Exhibit 99.2
Cheshire Trafford U.K. Limited
Financial Statements
December 31, 2017 and 2016
CONTENTS
Cheshire Trafford U.K. Limited
Balance Sheets
| | | December 31, 2017 | | | December 31, 2016 | |
| Assets | | | | | | |
| Current Assets | | | | | | | | |
| Cash | | $ | 1,404 | | | $ | 18,864 | |
| Accounts receivable - net | | | 47,920 | | | | 29,884 | |
| Prepaid expenses and other current assets | | | - | | | | 5,689 | |
| Investments | | | - | | | | 1,884 | |
| Total current assets | | | 49,324 | | | | 56,321 | |
| | | | | | | | | |
| Non-Current Assets | | | | | | | | |
| Property and equipment, net | | | 735 | | | | 990 | |
| Total non-current assets | | | 735 | | | | 990 | |
| | | | | | | | | |
| Total assets | | $ | 50,059 | | | $ | 57,311 | |
| | | | | | | | | |
| Liabilities and Stockholders’ (Deficit) / Equity | | | | | | | | |
| | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 5,176 | | | $ | 4,484 | |
| Due to related parties - afiliate | | | 25,656 | | | | - | |
| Due to related parties - director’s loan | | | 33,757 | | | | 36,996 | |
| Total current liabilities | | | 64,589 | | | | 41,480 | |
| | | | | | | | | |
| Total liabilities | | $ | 64,589 | | | $ | 41,480 | |
| | | | | | | | | |
| Commitments and contingencies (Note 16) | | | | | | | | |
| | | | | | | | | |
| Stockholders’ (Deficit) / Equity | | | | | | | | |
| Ordinary shares: 17,561 shares authorized; £1 or $1.6259 par value: 17,561 and 17,561 shares issued and outstanding, respectively. | | $ | 28,553 | | | $ | 28,553 | |
| Additional paid in capital | | | 52,743 | | | | 52,743 | |
| Accumulated deficit | | | (86,468 | ) | | | (56,068 | ) |
| Accumulated other comprehensive loss | | | (9,358 | ) | | | (9,397 | ) |
| Total stockholders’ (deficit) / equity | | | (14,530 | ) | | | 15,831 | |
| | | | | | | | | |
| Total liabilities & stockholders’ (deficit) / equity | | $ | 50,059 | | | $ | 57,311 | |
The accompanying notes are an integral part of these financial statements.
Cheshire Trafford U.K. Limited
Statements of Operations and Comprehensive Income (Loss)
| | | For the years ended, | |
| | | December 31, 2017 | | | December 31, 2016 | |
| | | | | | | |
| Commissions income | | $ | 193,531 | | | $ | 258,987 | |
| Cost of revenue | | | (13,998 | ) | | | (73,537 | ) |
| Gross income | | $ | 179,533 | | | $ | 185,450 | |
| | | | | | | | | |
| General and administrative expenses | | | 93,162 | | | | 96,503 | |
| Salaries and benefits | | | 110,475 | | | | 70,867 | |
| Professional services | | | 6,289 | | | | 3,877 | |
| Depreciation | | | 333 | | | | 886 | |
| Total operating expenses | | | 210,258 | | | | 172,132 | |
| | | | | | | | | |
| (Loss) / income from operations | | $ | (30,726 | ) | | $ | 13,317 | |
| | | | | | | | | |
| Other income (expenses): | | | | | | | | |
| Gain on disposals | | | 326 | | | | - | |
| Other income | | | - | | | | 1,881 | |
| Total other income | | | 326 | | | | 1,881 | |
| | | | | | | | | |
| Net (loss) / income | | $ | (30,400 | ) | | $ | 15,199 | |
| | | | | | | | | |
| Weighted average number of ordinary shares outstanding | | | 17,561 | | | | 17,561 | |
| | | | | | | | | |
| Net (loss) / earnings per ordinary share | | $ | (1.73 | ) | | $ | 0.87 | |
| | | | | | | | | |
| Comprehensive Income / (Loss): | | | | | | | | |
| Net (loss) / income | | | (30,400 | ) | | | 15,199 | |
| Gain / (loss) on foreign currency translation | | | 39 | | | | (1,774 | ) |
| Comprehensive (loss) / income | | $ | (30,361 | ) | | $ | 13,425 | |
The accompanying notes are an integral part of these financial statements.
