UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2018
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-189359
IMAGE INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 20-3204968 | |
| (State or other jurisdiction | (IRS Employer | |
| of incorporation or organization) | Identification No.) |
| 8105 Birch Bay Square St. Suite 103, Blaine, WA | 98230 | |
| (Address of principal executive offices) | (Zip Code) |
| (852) 6013-3877 |
| (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filed,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] | |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [ ]No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:As of December 24, 2018 and September 30, 2018, the Company had 113,059,000 shares of common stock issued and outstanding.
IMAGE INTERNATIONAL GROUP, INC.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2018
FORWARD-LOOKING STATEMENTS
This Form 10-Q for the quarterly period ended September 30, 2018 contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying Unaudited consolidated condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the nine-month period ended September 30, 2018 are not necessarily indicative of the results that can be expected for the year ending December 31, 2018.
| 3 |
IMAGE INTERNATIONAL GROUP, INC.
Condensed Consolidated Financial Statements
September 30, 2018
(Expressed in U.S. dollars)
(Unaudited)
| 4 |
IMAGE INTERNATIONAL GROUP, INC.
Condensed Consolidated Balance Sheets
(Expressed in U.S. dollars)
| September 30, 2018 $ | December 31, 2017 $ | |||||||||||
| Note | (Unaudited) | (Audited) | ||||||||||
| Current Assets | ||||||||||||
| Cash | 246,104 | 986,821 | ||||||||||
| Fixed deposits - Pledged | 291,206 | - | ||||||||||
| Prepayment, deposits and other receivables | 3 | 156,573 | 39,439 | |||||||||
| Amount due from related parties | 8 | 185,924 | 57,955 | |||||||||
| Total Current Assets | 879,807 | 1,084,215 | ||||||||||
| Property, Plant and Equipment, net | 4 | 188,583 | 198,548 | |||||||||
| Intangible Assets, net | 5 | 1,629,312 | 1,753,907 | |||||||||
| Total Non-current Assets | 1,817,895 | 1,952,455 | ||||||||||
| Total Assets | 2,697,702 | 3,036,670 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
| Current Liabilities | ||||||||||||
| Short-term loans and loan payable | 6 | 458,756 | 484,260 | |||||||||
| Other payables and accrued liabilities | 7 | 559,790 | 559,578 | |||||||||
| Notes payable | 291,206 | - | ||||||||||
| Deferred revenue | 8,663 | - | ||||||||||
| Due to related parties | 8 | 3,418,578 | 3,005,353 | |||||||||
| Total Current Liabilities | 4,736,993 | 4,049,191 | ||||||||||
| Total Liabilities | 4,736,993 | 4,049,191 | ||||||||||
| Stockholders’ Deficit | ||||||||||||
| Ordinary shares | ||||||||||||
| Common stock, 1,000,000,000 shares authorized, $0.001 par value, 113,059,000 and 414,059,000 shares issued and outstanding respectively | 113,059 | 414,059 | ||||||||||
| Additional paid-in capital | (1,356,456 | ) | (1,084,281 | ) | ||||||||
| Accumulated deficit | (698,039 | ) | (352,254 | ) | ||||||||
| Accumulated other comprehensive income | (97,855 | ) | 9,955 | |||||||||
| Total Stockholders’ Equity | (2,039,291 | ) | (1,012,521 | ) | ||||||||
| Total Liabilities and Stockholders’ Equity | 2,697,702 | 3,036,670 | ||||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-1 |
IMAGE INTERNATIONAL GROUP, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in U.S. dollars)
(Unaudited)
Three Months September 30, 2018 $ | Three Months September 30, 2017 $ | Nine months September 30, 2018 $ | Nine months September 30, 2017 $ | |||||||||||||
| Revenues | - | - | - | - | ||||||||||||
| General and Administrative expenses | ||||||||||||||||
| Amortization | 10,935 | 12,407 | 33,987 | 33,644 | ||||||||||||
| Audit fee | 7,461 | - | 23,675 | - | ||||||||||||
| Building management fee | 1,429 | 1,258 | 4,117 | 1,258 | ||||||||||||
| Consulting | 87,746 | 245,316 | 356,028 | 245,316 | ||||||||||||
| Depreciation | 1,500 | 2,839 | 4,318 | 5,425 | ||||||||||||
| Insurance | 537 | 5,916 | 537 | 5,916 | ||||||||||||
| Office expenses | 9,563 | 21,597 | 22,329 | 21,696 | ||||||||||||
| Professional fees | 805 | 642 | 5,419 | 642 | ||||||||||||
| Rental expenses | 27,246 | 24,866 | 77,769 | 24,866 | ||||||||||||
| Repair and maintenance | 10,248 | 4,591 | 15,392 | 4,591 | ||||||||||||
| Salaries and staff benefit | 61,550 | 22,051 | 173,542 | 23,798 | ||||||||||||
| Transfer agent and filing fees | 8,384 | 3,698 | 18,966 | 3,698 | ||||||||||||
| Travel | 6,767 | 99 | 7,613 | 144 | ||||||||||||
| Total Expenses | 234,171 | 345,280 | 743,692 | 370,994 | ||||||||||||
| Other income (expenses) | ||||||||||||||||
| Bank charges | (360 | ) | (420 | ) | (1,649 | ) | (453 | ) | ||||||||
| Interest income | 1,473 | 366 | 2,161 | 367 | ||||||||||||
| Loan interest expense | (4,622 | ) | (5,245 | ) | (14,368 | ) | (14,223 | ) | ||||||||
| Other finance expense | (25 | ) | - | (314 | ) | - | ||||||||||
| Other income/(expenses), net | (78 | ) | 1,050 | (78 | ) | 1,050 | ||||||||||
| Rental income | 10,547 | 39,631 | 27,073 | 39,631 | ||||||||||||
| Other income (expenses), net | 6,935 | 35,382 | 12,825 | 26,372 | ||||||||||||
| Net Profit (Loss) | (227,236 | ) | (309,898 | ) | (730,867 | ) | (344,622 | ) | ||||||||
| Foreign currency translation adjustment | (32,765 | ) | 18,715 | (33,364 | ) | 41,839 | ||||||||||
| Comprehensive Profit (Loss) | (260,001 | ) | (291,183 | ) | (764,231 | ) | (302,783 | ) | ||||||||
| Profit (Loss) Per Share, Basic and Diluted | (0.0023 | ) | (0.0007 | ) | (0.0068 | ) | (0.0007 | ) | ||||||||
| Weighted Average Shares Outstanding | 113,059,000 | 414,059,000 | 113,059,000 | 414,059,000 | ||||||||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-2 |
IMAGE INTERNATIONAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
| Nine months Ended September 30, 2018 $ | Nine months Ended September 30, 2017 $ | |||||||
| Operating Activities | ||||||||
| Net income (loss) | (730,867 | ) | (344,622 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 38,305 | 39,068 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Deposits, prepayments and other receivables | (123,517 | ) | (219,636 | ) | ||||
