreed to provide guidance and instructions on the Lutu Group’s daily operations, financial management and employment issues. Able Lead agreed to designate candidates recommended by GVBT as their representatives on the boards of directors of each member of the Lutu Group. GVBT has the right to appoint senior executives of each member of the Lutu Group. In addition, GVBT agreed to guarantee the Lutu Group’s performance under any agreements or arrangements relating to the Lutu Group’s business arrangements with any third party. In consideration, Lutu International agrees that it will not, and will cause the Lutu Group not to, without the prior consent of GVBT, engage in any transactions that could materially affect their respective assets, liabilities, rights or operations, including but not limited to, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of their assets or intellectual property rights in favor of a third party or transfer of any agreements relating to their business operation to any third party. The term of this operating agreement is five (5) years from its effective date and may be extended and terminated only upon GVBT’s written confirmation prior to the expiration of this agreement.
Unless otherwise expressly agreed in writing by GVBT and Able Lead, the Operating Agreement shall be automatically terminated upon the termination of any of the agreements in the Contractual Arrangements or the Majority Interest Exchange Agreement.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
Proxy Agreement
Pursuant to the proxy agreement entered into between Able Lead, Lutu International, and GVBT on May 12, 2017, Able Lead agreed to irrevocably grant a person to be designated by GVBT the right to exercise its voting rights and other rights, including the attendance of, and the voting at the shareholders’ meetings of Lutu International for and on behalf of Able Lead (or the signing of written resolutions in lieu of such meetings) in accordance with applicable laws and its articles of association, including but not limited to the appointment and voting for the directors and chairman of the board as the authorized representative of Able Lead to exercise controlling power in the Lutu Group. The proxy agreement may be terminated by joint consent of the parties or upon 7-day written notice from GVBT.
Changes Resulting from the Investment Transaction
The closing of the Investment Transaction occurred on May 12, 2017, resulting in a change of control of GVBT. Prior to closing of the Investment Transaction, GVBT had a total of 60,790,000 shares of common stock issued and outstanding. As a result of the closing of the Investment Transaction, GVBT now has a total of 160,790,000 shares of its common stock issued and outstanding, of which 60,790,000 shares, or approximately 37.8%, are owned by the previous existing shareholders of GVBT, with the balance of 100,000,000 shares, or approximately 62.2%, owned by the previous shareholders of Lutu International, with certain shares held in escrow pursuant to the Escrow Agreement.
Following the closing of the Investment Transaction, GVBT began carrying on the business of the Lutu Group. The Lutu Group, with its operation primarily located in the Shanxi Province of China, is engaged in the biotechnology industry, in particular, the production and distribution of bio-fertilizers. Revenues of the Lutu Group are currently generated from China.
Changes to the Board of Directors and Officers
Simultaneous with the closing of the Investment Transaction, there was a change in the officers and directors of GVBT. As authorized by the bylaws, the existing director of GVBT, Mr. Ma Wai Kin, appointed two (2) additional members to the Board of GVBT. Such members are Mr. Lam Ching Wan (also known as William Lam) and Mr. Leung Kwong Tak (also known as Dr. Michael Leung). Mr. Ma also appointed Mr. William Lam as GVBT’s Chief Executive Officer and Mr. Lo Kwok Leung as GVBT’s Chief Financial Officer. Mr. Lo Kwok Leung is not related to Dr. Michael Leung.
All members of the Board shall hold their respective offices for a term of one year from their respective dates of appointment, or until the election and qualification of their successors, and thereafter to resign as a director of GVBT. In accordance with the bylaws, officers are elected by the board of directors and serve at the discretion of the board of directors.
Accounting Treatment
The Investment Transaction was accounted for as a reverse-merger and recapitalization. For financial reporting purposes, Lutu International is the acquirer and GVBT is the acquired company. After completion of the transaction, the assets, liabilities, operations results and cash flow of GVBT that will be reflected in the historical consolidated financial statements prior to the Investment Transaction will be those of Lutu International and its subsidiaries and will be recorded at the historical cost basis of Lutu International and its subsidiaries. Number of shares deemed to be outstanding for the period from January 1, 2018 to the acquisition date will be reflected in the balance of the common stock and paid in capital. The Company changed its fiscal year ended from January 31 to December 31.
Tax Treatment and SEC Filer Status: Small Business Issuer
The Investment Transaction is intended to constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or such other tax free reorganization exemptions that may be available under the Code. Immediately following the Investment Transaction, the filer status of GVBT will be a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K, as promulgated by SEC.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for consolidated financial reporting.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The historical presentation of the consolidated financial statements includes the financial statements of LUTU INTERNATIONAL BIOTECHNOLOGY LIMITED, and its wholly-owned subsidiaries (collectively referred to herein as the “Company”). All intercompany accounts, transactions, and profits have been eliminated upon consolidation.
