| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements
(“CFS”) were prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”). The Company’s subsidiaries – Wang Da, Yiwu, Zhejiang, Hangzhou Lamapai and Zhejiang Lamapai’s
functional currency is the Chinese Renminbi (“RMB”), however, the accompanying CFS were translated and presented in
United States Dollars (“$”, or “USD”). Yosen is the parent company incorporated on August 20, 1998 under
the laws of the State of Nevada. The parent company does not have operations. Its main activities were incurring public company
expenses. Yosen pays all its expenses in USD, its functional currency. Capital was incorporated on July 22, 2004 under the laws
of the BVI. Capital is a holding company and does not have operations. As a result, we determined its functional currency is USD. Going Concern The accompanying CFS were prepared on a going
concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company realized net loss of $493,055 from continuing operations for the nine months ended September 30, 2017. The Company
had accumulated deficit of $51,636,800 as of September 30, 2017. There can be no assurance that the Company will become profitable
or that it will survive as a public company. These issues raise substantial doubt regarding the Company’s ability to continue
as a going concern. In June 2017, we closed all remaining stores
of Zhejiang. It represents the discontinuation of Yosen’s traditional electronics retail and wholesale business. The Company
now focuses on selling imported goods through online platform and customer experience stores. Principles of Consolidation The CFS include the accounts of Yosen and its
wholly owned subsidiaries Capital, Wang Da, Yiwu, Zhejiang, Lamapai and Saizhuo collectively referred to as the Company. All material
intercompany accounts, transactions and profits were eliminated in consolidation. Noncontrolling Interest As of September 30, 2017, the Company
invested RMB 6,193,541($898,852) in Zhejiang Lamapai and owns 65.1% interest in Zhejiang Lamapai. The 34.9% owned by the third
parties is presented as noncontrolling interest. The Company follows Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “ Consolidation The net income attributed to the NCI is separately
designated in the accompanying consolidated statements of income and other comprehensive income (loss). Losses attributable to
the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI
is attributed to those interests. The NCI shall continue to attribute its share of losses even if that attribution results in a
deficit NCI balance. Currency Translation The accounts of Zhejiang, Wang Da, Yiwu, Lamapai
entities were maintained, and its financial statements were expressed RMB. Such financial statements were translated into USD in
accordance with FASB ASC Topic 830-10, “Foreign Currency Translation,” “Reporting Comprehensive
Income,” Use of Estimates The preparation of financial statements in
conformity with US GAAP 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 differ from those estimates. Risks and Uncertainties The Company is subject to risks from, among
other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements,
rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public
markets. Contingencies Certain conditions may exist as of the date
the CFS are issued, which could result in a loss to the Company but which will only be resolved when one or more future events
occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves
an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted
claims that may result in such proceedings, the Company’s management evaluates the perceived merits of any legal proceedings
or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability is accrued in the Company’s CFS. If the assessment indicates that a potential material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote
by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. Accounts Receivable, net The Company maintains reserves for potential
credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis. Allowance
for doubtful accounts was $1,005,085 as of September 30, 2017 and December 31, 2016, respectively. Inventories, net Inventories are valued at the lower of cost
(determined on a weighted average basis) or market. Management compares the cost of inventories with the market value
and allowance is made for writing down their inventories to market value, if lower. As of September 30, 2017 and December 31, 2016,
inventory consisted entirely of finished goods. Property and Equipment, net Property and equipment are stated at cost.
Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized.
