| Note 2. Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting and Presentation The accompanying consolidated financial statements of the Company have been prepared on the accrual basis. All significant intercompany accounts and transactions have been eliminated in consolidation. All consolidated financial statements and notes to the consolidated financial statements are presented in United States dollars (US Dollar or US$ or $). Variable Interest Entity Pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation (ASC 810), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entity (VIE). ASC 810 requires a VIE to be consolidated by a company if it is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIEs residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIEs economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entitys determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de facto agents, have the unilateral ability to exercise those rights. Zhongshan WINHAs actual stockholders do not hold any kick-out rights that affect the consolidation determination. The consolidated financial statements include the accounts of the Company, its subsidiaries and its VIE for which it is deemed the primary beneficiary. All significant inter-company accounts and transactions have been eliminated in consolidation. The Company evaluates the need to consolidate its VIE in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The VIE agreement was not consummated until August 1, 2013, however, the purpose and design of the establishment of the VIE, Zhongshan WINHA, was to be consolidated under the Company through common control. ASC 810-10-25-38F states that a reporting entitys involvement in the design of a VIE may indicate that the reporting entity had the opportunity and the incentive to establish arrangements that result in the reporting entity being the variable interest holder with the power to direct the activities that most significantly impact the VIEs economic performance. As both the Company and the VIE, Zhongshan WINHA, were under the common control of Ms. Lai immediately before and after the acquisition, this transaction was accounted for as a merger under common control, using merger accounting as if the merger had been consummated at the beginning of the earliest period presented, and no gain or loss was recognized. All the assets and liabilities of the VIE, Zhongshan WINHA, are recorded at carrying value. Hence, Zhongshan WINHA was consolidated with the Company since its inception due to the purpose and design of its establishment. The following financial statement amounts and balances of Zhongshan WINHA have been included in the accompanying consolidated financial statements. March 31 2015 March 31 2014 Total assets $ 5,753,224 $ 389,357 Total liabilities $ 1,4769997 $ 463,680 Year Ended April 15, 2013 (inception) through March 31 2015 2014 Net income (loss) $ 2,459,143 $ (433,893) Foreign Currency Translation Almost all Company assets are located in the PRC. The functional currency for the majority of the Companys operations is the Renminbi (RMB). The Company uses the United States Dollar (US Dollar or US$ or $) for financial reporting purposes. The financial statements of the Company have been translated into US dollars in accordance with FASB ASC 830, Foreign Currency Matters. All asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transactions occurred. Statements of operations, changes in stockholders equity (deficit) and cash flow amounts have been translated using the average exchange rate for the periods presented. Adjustments resulting from the translation of the Companys financial statements are recorded as other comprehensive income (loss). The exchange rates used to translate amounts in RMB into US dollars for the purposes of preparing the financial statements are as follows: March 31 2015 March 31 2014 Balance sheet items, except for stockholders equity, as of the year or period end 0.1630 0.1609 Year Ended March 31 April 15, 2013 (inception) through March 31 2015 2014 Amounts included in the statements of operations, statements of changes in stockholders equity (deficit) and statements of cash flows 0.1624 0.1636 For the year ended March 31, 2015 and the period from April 15, 2013 (inception) to March 31, 2014, foreign currency translation adjustments of $31,732 and $(94), respectively, have been reported as other comprehensive income (loss). Other comprehensive income (loss) of the Company consists entirely of foreign currency translation adjustments. Pursuant to ASC 740-30-25-17, Exceptions to Comprehensive Recognition of Deferred Income Taxes, Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain. Hence, such translations should not be construed as representations that the RMB could be converted into US dollars at that rate or any other rate. The value of the RMB against the US dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRCs political and economic conditions. Any significant revaluation of the RMB may materially affect the Companys financial condition in terms of US dollar reporting. Vulnerability Due To Operations in PRC The Companys operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRCs political, economic and social conditions. There is also no guarantee that the PRC governments pursuit of economic reforms will be consistent, effective or continue. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Prepaid Expenses Prepaid expenses as of March 31, 2015 and 2014 mainly represent the prepayments of approximately $145,524 and $338, respectively for decoration expenses and pre-business expenses. Advances from Customers Advances from customers represents prepaid cards purchased by customers at our retail locations. We believe that prepaid cards are principally purchased for gift purposes and usually used quickly. Advances from customers was $732,212 and $433,283 as of March 31, 2015 and 2014, respectively. Website Development Costs The Company accounts for website development costs in accordance with ASC 350-50, "Accounting for Website Development Costs," wherein website development costs are segregated into three activities: 1. Initial stage (planning), whereby the related costs are expensed. 