The following table depicts the identity of the subsidiaries:
Name of Subsidiary
|
|
Place of
Incorporation
|
|
Attributable
Equity Interest %
|
|
Registered
Capital
|
|
Lutu International Biotechnology Limited (RTO accounting acquirer) (1)
|
|
Cayman Islands
|
|
100
|
|
USD100
|
|
Light Raise Limited (2)
|
|
BVI
|
|
100
|
|
USD 1
|
|
Hong Kong Prolific Mineral Resources Holdings Limited (3)
|
|
HKD
|
|
100
|
|
HKD 2
|
|
Shanxi Green Biotechnology Industry Company Limited (4)
|
|
PRC
|
|
100
|
|
RMB 100,000,000
|
|
Shenzhen Qianhai Lutu Supply Chain Management Company Limited (5)
|
|
PRC
|
|
100
|
|
RMB 5,000,000
|
|
_______________
Note:
|
(1)
|
Wholly owned subsidiary of Green Vision Biotechnology Corp.
|
|
(2)
|
Wholly owned subsidiary of Lutu International Biotechnology Limited
|
|
(3)
|
Wholly owned subsidiary of Light Raise Limited
|
|
(4)
|
Wholly owned subsidiary of Hong Kong Prolific Mineral Resources Holdings Limited
|
|
(5)
|
Wholly owned subsidiary of Shanxi Green Biotechnology Industry Company Limited
|
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING (CONTINUED)
Use of estimates
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Significant estimates and judgments inherent in the preparation of these consolidated financial statements include, among other things, accounting for asset impairments, allowances for doubtful accounts, depreciation and amortization, the collection of revenues from the Agricultural Cooperative.
Economic and political risks
The Company’s operations are mainly conducted in the Hong Kong Special Administrative Region (“Hong Kong”) and the People’s Republic of China (“China”) (for the purpose of this Current Report on Form 10-Q, China does not include Hong Kong, Macau Special Administrative Region of the People's Republic of China and Taiwan (The Republic of China) and a large number of customers are located in northern China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in Hong Kong and China, and by the general state of the economy in Hong Kong and China.
The Company’s operations and customers in Hong Kong and 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 environments, and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in Hong Kong and China, 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, among other things.
Foreign Currency Translation
The Company’s financial statements are presented in the U.S. dollar ($), which is the Company’s reporting currency, while its functional currency are Chinese Renminbi (RMB) and Hong Kong Dollar (HKD). Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of income. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange ruling at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of income.
In accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US $ using the rate of exchange prevailing at the applicable balance sheet date and the statements of income and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in shareholders’ equity as part of accumulated other comprehensive income.
Below is a table with foreign exchange rates used for translation:
For the three months and year ended, (Average Rate)
|
|
Mar. 31, 2019
|
|
|
Dec 31, 2018
|
|
|
Mar. 31, 2018
|
|
Chinese Renminbi (RMB)
|
|
|
RMB
|
|
|
|
6.78630
|
|
|
RMB
|
|
|
6.61633
|
|
|
RMB
|
|
|
6.35819
|
|
United States dollar ($)
|
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
As of (Closing Rate)
|
|
Mar. 31, 2019
|
|
|
Dec 31, 2018
|
|
|
Mar. 31, 2018
|
|
Chinese Renminbi (RMB)
|
|
RMB
|
|
|
|
6.69580
|
|
|
RMB
|
|
|
6.87755
|
|
|
RMB
|
|
|
6.28068
|
|
United States dollar ($)
|
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
For the three months and year ended, (Average Rate)
|
|
Mar. 31, 2019
|
|
|
Dec 31, 2018
|
|
|
Mar. 31, 2018
|
|
Hong Kong (HKD)
|
|
HKD
|
|
|
|
7.84110
|
|
|
HKD
|
|
|
7.83749
|
|
|
HKD
|
|
|
7.78750
|
|
United States dollar ($)
|
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
As of (Closing Rate)
|
|
Mar. 31, 2019
|
|
|
Dec 31, 2018
|
|
|
Mar. 31, 2018
|
|
Hong Kong (HKD)
|
|
HKD
|
|
|
|
7.84630
|
|
|
HKD
|
|
|
7.83170
|
|
|
HKD
|
|
|
7.84906
|
|
United States dollar ($)
|
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING (CONTINUED)
Foreign Currency Translation(continued)
For the three months and year ended, (Average Rate)
|
|
Mar. 31, 2019
|
|
|
Dec 31, 2018
|
|
Mar. 31, 2018
|
|
Hong Kong (HKD)
|
|
HKD
|
|
|
|
1.16270
|
|
|
HKD
|
|
|
1.18639
|
|
|
HKD
|
|
|
1.23124
|
|
Chinese Yuan (¥)
|
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
As of (Closing Rate)
|
|
Mar. 31, 2019
|
|
|
Dec 31, 2018
|
|
|
Mar. 31, 2018
|
|
Hong Kong (HKD)
|
|
HKD
|
|
|
|
1.16957
|
|
|
HKD
|
|
|
1.13873
|
|
|
HKD
|
|
|
1.24972
|
|
Chinese Yuan (¥)
|
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
|
|
|
$
|
1.00000
|
|
Revenue Recognition
The Company earns revenue by selling merchandise to end using customers primarily through distribution agent and directly to customers.