When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from
the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using
the straight-line method for substantially all assets with estimated lives of:
Automotive 5 years
Office Equipment 5 years As of September 30, 2017 and December 31, 2016, property and equipment
consisted of the following:
September 30, 2017 December 31, 2016
(Unaudited)
Automotive $ 41,600 $ 39,870
Office equipment 143,718 153,372
Plant and equipment 524,917 168,212
Construction in progress — 328,103
Subtotal 710,235 689,557
Less: accumulated depreciation (268,893 ) (187,942 )
Total $ 441,342 $ 501,615 Long-Lived Assets The Company periodically evaluates the carrying
value of long-lived assets to be held and used in accordance with FASB ASC 360, “Property, Plant and Equipment,” Fair Value of Financial Instruments FASB ASC Topic 825, “Financial Instruments” Short-term Loans As of September 30, 2017 and December 31, 2016, short-term loans
consisted of the following:
September 30, 2017 December 31, 2016
Line of credit from China Construction Bank , dated May 27, 2017, due on May 26, 2018, with 6.525% interest per annum. 28,100 —
Short term loan dated June 1, 2016, due on November 28, 2017, with 12% interest per annum, payable monthly, personally guaranteed by the CEO 450,797 —
From Bank of Chouzhou, dated July 10, 2017, due on August 10, 2018, with interest 6.00% payable monthly, personally guaranteed by the CEO 751,327 —
From Bank of Chouzhou, dated July 11, 2017, due on July 10, 2018 with interest of 6.00% payable monthly, personally guaranteed by the CEO 1,502,654 —
From Bank of Hangzhou, dated July 13, 2016, due on July 12, 2017, with interest of 6.96% payable monthly — 360,039
From Bank of Chouzhou, dated July 9, 2016, due on July 10, 2017, with interest 6.00% payable monthly, personally guaranteed by the CEO — 720,077
From Bank of Chouzhou, dated July16, 2016, due on July 10, 2017 with interest of 6.0625% payable monthly, personally guaranteed by the CEO — 1,440,154
Short term loan dated June 1, 2016, due on February 28, 2017, with interest payable monthly, personally guaranteed by the CEO — 432,046
$ 2,732,878 2,952,316 Revenue Recognition In accordance with FASB ASC Topic 605, “Revenue
Recognition,” The Company records revenues when title and
the risk of loss pass to the customer. Generally, these conditions occur on the date the customer takes delivery of
the product. Revenue generated is solely from retail of Yosen products . Cost of Sales Cost of sales (“COS”) consists
of actual product cost, which is the purchase price of the product less any discounts. COS excludes freight charges,
purchase and delivery costs, internal transfer, freight charges and the other costs of the Company’s distribution network,
which are identified in general and administrative expenses. General and Administrative Expenses General and administrative (“G&A”)
expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate
facilities, lease expenses, management fees, traveling expenses and other operating and administrative expenses, including freight
charges, purchase and delivery costs, internal transfer freight charges and other distribution costs. Shipping and Handling Fees The Company follows FASB ASC Sub-topic 605-45,
“Handling Costs, Shipping Costs” Vendor Discounts The Company has negotiated preferred pricing
arrangements with certain vendors on certain products. These arrangements are not contingent on any levels of volume and are considered
vendor discounts as opposed to rebates. The Company records these discounts along with the purchase of the discounted items, resulting
in lower inventory cost and a corresponding lower COS as the products are sold. Share Based Payment The Company follows FASB ASC Sub-topic 718-10,
“Compensation-Stock Compensation,” Advertising Advertising expenses consist primarily of costs
of promotion for corporate image and product marketing and costs of direct advertising. The Company expenses all advertising costs
as incurred. There was $5,966 and $11,731 advertising expense for the nine months ended September 30, 2017, respectively, and $0
and $2,210 for the three months ended September 30, 2017 and 2016. Income Taxes The Company utilizes FASB ASC Topic 740, “Income
Taxes.” Under FASB Sub-topic ASC 740-10-25, evaluation
of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position
will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits
of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount
of benefit to be recognized in the financial statements. Basic and Diluted Earnings (Loss) per Share Loss per share is calculated in accordance
with FASB ASC Topic 260, “Earnings per Share.” Statement of Cash Flows In accordance with FASB ASC Topic 230, “Statement
of Cash Flows,” Concentration of Credit Risk Financial instruments that potentially subject
the Company to concentrations of credit risk are cash, accounts receivable, advances to suppliers and other receivables arising
from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions.
The Company has a diversified customer base. The Company controls credit risk related to accounts receivable through credit approvals,
credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon
factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes
that its accounts receivable credit risk exposure beyond such allowance is limited. Segment Reporting FASB ASC Topic 280, “Segment Reporting,”
requires use of the “management approach” model for segment reporting. The management approach model is based on the
way a company’s management organizes segments within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in
which management disaggregates a company. The Company operated E-commerce business only in the first six months of 2017 through
Zhejiang Lamapai. Recent Accounting Pronouncements In January 2017, the Financial Accounting
Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2017-01, Business Combinations
(Topic 805) Clarifying the Definition of a Business In November 2016, the FASB issued
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash
and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance
sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for
interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating
the impact of this ASU on its CFS. In November 2015, the FASB issued
an ASU on the balance sheet classification of deferred taxes, which would require that deferred tax assets and liabilities be classified
as non-current in the balance sheet. Current GAAP requires the presentation of deferred tax assets and liabilities as either current
or non-current in the balance sheet. This ASU is effective for annual reporting periods beginning after December 15, 2016, including
interim reporting periods within those annual reporting periods. Earlier adoption is permitted. The guidance may be applied either
prospectively or retrospectively. The adoption of any such pronouncements did not cause a material impact on its financial condition
or the results of its operations. In October 2016, the FASB issued ASU 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory In August 2016, the FASB issued ASU 2016-15, Statement
of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments In March 2016, the FASB issued ASU 2016-09,
Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting In February 2016, the FASB issued
ASU 2016-02, Leases (Topic 842) Management does not believe that any recently
issued, but not yet effective, accounting standards could have a material effect on the accompanying CFS. As new accounting pronouncements
are issued, we will adopt those that are applicable under the circumstances. Other recent accounting pronouncements issued
by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”)
did not or are not believed by management to have a material impact on the Company’s present or future CFS. |
