Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Feb. 28, 2015 | Apr. 20, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | China Tianfeihong Wine Inc | |
Entity Central Index Key | 1501225 | |
Document Type | 10-Q | |
Document Period End Date | 28-Feb-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -23 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 34,396,680 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2014 |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Feb. 28, 2015 | Aug. 31, 2014 |
Current assets: | ||
Cash | $6,798,855 | $5,229,261 |
Accounts receivable | 2,879,217 | 431,940 |
Inventory, net | 1,734,300 | 375,750 |
Prepaid income taxes | 50,348 | |
Prepaid expenses | 21,073 | 40,625 |
Total current assets | 11,433,445 | 6,127,924 |
Fixed assets, net | 33,979 | 48,113 |
Total Assets | 11,467,424 | 6,176,037 |
Current liabilities: | ||
Accounts payable | 4,069,472 | 682,030 |
Taxes payable | 284,977 | 19,465 |
Loans from stockholder | 70,502 | 24,339 |
Accrued liabilities and other payables | 83,258 | 72,981 |
Total current liabilities | 4,508,209 | 798,815 |
Stockholders equity: | ||
Common stock, $0.0006 par value per share, 80,000,000 shares authorized; 34,396,680 shares issued and outstanding as of February 28, 2015 and August 31, 2014 | 20,638 | 20,638 |
Additional paid-in capital | 726,548 | 726,548 |
Statutory reserve fund | 420,406 | 420,406 |
Retained earnings | 5,395,991 | 3,865,318 |
Other comprehensive income | 175,790 | 203,702 |
Stockholders equity before noncontrolling interests | 6,739,373 | 5,236,612 |
Noncontrolling interests | 219,842 | 140,610 |
Total stockholders equity | 6,959,215 | 5,377,222 |
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | $11,467,424 | $6,176,037 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Feb. 28, 2015 | Aug. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Common Stock, Par Value | $0.00 | $0.00 |
Common Stock, Shares Authorized | 80,000,000 | 80,000,000 |
Common Stock, Shares Issued | 34,396,680 | 34,396,680 |
Common Stock, Shares Outstanding | 34,396,680 | 34,396,680 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | |
Income Statement [Abstract] | ||||
Revenue | $7,639,171 | $2,882,195 | $10,775,557 | $4,814,573 |
Cost of goods sold | -5,089,375 | -1,889,147 | -7,184,415 | -3,200,407 |
Gross profit | 2,549,796 | 993,048 | 3,591,142 | 1,614,166 |
Operating expenses | ||||
Selling and marketing | 872,087 | 312,077 | 1,259,418 | 509,614 |
General and administrative | 121,674 | 154,162 | 194,599 | 201,435 |
Total operating expenses | 993,761 | 466,239 | 1,454,017 | 711,049 |
Income from operations | 1,556,035 | 526,809 | 2,137,125 | 903,117 |
Interest income | 5,577 | 4,130 | 10,694 | 7,632 |
Income before provision for income taxes | 1,561,612 | 530,939 | 2,147,819 | 910,749 |
Provision for income taxes | 390,401 | 128,977 | 536,956 | 223,602 |
Net income | 1,171,211 | 401,962 | 1,610,863 | 687,147 |
Noncontrolling interests | -58,384 | -24,986 | -80,190 | -34,361 |
Net income attributable to common stockholders | 1,112,827 | 376,976 | 1,530,673 | 652,786 |
Earnings per common share, basic and diluted | $0 | $0 | $0 | $0 |
Weighted average shares outstanding, basic and diluted | 34,396,680 | 33,597,787 | 34,396,680 | 32,798,893 |
Comprehensive Income: | ||||
Net Income | 1,171,211 | 401,962 | 1,610,863 | 687,147 |
Foreign currency translation adjustment | -37,777 | 76,490 | -28,870 | 109,246 |
Comprehensive income | 1,133,434 | 478,452 | 1,581,993 | 796,393 |
Comprehensive income attributable to noncontrolling interests | -56,737 | -40,574 | -79,232 | -40,589 |
Net comprehensive income attributable to common stockholders | $1,076,697 | $437,878 | $1,502,761 | $755,804 |
Shareholders_Equity_Unaudited
Shareholders Equity (Unaudited) (USD $) | Common Stock | Additional Paid-In Capital | Statutory Reserve Fund | Retained Earnings | Other Comprehensive Income | Noncontrolling Interests | Total |
Beginning Balance at Aug. 31, 2014 | $20,638 | $726,548 | $420,406 | $3,865,318 | $203,702 | $140,610 | $5,377,222 |
Net Income | 1,530,673 | 80,190 | 1,610,863 | ||||
Foreign currency translation adjustment | -27,912 | -958 | -28,870 | ||||
Ending Balance at Feb. 28, 2015 | $20,638 | $726,548 | $420,406 | $5,395,991 | $175,790 | $219,842 | $6,959,215 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 6 Months Ended | |
Feb. 28, 2015 | Feb. 28, 2014 | |
Cash flows from operating activities: | ||
Net income | $1,610,863 | $687,147 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 23,761 | 33,260 |
Changes in operating assets and liabilities: | ||
(Increase) in accounts receivable | -2,447,277 | -301,677 |
(Increase) in inventory | -1,358,550 | -47,411 |
Decrease (Increase) in prepaid expenses | 69,900 | -15,795 |
Decrease in advances to suppliers | 45,670 | |
Increase in accounts payable | 3,387,442 | 790,579 |
Increase in taxes payable | 265,512 | 41,408 |
Increase in accrued liabilities and other payables | 10,277 | 24,316 |
Net cash provided by operating activities | 1,561,928 | 1,257,497 |
Cash flows from investing activities: | ||
Purchase of equipment | -9,694 | -852 |
Net cash (used in) investing activities | -9,694 | -852 |
Cash flows from financing activities: | ||
Proceeds from stockholder loans | 46,312 | 26,880 |
Net cash provided by financing activities | 46,312 | 26,880 |
Effect of exchange rate changes on cash | -28,952 | 24,394 |
Net change in cash | 1,569,594 | 1,307,919 |
Cash, beginning | 5,229,261 | 3,994,502 |
Cash, end | 6,798,855 | 5,302,421 |
Cash paid for: | ||
Interest | ||
Income taxes | $300,527 | $187,213 |
1_ORGANIZATION
1. ORGANIZATION | 6 Months Ended |
Feb. 28, 2015 | |
Accounting Policies [Abstract] | |
1. ORGANIZATION | NOTE 1. ORGANIZATION |
China Tianfeihong Wine, Inc. (“China Tianfeihong”), formerly known as Zenitech Corporation, was incorporated under the laws of the State of Delaware on July 28, 2005. From its inception until the closing of the reverse acquisition transaction, the Company was a development-stage company in the business of developing, manufacturing, distributing and marketing environmentally friendly floral sleeves and wrappers for the floriculture industry. | |
On August 1, 2013, China Tianfeihong filed a certificate of amendment to its articles of incorporation to change its name from “Zenitech Corporation” to “China Tianfeihong Wine Inc. ” (the “Name Change”) and to effect a 1 for 6 reverse stock split (the “Reverse Split”) of its outstanding shares of common stock. The Name Change and the Reserve Split were effective on August 12, 2013. Upon the effectiveness of the Reverse Split, the number of outstanding shares of China Tianfeihong’s common stock decreased from 14,380,266 to 2,396,680 shares. The number of authorized shares of common stock remained at 80,000,000 shares. | |
On December 30, 2013, China Tianfeihong completed a reverse acquisition transaction through a share exchange with the stockholders of Fanwei Hengchang Co., Ltd (BVI) (“Fanwei Hengchang”), whereby China Tianfeihong acquired 100% of the outstanding shares of Fanwei Hengchang in exchange for the issuance of 32,000,000 shares of China Tianfeihong’s common stock, representing 93.03% of the issued and outstanding shares of common stock. As a result of the reverse acquisition, Fanwei Hengchang became China Tianfeihong’s wholly-owned subsidiary and the former Fanwei Hengchang’s stockholders became our controlling stockholders. The share exchange transaction was treated as a reverse acquisition, with Fanwei Hengchang as the acquirer and China Tianfeihong as the acquired party for accounting purposes. Unless the context suggests otherwise, when we refer in this report to the business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of Fanwei Hengchang and its consolidated subsidiaries and variable interest entity. | |
As a result of the acquisition of Fanwei Hengchang, China Tianfeihong now owns all of the issued and outstanding capital stock of Changshi Tongrong Limited (Hong Kong) (“Changshi Tongrong”), which in turn owns all of the issued and outstanding capital stock of Changshitong Consulting (Shenzhen) Co. Ltd (“Changshitong Consulting”). In addition, China Tianfeihong effectively and substantially controls Fujian Tianfeihong Wine Co., Ltd (“Fujian Tianfeihong”) through a series of captive agreements with Changshitong Consulting. China Tianfeihong with its wholly owned subsidiaries, and its VIE, Fujian Tianfeihong, are collectively the “Company”. | |
Subsequent to the closing of the reverse acquisition transaction, the Company conducts operations through its controlled consolidated affiliate, Fujian Tianfeihong. Fujian Tianfeihong is primarily engaged in distributing fruit wine including green plum wine, loquat wine, olive wine and pomegranate wine to supermarkets and liquor stores in the People’s Republic of China (“PRC”). | |