| Due from Directors | (196,085 | ) | - | |||||
| Other payables and accrued liabilities | (79,293 | ) | 22,866 | |||||
| Deferred revenue | 9,137 | - | ||||||
| Due to related parties | 347,844 | 927,259 | ||||||
| Net Cash (used in) / generated from Operating Activities | (734,476 | ) | 424,935 | |||||
| Cash flows from investing activities: | ||||||||
| Addition to property, plant and equipment | (4,837 | ) | (13,283 | ) | ||||
| Increase in fixed deposits – pledged | (291,206 | ) | - | |||||
| Net cash used in investing activities | (296,043 | ) | (13,283 | ) | ||||
| Cash flows from financing activities: | - | - | ||||||
| Issuance of Notes Payable | 307,120 | - | ||||||
| Issue of shares | - | 1,284 | ||||||
| Advances from Shareholders | - | 1,791,033 | ||||||
| Net cash generated from financing activities | 307,120 | 1,792,317 | ||||||
| Effect of exchange rates on cash and cash equivalents | (17,318 | ) | (13,668 | ) | ||||
| Increase (Decrease) in Cash, cash equivalents and restricted cash | (740,717 | ) | 2,190,301 | |||||
| Cash, cash equivalents and restricted cash, Beginning of Period | 986,821 | 21,713 | ||||||
| Cash, cash equivalents and restricted cash, End of Period | 246,104 | 2,212,014 | ||||||
| Supplemental Disclosures: | ||||||||
| Interest paid | - | - | ||||||
| Income taxes paid | - | - | ||||||
(The accompanying notes are an integral part of these condensed consolidated financial statements)
| F-3 |
IMAGE INTERNATIONAL GROUP, INC.
Notes to the Condensed Consolidated Financial Statements
September 30, 2018
(Expressed in U.S. dollars)
(Unaudited)
NOTE 1- Organization and Description of Business
Image International Group, Inc. (“IMGL”) was initially incorporated in the state of Nevada on July 25, 2005 under the name of Eardley Ventures. On April 21, 2008, the Company’s name, Eardley Ventures, was changed to Owlhead Minerals Corp in order to more appropriately reflect the Company’s business plan. On December 23, 2014, Owlhead Minerals Corp. filed an Amendment to it Articles of Incorporation with the Nevada Secretary of State, changing its name from Owlhead Minerals Corp. to Image International Group, Inc. and increasing its authorized capital from 100,000,000 common shares with a par value of $0.001 to 1,000,000,000 shares common shares with a par value of $0.001.
Tang Dynasty Investment Group Limited (“Tang Dynasty”) was incorporated under the laws of Hong Kong on March 22, 2017 and its principal office is located at 121 Tung Tsz Shan Road, Ting Kok Tai Po, Ting Kok, New Territories, Hong Kong. It assumed a full ownership and control of Shenzhen GuYue Environmental Protection Technology Co. Ltd (“GuYue”) on November 29, 2017.
Shenzhen GuYue Environmental Protection Technology Co. Ltd (“GuYue”) was incorporated on November 8, 2010 as a domestic company in the People’s Republic of China. It was converted to a Wholly Foreign-Owned Enterprise (“WFOE”) on November 29, 2017. GuYue is mainly an equity holding company.
Yangshuo County Xing Yuan Lead-Zinc Mine Co., Ltd. (“Yangshuo”) was incorporated on January 22, 1996 under the laws of the People’s Republic of China. Yangshuo primarily engages in lead, zinc and copper mining ore and generates revenue through the sales of processed lead, zinc and copper to customers primarily in Guangxi province. Due to the Chinese government policy on environmental protection, its traditional business of mining of lead, zinc and copper has been idled in recent years. Yangshuo has been exploring business opportunities in the processing of lead-zinc tailings. During this transition period, Yangshuo made its building and land available for lease and entered into operating leases with individual and business lessees. The leases with individual lessees expire over the next 1 to 2 year(s) and the leases with commercial lessees expire over the next 3 years.
On December 5, 2017, GuYue obtained a controlling interest of Yangshuo through a series of contractual agreements including Exclusive Business Cooperation Agreement, Exclusive Option Agreement, Power of Attorney and Equity Pledge Agreement. As a result, GuYue contractually controlled and managed an operating company, Yangshuo and conducted its business solely through Yangshuo, its variable interest entity.
On January 15, 2018, Image International Group, Inc. (“IMGL”) entered into a share exchange agreement (“Share Exchange Agreement”) with (i) Tang Dynasty Investment Group Limited, a limited liability company formed under the laws of Hong Kong, Special Administrative Region, China (“Tang Dynasty”). Pursuant to the terms of the Share Exchange Agreement, IMGL issued 400,000,000 new shares of its common stock, par value at $0.001 per share for all of the outstanding common stock of Tang Dynasty. As a result, Tang Dynasty became our wholly owned subsidiary. However, on June 10, 2018, the Company and shareholders of Tang Dynasty agreed to amend the Share Exchange Agreement, in which the shareholders of Tang Dynasty have agreed to receive 99-million shares of the Company down from 400-million under the January 15, 2018 agreement. As a result, Common stock of IMGL as of June 30, 2018 has been re-stated as $113,059, being 113,059,000 shares issued and outstanding.
Accordingly, we refer to IMGL, its consolidated subsidiaries and variable interest entity collectively as the “Company”, “we”, “us” and “our”.
| F-4 |
NOTE 2 - Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying Unaudited condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 8-K/A for the year ended December 31, 2017, that was filed with the SEC on May 21, 2018.
Principles of Consolidation
These condensed consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimate and assumptions that impact the presented amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the presented amounts of revenues and expenses during the period. Actual results may differ from those estimates. Significant estimates reflected in the condensed consolidated financial statements include the collectability of receivables, the useful lives of long-lived assets and intangibles, assumptions used in assessing impairment of long-lived assets, valuation of accruals for expenses and tax due.