2. Development stage (web application, infrastructure, graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures. 3. Operating stage, whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality. The Company has a website and ongoing website development costs of $39,014 and $30,170 as of March 31, 2015 and 2014, respectively. The Companys online sales platform is currently in use; accordingly, the costs related to the development of graphics for the platform are being amortized. Amortization expense was $812 and $603 for the year ended March 31, 2015 and for the period from April 15, 2013 (inception) to March 31, 2014, respectively. Revenue Recognition The Company recognizes and plans to recognize revenue from the following channels: · · · Zhongshan WINHA grants certain commercial customers limited rights to return products and provides price protection for inventories held by resellers at the time of published price reductions. Zhongshan WINHA establishes an estimated allowance for future product returns based upon historical return experience when the related revenue is recorded and provides for appropriate price protection reserves when pricing adjustments are approved. Per Zhongshan WINHAs return policy, customers can return their merchandise in the original box and/or packaging within 7 days. There were no sales returns for the period from April 15, 2013 (inception) to March 31, 2015. Fair Value of Financial Instruments FASB ASC 820, Fair Value Measurement, Level 1 Inputs Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access. Level 2 Inputs Inputs other than the quoted prices in active markets that are observable either directly or indirectly. Level 3 Inputs Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements. ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. As of March 31, 2015 and 2014, none of the Companys assets and liabilities were required to be reported at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, accounts receivables, payables and accrued liabilities, approximate their fair values due to the short term nature of these financial instruments. There were no changes in methods or assumptions during the periods presented. Cash and Cash Equivalents The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts Receivable Accounts receivable is stated at cost, net of an allowance for doubtful accounts, if required. Receivables outstanding longer than the payment terms are considered past due. The Company maintains an allowance for doubtful accounts for estimated losses when necessary resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customers payment history, its current credit-worthiness and current economic trends. The Company considers all accounts receivable at March 31, 2015 and March 31, 2014, to be fully collectible and, therefore, did not provide an allowance for doubtful accounts. For the periods presented, the Company did not write off any accounts receivable as bad debts. Inventory Inventory, comprised principally of merchandise, is stated at the lower of cost or market. The value of inventory is determined using the weighted average cost method. The Company estimates an inventory allowance for excessive or unusable inventories. Inventory amounts are reported net of such allowances, if any. There was no allowance for excessive or unusable inventories as of March 31, 2015 and 2014. Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire the asset, and any expenditure that substantially increases the assets value or extends the useful life of an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred. The estimated useful lives for property, plant and equipment categories are as follows: Furniture and fixtures 3 to 5 years Computer equipment 5 years Leasehold improvements Over the shorter of lease term or estimated useful life of the improvements. Motor vehicles 5 to 10 years Impairment of Long-Lived Assets The Company applies FASB ASC 360, Property, Plant and Equipment, Income Taxes The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on the de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with these tax positions. As of March 31, 2015 and 2014, the Company did not record any liabilities for unrecognized income tax benefits. The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows: United States The Company is subject to United States tax at graduated rates from 15% to 35%. No provision for income tax in the United States has been made as the Company had no U.S. taxable income for the year ended March 31, 2015 and the period from April 15, 2013 (inception) to March 31, 2014. BVI C&V International Holdings Company Limited is incorporated in the BVI and is governed by the income tax laws of the BVI. According to current BVI income tax law, the applicable income tax rate for the Company is 0%. Hong Kong WINHA International Investment Holdings Company Limited is incorporated in Hong Kong. Pursuant to the income tax laws of Hong Kong, the Company is not subject to tax on non-Hong Kong source income. PRC Shenzhen WINHA, Zhongshan WINHA Catering Management Co., Ltd and Zhongshan Supermarket Limited are subject to an Enterprise Income Tax at 25% and each files its own tax return. Net Income (Loss) Per Share The Company computes net income (loss) per common share in accordance with FASB ASC 260, Earnings Per Share March 31, 2015 and the period from April 15, 2013 (inception) to March 31, 2014. Statutory Reserve The Companys China-based subsidiary and its VIE are required to make appropriations of retained earnings for certain non-distributable reserve funds. Pursuant to the China Foreign Investment Enterprises laws, the Companys China-based subsidiary, which is called a wholly foreign-owned enterprise (WFOE) and its VIE, are required to make appropriations from their after-tax profit as determined under generally accepted accounting principles in the PRC (the after-tax-profit under PRC GAAP) to a general non-distributable reserve fund. Each year, at least 10% of each entities after-tax-profit under PRC GAAP is required to be set aside as general reserve fund until such appropriations for the fund equal 50% of the paid-in capital of the applicable entity The general reserve fund is restricted to set-off against losses, expansion of production and operations and increasing registered capital of the respective company. The fund is not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor is it allowed for distribution except under liquidation. The required transfer to the statutory reserve fund was $252,053 and $0 as of March 31, 2015 and 2014, respectively Reclassifications Certain amounts in the prior periods financial statements have been reclassified for comparative purposes to conform to the presentation in the current years financial statements. These reclassifications had no effect on previously reported earnings. |
