KINGLY CHATEAU CORPORATION
(A DEVELOPMENT STAGE COMPANY)
October 31, 2012
Notes to the Financial Statements
(Unaudited)
NOTE 1 - ORGANIZATION AND OPERATIONS
Kingly Chateau Corporation, a development stage company, (the “Company”), was incorporated on March 28, 2011 under the laws of the State of Nevada. The Company has been engaged in organizational efforts and obtaining initial financing, since its inception. The Company was formed to pursue a business combination. The business purpose of the Company is to seek the acquisition of or merger with, an existing company.
The Company, in addition to seeking synergistic targets for acquisition, intends to implement its plan and acquire assets of operating companies or individuals in the wholesale, retail, internet, distribution and manufacturing markets, i.e. developing sales opportunities and revenues from the alcoholic beverage (mainly wine) industry. The following have been identified as potential markets that we may pursue:
| - | Wholesale sales and distribution |
| Internet-based sales and brokering |
| Manufacturing (bottling) or private labeling |
In addition to its Services, the Company is also planning to expand its footprint in the Asia via a mergers and acquisitions strategy of like or synergistic companies. The Company will also seek individuals critical to executing our plan and intends to engage their services in exchange (in part) for Company shares. In this way, the Company will use its initial offices to serve as a platform for a co-operative structure to expand in Hong Kong, Vietnam, Singapore, Thailand, the Philippines and Malaysia (the “Growth Markets). In additional to the aforesaid countries, the Company may further expand into other countries (collectively, the “Emerging Markets).
Propelled by the influx of PRC enterprises into the local and international capital market, the Company plans to serve the Greater China Region with expansion into the Growth Markets and Emerging Markets.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements of the Company for the year ended April 30, 2012 and notes thereto contained in the Company’s Annual Report on Form 10-K as filed with the SEC on June 29, 2012.
Development stage company
The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities.
Use of estimates
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 and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Due to the limited level of operations, the Company has not had to make material assumptions or estimates other than the assumption that the Company is a going concern.
Fair value of financial instrument
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1 | | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| | | |
| Level 2 | | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| | | |
| Level 3 | | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not however, practical to determine the fair value of advances from stockholders due to their related party nature.
Fiscal year-end
The Company elected April 30th as its fiscal year-end date.
Cash equivalents
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Revenue recognition
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Commitments and contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Income taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 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 Section 740-10-25, 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 should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Net loss per common share
Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding for the six months ended October 31, 2012.
Cash flows reporting
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently issued accounting pronouncements
FASB Accounting Standards Update No. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.
The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.
FASB Accounting Standards Update No. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.
The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.
FASB Accounting Standards Update No. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: De-recognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.
The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.
FASB Accounting Standards Update No. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.
FASB Accounting Standards Update No. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-12 “Comprehensive Income: Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). This Update is a deferral of the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. FASB is to going to reassess the costs and benefits of those provisions in ASU 2011-05 related to reclassifications out of accumulated other comprehensive income. Due to the time required to properly make such a reassessment and to evaluate alternative presentation formats, the FASB decided that it is necessary to reinstate the requirements for the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.
Other Recently Issued, but not yet Effective Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying financial statements, the Company had a deficit accumulated during the development stage of $114,476 at October 31, 2012.
While the Company is attempting to commence operations and generate revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
Business Consulting Agreement
| 1) | On September 30, 2011 (the “Effective Date”), the Company entered into a business consulting agreement (the “Consulting Agreement”) with Manila Call Solutions, Ltd. (“Consultant”), a Turks and Caicos Company. |
Under the terms of the Consulting Agreement, the Company engaged Consultant to provide general business and financial consulting services as well as the marketing and management of sales and marketing staff, and their travel expenses into and thoughout, but not limited to Hong Kong, China, Phillippines, Malaysia, and Korea.
The term of this Agreement shall be one year from the effective date hereof with automatic annual renewal unless otherwise stated in writing 60 days prior to effective date.
The Company shall pay a one-time consulting fee of $7,500.
| (iv) | Termination of the Agreement |
The Company may terminate this agreement with 60 days written notice to consultant.
The Company did not pay any consulting fees to the Consultant, but had issued 750,000 shares of its common stock as a final payment for the arrears owed on August 1, 2012.
| 2) | On September 30, 2011 (the “Effective Date”), the Company entered into a business consulting agreement (the “Consulting Agreement”) with Millhouse SA (“Consultant”), a BVI Company. |
Under the terms of the Consulting Agreement, the Company engaged Consultant to provide general business and financial consulting services as well as the marketing and management of sales and marketing staff, and their travel expenses into and thoughout, but not limited to Hong Kong, China, Phillippines, Malaysia, and Korea.