Going Concern Consideration
These condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely to generate earnings in the immediate future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at September 30, 2018, the Company has a working capital deficiency of $3,857,186 and has an accumulated deficit of $698,039 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These condensed financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Foreign Currency Translation
The reporting currency of the Company is the U.S. dollar. Tang Dynasty uses the local currency, Hong Kong Dollar, while GuYue and Yangshuo use the local currency, Renminbi (RMB), as their functional currencies as determined based on the criteria of ASC 830, “Foreign Currency Translation”. Assets and liabilities are translated at the unified exchange rate as quoted by the U.S. Federal Reserve at the end of the period. Income and expense accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of equity. 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. Translation adjustments included in accumulated other comprehensive gain/(loss) for the three months ended September 30, 2018 and 2017, for the nine month ended September 30, 2018 and 2017, amounted to $(32,765), $18,715, ($33,364) and $41,839 respectively.
| F-5 |
Below is a table with foreign exchange rates used for translation:
| (Average Rate) | September 30, 2018 | September 30, 2017 | ||||||||||||||
| Chinese Renminbi (RMB) | RMB | 6.5121 | RMB | 6.5785 | ||||||||||||
| Hong Kong dollar (HKD) | HKD | 7.8404 | HKD | 7.7877 | ||||||||||||
| United States dollar ($) | $ | 1.0000 | $ | 1.0000 | ||||||||||||
| (Closing Rate) | September 30, 2018 | September 30, 2017 | ||||||||||||||
| Chinese Renminbi (RMB) | RMB | 6.8680 | RMB | 6.6685 | ||||||||||||
| Hong Kong dollar (HKD) | HKD | 7.8259 | HKD | 7.8110 | ||||||||||||
| United States dollar ($) | $ | 1.0000 | $ | 1.0000 | ||||||||||||
Cash and Cash Equivalent
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain with various financial institutions in Hong Kong and PRC. As of September 30, 2018, cash balances held in Hong Kong and PRC banks are uninsured. We have not experienced any losses in bank accounts and believe we are not exposed to any risks on our cash in bank accounts.
Financial Instruments
The carrying amount reported in the balance sheet for cash, other receivables, accrued liabilities and other payables approximate fair value because of the immediate or short-term maturity of these financial instruments.
Plant, Property, and Equipment
Plant, property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains and losses on dispositions of property and equipment are included in operating income (loss). Major additions, renewals and improvements are capitalized, while maintenance and repairs are recognized as expense as incurred.
Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method over the useful lives of the assets are as follows:
| Classification | Estimated useful life | ||
| Buildings | Over the lease term |
Intangibles
Intangible assets are carried at cost less accumulated amortization.
We account for its significant leases of land use rights for purposes of classification of operating or capital. At the inception of the lease agreements, we will classify the leases as capital leases under ASC 840-30 if (a) transfer of ownership to lessee at the end of the lease term, (b) bargain purchase option, (c) the lease term equals to or exceeds 75% of economic life of the leased property, and/or (d) present value of minimum lease payments exceeds 90% of fair value of the lease property. Otherwise, the leases will be classified as operating leases.
Intangible assets with finite useful lives are amortized on a straight-line basis that align with it economic benefits of the intangible assets to be consumed. The original estimated useful life for the land use rights ranged from 38 to 70 years stipulated on the lease term.
Intangible assets are reviewed at least annually to determine whether there are any circumstances arisen that may trigger the impairment of their carrying values. Management considers intangible assets to be impaired if their carrying value exceeds the future projected cash flows from the perspective operations. Management also evaluates the periods of amortization to identify if any subsequent events or conditions that warrant revised estimates of useful lives.
| F-6 |
Impairment of Long-lived Assets
Long-lived assets, including buildings and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When we identify an impairment, we reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of the period ended September 30, 2018 and fiscal years ended December 31, 2017, management determined that there was no impairment.
Fair Values of Financial Instruments
ASC Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information of financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all non-financial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.
The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
We consider the carrying amount of cash, other receivables and other short-term payables, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization.
Comprehensive Income (Loss)
Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. Our other comprehensive income (loss) is comprised of foreign currency translation adjustments.
| F-7 |
Concentration of Risk
Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and other accounts receivable. As of September 30, 2018, and December 31, 2017 $246,104 and $986,821 were deposited with various major financial institutions located in Hong Kong and the PRC, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. Under the Deposit Scheme Protection Rules of Hong Kong Special Administrative Region, China, eligible bank deposits with banks in Hong Kong are insured up to $63,890 (HKD500,000). Eligible bank deposits include all types of ordinary deposits in any currency such as current accounts, savings accounts, secured deposits and time deposits with a maturity term no more than 5 years.
Historically, deposits in Chinese banks are secure due to state policy to protect depositor interests. However, China promulgated a Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures to provide for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the current Bankruptcy Law, a Chinese bank may file bankruptcy if it deems itself to be insolvent. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have intensified competition in many aspects, especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy at the institutions that the Company maintains deposits has increased. In the event of bankruptcy, the Company is unlikely to reclaim its deposits in full since it is unlikely to be classified as a secured creditor under PRC laws.
Deposits and other receivables consist of rental receivable, other receivable and deposit paid. These are typically unsecured and rental receivable are derived from revenue earned from leasee, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its leasees’ creditworthiness and its ongoing monitoring of outstanding balances. The Company maintains reserves for estimated credit losses, and such losses have generally been within expectations.
Income Taxes
We account for income taxes using an asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
We apply ASC 740,Accounting for Income Taxes, to account for uncertainty in income taxes and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted by the U.S. government which included a wide range of tax reform affecting businesses including the corporate tax rates, international tax provisions, tax credits and deduction with majority of the tax provision effective after December 31, 2017.
Certain activities conducted in foreign jurisdictions may result in the imposition of U.S. corporate income taxes on IMGL when its subsidiaries, controlled foreign corporations (“CFCs”), generate income that is subject to Subpart F or GILTI under the U.S. Internal Revenue Code beginning after December 31, 2017.