Revenue is recognized when merchandise is purchased by and delivered to the customer and confirmed and collectability is reasonably assured. Revenue from wholesale agent is recognized after goods delivered, amount fixed or determined and collectability is reasonably assured.
All revenues are shown net of estimated returns during the relevant period represented by estimated allowance for sales returns based upon historical experience.
The Company records sales tax collected from its customers on a net basis, and therefore excludes it from revenue as defined in ASC 605, Revenue Recognition.
During the three months ended March 31, 2019 and 2018, the provision of sales return were $ Nil respectively.
Cost of Goods Sold
Cost of goods sold includes the cost of materials, labor, and relevant manufacturing expenses.
Selling Expenses
Selling expenses include packaging and shipping costs, as well as advertising and certain expenses associated with operating the Company’s corporate headquarters.
Advertising Costs
The Company expensed all advertising costs as incurred. Advertising expense, net of reimbursement from suppliers, amounted to $Nil and $Nil for the three months ended March 31, 2019 and 2018 respectively. Advertising expense is included in selling expense and general and administrative expenses in the accompanying consolidated statements of income.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases
On January 1, 2019, the Company adopted Topic 842 using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with its historical accounting under Topic 840.
The Company elected the package of practical expedients permitted under the transition guidance, which allowed it to carry forward its historical lease classification, its assessment on whether a contract was or contains a lease, and its initial direct costs for any leases that existed prior to January 1, 2019. The Company also elected to combine its lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.
Upon adoption, the Company recognized ROU assets with corresponding liabilities on the consolidated balance sheets. The ROU assets include adjustments for prepayments and accrued lease payments. The adoption did not impact its beginning retained earnings, or its prior year consolidated statements of income and statements of cash flows.
Under Topic 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current and non-current operating lease liabilities, on the consolidated balance sheets.
The Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified as an operating lease. Operating lease rental expenses included in selling, general and administrative expenses for the three months ended March 31, 2019 and 2018 were $Nil and $5,083 respectively.
Accounts Receivable
Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the industry practice, the length of time the receivables are past due, significant one-time events and historical experience. The Company is selling products delivered to certain customers which are closed to Agriculture Cooperatives as defined by ASC 905 “Agriculture”. The collection cycle may be varied and depended on the growing crops cycle.
Management reviews and adjusts this allowance periodically based on historical experience and its evaluation of the collectability of outstanding accounts receivable. The Company evaluates the credit risk of its customers utilizing historical data and estimates of future performance. Bad debts are written off as incurred.
Outstanding accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.
During the quarter ended March 31, 2019 and year ended December 31, 2018, the provision of doubtful debts were $Nil and $Nil respectively.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories primarily consist of merchandise inventories and are stated at lower of cost or market and net realizable value. Cost of inventories is calculated on the weighted average basis which approximates cost.
Management regularly reviews inventories and records valuation reserves for damaged and defective returns, inventories with slow-moving or obsolescence exposure and inventories with carrying value that exceeds market value. Because of its product mix, the Company has not historically experienced significant occurrences of obsolescence.
Inventory shrinkage is accrued as a percentage of revenues based on historical inventory shrinkage trends. The Company performs physical inventory count of its stores once per quarter and cycle counts inventories at its distribution centers once per quarter throughout the year. The reserve for inventory shrinkage represents an estimate for inventory shrinkage for each store since the last physical inventory date through the reporting date.
These reserves are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from expectations.
During the quarter ended March 31, 2019 and year ended December 31, 2018, the provision of inventory were $Nil and $230,372 respectively.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is provided over the estimated useful lives, using the straight-line method with 5% scrape value as follows:
Buildings
|
20 years
|
Machinery & equipment
|
10 years
|
Office equipment
|
3 years
|
Motor vehicles
|
4 years
|
Land Use Rights
According to the laws of the PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through the land use rights granted by the government. The land use rights represent cost of the rights to use the land in respect of properties located in the PRC. Land use rights are carried at cost and amortized on a straight-line basis over the period of rights of 50 years.