Cheshire Trafford U.K. Limited
Statement of Changes in Stockholders’ (Deficit) / Equity
For the years ended December 31, 2017 and 2016
| | | Ordinary Shares | | | Additional Paid in | | | Accumulated | | | Accumulated Other Comprehensive | | | Total Stockholders’ | |
| | | Number | | | Amount | | | Capital | | | Deficit | | | Loss | | | (Deficit) / Equity | |
| | | | | | | | | | | | | | | | | | | |
| December 31, 2015 | | | 17,561 | | | $ | 28,553 | | | $ | 52,743 | | | $ | (71,267 | ) | | $ | (7,623 | ) | | $ | 2,406 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | - | | | | - | | | | - | | | | 15,199 | | | | - | | | | 15,199 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | (1,774 | ) | | | (1,774 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2016 | | | 17,561 | | | $ | 28,553 | | | $ | 52,743 | | | $ | (56,068 | ) | | $ | (9,397 | ) | | $ | 15,831 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | - | | | | - | | | | - | | | | (30,400 | ) | | | - | | | | (30,400 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other comprehensive gain | | | - | | | | - | | | | - | | | | - | | | | 39 | | | | 39 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 | | | 17,561 | | | $ | 28,553 | | | $ | 52,743 | | | $ | (86,468 | ) | | $ | (9,358 | ) | | $ | (14,530 | ) |
The accompanying notes are an integral part of these financial statements.
Cheshire Trafford U.K. Limited
Statement of Cash Flows
| | | For the years ended, | |
| | | December 31, 2017 | | | December 31, 2016 | |
| | | | | | | |
| Cash flows from operating activities: | | | | | | | | |
| Net (loss) / income | | $ | (30,400 | ) | | $ | 15,199 | |
| | | | | | | | | |
| Adjustments to reconcile net income (loss) to cash provided by operating activities: | | | | | | | | |
| | | | | | | | | |
| Depreciation | | | 333 | | | | 886 | |
| Bad debt (recovery) / expense | | | (3,008 | ) | | | 6,378 | |
| Gain on disposals | | | (326 | ) | | | - | |
| | | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | | |
| | | | | | | | | |
| Accounts receivable - net | | | (15,028 | ) | | | 1,302 | |
| Prepaid expenses and other current assets | | | 5,689 | | | | (3,503 | ) |
| Accounts payable and accrued liabilities | | | 692 | | | | 2,643 | |
| | | | | | | | | |
| Net cash (used in) / provided by operating activities | | $ | (42,048 | ) | | $ | 22,905 | |
| | | | | | | | | |
| Cash Flows provided by investing activities: | | | | | | | | |
| | | | | | | | | |
| Sale proceeds on disposal of investments | | | 2,406 | | | | - | |
| | | | | | | | | |
| Net cash provided by investing activities | | $ | 2,406 | | | $ | - | |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| | | | | | | | | |
| Due to related parties - afiliate | | | 25,656 | | | | (7,294 | ) |
| Partial repayment of director’s loan | | | (3,239 | ) | | | - | |
| | | | | | | | | |
| Net cash provided by / (used in) financing activities | | $ | 22,417 | | | $ | (7,294 | ) |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | $ | (235 | ) | | $ | (1,128 | ) |
| | | | | | | | | |
| Net (decrease) / increase in cash | | $ | (17,460 | ) | | $ | 14,483 | |
| | | | | | | | | |
| Cash at Beginning of Year | | $ | 18,864 | | | $ | 4,381 | |
| | | | | | | | | |
| Cash at End of Year | | $ | 1,404 | | | $ | 18,864 | |
| | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | |
| Cash paid for interest | | $ | - | | | $ | - | |
| Cash paid for income taxes | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these financial statements.
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Note 1 – Organization and Nature of Operations
Cheshire Trafford U.K. Limited (hereinafter referred to as “CT” or the Company), was incorporated under the laws of United Kingdom on January 26, 1976 as a limited liability company. CT is licensed and regulated by the Financial Conduct Authority (FCA), United Kingdom. The Company conducts business with customers primarily based in the United Kingdom.