The Company did not accrue any liability, interest or penalties related to uncertain tax positions in our provision for income taxes line of our consolidated statements of operations for the nine months ended September 30, 2018 and year ended December 31, 2017. We do not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
| F-8 |
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
Revenue Recognition: Effective January 1, 2018, the Company adopted Topic 606, Revenue from Contracts with Customers, using modified retrospective approach applied its contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are accounted for and presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with Topic 605. For the nine months ended September 30, 2018 and 2017, the Company is still in the development stage of its sand tailing business and has not generated revenue related to this business. The Company assessed that the adoption of ASC 606 does not have significant impact on its condensed consolidated financial statements. During this transition period, the Company has generated rental income from its buildings located in Yangshuocounty, PRC and accounted for its rental income in accordance with ASC 840-20, Leases, Operating Leases.
Financial instrument: In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 201n-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on January 1, 2018. Since the Company do not have any financial instruments, management does not expect there will be any material impact on the financial statements.
Statement of Cash Flows:In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments in this Update provide guidance on the following eight specific cash flow issues. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2018 and evaluated that the Company does not have any specific type of cash flow issues identified in the guidance. Therefore, the Company does not believe that this standard has a significant impact on the presentation of its consolidated statement of cash flows.
Statement of Cash Flows:In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which are currently recognized in other financing activities, on the Interim Condensed Consolidated Statement of Cash Flows. Furthermore, an additional reconciliation will be required to reconcile Cash and cash equivalents and restricted cash reported within the Interim Condensed Consolidated Balance Sheets to sum to the total shown in the Interim Condensed Consolidated Statement of Cash Flows. The Company has already disclosed the restricted cash separately on its Interim Condensed Consolidated Statements of Financial Position. Beginning the first quarter of 2018, the Company has adopted and also included the restricted cash balances on the Interim Condensed Consolidated Statement of Cash Flows and reconciliation of Cash, cash equivalent and restricted cash within its Interim Condensed Consolidated Statements of Financial Positions that sum to the total of the same such amounts shown in Interim Condensed Consolidated Statement of Cash Flows and the Cash Flows of Nine months ended September 30, 2017 has been applied retrospectively.
Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business(ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The Company has adopted this guidance effective for us in the first quarter of 2018 on a prospective basis. This standard does not have a material impact on our consolidated financial statements unless and until the Company plans an acquisition or deconsolidation in the future.
| F-9 |
Stock-based Compensation: In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock compensation (Topic 718): Scope of modification accounting” (“ASU 2017-09”). The purpose of the amendment is to clarify which changes to the terms or condition of a share-based payment award require an entity to apply modification accounting. For all entities that offer share based payment awards, ASU 2017-09 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company will apply this standard beginning in the first quarter of 2018. The Company has not yet granted, delivered or provided any stock-based compensation to its employees or third party service providers. This standard does not have a significant impact on its consolidated financial statements.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (“the Tax Act”). As of September 30, 2018, the Company has not completed our accounting for the effects of the Tax Act based on the currently available information and has made a reasonable estimates in the first quarter of 2018. The Company will monitor future guidance set forth by the Department of Treasury with regard to the tax provisions under the Act, and true up this estimate as appropriate within the one year measurement period. If revisions are needed as new information becomes available, the final determination of the deemed incremental income tax expense, deemed re-measurement of the deferred assets and liabilities or other applicable provisions of the Tax Act will be completed as additional information becomes available within the 12 months re-measurement period.
In January 2018, the FASB staff released Staff Q&A Topic 740 No. 5 which provides a guidance on accounting for tax provision of Global Intangible Low-Taxed Income (“GILTI”) as provided under the Tax Cuts and Jobs Act (“the Act”). The GILTI refers to the tax on the excess of a United States shareholder’s total net foreign income over a deemed return on tangible assets. Based on the information available to us for the first quarter of 2018, the Company provisionally made a policy election and accounted for its potential GILTI tax as a period cost when incurred.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods or services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except in certain circumstances. ASU 2018-07 clarifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be consumed in a grantor’s operations unless the transaction effectively provides financing to the grantor or are awarded under a contract accounted for under Topic 606 (as defined below). ASU 2018-07 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The amendments require that adjustments required upon application of the update be made through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. We have historically awarded share-based compensation to nonemployees; however, we do not currently have any outstanding share-based awards to nonemployees. Therefore, we do not believe the adoption of ASU 2018-07 will have an impact on our consolidated financial condition and results of operations unless share-based payments are issued to nonemployees in the future.
Leases:
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This accounting standard seeks 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. Current US GAAP does not require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. This standard also provides guidance from the lessees’ perspective on how to determine if a lease is an operating lease or a financing lease and the differences in accounting for each.
In January 2018, the FASB issued ASU No. 2018-01, which allows for an entity to elect an optional transition practical expedient for land easements that exist or expired before adoption of Topic 842. The adoption of this standard is required for interim and fiscal periods beginning after December 15, 2018 and it is required to be applied using the modified retrospective approach. Early adoption is permitted.
The Company is currently evaluating the impact of the above standards on their consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases”. These amendments affect narrow aspects of the guidance issued in the amendments in ASU 2016-02 including those regarding residual value guarantees, rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase option, variable lease payments that depend on an index or a rate, investment tax credits, lease term and purchase option, transition guidance for amounts previously recognized in business combinations, certain transition adjustments, transition guidance for leases previously classified as capital leases under Topic 840, transition guidance for modifications to leases previously classified as direct financing or sales-type leases under Topic 840, transition guidance for sale and leaseback transactions, impairment of net investment in the lease, unguaranteed residual asset, effect of initial direct costs on rate implicit in the lease, and failed sale and leaseback transactions. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. The Company is currently evaluating the impact of the adoption of ASU 2018-10 on its consolidated financial statements.
In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which works to improve on certain aspects of ASU No. 2016-02 identified by stakeholders as problematic or difficult to implement, including the adoption method. Currently, entities are required to adopt this ASU using a modified retrospective transition method. Under that transition method, an entity initially applies this ASU at the beginning of the earliest period presented in its financial statements. ASU No. 2018-11 provides another adoption method, which allows entities to initially apply ASU No. 2016-02 at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. We are currently evaluating the impact the standard may have on our consolidated financial statements and related disclosures.
Reporting of Comprehensive Income:
In February 2018, the FASB issued ASU 2018-02—Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this ASU is not expected to have an impact on our financial statements.