Goodwill
Goodwill represents the excess of purchase price over fair value of net assets acquired. Under ASC 350, Intangibles — Goodwill and Other, goodwill is not amortized but evaluated for impairment annually or whenever events or changes in circumstances indicate that the value may not be recoverable.
The Company performed an annual impairment test as of the fiscal year ended December 31, 2018, and a quarter review as of the period ended March 31, 2019, and determined that the impairment loss in the amount of $nil and $nil were recorded respectively.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-lived Assets
The Company reviews long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Long-lived assets are reviewed for recoverability at the lowest level in which there are identifiable cash flows, usually at the store level. The carrying amount of a long-lived asset is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. If the asset is determined not to be recoverable, then it is considered to be impaired and the impairment to be recognized is the amount by which the carrying amount of the asset exceeds the fair value of the asset, determined using discounted cash flow valuation techniques, as defined in ASC 360, Property, Plant, and Equipment.
The Company determined the sum of the undiscounted cash flows expected to result from the use of the asset by projecting future revenue and operating expense for each store under consideration for impairment. The estimates of future cash flows involve management judgment and are based upon assumptions about expected future operating performance. The actual cash flows could differ from management’s estimates due to changes in business conditions, operating performance and economic conditions.
During the reporting periods, the Company performed the evaluation and there was no impairment loss.
Cash and Concentration of Credit Risk
The Company maintains cash in bank deposit accounts in Hong Kong and PRC, and considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company performs ongoing evaluations of the institution to limit its concentration risk exposure.
The Company’s customers are mainly located in the northeastern China. Because of this, the Company is subject to regional risks, such as the economy, regional financial conditions and unemployment, weather conditions, power outages, and other natural disasters specific to the region in which the Company operates.
Retirement Benefit Plans
Full time employees of the Company in China participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to make contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Company accounts the mandated defined contribution plan under the vested benefit obligations approach based on the guidance of ASC 715, Compensation—Retirement Benefits.
The total amounts for such employee benefits which were expensed were $2,233 and $5,682 for the three months ended March 31, 2019 and 2018 respectively.
Income Taxes
The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Segment Reporting
The Company operates in one industry segment, operating manufacturing and selling of organic bio-fertilizer. ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Given the economic characteristics of the similar nature of the products sold, the type of customer and the method of distribution, the Company operates as one reportable segment as defined by ASC 280, Segment Reporting.
Basic and diluted earnings (loss) per share
In accordance with ASC No. 260 “Earnings Per Share”, the basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per common share is computed similarly to basic earnings (loss) per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Guidance
The FASB has issued Accounting Standards Update (ASU) No. 2019-01, Leases (Topic 842): Codification Improvements.
The new ASU aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied.
The ASU also requires lessors within the scope of Topic 942, Financial Services—Depository and Lending, to present all “principal payments received under leases” within investing activities.
Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard.
Credit Losses – FASB Issues Targeted Transition Relief to Institutions Applying the Credit Losses Standard
The FASB issued an Accounting Standards Update (ASU) that eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value.
Issued in 2016, the credit losses standard introduced the expected credit losses method for measuring credit losses on financial assets measured at amortized cost, replacing the previous incurred loss method. It also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis.
Some stakeholders, including auto financing institutions that extend credit to borrowers with limited or impaired credit histories, noted that certain financial statement preparers have begun (or are planning) to elect the fair value option on newly originated or purchased financial assets that have historically been measured at amortized cost. They noted that electing the fair value option would require them to maintain dual measurement methods, fair value measurements and amortized cost basis.
ASU 2019-05 allows an option for preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of the credit losses standard. This increases the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.
For institutions that have not yet adopted the credit losses standard, the new ASU will be effective when they implement the credit losses standard.
For institutions that have already adopted the credit losses standard, the new ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of the new ASU as long as an institution has adopted the credit losses standard.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Guidance (continued)
FASB Accounting Standards Updates - Accounting Standards Update No. 2019-07 —Codification Updates to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates
Accounting Standards Update No. 2019-07 —Codification Updates to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates
This Accounting Standards Update amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. Other miscellaneous updates to agree to the electronic Code of Federal Regulations also have been incorporated.
ASU No. 2019-10, Financial Instruments Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, finalizes various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), leases, and hedging standards.