On November 26, 2013, prior to the reverse acquisition transaction, Changshitong Consulting and Fujian Tianfeihong and its shareholders Jinxiang Fang and Zhiliang Fang entered into a series of agreements known as variable interest agreements (the “VIE Agreements”) pursuant to which Fujian Tianfeihong became Changshitong Consulting’s contractually controlled affiliate. The VIE Agreements included: | |
Exclusive Technical Service and Business Consulting Agreement: Pursuant to the Exclusive Technical Service and Business Consulting Agreement, Changshitong Consulting (“WFOE”) is to provide technical support and consulting services to Fujian Tianfeihong in exchange for (i) 95% of the total annual net profit of Fujian Tianfeihong plus (ii) RMB10,000 per month (U.S.$1,627). The Agreement has an unlimited term and only can be terminated upon written notice agreed to by both parties. | |
Proxy Agreement: Pursuant to the Proxy Agreement, Zhiliang Fang and Jinxiang Fang, each authorize Changshitong Consulting to designate someone to exercise their entire shareholder decision rights with respect to Fujian Tianfeihong. The Agreement has an unlimited term and only can be terminated upon written notice agreed to by both parties. | |
Call Option Agreement: a Call Option Agreement among Zhiliang Fang and Jinxiang Fang (together referred to as “Fujian Tianfeihong Shareholders”), and Changshitong Consulting under which they have granted to Changshitong Consulting the irrevocable right and option to acquire all of the equity interests in Fujian Tianfeihong to the extent permitted by PRC law. If PRC law limits the percentage of Fujian Tianfeihong that Changshitong Consulting may purchase at any time, then Changshitong Consulting may repeatedly exercise its option in such increments as may be allowed by PRC law. The exercise price of the option is RMB1.00 (US$0.16) or the minimum price required by PRC laws if at that time there is any regulatory PRC laws regulating the minimum price. The Fujian Tianfeihong Shareholders agreed to refrain from taking certain actions which might harm the value of Fujian Tianfeihong or Changshitong Consulting’s option. This Agreement remains effective until all equity interest under the Agreement have been transferred to Changshitong Consulting or its designated entities or natural persons. | |
Share Pledge Agreement: a Share Pledge Agreement among Zhiliang Fang and Jinxiang Fang, Fujian Tianfeihong, and Changshitong Consulting under which the Fujian Tianfeihong Shareholders agree to pledge all of their equity in Fujian Tianfeihong to Changshitong Consulting to guarantee Fujian Tianfeihong’s and its shareholders’ performance of their obligations under the Exclusive Technical Service and Business Consulting Agreement, the Call Option Agreement and the Proxy Agreement. This Agreement remains effective until the obligations under the Exclusive Technical Service and Business Consulting Agreement, Call Option Agreement and Proxy Agreement have been fulfilled or terminated. | |
The VIE Agreements with the Company’s Chinese affiliate and its shareholders, which relate to critical aspects of the Company’s operations, may not be as effective in providing operational control as direct ownership. In addition, these arrangements may be difficult and costly to enforce under PRC law. | |
As a result of the entry into the foregoing agreements, the Company has a corporate structure which is set forth as follows: | |
2_SUMMARY_OF_SIGNIFICANT_ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended | ||||||||||||||||
Feb. 28, 2015 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||||||
BASIS OF ACCOUNTING AND PRESENTATION | |||||||||||||||||
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting. The unaudited consolidated financial statements for the three and six months ended February 28, 2015 and 2014 include China Tianfeihong Wine, Inc., Fanwei Hengchang, Changshi Tongrong, Changshitong Consulting and its VIE, Fujian Tianfeihong. All significant intercompany accounts and transactions have been eliminated in consolidation. | |||||||||||||||||
The unaudited interim consolidated financial statements of the Company as of February 28, 2015 and for the three and six months periods ended February 28, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (the “SEC”) which apply to interim financial statements. Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K filed with the SEC. The results of operations for the three and six months ended February 28, 2015 are not necessarily indicative of the results to be expected for future quarters or for the year ending August 31, 2015. | |||||||||||||||||
All consolidated financial statements and notes to the consolidated financial statements are presented in United States dollars (“US Dollar” or “US$” or “$”). | |||||||||||||||||
VARIABLE INTEREST ENTITY | |||||||||||||||||
Pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity. | |||||||||||||||||
Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de facto agents, have the unilateral ability to exercise those rights. Fujian Tianfeihong’s actual stockholders do not hold any kick-out rights that affect the consolidation determination. | |||||||||||||||||
Through the VIE agreements disclosed in Note 1, the Company is deemed the primary beneficiary of Fujian Tianfeihong. Accordingly, the results of Fujian Tianfeihong have been included in the accompanying consolidated financial statements. Fujian Tianfeihong has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Fujian Tianfeihong do not have recourse to the Company’s general credit. | |||||||||||||||||
The following financial statement amounts and balances of Fujian Tianfeihong have been included in the accompanying consolidated financial statements. | |||||||||||||||||
28-Feb-15 | 31-Aug-14 | ||||||||||||||||
(Unaudited) | |||||||||||||||||
TOTAL ASSETS(1) | $ | 11,467,054 | $ | 6,175,646 | |||||||||||||
TOTAL LIABILITIES(1) | $ | 4,478,205 | $ | 781,126 | |||||||||||||
-1 | Total assets and liabilities of the VIE are reported net of intercompany balances that have been eliminated with the VIE consolidation. | ||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||
February 28, | February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Revenue | $ | 7,639,171 | $ | 2,882,195 | 10,775,557 | $ | 4,814,573 | ||||||||||
Net income (2) | $ | 1,167,667 | $ | 398,663 | 1,603,796 | $ | 687,211 | ||||||||||
-2 | Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to WFOE. | ||||||||||||||||
For the six months ended February 28, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
Net cash provided by operating activities | $ | 1,552,236 | $ | 1,265,516 | |||||||||||||
Net cash (used in) investing activities | (9,694 | ) | (852 | ) | |||||||||||||
Net cash provided by financing activities | 46,312 | 26,880 | |||||||||||||||
Effect of exchange rate changes on cash | (19,240 | ) | 15,875 | ||||||||||||||
Net increase in cash | 1,569,615 | $$1,307,419 | |||||||||||||||
The Company believes that Changshitong Consulting’s contractual agreements with Fujian Tianfeihong are in compliance with PRC law and are legally enforceable. The stockholders of Fujian Tianfeihong are also the senior management of the Company and therefore the Company believes that they have no current interest in seeking to act contrary to the contractual arrangements. However, Fujian Tianfeihong and its stockholders may fail to take certain actions required for the Company’s business or to follow the Company’s instructions despite their contractual obligations to do so. Furthermore, if Fujian Tianfeihong or its stockholders do not act in the best interests of the Company under the contractual arrangements and any dispute relating to these contractual arrangements remains unresolved, the Company will have to enforce its rights under these contractual arrangements through PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. | |||||||||||||||||
All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. As a result, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements, which may make it difficult to exert effective control over Fujian Tianfeihong, and its ability to conduct the Company’s business may be adversely affected. | |||||||||||||||||
USE OF ESTIMATES | |||||||||||||||||
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain 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 periods. Actual results could differ from those estimates. | |||||||||||||||||
FOREIGN CURRENCY TRANSLATION | |||||||||||||||||
Almost all Company assets are located in the PRC. The functional currency for the majority of the Company’s operations is the Renminbi (“RMB”). The Company uses the United States Dollar (“US Dollar” or “US$” or “$”) for financial reporting purposes. The financial statements of the Company have been translated into US dollars in accordance with FASB ASC 830, “Foreign Currency Matters.” | |||||||||||||||||
All asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transactions occurred. Statements of income amounts have been translated using the average exchange rate for the periods presented. Adjustments resulting from the translation of the Company’s financial statements are recorded as other comprehensive income (loss). | |||||||||||||||||
The exchange rates used to translate amounts in RMB into US dollars for the purposes of preparing the financial statements are as follows: | |||||||||||||||||
28-Feb-15 | 31-Aug-14 | ||||||||||||||||
Consolidated balance sheet items, except for stockholders’ equity, as of the periods end | 0.1621 | 0.1625 | |||||||||||||||
For the three months | For the six months | ||||||||||||||||
ended February 28, | ended February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Amounts included in the statements of income, statement of changes in stockholders’ equity and statements of cash flows for the periods | 0.1626 | 0.1636 | 0.1627 | 0.1632 | |||||||||||||
For the three months ended February 28, 2015 and 2014, foreign currency translation adjustments of $(37,777) and $76,490, respectively, have been reported as other comprehensive (loss) income. For the six months ended February 28, 2015 and 2014, foreign currency translation adjustments of $(28,870) and $109,246 have been reported as other comprehensive income. Other comprehensive income of the Company consists entirely of foreign currency translation adjustments. Pursuant to ASC 740-30-25-17, “Exceptions to Comprehensive Recognition of Deferred Income Taxes,” the Company does not recognize deferred U.S. taxes related to the undistributed earnings of its foreign subsidiaries and, accordingly, recognizes no income tax expense or benefit from foreign currency translation adjustments. | |||||||||||||||||
Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain. Hence, such translations should not be construed as representations that the RMB could be converted into US dollars at that rate or any other rate. | |||||||||||||||||
The value of the RMB against the US dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the RMB may materially affect the Company’s financial condition in terms of US dollar reporting. | |||||||||||||||||
REVENUE RECOGNITION | |||||||||||||||||
Revenues are primarily derived from selling fruit wines to contract distributors and retail establishments. The Company’s revenue recognition policies comply with FASB ASC 605 “Revenue Recognition.” The Company recognizes product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. The Company recognizes revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. | |||||||||||||||||
The Company has no product returns or sales discounts and allowances because goods delivered and accepted by customers are normally not returnable. | |||||||||||||||||
The Company recognizes gift sample products as cost of goods sold in compliance with ASC 605-50-S99. As such, when the Company gives a customer a free product, the expense associated with this free product at the time of sale is classified as cost of goods sold. | |||||||||||||||||
SHIPPING COSTS | |||||||||||||||||
Shipping costs incurred by the Company are recorded in selling expenses. Shipping costs for the three months ended February 28, 2015 and 2014 were $320,972 and $125,154, respectively; shipping costs for the six months ended February 28, 2015 and 2014 were $454,812 and $210,148, respectively. | |||||||||||||||||
CASH AND CASH EQUIVALENTS | |||||||||||||||||
The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. | |||||||||||||||||
ACCOUNTS RECEIVABLE | |||||||||||||||||
Accounts receivable are recorded at the contract amount after deduction of trade discounts, allowances, if any, and do not bear interest. The allowance for doubtful accounts, when necessary, is the Company’s best estimate of the amount of probable credit losses of accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. | |||||||||||||||||
Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of February 28, 2015 and August 31, 2014, the Company considers accounts receivable to be fully collectible and has no allowance. For the periods presented, the Company did not write off any accounts receivable as bad debts. | |||||||||||||||||
INVENTORY | |||||||||||||||||
Inventory, comprised principally of bottled wine, is valued at the lower of cost or market value. The value of inventories is determined using the first-in, first-out method. | |||||||||||||||||
The Company periodically estimates an inventory allowance for estimated unmarketable inventories. Inventory amounts are reported net of such allowances, if any. There were no allowances for inventory as of February 28, 2015 and August 31, 2014. | |||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||||||||||
FASB ASC 820, “Fair Value Measurement,” defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. | |||||||||||||||||
FIXED ASSETS | |||||||||||||||||
Fixed assets are recorded at cost, less accumulated depreciation. Cost includes the prices paid to acquire the assets, and any expenditures that substantially increase the asset’s value or extends the useful life of an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred. The estimated useful lives for fixed asset categories are as follows: | |||||||||||||||||
Computers and equipment 3 years | |||||||||||||||||
Motor vehicles 4 years | |||||||||||||||||
Fixture and furnitures 5 years | |||||||||||||||||
IMPAIRMENT OF LONG-LIVED ASSETS | |||||||||||||||||
The Company applies FASB ASC 360, “Property, Plant and Equipment,” which addresses the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company may recognize the impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to those assets. No impairment of long-lived assets was recognized for the periods presented. | |||||||||||||||||
INCOME TAXES | |||||||||||||||||
The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. As of February 28, 2015 and August 31, 2014, the Company has no deferred tax assets or liabilities. | |||||||||||||||||
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. As of February 28, 2015 and August 31, 2014, the Company does not have accruals for uncertain tax positions. | |||||||||||||||||
The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows: | |||||||||||||||||
United States | |||||||||||||||||
The Company is subject to United States tax at graduated rates from 15% to 35%. No provision for income taxes in the United States has been made as the Company had no U.S. taxable income for the three and six months ended February 28, 2015 and 2014 because it is the Company's intention to indefinitely reinvest such earnings in its foreign subsidiaries. If such earnings were distributed, the Company would be subject to additional U.S. income tax expense. Determination of the amount of the unrecognized deferred income tax liability related to these earnings is not practicable. | |||||||||||||||||
PRC | |||||||||||||||||
Changshitong Consulting and its VIE, Fujian Tianfeihong are subject to an Enterprise Income Tax of 25% and file their own tax returns. Consolidated tax returns are not permitted in China. | |||||||||||||||||
BVI | |||||||||||||||||
Fanwei Hengchang is incorporated in the BVI and is governed by the income tax laws of the BVI. According to the current BVI income tax law, the applicable income tax rate for the Company is 0%. | |||||||||||||||||
Hong Kong | |||||||||||||||||
Changshi Tongrong is incorporated in Hong Kong. Pursuant to the income tax laws of Hong Kong, the Company is not subject to tax on non-Hong Kong source income. | |||||||||||||||||
Advertising Costs | |||||||||||||||||
Advertising costs are charged to operations when incurred. For the three months ended February 28, 2015 and 2014, advertising expense was $375,606 and $94,888, respectively. For the six months ended February 28, 2015 and 2014, advertising expense was $530,402 and $135,782, respectively. | |||||||||||||||||
Statutory Reserve Funds | |||||||||||||||||
Pursuant to corporate law of the PRC, a company is required to transfer 10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the company’s registered capital. The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or used to increase registered capital, provided that the remaining reserve balance after use is not less than 25% of registered capital. As of August 31, 2014, the statutory reserves for Fujian Tianfeihong had been fully funded. |
3_RECENTLY_ISSUED_ACCOUNTING_S
3. RECENTLY ISSUED ACCOUNTING STANDARDS | 6 Months Ended |
Feb. 28, 2015 | |
Accounting Changes and Error Corrections [Abstract] | |
3. RECENTLY ISSUED ACCOUNTING STANDARDS | NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS |
In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, with early adoption permitted. This accounting standard update is not expected to have any impact on the Company’s financial statements. | |
In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12). ASU 2014-12 requires that a performance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification (ASC) 718, Compensation—Stock Compensation, as it relates to such awards. ASU 2014-12 is effective for our first quarter of fiscal 2017 with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after the effective date; or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, with the cumulative effect of applying ASU 2014-12 as an adjustment to the opening retained earnings balance as of the beginning of the earliest annual period presented in the financial statements. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements. | |
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Companies are permitted to adopt this new rule following either a full or modified retrospective approach. Early adoption is not permitted. The Company has not yet determined the potential impact of this updated authoritative guidance on its consolidated financial statements. | |
In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, which amends the requirements for reporting discontinued operations. Under ASU 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, this ASU requires additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. The guidance is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements. |
4_FAIR_VALUE_OF_FINANCIAL_INST
4. FAIR VALUE OF FINANCIAL INSTRUMENTS | 6 Months Ended | ||
Feb. 28, 2015 | |||
Fair Value Disclosures [Abstract] | |||
4. FAIR VALUE OF FINANCIAL INSTRUMENTS | NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS | ||
FASB ASC 820, “Fair Value Measurement,” specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy: | |||
Level 1 Inputs - | Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access. | ||
Level 2 Inputs - | Inputs other than the quoted prices in active markets that are observable either directly or indirectly. | ||
Level 3 Inputs - | Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements. | ||
ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. As of February 28, 2015 and August 31, 2014, none of the Company’s assets and liabilities were required to be reported at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, accounts receivable, payables and accrued liabilities, approximate their fair values due to the short term nature of these financial instruments. There were no changes in methods or assumptions during the periods presented. |
5_FIXED_ASSETS
5. FIXED ASSETS | 6 Months Ended | ||||||||
Feb. 28, 2015 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
5. FIXED ASSETS | NOTE 5. FIXED ASSETS | ||||||||
Fixed assets are summarized as follows: | |||||||||
February 28, | August 31, | ||||||||
2015 | 2014 | ||||||||
(Unaudited) | |||||||||
Computers and equipment | $ | 34,216 | $ | 24,618 | |||||
Motor vehicles | 148,138 | 148,504 | |||||||
Fixtures and furniture | 13,844 | 13,878 | |||||||
196,198 | 187,000 | ||||||||
Less: Accumulated depreciation | (162,219 | ) | (138,887 | ) | |||||
Fixed Assets - net | $ | 33,979 | $ | 48,113 | |||||
For the three months ended February 28, 2015 and 2014, depreciation expense was $11,850 and $22,700, respectively. For the six months ended February 28, 2015 and 2014, depreciation expense was $23,761 and $33,260, respectively. |
6_ACCRUED_LIABILITIES_AND_OTHE
6. ACCRUED LIABILITIES AND OTHER PAYABLES | 6 Months Ended | ||||||||
Feb. 28, 2015 | |||||||||
Payables and Accruals [Abstract] | |||||||||
6. ACCRUED LIABILITIES AND OTHER PAYABLES | NOTE 6. ACCRUED LIABILITIES AND OTHER PAYABLES | ||||||||
Accrued liabilities and other payables consisted of the following: | |||||||||
February 28, | August 31, | ||||||||
2015 | 2014 | ||||||||
(Unaudited) | |||||||||
Accrued payroll | $ | 12,040 | $ | 9,250 | |||||
Professional fees | 33,802 | 47,941 | |||||||
Other | 37,416 | 15,790 | |||||||
$ | 83,258 | $ | 72,981 | ||||||
7_LEASES
7. LEASES | 6 Months Ended | ||||||
Feb. 28, 2015 | |||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||
7. LEASES | NOTE 7. LEASES | ||||||
The Company leases office space under an eight-year operating lease from an unrelated third party, expiring on June 30, 2017. This lease has a renewal option and requires the Company to pay the year's rent in advance. | |||||||
The Company leases another office space from an unrelated third party, expiring on December 31, 2016. This lease has a renewal option. This lease requires the Company to pay the total rent in advance for one year from Jan 1, 2015 to December 31, 2015 of RMB 36,000 (US$5,854). The annual rent charge will be increased to RMB 39,600 (US$ 6,439) for the year ended December 31, 2016. | |||||||
The minimum future rentals under this lease as of February 28, 2015 are as follows: | |||||||
Period Ending | |||||||
August 31, | Amount | ||||||
2015 | 54,600 | ||||||
2016 | 65,000 | ||||||
$ | 119,600 | ||||||
Rent expense for the three months ended February 28, 2015 and 2014 was $13,171 and $15,109, respectively, and for the six months ended February 28, 2015 and 2014 was $25,381 and $30,144 respectively. |
8_INCOME_TAXES
8. INCOME TAXES | 6 Months Ended | ||||||||||||||||||
Feb. 28, 2015 | |||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||
8. INCOME TAXES | NOTE 8. INCOME TAXES | ||||||||||||||||||
The provision for income taxes consisted of the following: | |||||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||||
February 28, | February 28, | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
Current | $ | 390,401 | $ | 128,977 | $ | 536,956 | $ | 223,602 | |||||||||||
Deferred | — | — | — | — | |||||||||||||||
$ | 390,401 | $ | 128,977 | $ | 536,956 | $ | 223,602 | ||||||||||||
The Company did not generate any income in the United States or otherwise have any U.S. taxable income. The Company does not believe that it has any U.S. federal income tax liabilities with respect to any transactions that the Company or any of its subsidiaries may have engaged in through February 28, 2015. However, there can be no assurance that the IRS will agree with this position, and therefore the Company ultimately could be liable for U.S. federal income taxes, interest and penalties. (See Note 10) |
9_RELATED_PARTY_TRANSACTIONS
9. RELATED PARTY TRANSACTIONS | 6 Months Ended |
Feb. 28, 2015 | |
Related Party Transactions [Abstract] | |
9. RELATED PARTY TRANSACTIONS | NOTE 9. RELATED PARTY TRANSACTIONS |
The majority stockholder has loaned money to the Company, primarily to meet the non-RMB cash requirements. The loans are non-interest bearing and are due on demand. The balance of $70,502 and $24,339 at February 28, 2015 and August 31, 2014, respectively, represents professional and legal fees incurred in the U.S. paid by this stockholder. The balance is reflected as loans from stockholder on the consolidated balance sheets. |
10_CONTINGENCIES
10. CONTINGENCIES | 6 Months Ended |
Feb. 28, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
10. CONTINGENCIES | NOTE 10. CONTINGENCIES |
The Company did not file its U.S. Federal income tax returns, including, without limitation, information returns on Internal Revenue Service (“IRS”) Form 5471, “Information Return of U.S. Persons with Respect to Certain Foreign Corporations” for the fiscal year ended December 31, 2013. In addition, the Company did not file with the IRS the information report for the year ended December 31, 2013 concerning its interest in foreign bank accounts on Form TDF 90-22.1, “Report of Foreign Bank and Financial Accounts” (“FBAR”). Not complying with the FBAR reporting and recordkeeping requirements will subject the Company to civil penalties up to $10,000 for each of its foreign bank accounts. The Company has not determined the amount of any penalties that may be assessed at this time and believes that penalties, if any, that may be assessed would not be material to the consolidated financial statements. |
11_CONCENTRATION_OF_CREDIT_AND
11. CONCENTRATION OF CREDIT AND BUSINESS RISKS | 6 Months Ended |
Feb. 28, 2015 | |
Risks and Uncertainties [Abstract] | |
11. CONCENTRATION OF CREDIT AND BUSINESS RISKS | NOTE 11. CONCENTRATION OF CREDIT AND BUSINESS RISKS |
Substantially all of the Company’s assets and bank accounts are in banks located in the PRC and are not covered by protection similar to that provided by the FDIC on funds held in United States banks. | |
As of February 28, 2015 and August 31, 2014, no customer accounted for more than 10% of accounts receivable. There were no major customers which accounted for 10% or more of the total net revenue for the three months and six months ended February 28, 2015 and 2014. The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant. Four vendors individually accounted for 32%, 22%, 19% and 10% of purchases for the three months ended February 28, 2015. | |