The Company´s principal business is acting as broker for sale of Lump Sum or Single Premium Insurance Policies and/or the sale of Regular Premium Investment or Insurance Policies that are issued by third party insurance companies.
Note 2 – Basis of Presentation
The Company has prepared the accompanying financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All amounts in the financial statements are stated in U.S. dollars.
Note 3 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation, or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-confirming events. Accordingly, the actual results could differ from those estimates. Significant estimates in the accompanying financial statements relate to net book value and depreciation expense of fixed assets, the recognition and disclosure of contingent liabilities and the collectability of accounts receivable.
Risks and Uncertainties
The Company’s operations are subject to significant risk and uncertainties including financial, operational, competition and potential risk of business failure. These risks may include increased competition, reduction in market demographic, closing of available products, geo-political risks, regulatory changes, or inability to continue operations in a specific region.
Accounts Receivable and Allowance for Doubtful Accounts
The Company recognizes accounts receivable for commissions earned in connection with the services provided. The Company recognizes an allowance for doubtful accounts based on an analysis of current receivables aging and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2017 and 2016, the Company had no cash equivalents.
Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated depreciation. Depreciation is determined by the straight-line depreciation method over the estimated useful lives of the assets. Cost of improvements that substantially extend the useful lives of assets are capitalized. Repairs and maintenance expenses are charged to expense when incurred. In case of sale or disposal of an asset, the cost and related accumulated depreciation are removed from the financial statements.
Useful lives of the fixed assets are as follows:
| Fixtures and fittings | 10 years |
| Computer equipment | 3 years |
Impairment of Long-Lived Assets
The Company reviews long-lived assets, such as property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. There were no assets or liabilities held for sale at December 31, 2017 and 2016.
Functional and Foreign Currency
The accompanying financial statements are presented in United States dollars “$” and/or “USD”. The functional currency of the Company is the Great Britain Pound “£“and/or “GBP”. All foreign currency balances and transactions are translated into United States dollars “$” and/or “USD” as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of our stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss)”. Gains and losses resulting from foreign currency transactions are included in the statement of operations.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with various high quality financial institutions located outside of the United States and monitors the credit ratings of those institutions. The Company’s sales are primarily to customers located in the United Kingdom. The Company performs ongoing credit evaluations of its customers, and the risk with respect to trade receivables is further mitigated by the diversity of the customer base. Accounts receivable are due principally from the companies under stated contract terms.
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Fair Value Measurements and Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability.
The estimated fair value of certain financial instruments, including cash, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
Revenue Recognition
The Company recognizes revenue from the services it provides, when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) services have been performed; (3) commission rate and fees are fixed or determinable; and (4) collectability is reasonably assured.
The Company normally generates revenue by earning initial and trail commissions on insurance policy sales and renewals, which are based on a percentage of the insurance products sold. The Company generates commissions by acting as a broker of third party key products such as life insurance, medical insurance, regular savings policies, investment management services and lump sum insurance policies.
Commission income is recognized on the transaction date.
All revenues are generated from clients whose operations are based outside of the United States. For the years ended December 31, 2017 and 2016, the Company had the following concentrations of revenues:
| | | 2017 | | | 2016 | |
| | | | | | | |
| Adviser initial fee | | | 16.59 | % | | | 5.16 | % |
| Adviser ongoing fee | | | 19.12 | % | | | 35.40 | % |
| Initial commissions | | | 0.69 | % | | | 9.67 | % |
| Renewal commissions | | | 25.47 | % | | | 28.44 | % |
| Trial commissions | | | 27.97 | % | | | 17.01 | % |
| Other revenue | | | 10.16 | % | | | 4.33 | % |
| | | | 100 | % | | | 100 | % |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
At December 31, 2017 and 2016, the Company had the following concentrations of accounts receivables with various insurance companies:
| Name | | December 31, 2017 | | | December 31, 2016 | |
| | | | | | | |
| AJ Bell | | | 6.62 | % | | | 10.31 | % |
| Canada Life International | | | 11.09 | % | | | 8.18 | % |
| Fidelity International | | | 5.42 | % | | | 6.64 | % |
| Old Mutual International | | | 14.04 | % | | | 14.21 | % |
| Old Mutual Wealth Life | | | 12.83 | % | | | 29.25 | % |
| Royal London | | | 23.19 | % | | | 21.98 | % |
| Aviva | | | 3.14 | % | | | 0 | % |
| Prudential Assurance | | | 4.31 | % | | | 0 | % |
| Others | | | 19.37 | % | | | 9.43 | % |
| | | | 100 | % | | | 100 | % |
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry-forwards. Deferred income 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 income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company will record interest and penalties related to unrecognized tax benefits in income tax expense. There were no penalties or interest related to income tax positions for the years ended December 31, 2017 and 2016.