·
|
The effective dates for each of the standards are now as follows:
|
|
|
·
|
CECL (ASU No. 2016-13): For public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The one-time determination of whether an entity is eligible to be a smaller reporting company should be based on an entity’s most recent determination as of November 15, 2019, in accordance with SEC regulations.
|
|
|
·
|
For all other entities, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
|
|
|
·
|
Early application is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
|
|
|
·
|
Leases (ASU No. 2016-02): A public business entity, a not-for-profit entity that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and an employee benefit plan that files or furnishes financial statements with or to the U.S. Securities and Exchange Commission, for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Earlier application is permitted.
|
|
|
·
|
All other entities for financial statements issued for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Earlier application is permitted.
|
|
|
·
|
Derivatives and Hedging (ASU No. 2017-12): For public business entities, for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
|
|
|
·
|
For all other entities, for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.
|
|
|
·
|
Early adoption, including adoption in an interim period, is permitted.
|
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Guidance (continued)
FASB Issues Narrow-Scope Improvements to Credit Losses Standard. The FASB issued an Accounting Standards Update (ASU) that addresses issues raised by stakeholders during the implementation of ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
Among other narrow-scope improvements, the new ASU clarifies guidance around how to report expected recoveries. “Expected recoveries” describes a situation in which an organization recognizes a full or partial writeoff of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether expected recoveries were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets).
In response to this question, the ASU permits organizations to record expected recoveries on PCD assets.
In addition to other narrow technical improvements, the ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.
The ASU includes effective dates and transition requirements that vary depending on whether or not an entity has already adopted ASU 2016-13.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. GOING CONCERN
As of March 31, 2019 and December 31, 2018, the Company has an accumulated deficit of $6,320,936 and $6,245,242 respectively, and its current liabilities exceed its current assets resulting in negative working capital of $9,718,626 and $9,596,914 respectively. In view of the matters described above, recoverability of a major portion of the recorded asset amounts and realization of the portion of current liabilities into revenue shown in the accompanying balance sheets are dependent upon continued operations of the Company, which in turn are dependent upon the Company’s ability to raise additional financing and to succeed in its future operations. The Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors and/or stockholders of the Company. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing (i) additional funding which would enhance capital employed; and (ii) strategic partners which would increase revenue bases or reduce operation expenses. Management believes that the above actions will allow the Company to continue its operations throughout this fiscal year.
NOTE 4. OTHER RECEIVABLES
Other receivables consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Deposits
|
|
$
|
104,464
|
|
|
$
|
101,900
|
|
Prepaid expenses
|
|
|
4,460
|
|
|
|
4,213
|
|
Advance to employee
|
|
|
15,155
|
|
|
|
14,255
|
|
|
|
|
|
|
|
|
|
|
Less: Allowance for doubtful debts
|
|
|
(117,137
|
)
|
|
|
(114,261
|
)
|
Total
|
|
$
|
6,942
|
|
|
$
|
6,107
|
|
NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Buildings
|
|
$
|
2,981,020
|
|
|
$
|
2,907,837
|
|
Machinery & equipment
|
|
|
-
|
|
|
|
-
|
|
Office equipment
|
|
|
68,208
|
|
|
|
66,562
|
|
Motor vehicles
|
|
|
99,452
|
|
|
|
97,010
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
3,148,680
|
|
|
|
3,071,409
|
|
Less: accumulated depreciation and impairment charges
|
|
|
(762,968
|
)
|
|
|
(708,261
|
)
|
Total property, plant and equipment, net
|
|
$
|
2,385,712
|
|
|
$
|
2,363,148
|
|
The depreciation expenses for the three months ended March 31, 2019 and 2018 were $36,710 and $61,167 respectively.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Land use rights
|
|
$
|
1,199,843
|
|
|
$
|
1,170,387
|
|
Software system
|
|
|
1,309
|
|
|
|
1,277
|
|
Less – accumulated amortization
|
|
|
(359,262
|
)
|
|
|
(344,590
|
)
|
Total intangible assets, net
|
|
$
|
841,890
|
|
|
$
|
827,074
|
|
The amortization expenses of land use rights and software systems for the three months ended March 31, 2019 and 2018 were $5,968 and $6,331 respectively.