The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent and effective or that it will continue. | |
Under PRC laws and regulations, the Company’s PRC subsidiary and VIE are restricted in their ability to transfer certain of their net assets to the Company in the form of dividend payments, loans or advances. The restricted net assets of the Company’s PRC subsidiary and VIE amounted to $6,739,373 and $5,236,612 as of February 28, 2015 and August 31, 2014, respectively. | |
In addition, the Company’s operations and revenues are conducted and generated in the PRC; all of the Company’s revenues being earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulations in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars. |
12_CONDENSED_FINANCIAL_INFORMA
12. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY | 6 Months Ended | ||||||||||||||||
Feb. 28, 2015 | |||||||||||||||||
Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||
12. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY | NOTE 12. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY | ||||||||||||||||
Schedule I of Article 5-04 of Regulation S-X requires the condensed financial information of China Tianfeihong Wine, Inc. (“Parent Company”) to be filed when the restricted net assets of consolidated subsidiaries and VIE’s exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of this test, restricted net assets of consolidated subsidiaries and VIEs shall mean that amount of the registrant’s proportionate share of net assets of its consolidated subsidiaries and VIEs (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company in the form of loans, advances or cash dividends without the consent of a third party. The condensed Parent Company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Company’s PRC subsidiary and VIE exceed 25% of the consolidated net assets of the Company. | |||||||||||||||||
The following condensed financial information of the Parent Company includes the balance sheets as of February 28, 2015 and August 31, 2014, and the statements of operations, and cash flows for the three months and the six months ended February 28, 2015 and 2014: | |||||||||||||||||
Condensed Balance Sheets | |||||||||||||||||
28-Feb-15 | August 31, | ||||||||||||||||
2014 | |||||||||||||||||
(Unaudited) | |||||||||||||||||
ASSETS | |||||||||||||||||
Other Receivable from VIE | 1,523,606 | $ | 941,154 | ||||||||||||||
Investment in subsidiaries and VIEs | 5,215,767 | 4,295,458 | |||||||||||||||
TOTAL ASSETS | 6,739,373 | $ | 5,236,612 | ||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
Liabilities | |||||||||||||||||
Accrued expenses and other payables | — | $ | — | ||||||||||||||
Total liabilities | — | — | |||||||||||||||
Stockholders’ equity | |||||||||||||||||
Common stock, $0.0006 par value per share, 80,000,000 shares authorized; 34,396,680 shares issued and outstanding shares issued and outstanding as of February 28, 2015 and August 31, 2014 | 20,638 | 20,638 | |||||||||||||||
Additional paid-in capital | 726,548 | 726,548 | |||||||||||||||
Retained earnings | 5,992,187 | 4,489,426 | |||||||||||||||
Total stockholders’ equity | 6,739,393 | 5,236,612 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 6,739,393 | $ | 5,236,612 | |||||||||||||
Condensed Statements of Operations | |||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||
February 28, | February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Revenues | |||||||||||||||||
Share of earnings from investment in subsidiaries and VIE | $ | 1,076,696 | $ | 437,878 | 1,502,761 | $ | 755,804 | ||||||||||
Operating expenses | |||||||||||||||||
General and administrative | — | — | — | — | |||||||||||||
Net income | $ | 1,076,696 | $ | 437,878 | 1,502,761 | $ | 755,804 | ||||||||||
Condensed Statements of Cash Flows | |||||||||||||||||
For the three months ended February 28, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
Cash flows from operating activities | |||||||||||||||||
Net income | $ | 1,076,696 | $ | 437,878 | |||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||||||||||||
Share of earnings from investment in subsidiaries and VIE | (1,076,696 | ) | (437,878 | ) | |||||||||||||
Net cash (used in) operating activities | — | — | |||||||||||||||
Net increase in cash | — | — | |||||||||||||||
Cash, beginning of year | — | — | |||||||||||||||
Cash, end of year | $ | — | $ | — | |||||||||||||
For the six months ended | |||||||||||||||||
February 28, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
Cash flows from operating activities | |||||||||||||||||
Net income | $ | 1,502,761 | $ | 755,804 | |||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||||||||||||
Share of earnings from investment in subsidiaries and VIE | (1,502,761 | ) | (755,804 | ) | |||||||||||||
Net cash (used in) operating activities | — | — | |||||||||||||||
Net increase in cash | — | — | |||||||||||||||
Cash, beginning of year | — | — | |||||||||||||||
Cash, end of year | $ | — | $ | — | |||||||||||||
Basis of Presentation | |||||||||||||||||
The Company records its investment in its subsidiaries and VIEs under the equity method of accounting. Such investment is presented as “Investment in subsidiaries and VIE” on the condensed balance sheets and shares of the subsidiaries and VIE’s profits are presented as “Share of earnings from investment in subsidiaries and VIE” in the condensed statements of operations. | |||||||||||||||||
Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted. The parent only financial information has been derived from the Company’s consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended | ||||||||||||||||
Feb. 28, 2015 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
Basis of Accounting and Presentation | BASIS OF ACCOUNTING AND PRESENTATION | ||||||||||||||||
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting. The unaudited consolidated financial statements for the three and six months ended February 28, 2015 and 2014 include China Tianfeihong Wine, Inc., Fanwei Hengchang, Changshi Tongrong, Changshitong Consulting and its VIE, Fujian Tianfeihong. All significant intercompany accounts and transactions have been eliminated in consolidation. | |||||||||||||||||
The unaudited interim consolidated financial statements of the Company as of February 28, 2015 and for the three and six months periods ended February 28, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (the “SEC”) which apply to interim financial statements. Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K filed with the SEC. The results of operations for the three and six months ended February 28, 2015 are not necessarily indicative of the results to be expected for future quarters or for the year ending August 31, 2015. | |||||||||||||||||
All consolidated financial statements and notes to the consolidated financial statements are presented in United States dollars (“US Dollar” or “US$” or “$”). | |||||||||||||||||
VARIABLE INTEREST ENTITY | VARIABLE INTEREST ENTITY | ||||||||||||||||
Pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity. | |||||||||||||||||
Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de facto agents, have the unilateral ability to exercise those rights. Fujian Tianfeihong’s actual stockholders do not hold any kick-out rights that affect the consolidation determination. | |||||||||||||||||
Through the VIE agreements disclosed in Note 1, the Company is deemed the primary beneficiary of Fujian Tianfeihong. Accordingly, the results of Fujian Tianfeihong have been included in the accompanying consolidated financial statements. Fujian Tianfeihong has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Fujian Tianfeihong do not have recourse to the Company’s general credit. | |||||||||||||||||
The following financial statement amounts and balances of Fujian Tianfeihong have been included in the accompanying consolidated financial statements. | |||||||||||||||||
28-Feb-15 | 31-Aug-14 | ||||||||||||||||
(Unaudited) | |||||||||||||||||
TOTAL ASSETS(1) | $ | 11,467,054 | $ | 6,175,646 | |||||||||||||
TOTAL LIABILITIES(1) | $ | 4,478,205 | $ | 781,126 | |||||||||||||
-1 | Total assets and liabilities of the VIE are reported net of intercompany balances that have been eliminated with the VIE consolidation. | ||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||
February 28, | February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Revenue | $ | 7,639,171 | $ | 2,882,195 | 10,775,557 | $ | 4,814,573 | ||||||||||
Net income (2) | $ | 1,167,667 | $ | 398,663 | 1,603,796 | $ | 687,211 | ||||||||||
-2 | Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to WFOE. | ||||||||||||||||