Under the Corporation Tax Act, 2010 as applicable in the United Kingdom, income tax is to be calculated based on 19% of the taxable income.
Earnings per Share
Basic net earnings (loss) per share is computed by dividing net income (loss) by weighted average number of capital shares outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of capital shares and capital share equivalents outstanding during the period such as warrants, options and convertible securities. As at December 31, 2017 and 2016, the Company had no capital share equivalents outstanding that would be dilutive.
Comprehensive Income / (Loss)
The Comprehensive Income Topic of the FASB Accounting Standards Codification establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income for each of the two years in the period ended December 31, 2017, includes only foreign currency translation gains (losses), and is presented in the Company’s consolidated statement of comprehensive income (loss).
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Changes in accumulated other comprehensive income (loss) by component during the years ended December 31, 2017 and 2016 were as follows:
| Foreign Currency Translation gains (losses) | | | |
| | | | |
| Balance, December 31, 2016 | | $ | (7,623 | ) |
| Translation rate loss | | | (1,774 | ) |
| Balance, December 31, 2016 | | | (9,397 | ) |
| | | | | |
| Translation rate gain | | | 39 | |
| Balance, December 31, 2017 | | $ | (9,358 | ) |
Recent Accounting Pronouncements
There are no new accounting pronouncements that we expect to have an impact on the Company’s financial statements other than discussed below:
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle-based approach. The core principle of the standard is that revenue should be recognized when the transfer of promised goods or services is made in an amount that the entity expects to be entitled to in exchange for the transfer of goods and services. The update also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. On July 9, 2015, the FASB voted to defer the effective date of this guidance by one year. On March 17, 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations, which clarifies how an entity determines if it is a principal or an agent for each specified good or service promised to the customer, the nature of each specified good or service, and how an entity that is principal obtains control of a good and service provided by another party involved in providing goods or services to a customer. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing, which clarifies the guidance related to whether goods or services are distinct within the context of contract and therefore a performance obligation and the timing and pattern of revenue recognition for IP licenses. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and added some practical expedients. In December 2016, the FASB issued ASU 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements, which provides clarifying guidance in certain technical areas. The standard and related amendments will be effective for financial statements issued by public companies for interim and annual reporting periods beginning after December 15, 2017. Early adoption of the standard is permitted, but not before the original date of financial statements issued by public companies for interim and annual reporting periods beginning after December 16, 2017. After evaluating the potential impact of this guidance on these financial statements, the management believes that there would be no effect on prior revenue recognized until December 31, 2017.
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Note 4 – Accounts Receivable - net
Following is a summary of accounts receivable as at December 31, 2017 and 2016;
| | | December 31, 2017 | | | December 31, 2016 | |
| Accounts receivable – trade | | $ | 51,118 | | | $ | 35,684 | |
| Less: Allowance for doubtful accounts | | | (3,198 | ) | | | (5,800 | ) |
| | | $ | 47,920 | | | $ | 29,884 | |
Note 5 – Prepaid Expenses and Other Current Assets
At December 31, 2016, prepaid expenses and other current assets include prepaid regulatory fee and subscriptions amounting to $5,689 that was fully amortized to income statement during the year ended December 31, 2017. The Company had no prepaid expenses as at December 31, 2017.