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Income Tax:
In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”). The amendments in this update add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”). SAB 118 directs taxpayers to consider the implications of the Tax Cuts and Jobs Act (“Tax Act”) as provisional when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law. SAB 118 provides a one-year measurement period from a registrant’s reporting period that includes the Tax Act’s enactment date to allow the registrant sufficient time to obtain, prepare and analyze information to complete the required accounting under ASC 740. As described in the 2017 Form 10-K, we reflected the impact of the changes in rates on our deferred tax assets and liabilities at December 31, 2017, as we are required to reflect the change in the period in which the law is enacted. We are still analyzing certain aspects of the Tax Act, which could potentially affect the measurement of our income tax balances and future income tax expense or benefit. The ultimate impact of the Tax Act may differ from the estimates provided herein, possibly materially, due to additional regulatory guidance, changes in interpretations and assumptions, and other actions as a result of the Tax Act.
Codification Improvements:
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements (“ASU 2018-09”). The amendments in this update include changes to clarify and make other incremental improvements to GAAP under the FASB’s perpetual project to address suggestions from stakeholders. The amendments in this update affect a wide variety of topics and apply to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance is based on the facts and circumstances of each amendment. A number of the amendments do not require transition guidance and are effective as of the issuance of the update while many of the updates that have transition guidance are effective for annual periods beginning after December 15, 2018. For amendments relating to issued but not effective guidance, the effective date of these amendments follows that of the originally issued update. We are currently assessing the potential impact of the many amendments within ASU 2018-09 and are currently unable to quantify the impact, if any, the standard will have on our consolidated financial condition and results of operations.
Investments:
In March 2018, the FASB issued ASU No. 2018-04, Investments—Debt Securities (Topic 320 and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273, which supersedes previous SEC guidance in the Codification in SAB Topic 5.M, Other-Than-Temporary Impairment of Certain Investments in Equity Securities and special balance sheet requirements in Regulation S-X Rule 3A-05 for Public Utility Holding Companies. The changes are effective when issued. The adoption of these updates did not have a material impact on our consolidated financial statements.
Financial Instruments:
In February 2018, the FASB issued ASU 2018-03—Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in Update 2016-01. For all other entities, the effective date is the same as the effective date in Update 2016-01. All entities may early adopt these amendments for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted Update 2016-01. The adoption of this ASU is not expected to have an impact on our financial statements.
Accounting Pronouncements Issued But Not Yet Adopted
Leases: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-2”), which provides guidance on lease amendments to the FASB Accounting Standard Codification. This ASU will be effective for us on January 1, 2019. We are currently in the process of evaluating the impact of the adoption of ASU 2016-2 on our consolidated financial statements.
Financial Instruments - Credit Losses:In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): The amendments in this Update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. ASU 2016-13 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is allowed as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still evaluating the effect that this guidance will have on the Company’s consolidated financial statements and related disclosures.
Financial Instruments - Credit Losses: In June 2017, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): The amendments in this Update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more decision useful to users of the financial statements. ASU 2017-13 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is allowed as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still evaluating the impact of this standard on the Company’s consolidated financial statements and related disclosures.
| F-11 |
Leases:In September 2017, the FASB issued ASU 2017-13, Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption ASC Topic 842. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object certain public business entities to elect to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. The Company elected to adopt and ASC Topic 842 beginning January 1, 2019, respectively.
Except for the ASU above, in the period from February 2018 through May 2018, the FASB has issued ASU No. 2018-02 through ASU 2018-05, which are not expected to have a material impact on the consolidated financial statements upon adoption.
NOTE 3 – Prepayment, Deposits and Other Receivables
Prepayment, deposits and other receivables consisted of the following:
| September 30, 2018 | December 31, 2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| Rental receivable | $ | 29,159 | $ | 13,193 | ||||
| Deposit paid | 26,202 | 26,246 | ||||||
| Prepaid expenses | 47,397 | - | ||||||
| Other receivables | 53,815 | - | ||||||
| Total prepayment, deposits and other receivables, net | $ | 156,573 | $ | 39,439 | ||||
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following:
| September 30, 2018 | December 31, 2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| Buildings, at cost | $ | 203,844 | $ | 215,176 | ||||
| Office Equipment, at cost | 4,586 | - | ||||||
| Less: accumulated depreciation and impairment charges | (19,847 | ) | (16,628 | ) | ||||
| Total property, plant and equipment, net | $ | 188,583 | $ | 198,548 | ||||
The depreciation expenses for three months ended September 30, 2018 and 2017, and nine months ended September 30, 2018 and 2017 were $1,500, $2,839, $4,318 and $5,425 respectively.
| F-12 |
NOTE 5 – INTANGIBLES ASSETS, NET
Intangible assets consisted of the following:
| September 30, 2018 | December 31, 2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| Land use rights | $ | 1,790,914 | $ | 1,890,475 | ||||
| Less: accumulated amortization | (161,602 | ) | (136,568 | ) | ||||
| Total intangibles assets, net | $ | 1,629,312 | $ | 1,753,907 | ||||
The amortization expenses of land use rights for the three months ended September 30, 2018 and 2017, and nine months ended September 30, 2018 and 2017 were $10,935, $12,407, $33,987 and $33,644 respectively.
The estimated amortization expenses for each of the five succeeding years is as follows:
| Year ending December 31, | Estimated amortization expense | |||
| 2018 (remaining period) | $ | 10,752 | ||
| 2019 | 42,978 | |||
| 2020 | 42,978 | |||
| 2021 | 42,978 | |||
| 2022 | 42,978 | |||
| Thereafter | 1,446,648 | |||
| Total | $ | 1,629,312 | ||
NOTE 6 – SHORT TERM LOANS AND LOAN PAYABLE
Short-term loans represented amounts due to bank and government agency, normally due within one year. The principal of the loans is due at maturity but can be renewed at the bank’s option. Interest is due monthly.