Future amortization of land use rights and software systems is as follows:
Years ending December 31,
|
|
Amount
|
|
2019
|
|
$
|
17,998
|
|
2020
|
|
|
23,997
|
|
2021
|
|
|
23,997
|
|
2022
|
|
|
23,997
|
|
2023
|
|
|
23,997
|
|
Thereafter
|
|
|
727,904
|
|
Total
|
|
$
|
841,890
|
|
NOTE 7. INVENTORIES
Inventories consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Raw material
|
|
$
|
70,694
|
|
|
$
|
67,908
|
|
Goods on consignment
|
|
|
34,471
|
|
|
|
33,625
|
|
Finished goods
|
|
|
54,697
|
|
|
|
119,749
|
|
Less: Provision of inventory
|
|
|
(159,862
|
)
|
|
|
(221,282
|
)
|
Inventories, net
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 8. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Sales:
Customer
|
|
As at
March 31, 2019
|
|
|
As at
December 31, 2018
|
|
A
|
|
$
|
14,650
|
|
|
|
49
|
%
|
|
$
|
21,404
|
|
|
|
21
|
%
|
B
|
|
|
6,673
|
|
|
|
22
|
%
|
|
|
19,285
|
|
|
|
19
|
%
|
C
|
|
|
6,406
|
|
|
|
21
|
%
|
|
|
19,016
|
|
|
|
19
|
%
|
D
|
|
|
1,483
|
|
|
|
5
|
%
|
|
|
15,894
|
|
|
|
16
|
%
|
E
|
|
|
622
|
|
|
|
2
|
%
|
|
|
10,445
|
|
|
|
10
|
%
|
Total
|
|
$
|
29,834
|
|
|
|
99
|
%
|
|
$
|
86,044
|
|
|
|
85
|
%
|
Purchases:
Supplier
|
|
As at
March 31, 2019
|
|
|
As at
December 31, 2018
|
|
AA
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
4,467
|
|
|
|
49
|
%
|
BB
|
|
|
-
|
|
|
|
-
|
%
|
|
|
3,367
|
|
|
|
37
|
%
|
CC
|
|
|
-
|
|
|
|
-
|
%
|
|
|
698
|
|
|
|
8
|
%
|
DD
|
|
|
-
|
|
|
|
-
|
%
|
|
|
425
|
|
|
|
5
|
%
|
EE
|
|
|
-
|
|
|
|
-
|
%
|
|
|
204
|
|
|
|
1
|
%
|
Total
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
9,161
|
|
|
|
98
|
%
|
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. OTHER PAYABLES
Other payables consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
|
|
|
|
|
|
|
Payables to employees
|
|
$
|
3,710
|
|
|
$
|
1,859
|
|
Miscellaneous
|
|
|
73,343
|
|
|
|
35,930
|
|
Total other payables
|
|
$
|
77,053
|
|
|
$
|
37,789
|
|
NOTE 10. LOSS PER SHARE
The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share, which requires a dual presentation of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding during the fiscal year. Potentially dilutive common shares consist of convertible preferred stock (using the if-converted method) and exercisable warrants and stock options outstanding (using the treasury method). The following table sets forth the computation of basic and diluted net income per common share:
The following table sets forth the computation of basic and diluted net income per common share:
Period ended March 31,
|
|
March 31,
2019
|
|
|
March 31,
2018
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Net loss attributable to ordinary shareholders for computing basic net loss per ordinary share
|
|
$
|
(75,694
|
)
|
|
$
|
(233,313
|
)
|
Weighted-average shares of common stock outstanding in computing net loss per common stock
|
|
|
|
|
|
|
|
|
Basic
|
|
|
160,790,000
|
|
|
|
160,790,000
|
|
Diluted
|
|
|
160,790,000
|
|
|
|
160,790,000
|
|
Basic loss per share of common stock
|
|
|
(0.05
|
)cents
|
|
|
(0.15
|
)cents
|
Diluted loss per share
|
|
|
(0.05
|
)cents
|
|
|
(0.15
|
)cents
|
NOTE 11. AMOUNT DUE FROM / TO RELATED PARTIES
The details for amount due to related parties were as follows:
Amount as at
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Holmsun Capital Limited (a) (b)
|
|
|
5,312,408
|
|
|
|
5,310,386
|
|
|
|
$
|
5,312,408
|
|
|
$
|
5,310,386
|
|
________________
(a)
|
Common director, LEUNG Kwong Tak of operating subsidiary Lutu International Biotechnology Limited
|
(b)
|
Common shareholder, LEUNG Kwong Tak of operating subsidiary Lutu International Biotechnology Limited
|
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. INCOME TAXES
The Company and its subsidiaries have no operation in United States, Cayman Islands and British Virgin Islands, and are not subject to any domestic income tax. Therefore, no domestic income tax of United States, Cayman Islands and British Virgin Islands are paid in the quarter ended March 31, 2019 and year ended December 31, 2018.
Hong Kong Prolific Mineral Resources Holdings Limited was incorporated in Hong Kong and is subjected to Hong Kong profits tax rate of 16.5% for the three months ended March 31, 2019 and 2018. Income tax (reversal) expense amounted to $Nil for the quarter ended March 31, 2019 and year ended December 31, 2018.
