Cheshire Trafford U.K. Limited
Financial Statements
June 30, 2018
(Unaudited)
CONTENTS
Cheshire Trafford U.K. Limited
| June 30, 2018 | December 31, 2017 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 3,847 | $ | 1,404 | ||||
| Accounts receivable - net | 13,368 | 47,920 | ||||||
| Total current assets | 17,215 | 49,324 | ||||||
| Non-Current Assets | ||||||||
| Property and equipment, net | 631 | 735 | ||||||
| Total non-current assets | 631 | 735 | ||||||
| Total assets | $ | 17,846 | $ | 50,059 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 4,039 | $ | 5,176 | ||||
| Due to related parties - affiliate | - | 25,656 | ||||||
| Due to related parties - director’s loan | 66,456 | 33,757 | ||||||
| Total current liabilities | 70,495 | 64,589 | ||||||
| Total liabilities | $ | 70,495 | $ | 64,589 | ||||
| Commitments and contingencies (Note 14) | ||||||||
| Stockholders’ Deficit | ||||||||
| 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 | (126,525 | ) | (86,468 | ) | ||||
| Accumulated other comprehensive loss | (7,420 | ) | (9,358 | ) | ||||
| Total stockholders’ deficit | (52,649 | ) | (14,530 | ) | ||||
| Total liabilities & stockholders’ deficit | $ | 17,846 | $ | 50,059 | ||||
The accompanying notes are an integral part of these financial statements.
| 1 |
Cheshire Trafford U.K. Limited
Statements of Operations and Comprehensive Income (Loss)
For the three and six months ended June 30, 2018 and June 30, 2017 (Unaudited)
| For the three months ended, | For the six months ended, | |||||||||||||||
| June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Commissions income | $ | 64,112 | $ | 48,773 | $ | 88,522 | $ | 108,356 | ||||||||
| Cost of revenue | (4,893 | ) | (18,250 | ) | (9,075 | ) | (37,040 | ) | ||||||||
| Gross income | $ | 59,220 | $ | 30,523 | $ | 79,447 | $ | 71,316 | ||||||||
| General and administrative expenses | 22,873 | 22,714 | 44,044 | 41,361 | ||||||||||||
| Salaries and benefits | 33,458 | 20,374 | 67,689 | 36,582 | ||||||||||||
| Professional services | 7,314 | 3,598 | 7,681 | 3,769 | ||||||||||||
| Depreciation | 45 | 90 | 90 | 241 | ||||||||||||
| Total operating expenses | 63,690 | 46,776 | 119,504 | 81,953 | ||||||||||||
| Loss from operations | $ | (4,470 | ) | $ | (16,253 | ) | $ | (40,057 | ) | $ | (10,637 | ) | ||||
| Total other income (expenses) | - | - | - | - | ||||||||||||
| Net loss | $ | (4,470 | ) | $ | (16,253 | ) | $ | (40,057 | ) | $ | (10,637 | ) | ||||
| Weighted average number of ordinary shares outstanding | 17,561 | 17,561 | 17,561 | 17,561 | ||||||||||||
| Net loss per ordinary share | $ | (0.25 | ) | $ | (0.93 | ) | $ | (2.28 | ) | $ | (0.61 | ) | ||||
| Comprehensive Income / (Loss): | ||||||||||||||||
| Net loss | (4,470 | ) | (16,253 | ) | (40,057 | ) | (10,637 | ) | ||||||||
| Gain on foreign currency translation | 969 | 252 | 1,938 | 504 | ||||||||||||
| Comprehensive loss | $ | (3,501 | ) | $ | (16,001 | ) | $ | (38,119 | ) | $ | (10,133 | ) | ||||
The accompanying notes are an integral part of these financial statements.
| 2 |
Cheshire Trafford U.K. Limited
For the six months ended June 30, 2018 and June 30, 2017 (Unaudited)
| June 30, 2018 | June 30, 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (40,057 | ) | $ | (10,637 | ) | ||
| Adjustments to reconcile net income (loss) to cash provided by operating activities: | ||||||||
| Depreciation | 90 | 241 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable - net | 34,552 | 5,133 | ||||||
| Prepaid expenses and other current assets | - | (305 | ) | |||||
| Accounts payable and accrued liabilities | (1,137 | ) | 2,247 | |||||
| Net cash used in operating activities | $ | (6,552 | ) | $ | (3,321 | ) | ||
| Cash flows from financing activities: | ||||||||
| Due to related parties - affiliate | (25,656 | ) | - | |||||
| Repayment of director’s loan | - | (4,510 | ) | |||||
| Proceeds from director’s loans | 32,699 | - | ||||||
| Net cash provided by / (used in) financing activities | $ | 7,043 | $ | (4,510 | ) | |||
| Effect of exchange rate changes on cash | $ | 1,952 | $ | 357 | ||||
| Net increase / (decrease) in cash | $ | 2,443 | $ | (7,474 | ) | |||
| Cash at Beginning of Year | $ | 1,404 | $ | 18,864 | ||||
| Cash at End of Year | $ | 3,847 | $ | 11,390 | ||||
| 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.