Short term loans due to bank and government consisted of the following as of the years indicated:
| September 30, 2018 | December 31, 2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| Loan from Agricultural Bank of China with original principal amount at RMB 1,497,945 at a variable interest rate. Average interest rate is 4.9% for the quarter ended September 30, 2018 and the fiscal year ended December 31, 2017. The loan is matured in October 1989. Yangshuo is negotiating an extension with the lender. | $ | 218,105 | $ | 230,230 | ||||
| Loan from the Yangshuo County Bureau of Finance with original principal amount RMB 652,794 at a fixed interest rate. Interest rate is 7.92% per annum for the quarter ended September 30, 2018 and the fiscal year ended December 31, 2017. The loan is repayable on demand. | 95,048 | 100,333 | ||||||
| Loan from the Yangshuo County Bureau of finance with original loan amount RMB 1,000,000 at a zero interest rate. The loan is repayable on demand. | 145,603 | 153,697 | ||||||
| Total short-term loans | $ | 458,756 | $ | 484,260 | ||||
Interest expense on short term loans for the three months ended September 30, 2018 and 2017, and nine months ended September 30, 2018 and 2017 amounted to $4,622, $5,245, $14,368 and $14,223 respectively. No interest expense has been capitalized into property, plant and equipment as all borrowings were for working capital purposes.
| F-13 |
NOTE 7 – OTHER PAYABLES AND ACCRUED LIABILITIES
Other payables and accrued liabilities as of September 30, 2018 and December 31, 2017 consisted of:
| September 30, 2018 | December 31, 2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| Security deposits & other payable | $ | 91,834 | $ | 96,847 | ||||
| Accrued loan interest expenses | 400,064 | 407,923 | ||||||
| Payroll payable | 11,659 | 3,927 | ||||||
| Accrued expenses | 56,233 | 50,881 | ||||||
| Total | $ | 559,790 | $ | 559,578 | ||||
NOTE 8- RELATED PARTY TRANSACTIONS
On July 15, 2017, Tang Dynasty entered into consulting agreements with two of its former shareholders, Cheuk Kau Herman Kwong and Kwok Leung Lee (“the consultants”). The agreements provide that the monthly compensation for January and February 2018, $2,552 (HKD20,000), for March to September 2018, $1,275 (HKD10,000), is payable to each of the consultants for the financial and project management services rendered to Tang Dynasty. Pursuant to these agreements, Tang Dynasty has incurred and paid $3,827 (HKD30,000) and $14,030 (HKD110,000) and to each of the consultants during the three months period and nine months period ended September 30, 2018 respectively.
IMGL has incurred $30,000 and $90,000 as management consulting fee to Hoi Ming Chan, Chief Executive Officer, in respect of his services rendered to IMGL for the three months period ended September 30, 2018 and the nine month period ended period ended September 30, 2018 respectively. IMGL has incurred and paid $10,500 and $31,500 as financial consulting fee to AE Financial Management Ltd. in respect of the services rendered by Edward Low, Chief Financial Officer, for the three months period ended September 30, 2018 and the nine month period ended September 30, 2018 respectively.
Other receivables-related parties
Other receivables - related parties are those non-trade receivables arising from transactions between the Company and certain related parties, such as loans and employee advances to such related parties. The loans are unsecured, non-interest bearing and due in the next 12 months.
Other receivables - related parties consisted of the following
| Name of related parties | Relationship | Nature of transactions | September 30, 2018 (Unaudited) | December 31, 2017 (Audited) | ||||||||
| Image International Group Inc. | Mr. Hoi Ming Chan is the Chief Executive Officer | Loan for funding business development activities | $ | - | $ | 57,955 | ||||||
| Hui Zhang | Director of Yangshuo | Loan for funding business development activities | 185,924 | - | ||||||||
| Total | $ | 185,924 | $ | 57,955 | ||||||||
| F-14 |
Other payables-related parties
Other payables - related parties consisted of the following:
| Name of related parties | Relationship | Nature of transactions | September 30, 2018 (Unaudited) | December 31, 2017 (Audited) | ||||||||
| Hui Zhang | Director of Yangshuo | Funds to former shareholders | $ | - | $ | 392,235 | ||||||
| Ni Qin | Director of Shenzhen Guyue Environmental Technology Co. Ltd. | Loan from director for operating cash flows | 301,289 | 16,008 | ||||||||
| Hoi Ming Chan | Chief Executive Officer of IMGL and Director of Tang Dynasty | Advances from director to support the operation of Tang Dynasty and compensation for consulting service to IMGL | 3,114,661 | 2,575,428 | ||||||||
| Zhi Yuan Chen | Supervisor of Shenzhen Guyue Environmental Technology Co. Ltd. | Loan from supervisor for GuYue’s operating cash flow | 2,628 | 19,681 | ||||||||
| Shenzhen DongyuanDongli Battery Co., Ltd | Zhi Yuan CHEN is the corporate representative of the Company | Loan for GuYue’s operating cash flows | - | 799 | ||||||||
| Huizhou ShijiWufeng Agricultural Industry Co., Ltd | Owned by Shenzhen DongyuanDongli Battery Co., Ltd and Zhi Yuan CHEN | Loan for GuYue’s operating cash flows | - | 1,202 | ||||||||
| Total | 3,418,578 | 3,005,353 | ||||||||||
| Total other payables - related parties - current | 3,418,578 | 3,005,353 | ||||||||||
| Total other payables - related parties - non-current | $ | - | $ | - | ||||||||
NOTE 9 – NON-OPERATING REVENUE
Non-operating revenue mainly consists of rental revenue. Yangshuo has recognized its rental revenue in an amount of $10,547
and $27,073 for the three months and nine months ended September 30, 2018 respectively.
The following is a schedule by years of minimum future rentals on non-cancelable operating leases as of September 30, 2018:
| Year ending December 31: | ||||
| 2018 | $ | 7,770 | ||
| 2019 | 16,271 | |||
| 2020 | 6,686 | |||
| Total minimum future rentals receivable | $ | 30,727 | ||
NOTE 10 – INCOME TAXES
We are subject to income taxes in both the United States and multiple foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
| F-15 |
U.S.
Prior to January 31, 2018, IMGL, incorporated in Nevada, is subject to federal income tax rate at 34%. On December 22, 2017, the U.S government enacted the Tax Cuts and Jobs Act which covers a wide range of changes to the U.S. tax code, including, but not limited to (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal corporate income taxes on dividends from foreign subsidiaries (4) providing modification to subpart F provisions and new taxes on certain foreign earnings such as Global Intangible Low-Taxed Income (GILTI). Except for the one-time transition tax, most of these provisions go into effect starting January 1, 2018.
The share exchange between IMGL and Tang Dynasty was closed on January 18, 2018 and thus the business combination was effective on the same day. Accordingly, the Company was not subject to the one-time transition tax which was in effect in the calendar year 2017. Beginning the first quarter 2018, we are subject to GILTI and applying the guidance in SAB 118 when accounting for the enactment date effects of the Act.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of September 30, 2018, we have not completed our accounting for all the tax effects of the Tax Act. Since our foreign subsidiaries incurred losses for the three months ended September 30, 2018, we anticipated that the tax effects of the Tax Act is nominal. We will continue to evaluate the tax effects of the Tax Act and refine our estimate when additional information is available. Our estimate could be changed as we obtain a more thorough understanding of the Tax Act. Changes to the provisional estimate of the tax effect of the Tax Act will be recorded as a discrete item during the interim period.