For the six months ended February 28, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
Net cash provided by operating activities | $ | 1,552,236 | $ | 1,265,516 | |||||||||||||
Net cash (used in) investing activities | (9,694 | ) | (852 | ) | |||||||||||||
Net cash provided by financing activities | 46,312 | 26,880 | |||||||||||||||
Effect of exchange rate changes on cash | (19,240 | ) | 15,875 | ||||||||||||||
Net increase in cash | 1,569,615 | $$1,307,419 | |||||||||||||||
The Company believes that Changshitong Consulting’s contractual agreements with Fujian Tianfeihong are in compliance with PRC law and are legally enforceable. The stockholders of Fujian Tianfeihong are also the senior management of the Company and therefore the Company believes that they have no current interest in seeking to act contrary to the contractual arrangements. However, Fujian Tianfeihong and its stockholders may fail to take certain actions required for the Company’s business or to follow the Company’s instructions despite their contractual obligations to do so. Furthermore, if Fujian Tianfeihong or its stockholders do not act in the best interests of the Company under the contractual arrangements and any dispute relating to these contractual arrangements remains unresolved, the Company will have to enforce its rights under these contractual arrangements through PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. | |||||||||||||||||
All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. As a result, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements, which may make it difficult to exert effective control over Fujian Tianfeihong, and its ability to conduct the Company’s business may be adversely affected. | |||||||||||||||||
USE OF ESTIMATES | USE OF ESTIMATES | ||||||||||||||||
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain 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 periods. Actual results could differ from those estimates. | |||||||||||||||||
FOREIGN CURRENCY TRANSLATION | FOREIGN CURRENCY TRANSLATION | ||||||||||||||||
Almost all Company assets are located in the PRC. The functional currency for the majority of the Company’s operations is the Renminbi (“RMB”). The Company uses the United States Dollar (“US Dollar” or “US$” or “$”) for financial reporting purposes. The financial statements of the Company have been translated into US dollars in accordance with FASB ASC 830, “Foreign Currency Matters.” | |||||||||||||||||
All asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transactions occurred. Statements of income amounts have been translated using the average exchange rate for the periods presented. Adjustments resulting from the translation of the Company’s financial statements are recorded as other comprehensive income (loss). | |||||||||||||||||
The exchange rates used to translate amounts in RMB into US dollars for the purposes of preparing the financial statements are as follows: | |||||||||||||||||
28-Feb-15 | 31-Aug-14 | ||||||||||||||||
Consolidated balance sheet items, except for stockholders’ equity, as of the periods end | 0.1621 | 0.1625 | |||||||||||||||
For the three months | For the six months | ||||||||||||||||
ended February 28, | ended February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Amounts included in the statements of income, statement of changes in stockholders’ equity and statements of cash flows for the periods | 0.1626 | 0.1636 | 0.1627 | 0.1632 | |||||||||||||
For the three months ended February 28, 2015 and 2014, foreign currency translation adjustments of $(37,777) and $76,490, respectively, have been reported as other comprehensive (loss) income. For the six months ended February 28, 2015 and 2014, foreign currency translation adjustments of $(28,870) and $109,246 have been reported as other comprehensive income. Other comprehensive income of the Company consists entirely of foreign currency translation adjustments. Pursuant to ASC 740-30-25-17, “Exceptions to Comprehensive Recognition of Deferred Income Taxes,” the Company does not recognize deferred U.S. taxes related to the undistributed earnings of its foreign subsidiaries and, accordingly, recognizes no income tax expense or benefit from foreign currency translation adjustments. | |||||||||||||||||
Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain. Hence, such translations should not be construed as representations that the RMB could be converted into US dollars at that rate or any other rate. | |||||||||||||||||
The value of the RMB against the US dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the RMB may materially affect the Company’s financial condition in terms of US dollar reporting. | |||||||||||||||||
REVENUE RECOGNITION | REVENUE RECOGNITION | ||||||||||||||||
Revenues are primarily derived from selling fruit wines to contract distributors and retail establishments. The Company’s revenue recognition policies comply with FASB ASC 605 “Revenue Recognition.” The Company recognizes product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. The Company recognizes revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. | |||||||||||||||||
The Company has no product returns or sales discounts and allowances because goods delivered and accepted by customers are normally not returnable. | |||||||||||||||||
The Company recognizes gift sample products as cost of goods sold in compliance with ASC 605-50-S99. As such, when the Company gives a customer a free product, the expense associated with this free product at the time of sale is classified as cost of goods sold. | |||||||||||||||||
SHIPPING COSTS | SHIPPING COSTS | ||||||||||||||||
Shipping costs incurred by the Company are recorded in selling expenses. Shipping costs for the three months ended February 28, 2015 and 2014 were $320,972 and $125,154, respectively; shipping costs for the six months ended February 28, 2015 and 2014 were $454,812 and $210,148, respectively. | |||||||||||||||||
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS | ||||||||||||||||
The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. | |||||||||||||||||
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE | ||||||||||||||||
Accounts receivable are recorded at the contract amount after deduction of trade discounts, allowances, if any, and do not bear interest. The allowance for doubtful accounts, when necessary, is the Company’s best estimate of the amount of probable credit losses of accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. | |||||||||||||||||
Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of February 28, 2015 and August 31, 2014, the Company considers accounts receivable to be fully collectible and has no allowance. For the periods presented, the Company did not write off any accounts receivable as bad debts. | |||||||||||||||||
INVENTORY | INVENTORY | ||||||||||||||||
Inventory, comprised principally of bottled wine, is valued at the lower of cost or market value. The value of inventories is determined using the first-in, first-out method. | |||||||||||||||||
The Company periodically estimates an inventory allowance for estimated unmarketable inventories. Inventory amounts are reported net of such allowances, if any. There were no allowances for inventory as of February 28, 2015 and August 31, 2014. | |||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS | ||||||||||||||||
FASB ASC 820, “Fair Value Measurement,” defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. | |||||||||||||||||
FIXED ASSETS | FIXED ASSETS | ||||||||||||||||
Fixed assets are recorded at cost, less accumulated depreciation. Cost includes the prices paid to acquire the assets, and any expenditures that substantially increase the asset’s value or extends the useful life of an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred. The estimated useful lives for fixed asset categories are as follows: | |||||||||||||||||
Computers and equipment 3 years | |||||||||||||||||
Motor vehicles 4 years | |||||||||||||||||
Fixture and furnitures 5 years | |||||||||||||||||
Impairment of Long-Lived Assets | IMPAIRMENT OF LONG-LIVED ASSETS | ||||||||||||||||
The Company applies FASB ASC 360, “Property, Plant and Equipment,” which addresses the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company may recognize the impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to those assets. No impairment of long-lived assets was recognized for the periods presented. | |||||||||||||||||
INCOME TAXES | INCOME TAXES | ||||||||||||||||
The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. As of February 28, 2015 and August 31, 2014, the Company has no deferred tax assets or liabilities. | |||||||||||||||||
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. As of February 28, 2015 and August 31, 2014, the Company does not have accruals for uncertain tax positions. | |||||||||||||||||
