| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Text Block] | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with the instructions to Form 10-Q of the SEC. The financial information has not been audited and should not be relied upon to the same extent as audited financial statements. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles (the “GAAP”) have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and related notes contained in the Form 10-K for the year ended April 30, 2015. The Company’s unaudited condensed consolidated financial statements included the financial statements of its wholly-owned subsidiaries, Dao Sheng and Joymain International Intellectual Property Limited. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of operations for the three months ended July 31, 2015 are not necessarily indicative of the results of operations to be expected for the full fiscal year and are presented in US dollars. The condensed consolidated balance sheet as of April 30, 2015 contained herein has been derived from the audited consolidated financial statements, but do not include all disclosures required by GAAP.
Going Concern.
The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception and an accumulated deficit of $14,529,058
as of July 31, 2015 and further losses are anticipated in the development of its business, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and either loans from its major stockholder and or the sale of common stock.
The Company expects to depend on outside capital for its future business developments. Such outside capital will include proceeds from the issuance of equity securities and may include commercial borrowing. There can be no assurance that capital will be available as necessary to meet these development costs or, if the capital is available, that it will be on terms acceptable to the Company. The Company has a registration statement on Form S-1, effective on August 1, 2014, pursuant to which the Company planned to raise up to $12
million in equity. The registration statement expired on November 28, 2014 and the Company raised $10,150
in the offering.
The issuances of additional equity securities by the Company may result in a significant dilution in the equity interests of its current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. However, there can be no assurance that these arrangements will be sufficient to fund its ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time. There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all. In the event we are unable to continue as a going concern, we may elect or be required to seek protection from our creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
Cash and Cash Equivalents.
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. The Company maintains cash and cash equivalents with a financial institution in the U.S. Cash and cash equivalents consisted of cash and money market accounts at July 31, 2015. Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. As of July 31, 2015 and April 30, 2015, the Company had approximately $732,000
and $629,000
in excess of the federally-insured limits, respectively. The Company has not experienced losses on these accounts as of the date of this report.
Use of Estimates and Assumptions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In management’s opinion, all adjustments necessary for a fair statement of the results for the interim periods have been made, and all adjustments are of a normal recurring nature.
Inventories
Inventories, consisting of the Company’s Yoluxey products, are stated at the lower of cost or market (estimated net realizable value) utilizing the weighted average method. An allowance is established when management determines that certain inventories may not be saleable. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the market value. These reserves are recorded based on estimates. The Company works with its vendor and customer to arrange the drop shipments for its inventories and the inventories are shipped directly to the ports designated by the Company’s customer from the manufacture factory without going through the Company’s warehouse to conserve shipping costs. As of July 31, 2015 and April 30, 2015, the Company had approximately $1,197,000
and $0
inventories on hand and or in transit (products were in transit and have not yet reached the customer’s point of destination). There is no reserve for obsolete or slow-moving inventories necessary as of July 31, 2015 and April 30, 2015, respectively.
Advance to Suppliers The Company periodically makes advances to vendors for purchases of products for resale, and records theses purchases as advance to suppliers.
Marketable Securities. Marketable securities consist of trading and available-for sale securities. Trading securities are bought and held principally for the purpose of selling them in the near term. Available-for-sale securities are not classified as either trading securities or as held-to-maturity securities. Unrealized holding gains and loss for trading securities are included in earnings. Unrealized holding gains and loss for available-for-sale securities are excluded from earnings and reported in other comprehensive income until realized.
Fair Value of Financial Instruments.
The Company adopted ASC 820,
Fair Value Measurements and Disclosure ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1:
Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2:
Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3:
Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. The following table sets forth by level within the fair value hierarchy of the Company’s financial assets that were accounted for at fair value on a recurring basis as of July 31, 2015 and April 30, 2015:
July 31, 2015
April 30, 2015
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Marketable securities $
257,811
$
—
$
—
$
257,811
$
359,857
$
—
$
—
$
359,857
Total assets at fair value $
257,811
$
—
$
—
$
257,811
$
359,857
$
—
$
—
$
359,857
The carrying values of inventories, prepaid expenses, advance to suppliers, accounts payables, due to related parties, advance from customer and other payables approximate their fair values due to the short maturities of these instruments.
Stock-based Compensation. Stock-based compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC Topic 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The Financial Accounting Standards Board (“FASB”) also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company records compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated, based on the then current fair value, at each subsequent reporting date. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Income Taxes. The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce the deferred tax assets to an amount that it is more likely than not be realized. We apply the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our consolidated financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of July 31, 2015, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
Basic and Diluted Loss Per Share.
The Company computes loss per share in accordance with ASC 260,
Earnings per Share
Fiscal Periods. The Company's fiscal year end is April 30.
Revenue Recognition Pursuant to the guidance of ASC Topic 605, the Company recognizes revenue from product sales to its customers when: (1) title and risk of loss are transferred (in general, these conditions occur at either point of shipment or point of destination, depending on the terms of sale); (2) persuasive evidence of an arrangement exists; (3) the Company has no continuing obligations to the customer; and (4) collection of the related accounts receivable is reasonably assured.
Related Parties. Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of the Company’s principal owners and management, and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to the related party.
Advance from Customers The Company requires its customer to make payments prior to the products are shipped. Any payments received prior to the products are shipped to the customer’s point of destination and such advances received are recorded as advance from customers.
Foreign Currency Translation. The reporting currency of the Company is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s subsidiaries is the Hong Kong Dollar. For the subsidiaries, whose functional currencies are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. During the three months ended July 31, 2015, the Company’s subsidiaries have minimal assets or liabilities and they did not have any business activities. There was no cumulative translation adjustment and no effect of exchange rate changes on cash as of July 31, 2015 and April 30, 2015 and for the three months ended July 31, 2015 and 2014.
Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and marketable securities. We place our cash with high credit quality financial institutions in the United States. The Company has not experienced any losses in such accounts through July 31, 2015. All of the Company’s sales are to one customer whose ability to pay is dependent upon the industry economics prevailing in these areas; however, the Company believes that the concentration of credit risk with respect to sales is limited due to the requirements for the customer to make payments prior to shipments. The Company also perform ongoing credit evaluations of its customer to help further reduce potential credit risk. However, if the Company is not able to increase the number of customers and loses its sole customer, there will be significant risks for the Company to continue to generate revenue.
Recent Accounting Pronouncements.
In July 2015, The FASB has issued Accounting Standards Update (ASU) No. 2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory. There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows. |