Hong Kong
Tang Dynasty Investment Group Limited, incorporated in Hong Kong, SAR, is subject to Hong Kong Profits tax at 16.5%.
PRC
Our subsidiary, GuYue and VIE, Yangshuo are incorporated in the People’s Republic of China and governed by the income tax laws of the PRC. The income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments.
Under the EIT Laws, dividends paid by PRC enterprises out of profits earned post-2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries.
Effective tax rates for the Nine months ended September 30, 2018 and 2017 were nil. The Company and its subsidiaries have incurred operating losses historically. The Company believes that it is more likely than not that its accumulated operating losses from IMGL, Tang Dynasty, GuYue and Yangshuo will not be utilized before they are expired. Therefore, the Company has provided full valuation allowance for the deferred tax assets and accumulated net operating losses. Accordingly, the Company has no net deferred tax assets.
The Company did not recognize any interest and penalties related to uncertain tax positions in its provision for income taxes for the Nine months ended September 30, 2018 and year ended December 31, 2017. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
| F-16 |
NOTE 11 - STATUTORY RESERVE
Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). GuYue and Yangshuo did not make appropriations to statutory reserve for the nine months ended September 30, 2018 as both entities have incurred accounting losses and tax losses during that period.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
As of the reporting date, the Company has not incurred any unrecognized or recognized commitments or loss contingencies that are subject to disclosure requirements.
NOTE 13 – CONTINGENT LIABILITY
A group of former shareholders of Tang Dynasty and Yangshuo have filed a claim against the Company for outstanding obligations over an equity transfer. The Company refutes this claim and feels it has fully complied with the obligations under the equity transfer. The case is pending a hearing date, at the legal advice of Company’s counsel no provision was made.
| F-17 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations for the Three-Month Period Ended September 30, 2018 compared to Three-Month Period Ended September 30, 2017
Revenue
For the three-month period ended September 30, 2018 and 2017, we have not recognized any revenue as we were in the process of transitioning its traditional lead-zinc mining business to exploration of lead-zinc tailings production. Accordingly, our mining process has been idled and we have not recognized any revenue related to our lead-zinc mining business.
Cost of Revenue
For the three-month period ended September 30, 2018 and 2017, we have not recognized any cost of revenue as we were in the process of transitioning its traditional lead-zinc mining business to exploration of lead-zinc tailings production. Accordingly, our mining process has been idled and we have not recognized any revenue related to our lead-zinc mining business.
Operating Expenses
The general and administrative expenses for the three-month period ended September 30, 2018 and 2017 were $234,171 and $345,280 respectively.
Our general and administrative expenses for the three-month period ended September 30, 2018 and 2017 comprised of the following:
Three-Month Ended | Three-Month Ended | Change $ | Change % | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Amortization | $ | 10,935 | $ | 12,407 | $ | (1,472 | ) | -12 | % | |||||||
| Audit fee | 7,461 | - | 7,461 | 100 | ||||||||||||
| Building management fee | 1,429 | 1,258 | 171 | 14 | ||||||||||||
| Consulting | 87,746 | 245,316 | (157,570 | ) | -64 | |||||||||||
| Depreciation | 1,500 | 2,839 | (1,339 | ) | -47 | |||||||||||
| Insurance | 537 | 5,916 | (5,379 | ) | -91 | |||||||||||
| Office expenses | 9,563 | 21,597 | (12,034 | ) | -56 | |||||||||||
| Professional fees | 805 | 642 | 163 | 25 | ||||||||||||
| Rental expenses | 27,246 | 24,866 | 2,380 | 10 | ||||||||||||
| Repair and maintenance | 10,248 | 4,591 | 5,657 | 123 | ||||||||||||
| Salaries and staff benefit | 61,550 | 22,051 | 39,499 | 179 | ||||||||||||
| Transfer agent and filing fees | 8,384 | 3,698 | 4,686 | 127 | ||||||||||||
| Travel | 6,767 | 99 | 6,668 | 6735 | ||||||||||||
| Total | $ | 234,171 | $ | 345,280 | $ | (111,109 | ) | -32 | % | |||||||
Other Income (Expenses), Net
For the three-month periods ended September 30, 2018 and 2017, the Company incurred other income and expenses, net in an amount of $6,935 and $35,382, respectively. The increase in other income, net is primarily due to the rental income and interest income, offset by loan interest expenses, bank charges and other finance expenses.
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Results of Operations for the Nine-Month Period Ended September 30, 2018 compared to Nine-Month Period
Revenue
For the nine-month period ended September 30, 2018 and 2017, we have not recognized any revenue as we were in the process of transitioning its traditional lead-zinc mining business to exploration of lead-zinc tailings production. Accordingly, our mining process has been idled and we have not recognized any revenue related to our lead-zinc mining business.
Cost of Revenue
For the nine-month period ended September 30, 2018 and 2017, we have not recognized any cost of revenue as we were in the process of transitioning its traditional lead-zinc mining business to exploration of lead-zinc tailings production. Accordingly, our mining process has been idled and we have not recognized any revenue related to our lead-zinc mining business.
Operating Expenses
The general and administrative expenses for the nine-month period ended September 30, 2018 and 2017 were $743,692 and $370,994 respectively. The significant increase in general and administrative expense primarily due to additional entity, Tang Dynasty, incorporated on March 22, 2017.
Our general and administrative expenses for the nine-month period ended September 30, 2018 and 2017 comprised of the following:
Nine-Month Ended | Nine-Month Ended | Change $ | Change % | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Amortization | $ | 33,987 | $ | 33,644 | $ | 343 | 1 | % | ||||||||
| Audit fee | 23,675 | - | 23,675 | 100 | ||||||||||||
| Building management fee | 4,117 | 1,258 | 2,859 | 227 | ||||||||||||
| Consulting | 356,028 | 245,316 | 110,712 | 45 | ||||||||||||
| Depreciation | 4,318 | 5,425 | (1,107 | ) | -20 | |||||||||||
| Insurance | 537 | 5,916 | (5,379 | ) | -91 | |||||||||||
| Office expenses | 22,329 | 21,696 | 633 | 3 | ||||||||||||
| Professional fees | 5,419 | 642 | 4,777 | 744 | ||||||||||||
| Rental expenses | 77,769 | 24,866 | 52,903 | 213 | ||||||||||||
| Repair and maintenance | 15,392 | 4,591 | 10,801 | 235 | ||||||||||||
| Salaries and staff benefit | 173,542 | 23,798 | 149,744 | 629 | ||||||||||||
| Transfer agent and filing fees | 18,966 | 3,698 | 15,268 | 413 | ||||||||||||
| Travel | 7,613 | 144 | 7,469 | 5187 | ||||||||||||
| Total | $ | 743,692 | $ | 370,994 | $ | 372,698 | 100 | % | ||||||||
Other Income (Expenses), Net
For the nine-month period ended September 30, 2018 and 2017, the Company incurred other income and expenses, net in an amount of $12,825 and $26,372, respectively. The increase in other income, net is primarily due to the rental income and interest income, offset by loan interest expenses, bank charges and other finance expenses.