A reconciliation of the provision for income taxes with amounts determined by applying the Hong Kong profit rate of 16.5% to income before income taxes is as follows:
|
|
March 31,
2019
|
|
|
December 31,2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Profit (Loss) before income tax
|
|
$
|
(25,704
|
)
|
|
$
|
(209,849
|
)
|
Temporary Difference
|
|
|
-
|
|
|
|
-
|
|
Permanent Difference
|
|
|
-
|
|
|
|
-
|
|
Taxable loss
|
|
$
|
(25,704
|
)
|
|
$
|
(209,849
|
)
|
Hong Kong Profits Tax rate
|
|
|
16.5
|
%
|
|
16.5
|
%
|
Current tax credit
|
|
$
|
4,241
|
|
|
$
|
34,625
|
|
Less: Valuation allowance
|
|
|
(4,241
|
)
|
|
|
(34,625
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
No deferred tax has been provided as there are no material temporary differences arising during the quarter ended March 31, 2019 and year ended December 31, 2018.
Shanxi Green Biotechnology Industry Company Limited and Shenzhen Qianhai Lutu Supply Chain Management Company Limited were incorporated in the PRC and are subjected to income taxes under the current laws of the PRC. The EIT rate of PRC was 25% for the quarter ended March 31, 2019 and year ended December 31, 2018.
Profit (loss) before income tax of $(49,989) and $(1,152,274) for the quarter ended March 31, 2019 and year ended December 31, 2018 respectively, were attributed to operations in China. The income tax expenses consisted of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Profit (Loss) before income tax
|
|
$
|
(49,989
|
)
|
|
$
|
(1,152,274
|
)
|
Temporary Difference
|
|
|
-
|
|
|
|
-
|
|
Permanent Difference
|
|
|
-
|
|
|
|
-
|
|
Taxable loss
|
|
$
|
(49,989
|
)
|
|
$
|
(1,152,274
|
)
|
China Enterprise Income Tax rate
|
|
|
25
|
%
|
|
|
25.0
|
%
|
Current tax credit
|
|
$
|
12,497
|
|
|
$
|
288,069
|
|
Less: Valuation allowance
|
|
|
(12,497
|
)
|
|
|
(288,069
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
No deferred tax has been provided as there are no material temporary differences arising during the quarter ended March 31, 2019 and year ended December 31, 2018.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. SEGMENT INFORMATION
FASB Accounting Standard Codification Topic 280 (ASC 280) “Segment Reporting” establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.
In the quarter ended March 31, 2019 and year ended December 31, 2018, the Company is regarded as a single operating segment, being engaged in the manufacturing of bio-fertilizer. This principal activity and geographical market are substantially based in China, accordingly, no operating or geographical segment information are presented.
NOTE 14. COMPREHENSIVE INCOME
Total comprehensive income includes, in addition to net income, changes in equity that are excluded from the consolidated statements of income and are recorded directly into a separate section of shareholders’ equity on the consolidated balance sheets. Comprehensive income and its components consist of the following:
Period and Year Ended
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Net loss
|
|
$
|
(75,694
|
)
|
|
$
|
(1,362,122
|
)
|
Other comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(8,596
|
)
|
|
|
49,096
|
|
Comprehensive loss
|
|
$
|
(84,290
|
)
|
|
$
|
(1,313,026
|
)
|
NOTE 15. COMMITMENTS AND CONTINGENCIES
Operating Leases
Certain of our real properties are operated under lease agreements. Rental expense under operating leases was as follows:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Rent expense
|
|
$
|
-
|
|
|
$
|
15,382
|
|
|
|
|
|
|
|
|
|
|
Total rent expense, net
|
|
$
|
-
|
|
|
$
|
15,382
|
|
Annual minimum payments under operating leases are as follows:
Years Ended December 31,
|
|
Minimum Lease
Payment
|
|
|
|
|
|
2019
|
|
|
-
|
|
2020
|
|
|
-
|
|
Total
|
|
$
|
-
|
|
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. RELATED PARTY TRANSACTIONS
The Board must approve all related party transactions. All material related party transactions will be made or entered into on terms that are no less favorable to the Company than can be obtained from unaffiliated third parties.
The following table listed the transaction with related party for the quarter ended March 31, 2019 and 2018:
|
|
March 31,
2019
|
|
|
March 31,
2018
|
|
Consultancy fee paid to KM International Property Consultants Limited
|
|
$
|
-
|
|
|
$
|
12,649
|
|
|
|
|
|
|
|
|
|
|
Consultancy fee, net
|
|
$
|
-
|
|
|
$
|
12,649
|
|
Mr. Ma Wai Kin, Chief Operation Officer and Director of the Company, has a 100% ownership interest in KM International Property Consultants Limited (“KM”). The main transaction between the Company and KM is the consulting service regarding the marketing activities of GVBT provided by KM.