| 3 |
Cheshire Trafford U.K. Limited
June 30, 2018
(Unaudited)
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 accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The interim results for the period ended June 30, 2018 are not necessarily indicative of results for the full fiscal year. All amounts 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 unaudited 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.
| 4 |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
June 30, 2018
(Unaudited)
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2018 and December 31, 2017, 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 June 30, 2018 and December 31, 2017.
Functional and Foreign Currency
The accompanying unaudited 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’ deficit as “Accumulated other comprehensive income (loss)”. Gains and losses resulting from foreign currency transactions are included in the statement of operations.
| 5 |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
June 30, 2018
(Unaudited)
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.
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
As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASC 606”), that affects the timing of when certain types of revenue will be recognized.
Revenue is recognized by evaluating our revenue contracts with customers based on the five-step model under ASC 606:
1. Identify the contract with the customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to separate performance obligations; and
5. Recognize revenue when (or as) each performance obligation is satisfied.
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 when the Company satisfies a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. A single contract could include one or multiple performance obligations. For those contracts that have multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on its relative standalone selling price, which is determined based on the Company´s overall pricing objectives, taking into consideration market conditions and other factors.
| 6 |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
June 30, 2018
(Unaudited)
The payment terms and conditions in the Company´s customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either accrued accounts receivable, an asset or deferred revenues, a liability. Revenues recognized for services performed but not yet billed to clients are recorded as accrued accounts receivable. Client pre-payments and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable engagement agreement.
All revenues are generated from clients whose operations are based outside of the United States. For the six months ended June 30, 2018 and 2017, the Company had the following concentrations of revenues:
| June 30, 2018 | June 30, 2017 | |||||||
| Adviser initial fee | 34.70 | % | 16.06 | % | ||||
| Adviser ongoing fee | 39.81 | % | 32.34 | % | ||||
| Renewal commissions | 25.49 | % | 27.94 | % | ||||
| Trail commissions and other revenue | 0 | % | 23.66 | % | ||||
| 100 | % | 100 | % | |||||
At June 30, 2018 and December 31, 2017, the Company had the following concentrations of accounts receivables with various insurance companies:
| Name | June 30, 2018 | December 31, 2017 | ||||||
| AJ Bell | 5.64 | % | 6.62 | % | ||||
| Canada Life International | 27.72 | % | 11.09 | % | ||||
| Old Mutual International | 2.13 | % | 14.04 | % | ||||
| Old Mutual Wealth Life | 40.10 | % | 12.83 | % | ||||
| Royal London | 9.10 | % | 23.19 | % | ||||
| Fidelity International | 1.53 | % | 5.42 | % | ||||
| Prudential Assurance | 1.16 | % | 4.31 | % | ||||
| Others | 12.62 | % | 22.51 | % | ||||
| 100 | % | 100 | % | |||||
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 June 30, 2018 and 2017, 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 six months ended June 30, 2018, includes only foreign currency translation gains, and is presented in the Company’s statement of comprehensive income (loss).
| 7 |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
June 30, 2018
(Unaudited)
Changes in accumulated other comprehensive income (loss) by component during the six months ended June 30, 2018 were as follows:
| Foreign Currency Translation gains (losses) | ||||
| Balance, December 31, 2017 | $ | (9,358 | ) | |
| Translation rate gain | 1,938 | |||
| Balance, June 30, 2018 | $ | (7,420 | ) | |
Recent Accounting Pronouncements
There are no new accounting pronouncements that we expect to have an impact on the Company’s unaudited financial statements other than discussed below:
In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. The amendments of this ASU are effective for reporting periods beginning after December 15, 2018, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Management currently does not plan to early adopt this guidance and is evaluating the potential impact of this guidance on the financial statements as well as transition methods.