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Net Income/(Loss)
For the three-months periods ended September 30, 2018 and 2017, the Company had a net loss of $227,236 and $309,898, respectively.
For the nine-month period ended September 30, 2018 and 2017, the Company had a net loss of $730,867 and $344,622 respectively. The significant increase in loss before income taxes from operation for the nine-month period ended September 30, 2018 as compare to the nine-month period ended September 30, 2017 is due to expenses such as audit fee, rental expense, salaries related and other general expenses, relating to the acquisition of Yangshuo.
Capital Resources and Liquidity
The following tables set forth our consolidated statements of cash flow:
| Nine months ended September 30, | ||||||||
| 2018 | 2017 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Net cash (used in) / generated from operating activities | $ | (734,476 | ) | $ | 2,215,968 | |||
| Net cash provided by (used in) investing activities | (296,043 | ) | (13,283 | ) | ||||
| Cash flows generated from financing activities | 307,120 | 1,284 | ||||||
| Effect of exchange rate change on cash and cash equivalents | (17,318 | ) | (13,668 | ) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (740,717 | ) | 2,190,301 | |||||
| Cash, cash equivalents and restricted cash, beginning balance | 986,821 | 21,713 | ||||||
| Cash, cash equivalents and restricted cash, ending balance | $ | 246,104 | $ | 2,212,014 | ||||
During the nine months ended September 30, 2018, net cash used in operating activities totaled $734,476. Net cash used in investing activities totaled $296,043. Net cash generated from financing activities totaled $307,120. The resulting change in cash for the period was a decrease of $740,717. The cash balance at the beginning of the period was $986,821. The cash balance on September 30, 2018 was $246,104.
During the nine months ended September 30, 2017, net cash generated from operating activities totaled $2,215,968. Net cash used in investing activities totaled $13,283. Net cash generated from financing activities totaled $1,284. The resulting change in cash for the period was an increase of $2,190,301. The cash balance at the beginning of the period was $21,713. The cash balance on September 30, 2017 was $2,212,014.
Working Capital
| As of September 30, 2018 ($) | As of December 31, 2017 ($) | |||||||
| (Unaudited) | (Audited) | |||||||
| Current Assets | 879,807 | 1,084,215 | ||||||
| Current Liabilities | 4,736,993 | 4,049,191 | ||||||
| Working Capital (deficit) | (3,857,186 | ) | (2,964,976 | ) | ||||
For the nine-month period ended September 30, 2018, we require cash in approximately $4.8 million within the next twelve months including $0.5 million to repay outstanding short-term loans to the bank institutions and county agencies, $0.3 million to repay notes payable to bank institution, $0.5 million to accrued liabilities and other payables and $3.5 million to our director and related parties. In an effort to support and maintain our financial positions and operations, we have leased out our properties and land to multiple individuals and business parties. Furthermore, in the first quarter of 2018, we have entered into a share exchange agreement with Image International Group Limited (“IMGL”) which enabled us to raise capital through the over-the-counter channel.
For the year ended December 31, 2017, we require cash in approximately $4 million within the next twelve months including $0.5 million to repay outstanding short-term loans to the bank institutions and county agencies, $0.5 million to accrued liabilities and other payables, $0.4 million to shareholder and $2.6 million to our directors. In an effort to support and maintain our financial positions and operations, we have leased out our properties and land to multiple individuals and business parties. Furthermore, in the first quarter of 2018, we have entered into a share exchange agreement with Image International Group Limited (“IMGL”) which enabled us to raise capital through the over-the-counter channel.
The Company’s ability to continue as a going concern is dependent on its available cash and its ability to raise additional funds in the near future to support corporate operations and the exploration of our mineral property.
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Limited Operating History; Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance. We have limited revenue generating assets. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services.
The Company is aware that additional financing will be required in order to continue its pursuit of a mineral property opportunity or comparable opportunity in a related field. There is no assurance that additional funding will be successfully completed.
We will require additional financing to cover our costs that we expect to incur over the next twelve months. We believe that debt financing will not be an alternative for funding our operations, as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. However, we cannot provide any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our plan of operations. In the absence of such financing, we will not be able to continue and our business plan will fail.
There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our operations and our business will fail.
Future Financing
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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Item 4. Controls and Procedures.
We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2018 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.
Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in this report, we believe that our consolidated financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 fairly present our financial condition, results of operations and cash flows in all material respects.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.
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Management assessed the effectiveness of the Company’s internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:
| 1. | Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures. | |
| 2. | Insufficient Written Policies & Procedures: We have insufficient written policies and procedures for accounting and financial reporting. | |
| 3. | Inadequate Financial Statement Closing Process: We have an inadequate financial statement closing process. | |
| 4. | Lack of Audit Committee: The lack of a functioning audit committee and lack of a majority of outside directors on the Company’s Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. |
Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) prepare and implement sufficient written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors and audit committee members in the future.
Management, including our Chief Executive Officer and the Chief Financial Officer, has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
Our management, including our Chief Executive Officer and the Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2018 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Except for the appeal and second trial of the administrative litigation in China as detailed in Note 13 to the Condensed Consolidated Financial Statements as of September 30, 2018, we are not presently a party to any legal proceedings and, to our knowledge, no such proceedings are threatened or pending.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
No stock was sold during the three-month period ended September 30, 2018.
Item 3. Defaults Upon Senior Securities.
None.
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Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to our security holders for a vote during the three-month period ended September 30, 2018.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are attached hereto:
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
IMAGE INTERNATIONAL GROUP, INC
| By: | /s/ Hoi Ming Chan | |
| Hoi Ming Chan | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| December 27, 2018 |
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