Note 6 – Property and Equipment
The following table reflects net book value of property and equipment as of December 31, 2016:
| | | Furniture and fixtures | | | Computer equipment | | | Total | |
| Cost | | | | | | | | | | | | |
| Balance as at December 31, 2015 | | $ | 24,910 | | | $ | 18,125 | | | $ | 43,035 | |
| Additions / Disposals | | | - | | | | - | | | | - | |
| Translation rate differences | | | (4,102 | ) | | | (2,985 | ) | | | (7,087 | ) |
| Balance as at December 31, 2016 | | $ | 20,808 | | | $ | 15,140 | | | $ | 35,948 | |
| | | | | | | | | | | | | |
| Accumulated depreciation | | | | | | | | | | | | |
| Balance as at December 31, 2015 | | $ | 22,976 | | | $ | 17,909 | | | $ | 40,885 | |
| Depreciation charge for the year | | | 698 | | | | 188 | | | | 886 | |
| Translation rate differences | | | (3,847 | ) | | | (2,966 | ) | | | (6,813 | ) |
| Balance as at December 31, 2016 | | | 19,827 | | | | 15,131 | | | | 34,958 | |
| Net book value as at December 31, 2016 | | $ | 981 | | | $ | 9 | | | | 990 | |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
The following table reflects net book value of property and equipment as of December 31, 2017:
| | | Furniture and fixtures | | | Computer equipment | | | Total | |
| Cost | | | | | | | | | | | | |
| Balance as at December 31, 2016 | | $ | 20,808 | | | $ | 15,140 | | | $ | 35,948 | |
| Additions / Disposals | | | - | | | | - | | | | - | |
| Translation rate differences | | | 1,975 | | | | 1,438 | | | | 3,413 | |
| Balance as at December 31, 2017 | | $ | 22,783 | | | $ | 16,578 | | | $ | 39,361 | |
| | | | | | | | | | | | | |
| Accumulated depreciation | | | | | | | | | | | | |
| Balance as at December 31, 2016 | | $ | 19,827 | | | $ | 15,131 | | | $ | 34,958 | |
| Depreciation charge for the year | | | 324 | | | | 9 | | | | 333 | |
| Translation rate differences | | | 1,897 | | | | 1,438 | | | | 3,335 | |
| Balance as at December 31, 2017 | | | 22,048 | | | | 16,578 | | | | 38,626 | |
| Net book value as at December 31, 2017 | | $ | 735 | | | $ | - | | | | 735 | |
Note 7 - Accounts Payable and Accrued Liabilities
The following is a summary of accounts payable and accrued liabilities as at December 31, 2017 and 2016;
| | | December 31, 2017 | | | December 31, 2016 | |
| Payroll tax withholding payable | | $ | 2,944 | | | $ | 374 | |
| Pension payable | | | 505 | | | | - | |
| Accrued expenses | | | 1,727 | | | | 4,110 | |
| | | $ | 5,176 | | | $ | 4,484 | |
Note 8 – Due to Related Parties
From time to time, the Company receives advances from related parties such as principal officers and directors, shareholders or affiliated companies in the normal course of business. Loans and advances received from related parties are unsecured and non-interest bearing. Balances outstanding to these persons for less than 12 months are presented under current liabilities in the accompanying financial statements. As of December 31, 2017 and 2016, the Company owed $25,656 and $0, respectively to its affiliate and $33,757 and $36,996, respectively to its director on short-term basis.
Note 9 - Stockholders’ Equity
Ordinary Shares
At December 31, 2017 and 2016, the Company had 17,561 authorized, issued and outstanding ordinary shares having a par value of £1 or $1.6259 per share.
During the years ended December 31, 2017 and 2016, the Company had not issued any new ordinary shares.