The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows: | |||||||||||||||||
United States | |||||||||||||||||
The Company is subject to United States tax at graduated rates from 15% to 35%. No provision for income taxes in the United States has been made as the Company had no U.S. taxable income for the three and six months ended February 28, 2015 and 2014 because it is the Company's intention to indefinitely reinvest such earnings in its foreign subsidiaries. If such earnings were distributed, the Company would be subject to additional U.S. income tax expense. Determination of the amount of the unrecognized deferred income tax liability related to these earnings is not practicable. | |||||||||||||||||
PRC | |||||||||||||||||
Changshitong Consulting and its VIE, Fujian Tianfeihong are subject to an Enterprise Income Tax of 25% and file their own tax returns. Consolidated tax returns are not permitted in China. | |||||||||||||||||
BVI | |||||||||||||||||
Fanwei Hengchang is incorporated in the BVI and is governed by the income tax laws of the BVI. According to the current BVI income tax law, the applicable income tax rate for the Company is 0%. | |||||||||||||||||
Hong Kong | |||||||||||||||||
Changshi Tongrong is incorporated in Hong Kong. Pursuant to the income tax laws of Hong Kong, the Company is not subject to tax on non-Hong Kong source income. | |||||||||||||||||
Advertising Costs | Advertising Costs | ||||||||||||||||
Advertising costs are charged to operations when incurred. For the three months ended February 28, 2015 and 2014, advertising expense was $375,606 and $94,888, respectively. For the six months ended February 28, 2015 and 2014, advertising expense was $530,402 and $135,782, respectively. | |||||||||||||||||
Statutory Reserve Funds | Statutory Reserve Funds | ||||||||||||||||
Pursuant to corporate law of the PRC, a company is required to transfer 10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the company’s registered capital. The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or used to increase registered capital, provided that the remaining reserve balance after use is not less than 25% of registered capital. As of August 31, 2014, the statutory reserves for Fujian Tianfeihong had been fully funded. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended | ||||||||||||||||
Feb. 28, 2015 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
Variable Interest Entity | 28-Feb-15 | 31-Aug-14 | |||||||||||||||
(Unaudited) | |||||||||||||||||
TOTAL ASSETS(1) | $ | 11,467,054 | $ | 6,175,646 | |||||||||||||
TOTAL LIABILITIES(1) | $ | 4,478,205 | $ | 781,126 | |||||||||||||
-1 | Total assets and liabilities of the VIE are reported net of intercompany balances that have been eliminated with the VIE consolidation. | ||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||
February 28, | February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Revenue | $ | 7,639,171 | $ | 2,882,195 | 10,775,557 | $ | 4,814,573 | ||||||||||
Net income (2) | $ | 1,167,667 | $ | 398,663 | 1,603,796 | $ | 687,211 | ||||||||||
-2 | Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to WFOE. | ||||||||||||||||
For the six months ended February 28, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
Net cash provided by operating activities | $ | 1,552,236 | $ | 1,265,516 | |||||||||||||
Net cash (used in) investing activities | (9,694 | ) | (852 | ) | |||||||||||||
Net cash provided by financing activities | 46,312 | 26,880 | |||||||||||||||
Effect of exchange rate changes on cash | (19,240 | ) | 15,875 | ||||||||||||||
Net increase in cash | 1,569,615 | $$1,307,419 | |||||||||||||||
Foreign Currency Translation | 28-Feb-15 | 31-Aug-14 | |||||||||||||||
Consolidated balance sheet items, except for stockholders’ equity, as of the periods end | 0.1621 | 0.1625 | |||||||||||||||
For the three months | For the six months | ||||||||||||||||
ended February 28, | ended February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Amounts included in the statements of income, statement of changes in stockholders’ equity and statements of cash flows for the periods | 0.1626 | 0.1636 | 0.1627 | 0.1632 |
5_FIXED_ASSETS_Tables
5. FIXED ASSETS (Tables) | 6 Months Ended | ||||||||
Feb. 28, 2015 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Fixed Assets | February 28, | August 31, | |||||||
2015 | 2014 | ||||||||
(Unaudited) | |||||||||
Computers and equipment | $ | 34,216 | $ | 24,618 | |||||
Motor vehicles | 148,138 | 148,504 | |||||||
Fixtures and furniture | 13,844 | 13,878 | |||||||
196,198 | 187,000 | ||||||||
Less: Accumulated depreciation | (162,219 | ) | (138,887 | ) | |||||
Fixed Assets - net | $ | 33,979 | $ | 48,113 |
6_ACCRUED_LIABILITIES_AND_OTHE1
6. ACCRUED LIABILITIES AND OTHER PAYABLES (Tables) | 6 Months Ended | ||||||||
Feb. 28, 2015 | |||||||||
Payables and Accruals [Abstract] | |||||||||
Accrued Liabilities and Other Payables | February 28, | August 31, | |||||||
2015 | 2014 | ||||||||
(Unaudited) | |||||||||
Accrued payroll | $ | 12,040 | $ | 9,250 | |||||
Professional fees | 33,802 | 47,941 | |||||||
Other | 37,416 | 15,790 | |||||||
$ | 83,258 | $ | 72,981 |
7_LEASES_Tables
7. LEASES (Tables) | 6 Months Ended | ||||||
Feb. 28, 2015 | |||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||
Leases | Period Ending | ||||||
August 31, | Amount | ||||||
2015 | 54,600 | ||||||
2016 | 65,000 | ||||||
$ | 119,600 |
8_INCOME_TAXES_Tables
8. INCOME TAXES (Tables) | 6 Months Ended | ||||||||||||||||||
Feb. 28, 2015 | |||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||
Income Taxes | For the three months ended | For the six months ended | |||||||||||||||||
February 28, | February 28, | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
Current | $ | 390,401 | $ | 128,977 | $ | 536,956 | $ | 223,602 | |||||||||||
Deferred | — | — | — | — | |||||||||||||||
$ | 390,401 | $ | 128,977 | $ | 536,956 | $ | 223,602 |
12_CONDENSED_FINANCIAL_INFORMA1
12. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Tables) | 6 Months Ended | ||||||||||||||||
Feb. 28, 2015 | |||||||||||||||||
Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||
Condensed Financial Information of the Parent Company | 28-Feb-15 | August 31, | |||||||||||||||
2014 | |||||||||||||||||
(Unaudited) | |||||||||||||||||
ASSETS | |||||||||||||||||
Other Receivable from VIE | 1,523,606 | $ | 941,154 | ||||||||||||||
Investment in subsidiaries and VIEs | 5,215,767 | 4,295,458 | |||||||||||||||
TOTAL ASSETS | 6,739,373 | $ | 5,236,612 | ||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
Liabilities | |||||||||||||||||
Accrued expenses and other payables | — | $ | — | ||||||||||||||
Total liabilities | — | — | |||||||||||||||
Stockholders’ equity | |||||||||||||||||
Common stock, $0.0006 par value per share, 80,000,000 shares authorized; 34,396,680 shares issued and outstanding shares issued and outstanding as of February 28, 2015 and August 31, 2014 | 20,638 | 20,638 | |||||||||||||||
Additional paid-in capital | 726,548 | 726,548 | |||||||||||||||
Retained earnings | 5,992,187 | 4,489,426 | |||||||||||||||
Total stockholders’ equity | 6,739,393 | 5,236,612 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 6,739,393 | $ | 5,236,612 | |||||||||||||
Condensed Statements of Operations | |||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||
February 28, | February 28, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Revenues | |||||||||||||||||
Share of earnings from investment in subsidiaries and VIE | $ | 1,076,696 | $ | 437,878 | 1,502,761 | $ | 755,804 | ||||||||||
Operating expenses | |||||||||||||||||
General and administrative | — | — | — | — | |||||||||||||
Net income | $ | 1,076,696 | $ | 437,878 | 1,502,761 | $ | 755,804 | ||||||||||
Condensed Statements of Cash Flows | |||||||||||||||||
For the three months ended February 28, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
Cash flows from operating activities | |||||||||||||||||
Net income | $ | 1,076,696 | $ | 437,878 | |||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||||||||||||
Share of earnings from investment in subsidiaries and VIE | (1,076,696 | ) | (437,878 | ) | |||||||||||||
Net cash (used in) operating activities | — | — | |||||||||||||||
Net increase in cash | — | — | |||||||||||||||
Cash, beginning of year | — | — | |||||||||||||||
Cash, end of year | $ | — | $ | — | |||||||||||||
For the six months ended | |||||||||||||||||
February 28, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
Cash flows from operating activities | |||||||||||||||||
Net income | $ | 1,502,761 | $ | 755,804 | |||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||||||||||||
Share of earnings from investment in subsidiaries and VIE | (1,502,761 | ) | (755,804 | ) | |||||||||||||
Net cash (used in) operating activities | — | — | |||||||||||||||