Note 4 – Accounts Receivable - net
Following is a summary of accounts receivable as at June 30, 2018 and December 31, 2017;
| June 30, 2018 | December 31, 2017 | |||||||
| Accounts receivable – trade | $ | 13,368 | $ | 51,118 | ||||
| Less: Allowance for doubtful accounts | - | (3,198 | ) | |||||
| $ | 13,368 | $ | 47,920 | |||||
| 8 |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
June 30, 2018
(Unaudited)
Note 5 – Property and Equipment
The following table reflects net book value of property and equipment as of June 30, 2018:
| Furniture and fixtures | Computer equipment | Total | ||||||||||
| Cost | ||||||||||||
| Balance as at December 31, 2017 | $ | 22,783 | $ | 16,578 | $ | 39,361 | ||||||
| Translation rate differences | (500 | ) | (364 | ) | (864 | ) | ||||||
| Balance as at June 30, 2018 | $ | 22,283 | $ | 16,214 | $ | 38,497 | ||||||
| Accumulated depreciation | ||||||||||||
| Balance as at December 31, 2017 | $ | 22,048 | $ | 16,578 | $ | 38,626 | ||||||
| Depreciation charge for the period | 90 | - | 90 | |||||||||
| Translation rate differences | (486 | ) | (364 | ) | (850 | ) | ||||||
| Balance as at June 30, 2018 | 21,652 | 16,214 | 37,866 | |||||||||
| Net book value as at June 30, 2018 | $ | 631 | $ | - | 631 | |||||||
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 | ||||||
| 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 6 - Accounts Payable and Accrued Liabilities
The following is a summary of accounts payable and accrued liabilities as at June 30, 2018 and December 31, 2017;
| June 30, 2018 | December 31, 2017 | |||||||
| Payroll tax withholding payable | $ | 1,943 | $ | 2,944 | ||||
| Pension payable | 407 | 505 | ||||||
| Accrued expenses | 1,689 | 1,727 | ||||||
| $ | 4,039 | $ | 5,176 | |||||
Note 7 – 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 unaudited financial statements. As of June 30, 2018 and December 31, 2017, the Company owed $0 and $25,656, respectively to its affiliate and $66,456 and $33,757, respectively to its director on short-term basis.
| 9 |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
June 30, 2018
(Unaudited)
Note 8 - Stockholders’ Equity
Ordinary Shares
At June 30, 2018 and December 31, 2017, the Company had 17,561 authorized, issued and outstanding ordinary shares having a par value of £1 or $1.6259 per share.
During the six months ended June 30, 2018, the Company had not issued any new ordinary shares.
Note 9 – Cost of Revenue
The following is a summary of cost of revenue for the six months ended June 30, 2018 and 2017;
| June 30, 2018 | June 30, 2017 | |||||||
| Commissions paid | $ | 9,075 | $ | 23,551 | ||||
| Consulting services | - | 13,489 | ||||||
| $ | 9,075 | $ | 37,040 | |||||
Note 10 - General and Administrative Expenses
The following is a summary of general and administrative expenses for the six months ended June 30, 2018 and 2017;
| June 30, 2018 | June 30, 2017 | |||||||
| Rent | $ | 18,497 | $ | 16,912 | ||||
| Rates and water | 99 | 122 | ||||||
| Insurance | 4,334 | 4,825 | ||||||
| Light and heat | 2,909 | 3,692 | ||||||
| Staff recruitment | - | 747 | ||||||
| Telephone | 2,130 | 1,125 | ||||||
| Post and stationery | 565 | 1,035 | ||||||
| Travelling | 287 | 970 | ||||||
| Auto expenses | - | 1,290 | ||||||
| Regulatory fees and subscriptions | 3,914 | 261 | ||||||
| Computer expenses | 3,966 | 6,591 | ||||||
| Repairs and renewals | 1,198 | 1,236 | ||||||
| Subscriptions | 4,146 | 1,792 | ||||||
| Miscellaneous expenses | 1,999 | 763 | ||||||
| Total | $ | 44,044 | $ | 41,361 | ||||
| 10 |
Cheshire Trafford U.K. Limited
Notes to Financial Statements
June 30, 2018
(Unaudited)
Note 11 – Salaries and Benefits
The following is a summary of salaries and benefits for the six months ended June 30, 2018 and 2017;
| June 30, 2018 | June 30, 2017 | |||||||
| Staff salaries & allowances | $ | 60,692 | $ | 31,268 | ||||
| Social security | 5,724 | 2,619 | ||||||
| Pension | 1,273 | 2,695 | ||||||
| $ | 67,689 | $ | 36,582 | |||||
Note 12 – Professional Services
The following is a summary of professional services expenses for the six months ended June 30, 2018 and 2017;
| June 30, 2018 | June 30, 2017 | |||||||
| Accounting fees | $ | 2,439 | $ | 2,028 | ||||
| Bank charges | 288 | 231 | ||||||
| Legal fee | 4,954 | 1,510 | ||||||
| $ | 7,681 | $ | 3,769 | |||||
Note 13 – Related Party Transactions
At June 30, 2018 and December 31, 2017, there were advances due to related parties. (See Note 7)
Note 14 - 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 June 30, 2018 and December 31, 2017.
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. |
| 11 |