Note 10 – Cost of Revenue
The following is a summary of cost of revenue for the years ended December 31, 2017 and 2016;
| | | December 31, 2017 | | | December 31, 2016 | |
| Commissions paid | | $ | 2,534 | | | $ | 6,929 | |
| Consulting services | | | 14,473 | | | | 60,231 | |
| Bad debt (recovery) / expense | | | (3,008 | ) | | | 6,378 | |
| | | $ | 13,998 | | | $ | 73,537 | |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Note 11 - General and Administrative Expenses
The following is a summary of general and administrative expenses for the years ended December 31, 2017 and 2016;
| | | December 31, 2017 | | | December 31, 2016 | |
| Rent | | $ | 34,628 | | | $ | 39,489 | |
| Rates and water | | | 344 | | | | 476 | |
| Insurance | | | 9,107 | | | | 9,382 | |
| Light and heat | | | 6,817 | | | | 8,189 | |
| Staff recruitment | | | 958 | | | | 1,294 | |
| Telephone | | | 2,842 | | | | 4,055 | |
| Post and stationery | | | 2,036 | | | | 1,030 | |
| Travelling | | | 1,504 | | | | 1,734 | |
| Motor expenses | | | 2,709 | | | | - | |
| Regulatory fees and subscriptions | | | 9,453 | | | | 6,525 | |
| IT expenses | | | 14,021 | | | | 14,069 | |
| Repairs and renewals | | | 3,002 | | | | 4,512 | |
| Subscriptions | | | 4,369 | | | | 3,791 | |
| Sundry expenses | | | 1,373 | | | | 1,956 | |
| | | $ | 93,162 | | | $ | 96,503 | |
Note 12 – Salaries and Benefits
The following is a summary of salaries and benefits for the years ended December 31, 2017 and 2016;
| | | December 31, 2017 | | | December 31, 2016 | |
| Staff salaries & allowances | | $ | 102,449 | | | $ | 59,657 | |
| Compensation claims | | | - | | | | 6,780 | |
| Social security | | | 4,827 | | | | 1,673 | |
| Pension | | | 3,199 | | | | 2,756 | |
| | | $ | 110,475 | | | $ | 70,867 | |
Note 13 – Professional Services
The following is a summary of professional services expenses for the years ended December 31, 2017 and 2016;
| | | December 31, 2017 | | | December 31, 2016 | |
| Accounting fees | | $ | 4,237 | | | $ | 3,375 | |
| Bank charges | | | 461 | | | | 501 | |
| Legal fee | | | 1,546 | | | | - | |
| Other professional fees | | | 45 | | | | - | |
| | | $ | 6,289 | | | $ | 3,877 | |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Note 14 – Income Tax
The income tax provision differs from the amount of tax determined by applying the UK corporation tax rate of 19% as follows:
| | | 2017 | | | 2016 | |
| | | | | | | |
| Income Tax (benefit) provision at statutory rate: | | $ | (5,776 | ) | | $ | 2,888 | |
| | | | | | | | | |
| Increase (decrease) in income tax due to: | | | | | | | | |
| Depreciation | | | 63 | | | | 168 | |
| Gain on disposal of assets | | | (62 | ) | | | - | |
| Capital allowance | | | (65 | ) | | | (79 | ) |
| Change in valuation allowance | | | 5,840 | | | | (2,977 | ) |
| Total | | $ | - | | | $ | - | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income taxes.
Net deferred tax assets and liabilities are comprised of the following:
| | | 2017 | | | 2016 | |
| | | | | | | |
| Deferred tax assets | | | | | | | | |
| Net operating loss carry-forward | | $ | 13,797 | | | $ | 7,957 | |
| Valuation allowance | | | (13,797 | ) | | | (7,957 | ) |
| Deferred tax assets, net | | $ | - | | | $ | - | |
In assessing the realizability of deferred tax assets, management considers that whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2017 and 2016, based upon the levels of historical taxable income, the Company believes that it is more-likely-than-not that it will not be able to realize the benefits of some or all of these deductible differences. Accordingly, a valuation allowance of approximately $(13,797) and $(7,957) has been provided in the accompanying financial statements as of December 31, 2017 and 2016, respectively.
At December 31, 2017, the Company had approximately $72,615 of net operating loss carry-forwards that will not expire as long as the company continues to carry on the similar trade.
Note 15 – Related Party Transactions
At December 31, 2017, there were advances due to related parties. (See Note 8)
Cheshire Trafford U.K. Limited
Notes to Financial Statements
December 31, 2017 and 2016
Note 16 - Commitments and Contingencies
Contingencies
The Company consults with legal counsel on matters related to litigation and other experts both within and outside the Company with respect to matters in the ordinary course of business. The Company does not have any contingent liabilities in respect of legal claims arising in the ordinary course of business as at December 31, 2017 and 2016.
Commitments
The following is a list of the Company’s commitments that are incurred each year:
| | ● | Office rental agreement of $3,025 per month, on a month-to-month basis. |
Note 17 – Subsequent Events
Management has evaluated subsequent events through July 16, 2018, the date on which the financial statements were available to be issued. No events have occurred since the balance sheet date that would have material impact on the financial statements.