Net increase in cash | — | — | |||||||||||||||
Cash, beginning of year | — | — | |||||||||||||||
Cash, end of year | $ | — | $ | — |
1_ORGANIZATION_Details_Narrati
1. ORGANIZATION (Details Narrative) (USD $) | 12 Months Ended | |||
Aug. 31, 2014 | Feb. 28, 2015 | Aug. 12, 2013 | Aug. 11, 2013 | |
Common Stock, Shares Outstanding | 34,396,680 | 34,396,680 | 2,396,680 | 14,380,266 |
Common Stock, Shares Authorized | 80,000,000 | 80,000,000 | 80,000,000 | |
Shares Issued for Acquisition | 32,000,000 | |||
Percentage of Ownership after Transaction | 93.03% | |||
Percentage of Net Profit Paid for Consulting Services | 95.00% | |||
United States of America, Dollars [Member] | ||||
Payment for Consulting Services | 1,627 | |||
China, Yuan Renminbi [Member] | ||||
Payment for Consulting Services | 10,000 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Variable Interest Entity (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||||||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | Aug. 31, 2014 | ||||||
TOTAL ASSETS | $11,467,424 | $11,467,424 | $6,176,037 | |||||||
Revenue | 7,639,171 | 2,882,195 | 10,775,557 | 4,814,573 | ||||||
Net income | 1,171,211 | 401,962 | 1,610,863 | 687,147 | ||||||
Net cash provided by operating activities | 1,561,928 | 1,257,497 | ||||||||
Net cash (used in) investing activities | -9,694 | -852 | ||||||||
Net cash provided by financing activities | 46,312 | 26,880 | ||||||||
Effect of exchange rate changes on cash | -28,952 | 24,394 | ||||||||
Net increase in cash | 1,569,594 | 1,307,919 | ||||||||
Variable Interest Entity, Primary Beneficiary, Aggregated Disclosure [Member] | ||||||||||
TOTAL ASSETS | 11,467,054 | [1] | 11,467,054 | [1] | 6,175,646 | [1] | ||||
TOTAL LIABILITIES | 4,478,205 | [1] | 4,478,205 | [1] | 781,126 | [1] | ||||
Revenue | 7,639,171 | 2,882,195 | 10,775,557 | 4,814,573 | ||||||
Net income | 1,167,667 | [2] | 398,663 | [2] | 1,603,796 | [2] | 687,211 | [2] | ||
Net cash provided by operating activities | 1,552,236 | 1,265,516 | ||||||||
Net cash (used in) investing activities | -9,694 | -852 | ||||||||
Net cash provided by financing activities | 46,312 | 26,880 | ||||||||
Effect of exchange rate changes on cash | -19,240 | 15,875 | ||||||||
Net increase in cash | $1,569,615 | $1,307,419 | ||||||||
[1] | (1) Total assets and liabilities of the VIE are reported net of intercompany balances that have been eliminated with the VIE consolidation. | |||||||||
[2] | (2) Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to WFOE. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Foreign Currency Translation (Details) | 3 Months Ended | 6 Months Ended | |||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | Aug. 31, 2014 | |
Accounting Policies [Abstract] | |||||
Consolidated balance sheet items, except for stockholders equity, as of the periods end | 0.1621 | 0.1621 | 0.1625 | ||
Amounts included in the statements of income, statement of changes in stockholders equity and statements of cash flows for the periods | 16.26% | 16.36% | 16.27% | 16.32% |
2_SUMMARY_OF_SIGNIFICANT_ACCOU5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | |
Foreign Currency Translation Adjustments | $76,490 | ($37,777) | $109,246 | ($28,870) |
Shipping Costs | 125,154 | 320,972 | 210,148 | 454,812 |
Advertising Expense | $94,888 | $375,606 | $135,782 | $530,402 |
Internal Revenue Service (IRS) [Member] | ||||
Income Tax, Graduated Rate, Minimum | 15.00% | |||
Income Tax, Graduated Rate, Maximum | 35.00% | |||
PRC | ||||
Income Tax Rate | 25.00% | |||
BVI | ||||
Income Tax Rate | 0.00% | |||
Computers and Equipment [Member] | ||||
Estimated Useful Lives | p3y | |||
Motor Vehicles [Member] | ||||
Estimated Useful Lives | p4y | |||
Furniture and Fixtures [Member] | ||||
Estimated Useful Lives | p5y |
5_FIXED_ASSETS_Fixed_Assets_De
5. FIXED ASSETS - Fixed Assets (Details) (USD $) | Feb. 28, 2015 | Aug. 31, 2014 |
Fixed Assets | $196,198 | $187,000 |
Less: Accumulated depreciation | -162,219 | -138,887 |
Fixed Assets, Net | 33,979 | 48,113 |
Computers and equipment | ||
Fixed Assets | 34,216 | 24,618 |
Motor Vehicles | ||
Fixed Assets | 148,138 | 148,504 |
Fixtures and Furniture | ||
Fixed Assets | $13,844 | $13,878 |
5_FIXED_ASSETS_Details_Narrati
5. FIXED ASSETS (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation Expense | $11,850 | $22,700 | $23,761 | $33,260 |
6_ACCRUED_LIABILITIES_AND_OTHE2
6. ACCRUED LIABILITIES AND OTHER PAYABLES - Accrued Liabilities and Other Payables (Details) (USD $) | Feb. 28, 2015 | Aug. 31, 2014 |
Payables and Accruals [Abstract] | ||
Accrued payroll | $12,040 | $9,250 |
Professional fees | 33,802 | 47,941 |
Other | 37,416 | 15,790 |
Accrued liabilities and other payables | $83,258 | $72,981 |
7_LEASES_Leases_Details
7. LEASES - Leases (Details) (USD $) | Feb. 28, 2015 |
Commitments and Contingencies Disclosure [Abstract] | |
2015 | $54,600 |
2016 | 65,000 |
Future Minimum Lease Payments Due | $119,600 |
7_LEASES_Details_Narrative
7. LEASES (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | Dec. 31, 2016 | Dec. 31, 2015 | |
Rent Expense | $13,171 | $15,109 | $25,381 | $30,144 | ||
United States of America, Dollars [Member] | ||||||
Advance Lease Payments | 6,439 | 5,854 | ||||
China, Yuan Renminbi [Member] | ||||||
Advance Lease Payments | $39,600 | $36,000 |
8_INCOME_TAXES_Income_Taxes_De
8. INCOME TAXES - Income Taxes (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | |
Income Tax Disclosure [Abstract] | ||||
Current | $390,401 | $128,977 | $536,956 | $223,602 |
Deferred | ||||
Income Taxes | $390,401 | $128,977 | $536,956 | $223,602 |
9_RELATED_PARTY_TRANSACTIONS_D
9. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | Feb. 28, 2015 | Aug. 31, 2014 |
Related Party Transactions [Abstract] | ||
Due to Related Party | $70,502 | $24,339 |
10_CONTINGENCIES_Details_Narra
10. CONTINGENCIES (Details Narrative) (USD $) | Feb. 28, 2015 |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | $10,000 |
11_CONCENTRATION_OF_CREDIT_AND1
11. CONCENTRATION OF CREDIT AND BUSINESS RISKS (Details Narrative) (USD $) | 6 Months Ended | |
Feb. 28, 2015 | Feb. 28, 2014 | |
Risks and Uncertainties [Abstract] | ||
Variable Interest Entity | $6,739,373 | $5,236,612 |
12_CONDENSED_FINANCIAL_INFORMA2
12. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY - Condensed Financial Information of the Parent Company (Details) (USD $) | 3 Months Ended | 6 Months Ended | |||
Feb. 28, 2015 | Feb. 28, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | Aug. 31, 2014 | |
ASSETS | |||||
TOTAL ASSETS | $11,467,424 | $11,467,424 | $6,176,037 | ||
Stockholders equity | |||||
Common stock, $0.0006 par value per share, 80,000,000 shares authorized; 34,396,680 shares issued and outstanding shares issued and outstanding as of February 28, 2015 and August 31, 2014 | 20,638 | 20,638 | 20,638 | ||
Additional paid-in capital | 726,548 | 726,548 | 726,548 | ||
Retained earnings | 5,395,991 | 5,395,991 | 3,865,318 | ||
Total stockholders equity | 6,959,215 | 6,959,215 | 5,377,222 | ||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | 11,467,424 | 11,467,424 | 6,176,037 | ||
Operating expenses | |||||
General and administrative | 121,674 | 154,162 | 194,599 | 201,435 | |
Cash flows from operating activities | |||||
Net income | 1,171,211 | 401,962 | 1,610,863 | 687,147 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||
Net cash (used in) operating activities | 1,561,928 | 1,257,497 | |||
Cash, beginning | 5,229,261 | 3,994,502 | |||
Cash, end | 6,798,855 | 5,302,421 | 6,798,855 | 5,302,421 | |
Parent Company | |||||
ASSETS | |||||
Other Receivable from VIE | 1,523,606 | 1,523,606 | 941,154 | ||
Investment in subsidiaries and VIEs | 5,215,767 | 5,215,767 | 4,295,458 | ||
TOTAL ASSETS | 6,739,373 | 6,739,373 | 5,236,612 | ||
LIABILITIES AND STOCKHOLDERS EQUITY | |||||
Accrued expenses and other payables | |||||
Total liabilities | |||||
Stockholders equity | |||||
Common stock, $0.0006 par value per share, 80,000,000 shares authorized; 34,396,680 shares issued and outstanding shares issued and outstanding as of February 28, 2015 and August 31, 2014 | 20,638 | 20,638 | 20,638 | ||
Additional paid-in capital | 726,548 | 726,548 | 726,548 | ||
Retained earnings | 5,992,187 | 5,992,187 | 4,489,426 | ||
Total stockholders equity | 6,739,393 | 6,739,393 | 5,236,612 | ||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | 6,739,393 | 6,739,393 | 5,236,612 | ||
Revenues | |||||
Share of earnings from investment in subsidiaries and VIE | 1,076,696 | 437,878 | 1,502,761 | 755,804 | |
Operating expenses | |||||
General and administrative | |||||
Cash flows from operating activities | |||||
Net income | 1,076,696 | 437,878 | 1,502,761 | 755,804 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||
Net cash (used in) operating activities | |||||
Net increase in cash | |||||
Cash, beginning | |||||
Cash, end |