The term of this Agreement shall be one year from the effective date hereof with automatic annual renewal unless otherwise stated in writing 60 days prior to effective date.
The Company shall pay a one-time consulting fee of $5,000.
| (viii) | Termination of the Agreement |
The Company may terminate this agreement with 60 days written notice to consultant.
The Company did not pay any consulting fees to the Consultant, but had issued 500,000 shares of its common stock as a final payment for the arrears owed on August 1, 2012.
| 3) | On September 30, 2011 (the “Effective Date”), the Company entered into a business consulting agreement (the “Consulting Agreement”) with Bolt Tours and Travel International (“Consultant”), a BVI Company. |
Under the terms of the Consulting Agreement, the Company engaged Consultant to provide general business and financial consulting services as well as the marketing and management of sales and marketing staff, and their travel expenses into and thoughout, but not limited to Hong Kong, China, Phillippines, Malaysia, and Korea.
The term of this Agreement shall be one year from the effective date hereof with automatic annual renewal unless otherwise stated in writing 60 days prior to effective date.
The Company shall pay a one-time consulting fee of $6,000.
| (xii) | Termination of the Agreement |
The Company may terminate this agreement with 60 days written notice to consultant.
The Company did not pay any consulting fees to the Consultant, but had issued 600,000 shares of its common stock as a final payment for the arrears owed on August 1, 2012.
| 4) | On September 30, 2011 (the “Effective Date”), the Company entered into a business consulting agreement (the “Consulting Agreement”) with Asia Data Systems Limited (“Consultant”), a Turks and Caicos Company. |
| (xiii) | Nature of Services |
Under the terms of the Consulting Agreement, the Company engaged Consultant to provide general business and financial consulting services as well as the marketing and management of sales and marketing staff, and their travel expenses into and thoughout, but not limited to Hong Kong, China, Phillippines, Malaysia, and Korea.
The term of this Agreement shall be one year from the effective date hereof with automatic annual renewal unless otherwise stated in writing 60 days prior to effective date.
The Company shall pay a one-time consulting fee of $7,000.
| (xvi) | Termination of the Agreement |
The Company may terminate this agreement with 60 days written notice to consultant.
The Company did not pay any consulting fees to the Consultant, but had issued 700,000 shares of its common stock as a final payment for the arrears owed on August 1, 2012.
NOTE 5 – STOCKHOLDERS’ EQUITY
Preferred stock
Preferred stock includes 20,000,000 shares authorized at a par value of $0.001, of which none are issued or outstanding.
Common stock
Common stock includes 200,000,000 shares authorized at a par value of $0.001.
On March 28, 2011, the Company issued 6,000,000 shares of its common stock at $0.01 per share to the sole officer of the Company for services rendered, valued at $60,000.
On June 1, 2011, the Company sold 10,000,000 shares of its common stock for cash at $0.005 per share or $50,000 in aggregate.
On June 30, 2011, the Company sold 612,500 shares of its common stock for cash at $0.0101 per share or $6,160 in aggregate.
On August 1, 2012, the Company issued 2,550,000 shares of its common stock at $0.01 per share to 4 consultants for the services rendered, valued at $25,500.
On October 12, 2012, in a private transaction, 16,000,000 shares of common stock, which represented 79.72% of the issued and outstanding shares of common stock, were sold to OTC Investment Limited for the total price of $23,000. This resulted in a change in control of the Company. In connection with this transaction, also on October 17, 2012, Tung Yee Shing resigned from his position as Chief Executive Officer of the Company and Jeffrey Smuda was appointed as the new President and sole director of the Company as well as Chief Executive Officer of the Company, Secretary, Treasurer, Principal Financial Officer, and Principal Accounting Officer.
NOTE 6 – RELATED PARTY TRANSACTIONS
Free office space
The Company has been provided office space by its Chief Executive Officer at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statement.
Share issuance
At inception, the Company has issued 6,000,000 shares of restricted common stock to the majority shareholder for consulting services associated with the development of the business plan and other services related to the incorporation and start-up. Cost for this transaction was measured at the fair value of the services provided, based on similar services he has provided to unrelated third parties. The Company recognized this administrative expense in the current period and a corresponding increase to capital related to stock issued for services. Services were provided during the initial period presented and, accordingly, all shares issued are fully vested, and therefore there is no unrecognized compensation associated with this transaction.
NOTE 7 – SUBSEQUENT EVENTS
The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that the following reportable subsequent events need to be disclosed:
During December 2012, the Company consummated the Exchange Agreement and acquired all of the issued and outstanding ordinary shares of Intelligent Living, Inc. (“ILI”) for and in consideration of the issuance of 15,330,000 shares of its common stock pursuant to the Exchange Agreement. ILI is now operated as a wholly-owned subsidiary of the Company.