NOTE 17. LEGAL PROCEEDINGS
Civil case with Mr. Yao Gui Mu
Yao Gui Mu (“the Plaintiff”), former operation manager of the subsidiary in Shanxi, Shanxi Green Biotechnology Industry Company Limited (“the Shanxi Subsidiary”), brought a lawsuit against the Shanxi Subsidiary, in the District People’s Court of Jin Zhong City, Yu Ci District. The subject dispute of the lawsuit concerns an unsettled current account balance of $141,550 (RMB900,000) which was claimed to be a loan advanced to the Company by the Plaintiff. Together with the subject dispute, the Plaintiff also claimed the relevant interest was RMB513,100 calculated from November 6, 2012 to August 15, 2017 with 1% monthly interest rate. The Company’s PRC lawyer had submitted a Statement of Defense on November 23, 2017 to The District People’s Court of Yuci District, Jin Zhong City (“the Court”). A court hearing was held on December 5, 2017. Upon the request by the Court, Shanxi Subsidiary provided supplemental evidence to the Court on 16 January 2018. The second hearing was held on September 19, 2018.
The District People’s Court of Jin Zhong City, Yu Ci District released the civil judgement decision (2017) 晋0702 民初3879号, that there were not sufficient evidence provided by the Plaintiff for the dispute, and the Court did not support for the claim of loan and related interest against the Shanxi Subsidiary. The judgement decision dated on August 31, 2018.
Yao Gui Mu (“the Appealer”) appeal for the decision to the Intermediate People’s Court of Shanxi Province, Jin Zhong City. On May 10, 2019, the Intermediate People’s Court of Shanxi Province, Jin Zhong City released civil judgement decision (2019) 晋07民終355号, that due to the fact that there was a second hearing held on September 19, 2018 after the judgement decision made on August 31, 2018, which was a severe disorder of procedures. Therefore, the civil judgement decision (2017) 晋0702 民初3879号 was revoked and the case was put to re-trial, which was subsequently carried out on October 16, 2019.
On December 16, 2019, the Court released the civil judgement decision (2019) 晋0702 民初3543号之一, that the related dispute loan was being a criminal case under police investigation. Before the police formed a decision, the Court could not confirm that the civil case was under the district court’s judgement jurisdiction. Therefore, the lawsuit against the Shanxi Subsidiary was rejected.
For the relevant interest of RMB513,100 claimed by the Plaintiff, there is no evidence showing that it is more likely than not that the Company will be liable for the said interest. Hence, no provision was made as at March 31, 2019.
Criminal investigation regarding a potential fraud with one of its former customers
Management of the Company suspects that there was a potential fraud committed in the sales made to one of its previous customers. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud. The Bureau of Public Security of Yuci District officially undertook the case and initiated investigation procedures on 11 September 2017. Management has been informed that the case is currently under criminal investigation by relevant authorities.
Criminal investigation against one of GVBT’s former employee
Management of the Company suspects that one of its former senior staff may have committed the offence of “unlawfully taking possession of company property through taking advantage of his position” under his employment with the Company. Management reported to the local police of Yuci District, Jinzhong City, Shanxi Province, China about the said potential fraud on 10 October, 2017. The Bureau of Public Security of Yuci District officially undertook its case and initiated investigation procedures on 28 January 2018. Management has been informed that the case is currently under criminal investigation by relevant authorities in China.
GREEN VISION BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. COMMON STOCK
On July 30, 2019, the Company cancelled 89,000,000 shares of common stock, par value $.001 per share, and re-issued them to Able Lead Holdings Limited. The issuance was done pursuant to Section 4(a)(2) of the Securities Act of 1933. as it was a non-public offering. On May 12, 2017, the Company had placed the 89,000,000 shares into escrow with Booth Udall Fuller PLC, pending repayment of a loan and discharge of shares of Lutu International by Able Lead Holdings Limited. Full repayment of such was made on February 27, 2019. Therefore, the 89,000,000 shares were returned from escrow and cancelled. Then they were re-issued to Able Lead Holdings Limited.
NOTE 19. SUBSEQUENT EVENT
On September 26, 2019, the Company has resolved to discontinue the operation of the subsidiary company, Shenzhen Qianhai Lutu Supply Chain Management Company Limited. According to the PRC Company Law and related regulation required, a de-registration committee has been properly formed and the de-registration procedures are undergoing accordingly. On November 11, 2019, the Shenzhen taxation bureau has released the taxation completion certificate, and on December 11, 2019, the Shenzhen market supervision administration has released the notice that the de-registration of Shenzhen Qianhai Lutu Supply Chain Management Company Limited is in process. On April 7, 2020, the Company received notice that the de-registration of Shenzhen Qianhai Lutu Supply Chain Management Company Limited had been completed.
Other than as described on Note 17, Note 18 and above, management has evaluated all activities and concluded that there was no other subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.
All subsequent events are being disclosed in the Company’s periodic reports that are currently in preparation for filing. Such events shall be described in detail therein.
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements". These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.